Bookkeeping might not be the most glamorous part of running a business – but it’s one of the most important. When your books are off, your decisions are off. And the longer mistakes go unnoticed, the messier and more stressful things get.
Whether you’re a solo-preneur just starting out or an established small business owner wearing all the hats, here are 10 common bookkeeping mistakes we see all the time – and more importantly, how you can avoid them.
1. Mixing Business and Personal Finances
One of the most common (and costly) mistakes is combining personal and business spending in one account. This makes it harder to track business expenses, complicates tax prep, and puts your liability protection at risk if you operate as an LLC.
What to do instead
Open a dedicated business bank account and credit card just for business use. Avoid paying for personal expenses from your business accounts. Even if you’re a sole proprietor, keep all your transactions separate from day one.
2. Falling Behind on Your Books
When you don’t update your books regularly, transactions pile up and become harder to sort out later. You might miss deductions, forget to invoice a client, or overlook a bank error – costing you time and money. Not to mention the stress!
Try this instead
Schedule time weekly or monthly to update your books. If you’re consistently behind, consider hiring a professional bookkeeper to keep things current.
3. Not Tracking Receipts
Receipts back up your deductions and protect you during an audit. If you’re throwing away receipts or relying solely on your bank statement, you’re missing critical detail – like what was purchased and why.
Quick fix
Use a mobile app (like QuickBooks Online) to snap photos of receipts and store them with your transactions. It’s fast, easy, and keeps everything in one place.
4. DIY-ing Your Books Without the Right Tool
Spreadsheets work fine at first, but they can’t handle complexity as your business grows. Manual entry increases the risk of errors, missed transactions, or accidental overwriting of data.
Better approach
Move to an accounting platform like QuickBooks Online, which syncs with your bank, tracks income and expenses, and generates real-time reports – so you can make informed decisions. It’s reliable, scalable, and makes tax season way easier.
5. Misclassifying Expenses
Using the wrong categories can distort your financial reports, affect your budgeting, and potentially raise red flags with the IRS. And it prevents you from really understanding the true operating costs of your business.
The solution
Learn the basic expense categories that apply to your business – or work with a bookkeeper who can customize your chart of accounts and ensure that transactions are coded correctly.
6. Overlooking Sales Tax (or Collecting It Incorrectly)
Sales tax can be more complicated than it looks – especially if you sell in multiple states or online. Many small business owners don’t realize they may need to collect sales tax not just in their home state, but in other states where they’ve created nexus (a tax connection). If you’re not collecting in states where you’re required to, you could face penalties.
The Solution:
Know your sales tax obligations in every state where you do business. Use tools like TaxJar, Avalara, or QuickBooks Online’s sales tax feature to track and automate sales tax. Reassess your nexus status regularly if you sell across state lines or online. Sales tax mistakes can lead to penalties, but with the right tools (and a savvy bookkeeper), they’re completely avoidable.
7. Ignoring Accounts Receivable
Unpaid invoices hurt your cash flow and profitability. If you’re not tracking what clients owe you – or following up – you might miss revenue you’ve already earned.
Try this instead
Monitor outstanding invoices monthly. Send gentle reminders, automate follow-ups, and consider requiring deposits or partial payments up front.
8. Not Reconciling Bank Accounts
Reconciliation ensures your bookkeeping records match your actual bank activity. If you’re not reconciling your bank and credit card accounts monthly, you could be missing errors like duplicate charges, missing deposits, or even fraud.
Quick fix
Reconcile all bank, credit card, and loan accounts every month. This is an essential part of clean bookkeeping and helps you catch errors early.
9. Paying Contractors Incorrectly
If you’re treating an employee as a contractor (or vice versa), you could run into payroll tax issues and penalties from the IRS or state agencies.
The solution
Understand the difference: contractors are independent and self-managed, while employees follow your direction. If you work with independent contractors, collect W-9s before you pay them for the first time, and issue 1099s as required.
Not sure? Talk to a pro.
10. Waiting Until Tax Season to Review Your Books
Trying to catch up on a year’s worth of bookkeeping in March (or worse, April) is stressful, error-prone, and can lead to missed deductions. You may struggle to remember what your receipts and transactions were actually for and you won’t have time to catch and fix errors before they have already become a problem. And perhaps worst of all, you have missed the opportunity to really understand in real time what’s been going on in your business all year long.
Better approach
Bookkeeping should be an ongoing part of your business – not a scramble at year-end. Our advice is to keep your books updated and reconciled monthly, at the very least. You’ll always be tax-ready and in control of your numbers. Ongoing bookkeeping also helps with cash flow planning, loan applications, and more. Plus, your tax CPA will thank you for being organized.
Let Willmes Accounting Help You Avoid These Mistakes
At Willmes Accounting, we help small business owners, LLCs, and solo-preneurs stay organized, compliant, and confident in their numbers. We specialize in virtual bookkeeping using QuickBooks Online, so you can focus on your business while we keep your books clean.
If you’ve made any of these mistakes, don’t worry – you’re not alone. Let’s fix it together.
Get in touch and let’s talk about how we can take bookkeeping off your plate, so you can get back to running your business.
