Bookkeeping stands as the foundational pillar of a business’s financial health. When done meticulously, it ensures transparency and correctness. However, many small business owners, in an attempt to manage costs or due to unfamiliarity with the process, fall into the trap of committing unnecessary bookkeeping mistakes. Such errors, though seemingly benign, can have a substantial cost in the long run, leading to troubling financial issues:

Did You Know?

  • 56% of small business owners with fewer than six employees manage their bookkeeping.
  • A staggering 60% admit a lack of knowledge in accounting and financing.
  • A worrying 82% of small business failures can trace their downfall to cash flow or financial mismanagement.

In Washington County, where the percentage of small businesses is growing, avoiding these mistakes might just benefit your ventures in the long run.

Most Common Bookkeeping Mistakes:

1. Misinterpreting the Chart of Accounts

At the heart of bookkeeping lies the Chart of Accounts. It’s the categorization tool for all your transactions.

    • Income Statement Accounts: Presents a business’s overall income, including profit, COGS, and overhead costs like utilities, rent, and salaries.
    • Balance Sheet Accounts: Demonstrates a business’s net worth by showcasing assets, liabilities, and equity. It’s pivotal in assessing a business’s health.


2. Overlooking Software Nuances and Workflows

Take the time to learn how your software works, and how the actions you take may be tied to your financial statements. This will help reduce accidental mistakes. For example, when you create an invoice and send it to the customer, software such as Quickbooks automatically adds this to your income. If you were to manually enter the payment later when you receive a check, you would be double booked the income.


3. Complicating the Chart of Accounts

Creating a ton of accounts and subaccounts in your Chart of Accounts increases the likelihood of not staying consistent in using them. Keep your Chart of Accounts simple – only track accounts you need information on for management reasons. If you are looking for more detailed information, most accounting software provides reports (like sales reports) that are more precise without overcomplicating your Chart of Accounts.


4. Bypassing Bank and Credit Card Statement Reconciliation

Reconciling your accounts means checking that your records match the bank’s records. Reconciling accounts is an essential part of bookkeeping, as it helps to ensure that all transactions are accurately recorded and accounted for. Business owners who fail to reconcile their accounts regularly are likely to make mistakes in bookkeeping, which can lead to inaccurate financial statements and tax filings.


5. Infrequent Financial Statement Reviews

As a business owner,you must review, compare and analyze your financial statements regularly. Make sure to categorize expenses accurately and consistently to avoid errors such as inaccurate financial statements, tax filings, and audits.


Bookkeeping, when done accurately, safeguards a business from potential financial pitfalls. Such precision not only ensures compliance but lays the groundwork for informed business decisions. Given its vital role, consider investing in professional bookkeeping services or reliable accounting software. Whether you’re considering professional bookkeeping services or reliable accounting software, remember that Sunrise County Economic Council is here to support and guide you.

For Further details on how to effectively manage your business’ booking keeping watch the full webinar from Maine SBDC.

Skip to content