Avoid these bookkeeping mistakes as a small business owner

The types of bookkeeping errors that can be detrimental to your small business are numerous and tragically common. Over our years of cleaning up bookkeeping mistakes, I’ve seen everything from the mundane to the egregious. This guide will help you identify and steer clear of the most common pitfalls that even experienced bookkeepers make.

Routine bookkeeping offers hundreds of opportunities to make mistakes. The top three most common bookkeeping mistakes to avoid:

1. Overcomplicating the General Ledger and Chart of Accounts.

2. Relying on admin email for financial communications.

3. Making one person responsible for all bookkeeping.

Mistake: Creating a general ledger (GL) account for nearly every type of expense. GL accounts are easy to create but difficult to get rid of.

Impact: Complex GL’s lead to confusion and inefficiency, obscuring vital financial insights.

Best Practice: Your accounts should be as simple as possible but not any simpler. Clarity trumps complexity in accurate bookkeeping.

Mistake: A frequent bookkeeping error is using admin emails, such as Admin.name@yourcompany.com for all Accounts Payable communications.

Impact: This practice creates headaches through reduced transparency, increased fraud risk, and lost communication and data when personnel changes occur.

Best Practice: Use a dedicated, shared email inbox like AP@yourcompany.com. This reduces information silos and ensures continuity in your financial communications, a vital aspect of organized bookkeeping.

Mistake: Attempting to manage all bookkeeping tasks by yourself.

Impact: Solo bookkeeping carries many downsides, including:

·        Inefficient use of your time

·        Poor quality assurance and error checking

·        Increased suspicion of inaccuracies and fraud

·        Hindered business growth due to unscalable processes

·        Increased stress and anxiety for you

Best Practice: Delegate and verify. Effective bookkeeping involves separation of duties, teamwork, and checks and balances. This reduces suspicion that you are incompetent or stealing money.

By knowing which accounting mistakes to avoid, you set a solid foundation for your business’s financial management. Effective bookkeeping is not just about compliance; it’s about strategic business decision-making.

Common bookkeeping mistakes can hinder your business’s growth, but now more than ever there are excellent service providers to help your small business. To learn more about how CFOshare uses bookkeeping best practices, schedule a free consultation with our team.

This article was written by a CFOshare employee with assistance from generative AI for rhetoric, grammar, and editing. The ideas presented are a combination of the author’s expertise, original ideas, and industry best practices.