Hi there, friend. Thanks for joining us! Tax season is upon us once again and maybe you're braving this task on your own. If you are and seem to notice some things just aren't adding up, this may be just the post for you. Today I want to share a few bookkeeping mistakes to be mindful of and how to fix them moving forward.
Too Many Categories Many business owners want to get really specific in their books. While this isn't always a bad thing, there is such a thing as having too many categories. The problem with this is that many of them end up being very similar. For example; "office supplies", "miscellaneous supplies" and "materials" can all be grouped under one of these names. This can be fixed by removing any categories that aren't related to your business, renaming any confusing titles, and/or combining categories that are basically the same thing.
Not reconciling bank accounts When was the last time you reconciled your accounts? Hopefully the answer is, "last month!" but if it's not, you're not alone. Consistent reconciliation (aka, balancing) is a great way to make sure everything is accounted for and there's nothing missing or entered multiple times. Even though this is such an important part of bookkeeping, this step is often skipped and can result in duplicate or missing transactions as mentioned before. The fix? Go back and pick up where you left off!
Deleting personal transactions We've always been told to never mix business and personal transactions. This is a good practice to keep in mind but sometimes you can grab the wrong card, and boom - business is mixed with personal. It can happen. The mistake to avoid in this case is deleting the transaction. Keep it in your register and reconcile it just as you would the other entries since it's part of your bank statement. Automatically deleting the transactions will throw off the books and you'll be stuck looking for the difference. Chat with your accountant about it but the recommend fix is to categorize any personal amounts as an "owner contribution" or "owner's draw."
These are just a few common mistakes to remember and hopefully avoid as you're working on your books throughout the year. Maybe you learned a bookkeeping lesson the hard way. What mistake was made and how did you fix it? As always, your experiences and expertise are always appreciated!