Accounting mistakes startups are making (and how to fix them)

It’s easy to treat accounting like a ‘sort-it-out’ later job – until one missing filing, messy cap table, or wrongly categorised transaction turns into investor panic and manic scrambles before year-end.

For fast-moving startups, even small bookkeeping slips can quickly escalate into bigger problems that hit your cashflow, compliance and fundability. 

Join Ruben Portz and Tom Kelly from Novabook as they dissect the most common accounting mistakes they see founders make – and serve you the simple fixes that can keep your business safe and tidy for yourself and investors. 

Watch the recording below.

Key takeaways

Protect your privacy early and save yourself admin later

• Using your home address on Companies House makes it public – and once it’s there, it’s hard to remove, so it can lead to spam and unwanted post.
   
• A registered office service can be very cheap (often £10-£20/year) and gives you a simple privacy buffer between you and the company.
• Bonus: those services also help manage office mail, so you don’t miss important letters or deadlines.

Keep your cap table clean

• Not knowing exactly who owns what (or missing share related filings) can delay funding rounds and rack up expensive legal fixes.
• If you issue new shares, you’ll typically need to file an SH01. This is one of the most common ‘oops’ moments that later causes chaos.
• Share transfers are different: they’re usually updated via your annual confirmation statement, not immediately – but you still need to track them properly.
  

Bookkeeping mistakes get expensive fast

• Founders often do their own bookkeeping and unintentionally misclassify revenue, expenses, VAT treatment, or what’s allowable for corporation tax.
• When an accountant later has to untangle it, you can get charged for clean-up and errors may slip through into filings. The simplest fix is to create a clean system for capturing invoices and receipts instead of guessing categories as you go.
• Complexity triggers to watch for: revenue starts coming in, you hire people, you register for VAT, you have multiple bank accounts, or you start using directors’ loans. That’s usually the moment to seek proper support.

VAT and payroll: know what you’re registered for

• VAT can be a cashflow benefit for some startups (eg. B2B services sold overseas under reverse charge, where you may reclaim VAT on costs without charging VAT on sales), but it may hurt margins for others (often B2C).
• A surprisingly common issue: businesses don’t realise they are VAT registered (or assume their accountant is filing) and end up with overdue VAT returns, penalties, and a growing HMRC liability.
• Payroll mistakes happen when founders have employment contracts in place but don’t actually run PAYE and file with HMRC – having a contract isn’t enough.
• PAYE setup can take time (sometimes up to 2–3 months for references), so plan ahead, especially around funding rounds and hiring.

Compliance basics that make you look investor-ready

• Your annual accounts and confirmation statement are two defaults you should track from day one. This is because missing filings can trigger penalties, look bad to investors and also (in worst cases) even risk the company being struck off.
• Build a simple tax calendar, embedded with reminders for PAYE monthly deadlines and VAT quarterly deadlines.
• Set up a finance inbox and funnel all receipts/invoices through it – creating an audit trail like this makes year-end (and due diligence) much less stressful.
• Use banking ‘pots’ or separate accounts to protect cask and stay disciplined: set aside money for corporation tax and keep your main funding safer from day-to-day spend risk.