Are you a small business owner making bookkeeping and accounting decisions on your own?

Accounting can take up a lot of your valuable time.

However, accurate bookkeeping and accounting are essential for the success of any small business.

Many small businesses who do their own bookkeeping can fall behind in their books and end up having to do catchup.

This blog post highlights the 12 most frequent bookkeeping and accounting errors that small businesses make in 2023.

12 Super-Common Bookkeeping & Accounting Mistakes Small Business Make 2023

Bookkeeping & Accounting Tip #1 - Overpaying Tax by Neglecting Tax Reduction Planning

You don't want to be giving the government more of your money for no reason.

There are many different tax reduction planning strategies that you can follow to reduce your taxes.

Deductions, business structures, neglecting tax planning, & more things will help you reduce taxes.

Consult a CPA or a tax accountant that follows the outsourced accounting model that does tax reduction planning.

Bookkeeping & Accounting Tip #2 - Settling for a Year-End Tax Preparer

When you choose a tax preparer that only does taxes at the years end, you miss out on tax opportunities throughout the year.

Tax planning is an on-going process that needs to be done at least every quarter to ensure you get the most out of your possible deductions and credits.

By waiting till the end of the year, you limit yourself by not allowing time for effective tax planning.

You need a proactive tax accountant or CPA that can anticipate tax issues and not deal with them when they become problems.

Bookkeeping & Accounting Tip #3 - Mixing Personal and Business Expenses

If you don't separate your personal and business expenses, it can disrupt your record keeping and be difficult to determine profitability, track expenses, and preparing financial statements.

If your business were to be audited, having clear and separate records makes the process go smooth and not have bumps.

When your business is structured as an LLC, to be able to ensure you maintain legal protection of personal assets.

It's easier to track expenses, calculate profitability, and prepare financial statements when business transactions are not mixed with personal ones.

Bookkeeping & Accounting Tip #4 - Inaccurate categorization of expenses

Different categories of expenses can have different tax treatments.

Such as labeling expenses that need to be capitalized or depreciated over time.

Misclassifying expenses may cause wrong budgeting predictions, resulting in inadequate financial planning.

Some industries have specific regulations about how certain expenses should be categorized and reported.

We recommend talking to a CPA that works in your specific industry.

Bookkeeping & Accounting Tip #5 - Not setting aside money for taxes

If you fail to set aside money for taxes, you can be screwed from unexpected taxes, penalties, and legal consequences.

Small business owners may be caught off guard by the amount they owe when tax season arrives.

When you don't put enough money towards taxes you will end up owing money, and if you reinvested the money into your business you will have to pay interest on the amount owed to the IRS.

Allocating funds for taxes is an essential component of a small business's financial approach.

Bookkeeping & Accounting Tip #6 - Inefficient payroll management

With inefficient payroll management, your business can fall victim to tax errors, financial inaccuracy, and legal problems.

Efficiently handling payroll goes beyond merely distributing checks; it's a vital aspect of business operations that demands precision, promptness, and a thorough grasp of rules and taxes.

Inefficient management could lead to non-compliance, which might result in penalties, fines, or even lawsuits.

If a small business outsourced their accounting and payroll, they don't need to worry about keeping compliant with payroll, and leave it to the professionals.

Bookkeeping & Accounting Tip #7 - Lack of Consistency

You need to be consistent with your bookkeeping and accounting by keeping up-to-date financial records, and not fall behind.

Which will then lead to trouble with taxes, and maybe result in penalties from the IRS or other authorities.

Inconsistent policies or management can lead to confusion and low morale among employees, and can hinder performance and productivity.

Bookkeeping & Accounting Tip #8 - Not Saving Receipts

Receipts prove that expenses are for businesses.

If you don't keep the receipts to backup the deductions, you may lose out on those deductions.

If the IRS decides to audit your business, one of the first things they will request is proof of income and expenses, and receipts will prove that.

Bookkeeping & Accounting Tip #9 - Failing to Plan for Major Expenses

Unexpected big expenses like buying new equipment or getting emergency repair for equipment can disrupt a small businesses cash flow.

You may end up needing to borrow money to cover the expense, and then pay fees related to that.

If the business does not have enough cash on hand and is unable to secure financing, it may not be able to continue operations.

Bookkeeping & Accounting Tip #10 - Inadequate knowledge of tax laws and regulations

Staying on top of every regulation and tax law in your industry can be a demanding task on top of running your business.

Not knowing if they're doing things correctly can cause significant stress and worry for small business owners.

If a business owner isn't aware of their tax obligations, they could be hit with unexpected tax bills.

That is why it is important to find an accountant that will handle your taxes.

Bookkeeping & Accounting Tip #11 - Poor record-keeping

Businesses are required by law to maintain certain records.

Which you most likely are keeping up with, however you may be falling behind in the non essential ones.

Accurate financial records provide invaluable insights for strategic planning and business growth.

Hire a bookkeeper to keep your records up to date every month.

Bookkeeping & Accounting Tip #12 - Not seeking professional help

Tax laws and financial regulations change frequently, and staying current can be a full-time job.

Professionals are less likely to make these mistakes and can also spot and correct any errors in existing records.

It is hard to stay up-to-date with ever changing laws, and running a successful business.

A CPA or tax accountant can provide advice on financial management, tax planning, business growth strategies, and more.

Conclusion

While you may be tempted to handle all of your business's accounting and bookkeeping tasks yourself to save money, we have highlighted many mistakes business owners doing their own books can fall victim to.

Remember, seeking professional help isn't a sign of weakness, but rather a smart business move.

By doing so, they not only save you money but also free up your time to focus on what you do best – running and growing your business.

We are a certified public accountant that helps with business startup, s-corp setup, bookkeeping, and business tax preparation.

We're committed to integrity in the large and small things, and embracing the truth through aggressive tax planning.

Schedule a consultation today.