Common Bookkeeping Mistakes and How to Avoid Them
Chosen theme: Common Bookkeeping Mistakes and How to Avoid Them. Welcome! We turn painful accounting missteps into clear, doable habits. Expect practical fixes, friendly stories, and prompts to take action today. Share your experiences in the comments and subscribe for weekly, zero-jargon guidance.
Create a Consistent Chart of Accounts
Standardize categories that match how your business truly operates, and document rules for edge cases. Keep names short, unambiguous, and stable over time. Review the chart quarterly, archive unused codes, and map new vendors to default categories from day one. Comment your toughest categorization questions below.
Train Teams to Code Receipts Correctly
Frontline staff often pick the first category that “seems fine.” Fix this with a one-page guide, examples per department, and required fields like job, class, or project. Add monthly spot checks and friendly feedback loops. Invite teammates to a short lunch-and-learn and share the guide with them today.
The Receipt Black Hole: Missing Documentation
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Teach everyone to snap receipts immediately using a mobile app, assign a category, and write a ten-word purpose note. Set a weekly five-minute sweep to chase stragglers. Create a shared inbox for emailed invoices and turn on auto-forwarding rules. What app works best for you? Tell us and help others decide.
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Define how long to keep source documents—often at least seven years for tax. Use consistent file names, month folders, and vendor subfolders. Encrypt sensitive data and back up to two locations. Document your policy so turnover doesn’t break the process. Want a retention checklist? Subscribe and we’ll send the template.
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A founder tossed small receipts, assuming they were trivial. During review, cumulative undocumented expenses were disallowed, inflating taxes and stress. We introduced automatic receipt capture and vendor rules, and the issue vanished. Share your smallest receipt that caused the biggest headache—and how you solved it.
Timing Trouble: Cash vs. Accrual Confusion
Select cash or accrual based on reporting needs, financing requirements, and tax strategy. Document the choice, update your accounting settings, and teach your team. Accrual offers clearer performance insight, but cash is simpler for very small operations. Which method do you use and why? Share your reasoning below.
Timing Trouble: Cash vs. Accrual Confusion
Create a month-end checklist: capture late bills, accrue payroll, defer prepaid expenses, and recognize revenue properly. Lock the period once reconciled. Use a five-day close calendar with owners for each step. Want our sample close checklist and timeline? Subscribe and we’ll send it right to your inbox.
Sales Tax and Compliance Pitfalls
Post–Wayfair (2018), many states use economic thresholds to trigger sales tax obligations. Track revenue and transaction counts by state monthly. Confirm product taxability, exemptions, and marketplace facilitator rules. If thresholds loom, register before crossing them. Have a tricky state? Ask the community and compare experiences.
Sales Tax and Compliance Pitfalls
Rates change constantly. Use software or service providers that update jurisdiction rates, apply product tax codes, and generate returns. Calendar filing deadlines and set a reminder buffer. Reconcile tax collected to returns before paying. Want a neutral comparison of options? Comment “tax tools,” and we’ll send our guide.
Sales Tax and Compliance Pitfalls
One retailer assumed the marketplace collected all taxes. It didn’t, for certain states and products, leaving exposure. We mapped responsibilities, cleaned past filings, and automated registrations. Problem solved, confidence restored. Share your marketplace setup and we’ll point out common blind spots to avoid similar surprises.
Owner Draws vs. Payroll: Blurred Lines, Real Consequences
Pay Yourself Right
Choose the correct mix of payroll and distributions for your entity type and role. Document compensation policies and use separate accounts for owner activity. Avoid paying personal expenses from business cards. If you changed your approach this year, tell us what sparked it—your insight may help someone else.
Document, Document, Document
Board minutes or owner memos explaining compensation decisions create a defensible trail. Label transfers clearly, and attach notes in your ledger. Reconcile owner accounts monthly and review with your advisor. Want our owner-activity labeling cheat sheet? Subscribe, and we’ll email the concise, practical version.
Close the Loop with Clean Reports
Use custom reports to separate operating results from owner activity so margins reflect true performance. Review quarterly and adjust if trends drift. Share a redacted report screenshot in the comments, and we can suggest clarity improvements without exposing private numbers.