5 Common Bookkeeping Mistakes and How to Avoid Them
Updated: Jul 10
Bookkeeping has a lot going on into it, there are many moving parts. You are recording, managing, and up-keeping financial transactions, ensuring accuracy, compliance, and financial health.
With so much going on, it's not uncommon for even the most diligent businesses and corporations to make some bookkeeping mistakes.
Sometimes looking out for the most common mistakes is the easiest way to see the rest of them and ensure perfection.
Mistake #1: Neglecting to Reconcile Books Regularly:
This is the process of matching the transactions shown in the books to those on your bank statements. When it isn't done correctly or looked at closely, this would lead to discrepancies, unnoticed errors, and also increases the likelihood of further financial problems.
The best, easiest way to avoid this, is to simply always reconcile your books at least once a month. This way you ensure that everything is entered accurately and timely. Doing this process also helps you to keep an eye on early errors like double entries or forgotten transactions.
If you also use accounting software, then take advantage of that technology and utilize its reconciliation features. However, also be mindful to manually review after, to ensure perfect accuracy.
Mistake #2: Mixing Personal and Business Expenses:
This error is more common with smaller business owners, and often times it happens without even knowing. For example, you may use a personal credit card for business expenses by mistake. This practice will complicate your bookkeeping and will lead to incorrect tax fillings as well, further complicating your problem.
Therefore, simply separate your personal and business finances, have a separate bank account and credit card for your business. Simultaneously make sure that all expenses are paid only from that account and personal is done from personal.
This helps alleviate the headache of disorganization and secures ease when tracking expenses and doing your taxes.
Mistake #3: Not Keeping Track of Receipts:
Receipts are more than essential when it comes to verifying your expenses and without them it is a challenge to accurately see where your money is going. If an audit arises, you will also need to provide receipts to verify all your expenses.
This is where organizational skills are most needed, simply designate a folder or even a box to keep all your receipts, and you can even digitally record and save them to.
However you choose to organize them, make it second nature for you to store receipts right after a purchase is made, so you avoid losing them.
Mistake #4: Incorrectly Recording Transactions:
When you don't pay special attention that your transactions are recorded accurately, as a business owner, the financial health of your company can be vastly mislead.
Firstly prevent this by understanding the basics of bookkeeping and accounting to know what exactly to look out for. Also consider using reliable software to largely diminish any common errors to this regard. Such software, can instantly place your transactions in various categories but it will always need your eye to verify and confirm everything is accurate.
Mistake #5: Not Backing Up Financial Data:
If you don't back up your data and your computer crashes or a server fails, all your financial information is lost. Now imagine how long it would take to recreate those records.
Therefore, avoid this disaster by regularly backing up your data. Keep your information in an external hard drive or a cloud service. Some accounting software even offer automatic backup features, and make sure your data is safe even if you forget.
Taking this Information Forward:
Yes, bookkeeping can be a daunting task, but always remembering to look out for the most common mistakes, you will be able to find the other minute ones and cut the time and amount of tasks by more than half.
Following this will most definitely help you avoid any pitfalls of bookkeeping errors and secure your financial health and your business's longevity.