Are You Making These 5 Common Bookkeeping Mistakes?

Got five minutes? Awesome! Let’s hop in our time machine and zip back to 1494 in Italy. Ever heard of Luca Pacioli?

This guy was the OG of accounting, often called the father of accounting. 

He did something phenomenal back then — something that would change the game for numbers, money, and records.

Any guesses?

Time’s up.

Here’s what he did:

Luca published a massive book on Bookkeeping called “Summa de Arithmetica.” This wasn’t just another math book — it set the stage for everything we know about accounting today. 

It was the foundation for bookkeeping manuals and standardizing methods and led to the development of the current accounting system.

That’s why he’s credited as the father of accounting and double-entry bookkeeping (even though he didn’t invent it).

Now, Luca wasn’t your average bean counter. This Renaissance man wrote at least ten books, taught algebra, was a chess whiz, and even hung out with Leonardo da Vinci. Talk about a power squad! 

But his real claim to fame? Explaining bookkeeping in a way that stuck. He broke it down into five basic principles:

💡 All transactions involve two elements: an item exchanged and a form of settlement.

💡 All forms of settlement can substitute for each other.

💡 One element is debit and the other is credit.

💡 The amount of the debit equals the amount of the credit.

💡 The entries in the money column are to be in one currency only.

Fast forward to 2024. Bookkeeping has gotten a major facelift. We’ve gone from quills and ink to cloud-based software like QuickBooks, Xero, and FreshBooks. 

These tools automate those boring, repetitive tasks, give us real-time financial insights, and keep our data safe in the cloud. Snap a photo of a receipt and have it instantly logged? Yes, that’s just a regular Tuesday for a bookkeeper now.

From Pacioli’s era to today’s digital world, bookkeeping has come a long way.

What started in royal courts is now essential for every business, big or small. The basics of bookkeeping are still the same, but the tools have evolved dramatically.

So, with all these changes, we need to be careful about certain things. Technology brings a lot of caution. It’s a no-brainer. In this blog, we’ll walk you through some modern bookkeeping mistakes you absolutely need to avoid. 

We’re not in the 1400s or 1800s anymore, so if you’re not careful, these errors can cost you a lot of money. 

Let’s get started.

Mistake 1: The Procrastination Plague

You know that little voice that says, “I’ll get to it later”? Yeah, that’s the one we are talking about here. It’s easy to ignore your books when the fear of messing them up is so strong, especially if you’re still figuring out what a balance sheet even is.

As a small business owner, the thought of messing up your books can be terrifying. So, you delay. Understandable.

Sure, ignoring it feels good at the moment, but eventually, you’ll be buried under a mountain of paperwork.

And that’s even more scary.

Here’s what happens when you procrastinate in bookkeeping:

Missed tax deadlines: Ignoring your books means you might forget important tax dates, which can lead to penalties.

Forgetting expenses: Ever tried to remember what that $42.37 expense was three months ago? Cue here: you won’t remember.

Confusion and backtracking: Delaying your bookkeeping tasks can lead to a mess of records that are hard to reconcile, causing a lot of backtracking and frustration.

Listen up, bookkeeping doesn’t have to be scary. Take baby steps and start small.

Set aside a bit of time each week to update your records, maybe before you go for your evening walks. And, if the numbers make you want to cry, consider hiring an expert or taking a CPA consultation

Better to get help than to drown in a sea of receipts and regret.

Mistake 2: Mixing Business and Personal Spending

It’s another classic bookkeeping blunder. So avoid this at all costs.

Here’s how this mistake can sneak up on you. Imagine you’re at the store, grabbing some office supplies, and you see those fancy, gourmet cookies. Your mind goes, “I deserve a treat! I had a tough day,” and just like that, you swipe your business card.

Seems harmless, right? Wrong. It’s a BIG deal.

Mixing business and personal expenses is like trying to mix oil and water—it’s never going to work, and it can create a real mess.

Let’s break down how mixing business with personal spending can give you a hard time:

📚 Tax Time Turmoil

When you mix your expenses, you’re inviting a tax disaster. The IRS isn’t a fan of obscure spending, and neither is your CPA. Keeping things separate makes deductions straightforward and your records clean.

Trust us, the only thing worse than an IRS audit is explaining why your business is buying flowers and gourmet cookies for your girlfriend.

🤝 Professionalism Points

Keeping your finances separate shows you mean business. Separate accounts help you track your business health accurately and present a professional front to investors, lenders, and even yourself. Open a business bank account. Use this account for all your business transactions — income, expenses, everything. 

So don’t wait until you’re knee-deep in receipts to figure this out.

If you’re ever unsure, make a quick call to your CPA or hire a registered agent who will handle all your paperwork. It’s way easier to ask now than to untangle a year’s worth of mixed expenses later.

Mistake 3: Tossing Away Your Receipts

You’ve just enjoyed a business lunch with Italian caviar. The bill arrives, and you casually toss the receipt into the trash after coming home.

It’s gone, out of sight, out of mind.

But you know what? This seemingly small act could lead to a major headache down the road.

Let’s give you a sneak peek of why tossing away receipts like it’s nobody’s business can spell trouble:

👩🏻‍💻 Audit Anxiety

Nobody wants to get audited, but it can happen, and it does. Whether you’re a small business with two people or a larger enterprise, audits are a reality.

When that time comes, you’ll be scrambling for proof of all those business expenses.

Receipts are your tax saviors during an audit. They’re the concrete evidence that backs up your claims. Without them, you’re left with nothing but your word, and the IRS prefers paper (or digital) trails.

