7 Common Bookkeeping Mistakes

As bookkeepers, we make mistakes all of the time. These costly mistakes can cause problems for our clients and rob us of thousands of dollars in lost revenue each year.

These are not technical mistakes, although there are plenty of those too.
Quick tip: if the amount you're out of balance is divisible by 9, you flipped two numbers somewhere.

And while these are all common bookkeeping mistakes, they could also be called common bookkeeper mistakes. These are habits and routines we get into when we're busy and want to get the work done. Like all bad habits, they tend to worsen the longer you've been doing the work.

You may not do all of these, but I will bet you will recognize a few of the mistakes on the list.

7 Common Bookkeeping Mistakes

1. Not getting all of the deadlines up front.
2. Not double-checking your work.
3. Assuming no news is good news.
4. Not documenting your processes.
5. Dismissing something as a one-time issue.
6. Letting your invoices go unpaid.
7. Not offering your client more services.

Bookkeeping mistake #1: Not getting all of the deadlines up front.

If you have worked with 1 or 501 clients, the 502nd will have some weird filing to complete that you've never heard of before. It will be at an unusual time of the year, and it will cause big problems if it's not filed on time.

To make matters worse, the client is used to these filings, and so was their last bookkeeper. It will not occur to them to remind you of these. They will assume that every bookkeeper knows about the Springfield County semi-annual Business Revitalization Zone reports.

How to stay on top of deadlines.

It's perfectly fine that you didn't know about this before you started. As part of your client onboarding checklist, ask about all of their annual filing requirements. Get copies of all of last year's returns. Also, get all the necessary documentation so you know:

• What information is needed in the return.
• When the return is due.
• Who needs to review the return before you file it?
• Are there fees associated with the return?
• How is it filed? (online, email, mail)

Once you have all of this information, create recurring tasks that include a checklist, links to supporting documents, and links to the website where you file the returns. Keeping track of these important dates will save you a lot of late-night panic attacks.

Bookkeeping mistake #2: Not double-checking your work.

Categorizing business expenses is one of those tasks that has truly benefitted from automation. You can set up bank rules in QuickBooks or Xero, and the 27 times your client used Lyft last month are magically recorded correctly. It's so good, in fact, that it's really easy to gloss over the entire process.

You have a million things to get done today. All you know is that the bank accounts are reconciled, so that's good enough, right?

With great rule-making power comes great rule-making responsibility.

The client has a lot of small software charges from Apple. So, you create a rule that says any business expenses from Apple = Software Expenses. The next time you review the financial statements with your client, they point out that this expense category has really gone up.

After some review, you see your mistake. The rule did its job. It categorized everything Apple as Software Expenses. That included the $0.99 apps, but also the three computers they bought from Apple, the books they bought from Apple Books as a personal expense, and the advertising work they had done by Big Apple Marketing.

This is a totally fixable mistake, but one you should have caught before presenting the reports. You assumed the rules did their job, but you didn't double-check.

Set up regular reviews of business expenses.

Until you have an employee whose work you review, pretend you're that employee. Take a few minutes or a few hours if needed, and review the financial records regularly.

When you prepare the monthly financial statements, compare them against the last two months. Does anything jump out? Did one category double this month? Did you suddenly have an expense in a category you rarely use? Are you sure none of those Amazon purchases were personal expenses?

Was this a minor error? Sure, and an easy one to fix. However, when you make simple bookkeeping mistakes, the business owner loses faith that the rest of your work is accurate.

Bookkeeping mistake #3: Assuming no news is good news.

When you're just getting started, you might only have one client to manage, which makes it easy to stay in touch.

Once you start to grow, you'll have several business owners to juggle. It's natural to pay more attention to the ones who are the loudest and most persistent. It might feel like a relief that one of your clients isn't complaining. You mistake the silence as a sign that you've done a good job.

No news might be them dealing with a crisis and not having the time to reach out. Or maybe they're quietly fuming about an issue they have with their financial statements.

Set up regular check-ins with all of your clients.

Whether you need to or not, make sure you check in with your clients regularly. Often a simple email will do. This is especially important with your quarterly or annual clients. The ones who need your help so little you almost forget they're clients.

• For those clients, check in on a monthly basis. Don't wait until tax time. This does three things.
• It lets them know you're thinking about their business, and you're not taking them for granted.
• It prompts them to inform you if something significant in their business has changed, or if they had an issue or question they wanted to address.
• It might even turn into more work for you. If you're in regular contact, you'll be the one they ask when they need additional help, or if they have a friend who needs a bookkeeper.

Bookkeeping mistake #4: Not documenting your processes.

At first, you barely know what you're doing, let alone the best way to do it.

It will take a while to figure out what systems and processes work best for your situation. The big mistake here is to ignore the lessons you're learning. If you don't write down a system and take copious notes, you will constantly reinvent the wheel.

You won't remember how you solved that problem in QuickBooks last year, or what you said that landed you that big client.

And what about when you need a vacation? How will anyone know how to handle your work while you're away?

Create a bookkeeping playbook.

