Bookkeeping errors have the potential to cost your practice thousands in tax payments so it’s important to get it done right. As accountants, we are experienced with Xero and at Hive we are experts in completing bookkeeping for the Dental sector. In order to support you if you are completing the bookkeeping yourself, please see the guidance below.

Mixing private expenditure with personal

Keep a separate bank account for all business expenses and don’t add your personal banking accounts to Xero. Including personal expenditure incorrectly can cause your financial reports to be an untrue reflection of your business. This results in you either submitting false information or alternatively costs you time to separate the business and personal expenses.

In the event that you use your personal card for a business expense, please let us know and we can ensure that we factor this in as part of the accounts process. Through a twelve-month period, these costs can add up causing you to miss out on the tax relief those costs bring your business – and in turn, risking a higher tax bill than you truly should’ve incurred.

Misallocated payments to directors

Payments to directors need to be allocated correctly depending on what the payment was for:

• Any money that you intend to repay to the company should be posted to the Directors Loan Account (DLA).
• Payments that you intend to declare on your personal tax return and pay income tax on should be posted to the Dividends code.
• Any reimbursements to yourself for business expenses paid personally should be posted to the appropriate code for the expense. For example, if you paid for a taxi to a training using your personal card, the reimbursement would go to the Travel code.

What can I claim?

There are some items of expenditure that may be slightly ambiguous as to whether or not it is an allowable business expense. In order to provide some clarity, please see the detail below:

Entertainment

• Can claim: Staff parties, staff lunches, internal staff meetings, business meetings with colleagues that are held on the business premises and are available to all staff.
• Be careful: Taking a client or potential client for a meal, business lunch meetings, entertainment solely for directors or partners. E.g directors lunch. Whilst this is a valid business expense so can be paid for by your business, HMRC won’t usually allow a tax deduction.

Travel:

• Can claim: Training courses, consulting at a different practice, travel in between practices, attending a meeting/conference.
• Be careful: Anything that is part of your usual commute, anything that is not wholly and exclusively for business purposes e.g. if you attend a course in Italy for a day, and stay there for a week’s holiday afterwards.

Uniform

• Can claim: Scrubs, clothing embroidered with the practice name or logo, shoes left at the practice.
• Be careful: Anything that is not wholly and exclusively for business purposes e.g. clothing that you wear outside of work.

Incorrect analysis

Finally, please see below examples of items that we see commonly coded to incorrect codes:

• General expenses and/or sundry should be used minimally. Where possible, please use a more specific code.
• Associate and Hygienist costs should not be posted to Salaries or Wages Payable. This code should only be used for employees that are on that PAYE payroll scheme.
• Small items of stationery or computer equipment should not be coded to an Equipment code. This code should only be used for larger value purchases that will remain in the business for more than a year.

If you have any queries regarding your personal and business expenditure, would like some bookkeeping training, or alternatively would like to enquire about us processing your bookkeeping for you, please get in touch.