📝 Tracking Troubles

Receipts are crucial for accurate record-keeping. They help you track your expenses and ensure your financial records are precise.

Tossing them away is like deleting pieces of a jigsaw puzzle — you’ll struggle to see the whole picture when pieces are missing.

So, the next time you’re tempted to toss that receipt, think twice.

Make it a habit to digitize your receipts as soon as you get them.

Use apps like Expensify, Receipt Bank, or even just your phone’s camera to keep a digital copy. This saves space and ensures you can retrieve any receipt with a quick search.

Plus, it’s environmentally friendly — less paper waste, more trees!

Mistake 4: Doing It Yourself for Too Long – The DIY Trap

If your goal is to grow your business, you’ll need to hand off those bookkeeping duties sooner rather than later.

The sooner you get this, the better.

At first, bookkeeping can be manageable, maybe even exciting for a new founder. It might feel like a new science experiment at school.

But as your company expands, so does the complexity of your bookkeeping.

More transactions, more expenses, more everything.

And, before you know it, you’re buried in receipts and ledgers, wondering where it all went wrong.

Now, as a business owner, your time should be spent on strategic decisions — not in the back office wrestling with spreadsheets and ledgers.

Sure, hiring a bookkeeper might seem like an added expense, but trust us, it’s an investment that pays off.

These bookkeeping experts can save you time, catch mistakes before they become costly, and ensure everything is in order come tax season.

Here’s why outsourcing bookkeeping services is crucial:

⏳ Time Management

Your time is valuable. Spending hours on bookkeeping tasks means less time for strategy, innovation, and growth.

📍 Accuracy

Professionals are trained to spot errors and ensure your books are accurate. Mistakes can be costly, both financially and emotionally.

🏆 Scalability

As your business grows, so do your financial records. A bookkeeper or a robust software solution can handle increased complexity without breaking a sweat.

So, if you’re still trying to manage all the bookkeeping yourself, it’s time to consider passing it off.

Invest in a professional service like doola, so you can hand off those bookkeeping responsibilities completely and keep your eyes on the prize — that’s growing your ROI.

And honestly, no one starts a business to become their own accountant.

Mistake 5: Reporting Transfers as Income – The Phantom Profit Problem

Alright, this one can be a real doozy, especially if you’re new to accounting. So, let’s break it down in plain English.

Imagine this scenario: you’re moving money from one business account to another. No big deal, right? 

But then you accidentally record that transfer as income. Suddenly, it looks like your business just made a lot more money than it actually did. 

Sounds like a win, but it’s not. 

This phantom profit can mess up your financial statements in ways you can’t even imagine. Not kidding.

Here’s why this mistake can lead you down a dangerous path:

Distorted Financial Health

An accurate financial statement is crucial for making informed decisions about your company’s financial health.

If you report transfers as income, your records will show inflated revenues. This false picture can lead you to believe your business is doing better than it actually is.

Poor Decision Making

With inaccurate records, you might make decisions that aren’t in the best interest of your business.

For example, you might think you have extra funds to invest in new projects or hire more staff, only to find out later that the money was never really there.

Tax Troubles

Reporting transfers as income can also create headaches during tax season. The IRS expects precise records, and if your books are showing inflated income, you could end up paying more taxes than necessary.

Or worse, it could trigger an audit or a series of audits that can last until next year’s Christmas.

So, how do you avoid this bookkeeping blunder?

Keep It Separate

Always differentiate between actual income and money transfers between accounts. They are not the same thing, and mixing them up can lead to a whole host of problems.

Use Reliable Software

Implement bookkeeping software that can help you track financial transactions correctly. Programs like QuickBooks or Xero have features that can distinguish between income and transfers, reducing the risk of errors.

Consult a Pro

When in doubt, ask your CPA or bookkeeper. It’s much better to ask a quick question now than to try and untangle a financial mess later.

How Can doola Help You Avoid These Bookkeeping Blunders?

When to Choose doola

Mistakes can happen to the best of us. It’s part of life. No matter how much we try to dodge them, there will be times when we slip. But don’t let that get you down.

It’s perfectly normal to get anxious when you mess up anything related to money, finance, or numbers. And even if that frustrating mess-up happens, you don’t have to go through it alone.

Talk to people who have been there and done that. It’s a relief to know what your peers did when they ended up in a situation as tricky as yours. 

But if swapping war stories doesn’t quite cut it, we’ve got you covered. 

With our comprehensive bookkeeping services, you get more than just a number-cruncher. You get a whole team dedicated to keeping your financial records clean, accurate, compliant, and audit-ready.

Here’s what doola brings to the table:

Expertise: Check ✅

Our team of experts knows the ins and outs of bookkeeping, ensuring that every entry is accurate and every penny is accounted for.

Efficiency: Check ✅

Save time and avoid headaches. With doola handling your books, you can focus on what you are actually meant to do — growing your business.

We take care of the grunt work, so you don’t have to.

Peace of Mind: Check ✅ Say Sayonara to audit anxiety.

With us, you can rest easily knowing your financial records are in top shape and ready to withstand any scrutiny from the IRS.

In short, doola helps you sidestep the common pitfalls of DIY bookkeeping. 

Book a free consultation with us today and keep your finances in check together.

doola's website is for general information purposes only and doesn't provide official law or tax advice. For tax or legal advice we are happy to connect you to a professional in our network! Please see our terms and privacy policy. Thank you and please don't hesitate to reach out with any questions.

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