Whenever you solve a problem, write it down. Better yet, record a quick video of you solving it. Using an app like Scribe is a quick way to document your processes. I'll be sure to do a post on it in the future.

Start creating your own bookkeeping playbook. It will change over time, and that's fine. At any given time, you have a set of formal bookkeeping practices that you can share with your future team.

Bookkeeping mistake #5: Dismissing something as a one-time issue.

The accounting software you chose runs into a weird issue, and you lose some data. Next month it's a different issue and you can't log in. Then you email support about something else and you find their response slow and unhelpful. You convince yourself that these are isolated issues. You waste time each month sorting out a new issue, which cause you and your client major problems.

Address problems before they get out of hand.

Just like you do with your playbook of good ideas, consistently track the problems you encounter. Review these notes periodically. Look for patterns that need to be addressed.

If you notice that your accounting software has crashed three times in pretty significant ways, it might be time for a change. This is the way you make your living, so you can't afford to have your tools break down regularly.

Bookkeeping mistake #6: Letting your invoices go unpaid.

I suppose the problem is pretty obvious, but so easy to find yourself in this situation. This is a huge problem if you're switching from employee to freelancer. You're used to getting paid regularly and on time. You didn't have to chase down your boss for money each payroll.

There are common mistakes on your end that will get you into this situation.

• You don't have clear payment terms in your contract.
• You don't get your invoices sent out on time.
• You don't make it easy for your client to pay you.

Or, your client is just terrible at paying people on time.

The problem compounds by being scared to ask for the money. When you bring it up, your client gives you an excuse, so you wait another 2 weeks. Pretty soon you're having serious money problems.

Make it easy to get paid.

Step one is to make it super easy to get paid. If you eliminate all of the valid excuses, it will solve most of your problems.

• Have your invoices sent out on the first of the month.
• Accept multiple options for paying you including credit card and direct deposit.
• Have clear rules in your contract, and on each invoice, that states when you need to be paid, and what will happen if you're not.

Step two is to follow up politely, but regularly if the invoice is late.

This is a bit easier to solve if you're also in charge of their Accounts Payable. You can simply include your invoice in the stack that needs approval. If they only approve a couple of the bills, let them know you'll process the payments as soon as all of the bills have been approved.

If the owner handles these, don't hide behind the auto-reminders your invoicing software sends out. Ask them directly the next time you meet. I have had so many times when the reminder emails did nothing to prompt payment. After bringing it up during our next phone call, the invoice was paid that day.

The pro tip is to never have receivables in the first place. Check out this great article from Ignition on a better way to get paid.

Bookkeeping mistake #7: Not offering your client more services.

I hate the term "just a bookkeeper". It's hard work, and it provides a huge benefit to the small business owners it serves.

Unfortunately, it's easy to get that stuck in your head. You will limit yourself to the bare essentials, even when you know you have so much more to offer. Doing this leaves so much money on the table.

You sign up a client and offer the least amount of services possible. You don't want to be too pushy and offer add-ons or extras. Your clients don't ask you to do more, so you assume they don't want more than what you currently offer.

Instead of building more value for you and your client, you're stuck finding more and more clients just to make ends meet.

Always look for ways to offer more.

Most small business owners do not know what a bookkeeper does. I wrote in a post a while ago about the different ways people define bookkeeper. The biggest reason your clients don't ask you for additional services is because they don't know what you offer. They know they need their "books done", but don't know what else a bookkeeper can help them accomplish in their business.

A low pressure option is to show them a list of all the services you offer. Have this on your website, or have a list you share with them directly. I suggest doing this at the beginning of the engagement. This could allow you to bundle some premium services into your monthly fees.

Another option is the bring these up organically while you're performing your "regular" functions.

I've noticed your accounting software isn't configured properly. Would you like me to make some improvements? While I'm at it, I could offer your team some regular training sessions.

I understand you're trying to decide whether hiring is a good idea. I could run some scenarios for you that would show you how hiring now will impact your financials next quarter.

There are so many extra services you could be offering. Yes, these would drastically increase your earning potential. But they would also really help your clients. There are important business decisions that business owners avoid dealing with because they don't feel they have the professional help they need to make them.

Many business owners, especially sole proprietors, assume they don't have access to these services. They will assume it's simply too much money. By showing them all the services an experienced bookkeeper can provide, it will make a positive impact on both of your businesses.

Conclusion

Over my many years of working with clients, these are the most common bookkeeping mistakes that have impacted my business.

Yes, there will be more common mistakes when you're just getting started. I'm sorry to tell you, but you're going to look dumb in front of the business owners for a while. You'll forget something basic on the financial reports. If you provide tax services, you will forget to enter something on their tax return. It will suck, but it's part of learning, and these problems will go away with experience.

I find it's these 7 that stick around if you don't address them early and often. But these are just my 7. What are yours? What bookkeeping mistakes do you run into in your business? Contact me and let me know.

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Until then, have a great day!

P.S.: Thanks to this old blog post from 2018 that helped me figure out how to do the Table of Contents in Markdown.