Bookkeeping is the recording of financial transactions performed by a company over a period of time. It helps know the financial health of your business. Since a business that is not solid fundamentally and financially is vulnerable to failure from all sides, failing to keep an eye on your books can be an unforgivable mistake to make.

I have spent years managing small business finances and have spoken with thousands of business owners throughout my decade-long career. And it has made me realize that there are countless businesses that make the same accounting errors as if it were some sort of a universal tendency.

So, I have to come up with a list of bookkeeping mistakes that you must avoid when managing your company finances. Let’s dive in. 

1. Not bookkeeping because your business is too small 

If you own a company, you already know how important it is to be meticulous about the accounting side of your small business. It is one of the determining factors of your success. 

A successful business means proper bookkeeping – ensuring all transactions are correctly recorded and accounted for.

But it is rather typical for entrepreneurs to put off accounting and bookkeeping tasks or assume that they can do it on their own. This leads to incomplete or inaccurate information, which in turn affects the overall health of the business. 

The truth is, many small businesses generally forget about the fact that bookkeeping is a crucial task that shouldn’t be ignored if you want to run a successful company.

If you think your business is too small and you don’t need to worry about bookkeeping, think again. Because no matter the size of your business, you need to set a good financial foundation.

And bookkeeping may not be something that most business owners wish to spend time on. It is also not a fundamental qualification for any given small business owner to know how to do it. But it still provides an essential insight into how well the business performs financially.

More important than just being aware of your direct financial performance, bookkeeping is a tool that enables you to keep track of important financial data. Such data can be used as a measure of the future success of any business and can predict any possible future problems.

2. Mixing business and personal funds

Mixing funds will lead to stress and headaches, especially around tax time.

That’s why it is important to get used to separating your business from your personal finances as early as possible.

Regardless of the size of your business, you should have a separate bank account for your business transactions. Your business bank account should be used only for business and vice versa. This will give you a clear and accurate picture of where your businesses finances stand without any confusion.

3. Not recording your income and expenses

It’s no secret that small business owners work extremely hard and often go through growing pains. This is when the books tend to take a backseat. If you find yourself not keeping up with categorizing your income and expenses, it’s time to make it a priority. 

Whether you manage your business’ finances in excel or have accounting software, the goal is to track every dollar in and out of your business.

The longer you ignore this process the more stress you will have in the long run especially around tax time.

In order to make important financial decisions you need to stay on top of this.