7 Common Bookkeeping Mistakes Small Businesses Make

Running personal expenses through the business account, or business expenses through a personal card, makes bookkeeping much harder and weakens the legal separation that protects you. Open a dedicated business checking account and a business credit card from day one and use them only for business.

Skipping monthly reconciliation lets small errors compound into big ones. By the time anyone notices, untangling a year of unreconciled transactions costs far more than staying current would have. Reconcile every account every month, no exceptions.

Putting expenses in the wrong category distorts your profit and loss statement and can cost you legitimate deductions. A consistent chart of accounts and someone who knows what belongs where is the cure.

Treating a worker as a 1099 contractor when they should be a W-2 employee can trigger back payroll taxes, penalties, and lawsuits. The IRS rules are knowable. Use them.

If the IRS ever questions a deduction, you need documentation. Build the habit of capturing receipts digitally as transactions happen. Tools like Hubdoc and Dext make this nearly automatic.

Most owners try to handle bookkeeping themselves long past the point where it makes sense. The hours you spend on the books have a real cost, and they are usually worth more elsewhere.

Sales tax rules vary by state and have grown more complex since the Wayfair decision. Businesses that sell across state lines often have collection obligations they do not realize. This is one of the most expensive blind spots in small business bookkeeping.