The Top 5 Bookkeeping Mistakes Small Business Owners Make (and How to Avoid Them)
- erin3433
- Oct 25, 2025
- 4 min read
Running a small business is no easy task. It’s a constant juggle of keeping customers
happy, managing your team, trying to stay on top of marketing, and many other tasks
that never seem to end. And then, there’s bookkeeping! Not the most exciting part of
your day, right?
But here’s the thing…it’s super important.
Here’s the good news! If you’re able to avoid these few common mistakes, you’ll be
able to save yourself a ton of time, stress, and money.
Mixing Personal and Business Finances
One of the first steps when starting your own business is opening a business account. This is where a lot of business owners make their first mistake! Many people will use the same bank account or credit card for both their personal and business expenses. I know, I know…but it’s super convenient. Yes…but this can lead to a host of problems!
According to the IRS, a business expense must be both "ordinary and necessary" but what does that mean exactly? An ordinary expense would be your rent or utilities at your office space or building where you operate. A necessary expense would be something more specific to your line of business.
Let’s say that you own a coffee shop, a necessary expense would be coffee beans, syrups, and machinery like grinders,
espresso makers, and so on. These are all expenses that can be considered as write-offs. Things like a fancy new watch may seem like a necessity to look presentable, but that would fall under a personal expense and can’t be written off.
Not separating your accounts can lead to legal issues, an organized mess, increasing your chances of being audited, hurting your business growth, etc. The easiest thing to do to avoid all of this is pretty straightforward: just don’t do it! Make sure you have separate accounts and credit cards for your business and personal expenses.
Doing It All Yourself
We have tons of respect for business owners that DIY their way to the top, especially when it comes to their finances. That being said, the DIY life isn’t for everyone. So, what’s best for you and your business?
Ask yourself these questions:
“Do I have time to learn?”'
You don’t necessarily need a college degree in accounting, but you will need to be able to devote some time to learning the basics. If you are already telling yourself that you don’t have enough time in the day or need a clone of yourself, you may want to outsource your bookkeeping.
“Do I have time to keep up with it?”
Can you commit to setting aside an afternoon here and there to reconcile your expenses and income, on top of the weekly bookkeeping tasks?
“Do I have the resources to learn?”
Yes, you can google your way through it, but that will only get you so far and can be specific depending on what bookkeeping program you are using and how often they update their processes.
Ignoring Important Deadlines
This is one of the most expensive mistakes that a business can make. Once you’ve started missing tax deadlines, the IRS will add both penalties and interest to what you already owe.
Beyond that, you are also exposing your business to audits, negative
impacts on credit, and even more importantly…losing the trust of clients and investors.
The easiest way to avoid this, honestly, is to avoid the rest of the mistakes laid out in this blog.
Reconciling your accounts monthly, keeping track of your expenses, keeping
your personal and business accounts separate and having someone with the proper knowledge and time, are you best defenses to making sure you don’t miss all the important deadlines.
Not Reconciling Accounts Regularly
Regular reconciling of accounts is essential for keeping your financial records
organized. But it’s also the easiest thing to put to the wayside, whether it’s due to a lack of time or because it doesn’t seem important. This alone can send your business into financial chaos and down a rabbit hole that you can’t climb out of.
Failing to regularly reconcile your accounts can lead to making uninformed decisions about your business and lead to inaccurate financial statements and costly penalties during tax season.
Make sure to set aside time each week to go over your books and make any necessary updates.
This can be something as simple as:
- Entering receipts
- Reconciling accounts
- Reviewing financial statements
If you find yourself not having the time for this, or that it’s too challenging, than please consider hiring a professional bookkeeper.
Not Tracking Receipts
And last but not least…everyone’s favorite thing to do! Tracking and filing receipts! Just kidding…I know it’s a pain. So, what is the main reason behind keeping receipts?
Audits.
It’s the biggest reason behind keeping them. The IRS may want to audit your
business, and they don’t want to take your word for why you needed new equipment from Staples. They want to see the actual receipt and may even do as far as to wanting to match it up to the item in your office. It’s always good habit to keep receipts of everything. From meals, office supplies, inventory, advertising, and basically anything you want to write-off.
I know…you’re thinking, great, now I have to find some empty shoe
boxes to stuff all this in! But there are some great apps that we can recommend that will help save your receipts in the cloud so that you don’t have to keep all these physical papers around.
They are as easy as scanning the receipt and filing it away and you’re done!
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