7 Common Bookkeeping Mistakes and How to Avoid Them

1. Failing to Keep Receipts

The Mistake: One of the most common bookkeeping errors is failing to keep receipts for business expenses. In some cases, you either throw away your receipts or misplace them. With proper documentation, it becomes easier to verify expenses during audits or tax season.

How to Avoid It:

  • Implement a Receipt Management System: Use digital tools like Expensify or Shoeboxed to scan and store receipts electronically. If you are unfamiliar with these tools, taking a picture and keeping them in cloud storage can work fine. If you sign on for bookkeeping with us at Glo-ing Profit, you’ll get a free mobile app and an easy-to-use client portal! 
  • Consistent Habits: Make it a habit to immediately store receipts after each purchase. This can be done through mobile apps that allow you to take pictures of receipts and categorize them. 
  • Regular Reviews: Schedule regular reviews of your receipts to ensure they are correctly categorized and stored. Make sure to record every detail of your receipt, especially for entertainment and meals so you can easily justify them in the future. With Glo-ing Profit, our monthly or quarterly reviews with you helps keep everything top of mind and accurate!

2. Mixing Personal and Business Finances

The Mistake: Mixing personal and business finances can lead to confusion, inaccurate financial records, and potential legal issues. It makes it difficult to track business expenses and can complicate tax filings.

How to Avoid It:

  • Separate Accounts: Open a dedicated business bank account and credit card. This separation helps in maintaining clear records of business transactions.
  • Consistent Use: Ensure all business transactions are conducted through the business account. Avoid using personal accounts for business expenses.
  • Regular Reconciliation: Regularly reconcile your business accounts to ensure all transactions are accurately recorded. If you do have personal and business expenses mixed, Glo-ing Profit is an expert in untangling the two!

3. Not Reconciling Your Accounts Regularly

The Mistake: Failing to reconcile accounts regularly can lead to discrepancies between your books and bank statements. This can result in missed transactions, errors, and potential fraud.

How to Avoid It:

  • Monthly Reconciliation: Make it a practice to reconcile your accounts at least once a month. This helps in identifying and correcting discrepancies promptly.
  • Use Accounting Software: Tools like QuickBooks, Xero, Freshbooks, or Wave, can automate the reconciliation process, making it easier and more accurate. 
  • Review Statements: Regularly review bank and credit card statements to ensure all transactions are accounted for.

4. Ignoring Small Transactions

The Mistake: Small transactions may seem insignificant, but ignoring them can lead to inaccurate financial records. Over time, these small amounts can add up and impact your financial statements and may cause some problems in the future that could have been avoided in the first place. 

How to Avoid It:

  • Record Everything: Ensure that every transaction, no matter how small, is recorded in your books. This includes petty cash expenses and minor purchases.
  • Use Technology: Utilize accounting software to automatically capture and categorize small transactions.
  • Regular Audits: Conduct regular audits of your financial records to ensure all transactions are accurately recorded. Avoid procrastinating!

5. Overlooking Tax Deadlines

The Mistake: Missing tax deadlines can result in fines, penalties, and increased scrutiny from tax authorities. This mistake is often due to poor planning or lack of awareness of important dates.

How to Avoid It:

  • Mark your calendar: Mark all tax deadlines on your calendar and set reminders well in advance.
  • Hire an accountant: If you think that you are having problems keeping up with tax schedules, work with an accountant or tax professional to ensure you’re aware of all relevant deadlines.
  • File your taxes: It is better to file your taxes early, if possible, to avoid last-minute stress and errors. This will not only avoid unnecessary stress but also fines and penalties for your business.

6. Lack of Backup and Security

The Mistake: Not having a backup of your financial records can be disastrous in case of data loss due to hardware failure, cyber-attacks, or natural disasters. 

Additionally, inadequate security measures can expose your financial data to unauthorized access.

How to Avoid It:

  • Regular Backups: Implement a regular backup schedule for your financial data. Use cloud-based solutions like Google Drive or Dropbox for secure storage.
  • Security Measures: Ensure your accounting software and systems are protected with strong passwords, encryption, and regular updates. There are great password managers out there like LastPass and OnePassword, that can help you create strong passwords and securely store your information.
  • Access Controls: Limit access to your financial data to authorized personnel only. Implement role-based access controls to enhance security. Remember that as a business owner, your books belong to you, not the accountant or any employee. Make sure everyone who has access to the file is someone you trust.

7. Doing Everything Yourself

The Mistake: Many small business owners try to handle all aspects of bookkeeping themselves, even if they lack the necessary expertise. This can lead to errors and inefficiencies that could have been avoided with professional help.

How to Avoid It:

  • Get help: Consider outsourcing your bookkeeping to a professional if you don’t have the time or expertise to manage it yourself.  Click here to get a free quote. 
  • Don’t be afraid of technology: Use bookkeeping software that simplifies the process and provides support when needed.
  • Do what you do BEST: Focus on what you do best – running your business and let the experts handle the complex financial tasks.

Hire an Experienced Bookkeeper

Bookkeeping is a critical aspect of running a successful business, but it’s also an area where mistakes can easily occur. 

Avoiding these common bookkeeping mistakes can save your business time, money, and stress. By implementing proper systems and practices, you can ensure that your financial records are accurate, up-to-date, and compliant with regulations. 

Remember, good bookkeeping is not just about avoiding mistakes; it’s about building a solid foundation for your business’s financial health.

If you are having difficulties in taking care of your financial and bookkeeping records, stress no more!

Schedule a free consultation today and let’s talk about your business.

Schedule your free consultation today!