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4 Common Bookkeeping Mistakes to Avoid

As a small business owner, you juggle countless tasks every day, and bookkeeping often falls under the “vital to-do but put off until the last minute” category. 

Do you ever wonder if you are missing anything or making mistakes? 

I get it, and I am here to help. 

As a small business owner myself, I understand the challenges you face. Through my work as a bookkeeper, I have noticed some common bookkeeping mistakes. I have gathered them together so you can avoid these errors and be set up for success. 

Let’s dive in and explore how you can streamline your finances while saving time, money, and energy.

#1 – SAVING EMAILED RECEIPTS

I am sure you have heard the reminders to save all your receipts. 

When I hear this, I automatically think of paper receipts. It’s good practice to scan or take pictures of your physical receipts, but what about your email inbox? 

Did you know that you also need to save the receipts you receive by email? 

A common bookkeeping mistake that I find with clients is that they often forget about the emailed receipts. 

If you’re anything like me, you have a steady stream of monthly and yearly subscriptions that send emailed receipts.  And anytime I make an online purchase I receive a receipt by email. You need to save these, too! 

Here are the steps I recommend for saving them.

  • Organize your email: Start by creating a separate email folder or label just for the receipts you receive by email. You can name it “accounting,” “bookkeeping,” or simply “receipts.” Whatever works best for you. Then create a sub-folder for each year. As you receive email receipts move them to this designated folder.
  • Convert to PDFs: Take your organization a step further by converting your email receipts to PDF format. Set aside time each month to convert your receipts and store them in a designated online receipts folder. Save the digital copies of your paper receipts in this same folder.

For more tips on saving receipts, download the 6 Proven Steps to Organizing Your Pile of Receipts here.

Imagine the peace of mind knowing that all your receipts, whether digital or physical, are digitized, organized, and securely saved. By diligently saving your receipts you will save valuable time and effort during tax season.

#2 – FORGETTING ABOUT PAYMENT PROCESSING FEES

Do you receive customer payments with an online payment app? 

With the variety of payment processing apps available, it’s become easier than ever to receive payments.

However, there’s an often-overlooked detail: the processing fee. 

One of the common bookkeeping mistakes I find among small business owners is not including these fees in their financial records. 

I help each of my clients review their processes and reports to make sure they include the fees. Then we determine the best approach to track the payment processing fees. Here are two common solutions:

  • Include fees with each transaction: For businesses with a low volume of sales, you can record processing fees with each individual transaction. This method keeps your financial records up to date with every sale.
  • Monthly journal entry: If your business has a high sales volume, it may be best to consolidate processing fees with a monthly journal entry. This approach requires a manual process involving accounting debits and credits. Please consult a bookkeeping or accounting professional for the details.

How about you? Do you have a method in place to routinely track payment processing fees within your bookkeeping process? 

It’s a common oversight you don’t want to miss, especially because it affects your total revenue from sales and the fees are tax-deductible.

#3 – TRACKING CASH

I know I just talked about online payments, but what about cash? Even today cash can be a vital part of many businesses. 

Do you ever wonder what do when a customer pays with cash? Do you find it hard to keep business and personal cash separate? 

If so, here are some simple steps to help you avoid the common mistake of not tracking cash transactions. 

  • Establish a petty cash fund: If you find yourself using cash for small, minor expenses, consider setting up a petty cash fund. Petty cash is a small amount of cash kept on hand, typically no more than a few hundred dollars, and stored in a lockbox for safety. Using this fund maintains organization and prevents you from mixing personal and business cash.
  • Record cash payments received: When a customer pays you in cash, it’s important to provide a receipt as proof of the transaction. Receipts need to include the date, amount, customer’s name, your business name, and a brief description of the goods or services provided. Keep this receipt for your records and store the cash securely until it’s deposited in your bank. For a detailed guide on saving receipts download the 6 Proven Steps to Organizing Your Pile of Receipts here. 
  • Maintain detailed records: Your business needs to have a written policy of how cash will be managed. In addition to the policy, you need a ledger (notebook or spreadsheet) that includes important details, including the date, description of the transaction, and the parties involved. Remember to update the petty cash ledger regularly and reconcile it with your bank statements. 

It’s important to remember that cash transactions are not exempt from IRS reporting. 

Following these steps will help you maintain accountability, control, and accuracy of your cash transactions.

#4 – TRACKING BUSINESS MILEAGE

I find it’s common for new business owners to miss this item. 

If your principal place of business is at a home office and you use your car for work-related purposes, you may be eligible to claim car-related expenses as tax deductions. 

The IRS has two different methods for tax purposes: the standard mileage rate and the actual car expenses. Please read the IRS publication for details and consult your tax preparer to determine which method is best for your specific situation. 

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My purpose is to inform you of the options so you can start tracking your business mileage without delay. If you opt for the standard mileage rate, you need to record the number of miles driven for business purposes. 

Here are some tips to help you:

  • Keep a mileage log: You must be able to substantiate the miles driven for business purposes. The IRS states that your business mileage log needs to include the date, the purpose of the trip, starting and ending odometer reading, and the total miles driven. You can use a physical notebook (which is what I currently use) or one of the many mileage-tracking apps available.
  • Consult IRS guidelines and your tax preparer: Again, there are two methods for deducting personal vehicle expenses. You need to determine which approach is correct for your circumstances. Please be aware that if your business owns the vehicle, the requirements are different, so please do your research.

I have consistently tracked my mileage for all my businesses. Most years it consists of small trips that add up over time. 

Two years ago, I had the opportunity to add a baby grand piano for my private piano studio. It required driving through two states and back. I was able to claim the standard mileage deduction for over 1000 miles that year – a signification tax savings!

How did you do? Do you have anything new to implement in your business? 

My hope is that you’ve not only identified potential improvements, but also gained valuable insights for streamlining your financial processes. 

With a commitment to saving all your receipts, tracking payment processing fees, managing cash effectively, and diligently recording business mileage, you’re now on the path to reduced stress and more accurate financial records. 

Here’s to a bright business future!

Rene Barlow

Hi, I’m Rene Barlow!

The person who helps you keep more of your money!

I help women-owned businesses gain clarity and control of their business finances… and feel more confident in their financial decisions, using an easy, step-by-step process to organize and track your business numbers… and you grow your bottom line!

Start with a free consultation