Common Bookkeeping Mistakes and How to Avoid Them

When it comes to bookkeeping, ensuring everything is accurate, accounted for, and up-to-date can take up much of a business owner’s time. Mistakes are easily made, and they can cost a business in the long run. Luckily, errors can be fixed when they are caught quickly. We’ve put together a list of the 5 most common bookkeeping mistakes, and how to prevent making them!

Not Reconciling Bank and Credit Card Statements

One of our biggest tips for making bookkeeping easier is to reconcile your bank statements with your books as often as possible. This way, you will know exactly how much money your business has at any moment. It will also allow you to catch any errors or mistakes quickly. When done regularly, reconciliation gives you insight into the health and status of your business. We recommend setting aside monthly time to compare your statements and bank accounts to ensure accuracy.

Combining Personal and Business Expenses

Co-mingling your personal and business expenses is one of the most common and expensive mistakes we see business owners make. Mixing these accounts could even cause issues with the law if your business was audited. We advise opening a bank account for your business that is separate from your personal accounts. This way, when it is time to reconcile your accounts, you can easily track expenses and payments, ensuring that your books are accurate. This will make the process simple and hassle-free.

Classifying Employees Incorrectly

When classifying your employees, it is crucial to be as specific as possible about what type of employee they are. For example, if you hire an independent contractor and incorrectly classify them as an employee, you will be at risk of owing a hefty fine to the IRS. In some types of businesses, owners make the mistake of listing themselves on their payrolls, but they are not technically W-2 employees. It can quickly get complicated when it comes to classifying what type of employees you have and labeling them appropriately. Be sure you are categorizing them correctly!

Neglecting to Track Reimbursable Expenses

Another major mistake we often see is neglecting to track reimbursable expenses. These charges are easy to forget because you pay a client and then charge it back to them. Make a point to keep a log of every reimbursable expense. This will protect you with a paper trail during an audit, allow you to ensure you are not losing money, and save you money down the road when you are filing your taxes!

Trying to Do it All Yourself

As your business grows, bookkeeping can become complex and time-consuming. Business owners who try to manage everything from finances to operations may find themselves burning out, which can lead to making costly mistakes. Consider outsourcing your bookkeeping to an accounting firm. Professional bookkeepers have the expertise to catch any errors, provide insight into your finances, and help you stay up to date on ever-changing tax requirements.

Warren Accounting Group is the go-to firm for payroll processing and bookkeeping services your business may need. Our experienced team can assist you by offering various services to improve your business’s financial health. Ready to focus on growing your business? Contact our office today to get started at 252-827-2652.