Let’s be real—nobody starts a business because they’re excited about bookkeeping (unless you’re us, obviously 😉). You’re already juggling things like staying relevant on social media, answering customer emails, and funding your next payroll, so when it comes to your bookkeeping… getting it done fast⏤fast⏤and faster is typically the name of the game.
But the thing is, this method becomes a breeding ground for bookkeeping errors. Speed often leads to sloppy work—and those slip-ups can cost you time, money, and sanity. Having well-kept books gives your business a solid foundation and helps you make financially healthy decisions that keep you moving forward.
So today, we’re sharing the most common DIY bookkeeping mistakes we see & how to fix them. We’re hoping this will save you some time and a few headaches down the road!
1. Mixing Personal and Business Expenses
AKA: “But it’s all coming out of the same bank account!”
Blending personal and business expenses is like baking a cake and then trying to remove the eggs. Once it’s mixed, it’s messy.
Whether it’s paying for lunch with your business card or using your personal funds to cover a vendor invoice, blending personal and business money makes it hard to see what your business is really earning (and spending)—and it’s a big no-no if you ever face an audit.
Real World Story:
We once worked with a boutique owner who ran everything through her personal debit card because it was ‘just easier.’ By the time she came to us, half her expenses were tangled, her reports made it look like she was making more than she really was, and tax season clean-up was both costly and a nightmare. Cleaning it up took hours—but once her accounts were separated, she could actually see what her boutique was earning (and paying herself got a whole lot simpler).
The fix:
Open a separate bank account and credit card for your business. Like, now. If you need a referral, our favorite business bank is Relay, it’s online and completely free, plus has some cool automation features to help you with Profit First style savings. Even if you’re a sole proprietor, this still applies. If you do need to pay for something business-related with personal funds (it happens), record it properly as an owner contribution aka you are putting money into the business. And vice versa, if you purchase something personal with business funds, either reimburse the business or record it as an owner’s withdrawal.*
*Keep in mind that there are MANY nuances re: comingling personal and business finances with relationship to legality and entity type (i.e., too many to cover in a blog). Always confirm specifics with your licensed tax professional.
2. Poorly Set Up Chart of Accounts
A.K.A. The “Miscellaneous” Monster
Your Chart of Accounts (COA) — basically the master list of categories you use to track money in and out — is the backbone of your financial reports. If it’s cluttered, confusing, or full of duplicates, your reports won’t actually tell you much. Trust us, we’ve seen COA’s as long as your Amazon “save for later” list …and honestly, they don’t make the numbers any clearer. No one needs 12 versions of “dues and subscriptions”.
The fix:
Clean it up. Simplify your categories so they actually reflect how your business earns and spends money. Use clear, distinct names and group similar items together. And don’t be afraid to archive what’s no longer useful or merge similar accounts together (just remember, once accounts are merged, there’s no “undo” button). If you need a second set of eyes on this, that’s what we’re here for.
3. Recording Loan Payments as Expenses
That loan principal you’re paying? Not an expense.
This one trips up a lot of small business owners: you take out a loan, make your monthly payments, and categorize the whole thing as an expense. But in reality, only the interest portion of that payment counts as an expense. The rest is simply paying down what you owe (your loan balance). When you categorize the whole payment as an expense, it makes your business look less profitable than it really is—which can lead you to make bad decisions based on inaccurate reports.
The fix:
Set up the loan properly in your books as a liability account. Then, each time you make a payment, split the transaction between principal (reducing the loan) and interest (hitting your P&L). Most lenders provide an amortization schedule so you know how much goes to each. If splitting every payment feels overwhelming, your tax professional can make one adjustment at year-end, so your reports reflect the right totals. And yes, this usually involves a (try not to wince 😱) journal entry—but don’t panic, that’s what pros are for.
💡 Pro Tip: Want to make sure you’re not missing these kinds of details? Grab our Month-End Bookkeeping Checklist—it’s a tool our bookkeeping team built to help you keep your books clean and stress-free.
👉 Download the Checklist Here
4. Running Payroll Without Syncing to Your Books
“It’s all in Gusto/ADP, so we’re good... right?”
Not quite. Just because payroll happened doesn’t mean it landed in your books correctly. Things like wages, taxes, reimbursements, and paycheck deductions all need to show up in your bookkeeping software — otherwise your reports could give you the wrong picture.
The fix:
Make sure your payroll platform is integrated with your accounting software (and double check the mapping). If it’s not integrated, you’ll need to record the totals manually—think wages, taxes, benefits, and reimbursements. It doesn’t have to be fancy, but accuracy here keeps your reports trustworthy. Lastly, make sure that the total payroll recorded on your P&L matches what’s reported on your payroll provider’s annual payroll tax returns. Discrepancies between your business’s income tax returns and payroll tax returns could trigger an audit (yes, another wince-inducing word).
5. Misclassifying Transfers Between Accounts
One business account → another business account ≠ income.
We see this mistake often when a business has multiple bank accounts, credit cards, or platforms like PayPal, Venmo, or Stripe and they are all connected to their accounting platform. Moving money between your own accounts is not income or an expense—it’s just a transfer.
Real World Story:
We had a client with three different bank accounts, plus PayPal and Venmo in the mix. Every time money moved between accounts, it was being recorded as additional income or an additional expense. On paper, it looked like they had doubled their revenue overnight—which sounds amazing until you realize it wasn’t real. Once we got their historical transactions cleaned up and showed them how to use the ‘transfer’ function properly, their income reports made sense again—and they could finally trust their numbers.
The fix:
Use the transfer or credit card payment function in your accounting software when moving funds between internal accounts. Even if it shows up twice (once in each account), your software should only record it once—as a transfer or credit card payment, not income or expense. When a transaction shows up as income or expense and it’s not, reclassify it properly. Clean books = clean insights.
6. Forgetting to Record Sales Tax Liabilities
If you’re collecting it, you’re holding it in trust. Not revenue.
If your business collects sales tax (online or in person), that money is not yours—you’re just the middleman. Forgetting to record or set aside sales tax collected can result in a nasty surprise when it’s time to remit those funds.
Real World Story:
A few years ago, a very successful eCommerce client started working with us. Unfortunately, when we dug into their financials, we found that all sales tax collected had been recorded as income, meaning they not only were showing about $20k more income than they actually had, but they also owed that same amount to various states.
The fix:
Set up a liability account for sales tax. Every time you collect it, that money should be tracked separately from your income. If your sales platform tracks this for you, great! But make sure it’s also flowing correctly into your books. And yes, you should reconcile your sales tax liability to what’s actually due, just like any other liability account.
Final Thoughts
Mistakes happen. Especially when bookkeeping isn’t your full-time gig. But the good news? Every one of these mistakes is fixable—and the sooner you catch them, the better off your business will be.
If any of this made you sweat a little, don’t panic. That’s why people like us exist, the ones that get excited about bookkeeping and start businesses to do just that. We’re not here to judge—we’re here to help you get clean books, real insights, and a stronger financial foundation.
Mistakes are fixable—and you don’t have to fix them alone. Grab our free Month-End Checklist and let’s make sure your books are helping you grow, not holding you back.
Until next time, friends: stay balanced. 😉
Leave a comment (all fields required)