10 Common Bookkeeping Mistakes Small Businesses Make

After working with many new business owners, we see the same bookkeeping mistakes again and again. The good news: each one is easy to prevent.

1. Mixing personal and business money

Using one account for everything makes bookkeeping slow, deductions easy to miss and liability protection weaker. Fix: separate business checking and credit card from day one.

2. Not reconciling accounts

Bank feeds import duplicates and miss transactions. Fix: reconcile every bank, card and payment account monthly.

3. Counting transfers as income

Moving money from savings to checking, or from PayPal to your bank, isn't new income. Counting it twice inflates revenue and taxes. Fix: record transfers between your own accounts as transfers.

4. Treating sales tax as revenue

Sales tax you collect belongs to Washington State. Fix: record it as a liability and set it aside.

5. Recording owner draws as expenses

Paying yourself isn't a deductible expense for a sole proprietor or LLC. Fix: use owner draw or distribution accounts.

6. Recording the full loan payment as an expense

Only the interest portion of a loan payment is deductible. The principal reduces the loan balance. Fix: split each payment, using your loan statement.

7. Expensing big equipment without tracking it

Large purchases should be recorded as assets so depreciation, Section 179 and future sales are handled correctly. Fix: set up fixed asset accounts and keep purchase invoices.

8. Losing receipts

No receipt can mean no deduction, especially for meals and travel. Fix: photograph receipts immediately and attach them in your software.

9. Not tracking contractor payments

Missing W-9s and unclear vendor totals make January 1099 filing stressful. Fix: collect a W-9 before the first payment and use vendor names consistently.

10. Waiting until tax season

Doing a year of bookkeeping in March means missed deductions, rushed decisions and a year without useful financial information. Fix: monthly bookkeeping on a set schedule.

Bonus: overusing "Miscellaneous" and "Uncategorized"

These categories hide information and raise questions in an audit. Every transaction deserves a real category.

The bottom line

Most bookkeeping mistakes come from a lack of routine, not a lack of skill. Separate accounts, reconcile monthly, save receipts and get help when your books start slipping.

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Need help getting this right? TRIG Bookkeeping & Tax Services helps new business owners in Washington with company registration, monthly and annual bookkeeping, and government compliance. Contact us to talk about your business.

This article is general information, not legal or tax advice for your situation. Tax rules and fees change, so confirm current details with the IRS, the Washington Department of Revenue, or a qualified professional.