Top 10 Bookkeeping Mistakes Small Businesses Make—and How to Avoid Them
1. Mixing Personal and Business Finances
The Mistake: Using the same bank account or credit card for both personal and business expenses.
Why It Hurts: It creates a bookkeeping nightmare and raises red flags with the IRS during audits.
How to Avoid It: Open separate business checking and credit accounts. Keep all business transactions isolated.
2. Not Keeping Receipts or Supporting Documents
The Mistake: Tossing receipts or assuming bank statements are enough.
Why It Hurts: You may lose valuable deductions and have nothing to show during an audit.
How to Avoid It: Use digital tools like receipt scanners or bookkeeping apps to store records electronically.
3. Neglecting to Reconcile Accounts
The Mistake: Failing to regularly compare your books to bank or credit card statements.
Why It Hurts: Errors or fraud can go unnoticed, and your financials may be off.
How to Avoid It: Reconcile your accounts at least monthly using accounting software or with the help of a bookkeeper.
4. Misclassifying Expenses
The Mistake: Placing expenses in the wrong category (e.g., meals as office supplies).
Why It Hurts: Skews your financial reports and may lead to incorrect tax filings.
How to Avoid It: Learn basic accounting categories or work with a professional to set up your chart of accounts properly.
5. Procrastinating on Bookkeeping
The Mistake: Waiting until tax season to catch up.
Why It Hurts: You risk mistakes, missed deductions, and last-minute panic.
How to Avoid It: Set a regular weekly or monthly schedule to update your books consistently.
6. Not Using Accounting Software
The Mistake: Relying on spreadsheets or manual entries.
Why It Hurts: It’s time-consuming and prone to human error.
How to Avoid It: Invest in cloud-based accounting software like QuickBooks, Xero, or Wave to automate and simplify your bookkeeping.
7. Forgetting to Track Invoices and Receivables
The Mistake: Not following up on unpaid invoices or not recording them properly.
Why It Hurts: You lose cash flow and risk bad debt.
How to Avoid It: Use accounting software to track outstanding invoices and send automated reminders to clients.
8. Overlooking Payroll Taxes
The Mistake: Mishandling payroll or failing to set aside taxes.
Why It Hurts: You could face penalties, interest, or IRS scrutiny.
How to Avoid It: Use payroll software or a payroll service to calculate and remit payroll taxes accurately and on time.
9. Not Backing Up Financial Data
The Mistake: Storing all data locally without backups.
Why It Hurts: A computer crash or data loss could destroy essential records.
How to Avoid It: Use cloud-based software with automatic backups, or back up files manually to secure cloud storage.
10. Trying to Do It All Yourself
The Mistake: Assuming you can handle bookkeeping without help.
Why It Hurts: You may make costly errors or miss strategic financial insights.
How to Avoid It: Hire a professional bookkeeper or CPA, even part-time, to review your books and provide guidance.
Final Thoughts
Bookkeeping mistakes can be expensive—but they’re also avoidable. By staying organized, using the right tools, and knowing when to ask for help, you can take control of your business finances and focus on growth with confidence.
At MakeCentsBookkeepingllc we can categorize your transactions, reconcile your business accounts, and provide your business financial statements.
