5 Things Small Business Owners Get Wrong About Bookkeeping

Bookkeeping is one of those things that most small business owners know they should be doing properly, but few actually are. And the mistakes tend to be the same ones over and over. Here are the five most common ones and how to avoid them.

Leaving it all to the end of the year

This is the biggest one. Trying to reconstruct a full year of transactions from memory and bank statements is painful, time-consuming and error-prone. Logging as you go takes seconds. Catching up months later takes hours.

Mixing personal and business expenses

If you pay for something business-related from your personal account, or buy something personal on a business card, you create a mess that someone has to clean up later. That someone is usually your accountant, and they charge by the hour.

Throwing away receipts

A bank statement shows that money left your account. A receipt shows what it was for and proves it was a legitimate business expense. Without receipts, you cannot claim expenses properly and you have no backup if you are ever questioned on a filing.

Not knowing the difference between an expense and a claim

An expense is something the business paid for. A claim is something you paid for personally on behalf of the business and need to be reimbursed for. They are tracked differently and treated differently at tax time. Mixing them up causes confusion later.

Assuming your accountant will sort it all out

Your accountant is there to interpret your finances, file your returns and give you advice. They are not there to do your basic record-keeping for you. The more organised your records are, the faster and cheaper their job becomes.