The 12 Most Common Bookkeeping Mistakes to Avoid

Bb girl, the government doesn’t deserve any more of your hard-earned money. Let’s change that. By reading this blog post, and learning about the most common bookkeeping mistakes you can avoid, you’ll be able to hang on to more of your cashola. 

(Oh, and by the way, before you start reading this list, don’t you even consider beating yourself up if you’ve made some of these bookkeeping mistakes. You don’t know what you don’t know and that’s why we’re here: to help you figure the confusing sh*t out.)

#1 – The big ‘ol bad boy bookkeeping mistake: mixing business and personal

Separating business and personal finances is 100 percent essential, required, absolutely have-to do it. And we’re not saying that just to say it, we’re saying that because not separating business and personal finances will make your life (and tax season) a living hell. Plus, it can void your LLC status and will make tracking your income and expenses a bajillion times more complicated. 

(Just imagine trying to sort through your bank statements and figure out what each charge even is and whether or not it’s a business-related expense. You’ll definitely end up missing some, which means you’ll end up having to report more profit, which means you’ll have to pay Uncle Sam more in taxes and that’s gross.)

Separate business and personal finances by opening up a different bank account for your business instead. 

(We recommend Chase or RelayFi)

 
#2 – Not creating a baby budget

We know that the word “budget” makes most people feel like this…

But. What if, instead of thinking of budgeting as making a bunch of rules about what you’re not allowed to spend on, it’s about figuring out what’s actually important to you and helping you find the money to spend on that important shit.

You don’t have to make a budget down to the cent (unless you want to, I mean, I do, but that’s because I’m a numbers nerd), but we definitely recommend making yourself a baby budget.

And to do that, you just gotta sit down and think about all of the things you wanna spend money on this year (or next year)—think: subscriptions, contractors—like website designers, copywriters, and more—business events and retreats, potential hires, etc.—and then you map it all out against what you expect to earn (read: forecasting) to make sure you can afford it all.

That way you avoid one of the most common bookkeeping mistakes which is looking at your biz account, seeing a nice stack of cash, and thinking, “Oh, I have money, I can afford XYZ”… And ending up with nothing for the investments you actually want to make.

Instead, you’ll know that the money in your account is going towards a much-needed new camera body, floral cooler, a slick rebrand, or whatever the funk you want (or need).

#3 – Forgetting to pay your damn self 

In order to be a rich bad bitch, you have to pay yourself. Seriously. And you should be paying yourself first, always. Because otherwise, chances are, you’re gonna end up spending that cashola elsewhere, and you deserve to be spoiled. 

The best way to make sure you’re paying yourself consistently is to set a schedule and choose a percentage you’re going to send to yourself.

Por ejamplo, perhaps every time you get that juicy notification from your invoicing platform that “X dollars are about to hit your bank account,” you decide you’re going to immediately pay yourself 10%. And then you can see what’s leftover and work from there. 

(But also, see #2 because you don’t want that money to just be hanging around, begging for you to spend it on something random.)

#4 – Not tracking expenses 

One of the most common bookkeeping mistakes we see when our dope clients welcome us into their accounting software, bookkeeping spreadsheets, and bank accounts is with tracking expenses. Or rather, missing out on tracking expenses.

(And that’s totally understandable because expenses can be motherfuggin’ complicated.)

What you need to know about tracking your expenses for bookkeeping are that A) you need to track every single dollar you’re claiming as an expense for you business and B) you need to know what you can claim as a business expense and as a write-off.

And btw, what you can write-off totally varies based on bunches of different factors like the industry you’re in and what the item you’re buying is being used for.

You can’t write-off clothes you buy to photograph weddings, but you can write-off clothes you buy to photography weddings if it has your logo on it. You can only write-off up to $25 of a client gift, unless any part of that gift is branded, then all the branded items would be considered marketing expense and not gifts. See how everything can be a little loop-holey.

The point is, what you can write-off isn’t a one-size-fits-all sitch so when you’re tracking your expenses, you need to make sure you know what qualifies and where to categorize it.

(Oh, and make sure you’re charging all your expenses to your biz account!)

#5 – Tracking things that aren’t expenses

Okay, we just talked about expenses literally five seconds ago, but on the flip side of not tracking your expenses are expenses that don’t actually qualify as write-offs. 

Here are the five most common non-write-offable things we see:

• #1 – Owner Draws: Your owner pay is not an expense unless you’re an S-Corp or a C-Corp.

• #2 – Quarterly Taxes: Unfortunately, you can’t write-off your federal taxes (would be sick if you could though).

• #3 – Charitable Donations: Unless you’re an S-Corp or a C-Corp, donations don’t count as a business write-off. They might count as a personal write-off though, so keep donating, and give the receipts your CPA.

• #4 – Gas/Fuel: Unless your business owns that vehicle, gas is not a write-off. Instead, track your mileage if you’re using a personal vehicle for business activities.

