Bookkeeping is an essential aspect of managing your finances and keeping track of your business’s financial health. Humans, however, are fallible and mistakes sometimes happen. Bookkeeping mistakes can be costly and time-consuming to correct, and might even land you in hot water with regulatory agencies or tax officials.

To help you avoid these headaches, we’ve outlined the most common bookkeeping mistakes that you should be aware of and how to avoid them. Taking your time, being thorough and meticulous, and keeping as many records as possible can help you avoid some of the worst bookkeeping mistakes, like:

1. Not Keeping Accurate Records
   One of the most significant mistakes in bookkeeping is not keeping accurate records. It’s essential to maintain accurate records of all financial transactions, including income, expenses, and receipts. Failure to do so can result in incorrect financial statements, missed tax deductions, and potential legal issues.
2. Failing to Reconcile Bank Accounts
   Failing to reconcile your bank accounts regularly is another common mistake. Reconciling your bank accounts involves comparing your records to your bank statements to ensure that they match. This can help identify any discrepancies and prevent errors.
3. Not Tracking Expenses Properly
   Tracking expenses is a critical aspect of bookkeeping. Failing to track expenses properly can result in missed deductions, inaccurate financial statements, and tax issues. Make sure to keep receipts and other documentation for all expenses and record them in your accounting software.
4. Mixing Business and Personal Finances
   Mixing business and personal finances is a common mistake, especially for small business owners who might do their own bookkeeping. It’s important to keep your personal finances separate from your business finances to avoid confusion and potential legal issues.
5. Forgetting to Record Cash Transactions
   Forgetting to record cash transactions is another common bookkeeping mistake. Make sure to record all cash transactions, including cash sales, petty cash expenses, and withdrawals.
6. Not Updating Books Regularly
   Not updating your books regularly can result in incomplete or inaccurate records. Set a regular schedule for updating your books and stick to it to ensure that your records are up-to-date and accurate.

Bookkeeping mistakes can be costly and time-consuming to correct. Not keeping accurate records, failing to reconcile bank accounts, not tracking expenses properly, mixing business and personal finances, forgetting to record cash transactions, and not updating books regularly are common mistakes to avoid.

By being aware of these mistakes and taking steps to prevent them, you can ensure that your bookkeeping is accurate and up-to-date, providing you with valuable insights into your business’s financial health.

What to Do If You Catch a Bookkeeping Mistake

Now that you know the common bookkeeping mistakes, what do you do if you find one in your books or financial reports? Discovering an error or discrepancy on a financial statement can be a concerning experience, but it’s important to know what steps to take to address the issue. Here are some steps you should take if you find an error on a financial statement:

1. Identify the Error
   The first step is to identify the error and determine its nature. Is it a simple math mistake or a more significant error that could impact the accuracy of the statement? It’s essential to have a clear understanding of the error to determine the appropriate action.
2. Document the Error
   Once you have identified the error, document it carefully. Make note of the date, the statement affected, the amount of the error, and any other relevant details. This documentation will be helpful if you need to discuss the error with others, like a company executive or auditor, or if there are future questions about the situation.
3. Contact the Responsible Party
   Depending on the nature of the error, you may need to contact the responsible party to address the issue. This could be the financial institution that issued the statement or the individual or organization responsible for preparing the statement. Explain the error clearly and provide any documentation you have collected.
4. Request a Correction
   If the error is significant and could impact the accuracy of the statement, you should request a correction. The responsible party should be able to correct the error and provide you with a revised statement. Be sure to review the revised statement carefully to ensure that all errors have been corrected.
5. Follow Up
   After requesting a correction, follow up to ensure that the error has been corrected and that you have received the revised statement. If there are any questions or concerns about the situation, address them promptly.
6. Learn from the Situation
   Finally, it’s important to learn from the situation and take steps to avoid similar errors in the future. Consider reviewing your own records more carefully, double-checking statements for accuracy, and asking questions if anything seems unclear.

Common bookkeeping mistakes can be avoided most of the time, but that doesn’t mean an error won’t happen. When it does, it’s important to know what steps to take to address the issue. Identify the error, document it carefully, contact the responsible party, request a correction, follow up, and learn from the situation. By taking these steps, you can address the error and ensure that your financial records are accurate and up-to-date.

Discovering an error on a financial statement can be a stressful experience. Bookkeeping in general can be worrisome for many small business owners, who understandably don’t want to get on the wrong side of the tax collector. Propel can help. Our team of experienced and professional bookkeepers can help you take command of your back office, so you can focus on what you do best. We’ll handle the rest! Simply say hello to get the conversation started.