Top 5 Bookkeeping Mistakes Businesses Makes

5 common bookkeeping mistakes small businesses make by benchmark ledger solutions

Bookkeeping isn’t the top priority for a lot of business owners. When you’re trying to get clients, there isn’t always time to log all your expenses and create monthly reports of your books. Here are 5 of the most common bookkeeping mistakes small businesses make, why they happen, and how you can prevent them from happening at your business.

Personal & Business Finances

Mixing personal and business finances is the most common bookkeeping mistake a business makes, especially in its early stages. Business owners often use their personal accounts for everything, and don’t keep track of which expenses, which makes it difficult to accurately report taxes and stay in federal or state compliance.

Opening a dedicated business bank account and using a separate debit or credit card for all business expenses. This keeps records clean and separated, simplifying taxes when you file.

Reconciliation

Many business owners assume that their software or account statements are always correct, but not reconciling can cost their business money in expenses they might have forgotten due to not being properly documented.

Prevent inaccurate bookkeeping by reconciling your books and statements monthly or weekly to catch missing transactions, errors, or duplicated entries before they become larger issues.

Reciepts & Documentation

Many business owners ignore receipts and documentation in the early stages of their business, and receipts get lost or seen as unimportant after being entered into bookkeeping software. According to the IRS, it is always to keep records on hand for 2 years after filing for that year. 

To prevent being unprepared if an audit were to occur, use digital tools like QuickBooks, HubDoc, Google Drive, or even your phone gallery to store receipts after purchasing. This ensures audit readiness and accurate expense tracking.

Misclassifying Expenses

Business owners sometimes guess categories for their expenses, or lump everything into a “miscellaneous” category. Accurate classification of expenses is crucial to making sure you are only paying the taxes you should, and it will help provide better clarity if you ever need to reference your books in the future.

Learn and reference your chart of accounts, or work with a bookkeeper like Benchmark Ledger Solutions, to ensure proper categorisation for accurate reporting and deductions for your business.

Falling Behind

Running a business can be overwhelming, and it’s not uncommon for business owners to fall behind on bookkeeping when they are managing everything on their own. Daily operations often take priority, and bookkeeping gets pushed off until tax time. 

Schedule weekly bookkeeping sessions into your business operation workflow, or outsource it to a professional to save yourself more time. Staying current with your finances helps provide you with a clear picture of cash flow and helps you make better financial decisions.

Conclusion

Hiring a bookkeeping service can help save you time and money as a business owner; however, when doing your own bookkeeping, stay objective and remember the tips above to help ensure accuracy and compliance in your bookkeeping.