• #5 – Clothing: We’re bring this one up again because it happens all-the-time and it’s hella confusing. Clothes are not typically deductible unless they meet one of these criteria:
  • Branded clothes with your logo.
  • Prop clothing counts, like a client closet, remember though you are not allowed to wear them.
  • Clothing that is a legit uniform or industry specific. Think culinary jacket if you own a bakery or a brush belt if you’re a HMUA.
  • Costumes for theatre or even for social media content. The catch: you cannot wear them in everyday life.
  • Protective gear, like if you’re photographing an elopement in Iceland and you need specialty gloves so you don’t get frostbite on those precious fingies.
  • When you rent clothing for a business purpose, that is later returned, it qualifies.

These are just our top-five babe, the US tax code is 70,000 pages long (almost like they made it complicated on purpose). So it’s mega important to consult a profesh if you aren’t sure about an expense.

#6 – Not reconciling your accounts

Reconciling sounds a lot scarier than it is because all it really means is cross-checking that everything that happened in your bank account also happened in your accounting software or bookkeeping spreadsheet. 

So one of your clients paid a $2,000 retainer for custom wedding florals, did you record that retainer as income in your accounting software or bookkeeping spreadsheet? When you used your business credit card to buy new hard drives, did you allocate that expense to the correct category?

Double-checking your numbers is critical for ensuring your income isn’t over-reported, and your expenses are never under-reported. These two things are what will determine how much tax you’ll ultimately have to pay. Goal: Never ever pay more tax than is required.

(If you’re a DIYer, consider using a bookkeeping spreadsheet, or joining a DIY support group if you’re set on using a software.)

#7 – Forgetting about sales tax

We’ve said it before and we’ll say it again, sales tax motherfuggin’ sucks. In order avoid pain and suffering later, you should not ignore your sale tax obligations.

While not all business are responsible for sales tax, you want to find out sooner than later if you are. Because guess what, the state will want their money either way. And I bet you know whose pocket its coming out of if you didn’t pay (hint: yours).

If you recently learned you should have been filing sales tax it this whole time (oopsie poopsie) don’t panic, mama is here. Schedule a 1:1 session with Kirsti to learn all the imporant deets and steps to manage it successfully.

#8 – Missing deadlines

Uncle Sam is a punctual man who likes to slap late fees on stuff that doesn’t get paid on time. (Uncle Sam is also an a-hole and we don’t want to give him any extra money).

To avoid giving him any more of your $$, make sure you skip the mistake of missing deadlines like these:

• #1: Quarterly taxes: due four times a year. If you want more info about the where, how, and when of quarterly taxes, download our free Quarterly Tax Checklist.

• #2: Sales tax: can be due monthly, quarterly, semi-annually, or annually. Check with your state to see what schedule they have you on.

• #3: Sending and filing 1099-NEC forms (for any contractors you’ve paid more than $600 to).

• #4: Employer taxes (only if you have W2 employees!).

• #5: Random sh*t like your annual LLC renewal, the new federal BOIR requirement, or local licenses and permits.

Pro-tip: Add important dates to you calendar and attached 2 week reminders to them. No more pit in your stomach when you realize something important was due yesterday.

#9 – Throwing away receipts 

One of the bookkeeping essentials all business owners have to do is keep track of their receipts. And no, your bank statement does NOT count as a receipt.

A receipt needs to have detailed information on it to be accepted by the IRS-trolls as proof of purchase. Not just the vendor and the date. Receipts should have an itemized list of what what purchased, the cost of each item, and sales tax. The best way to store receipts is digitally (think: Google Drive or DropBox). Avoid at all costs: the center console of your car or a dusty old shoe box.

Extra credit if you attach your receipts in QuickBooks, that way they’re easy to find in case of an audit (hissss). FYI, if you accidentally lose or break a piece of gear, your insurance will also want to see a receipt before then reimburse you.

And better safe than sorry, you should save all your receipts for 7 years. Yes. SEVEN.

#10 – Trying to tackle QuickBooks by yourself

Don’t believe their lies. 

Even though QuickBooks claims it was built for anybody to use… it’s not. And if you end up trying to use it on your own, you’re gonna end up feeling like this…

We know because we’re spending a bajillion hours in QuickBooks every month, and the endless updates and overly-complicated interface will make you want to scream. We give you permission to slam your laptop shut on QuickBooks, and opt for a bookkeeping spreadsheet instead. But if you’re feeling spicy, you could also seek out a DIY support group that will help keep your QuickBooks in check.

(You might dig our bookkeeping spreadsheet, it was made for dimes just like you. 😘)

#11 – Underpricing yourself

This one’s a lil different than the others, but is easily one of the most common bookkeeping mistakes we’ve seen over the years. So many creative businesses are undercharging.

So you’re staying on top of your bookkeeping, starting to pay yourself and your taxes, even made yourself a cutie little budget (so proud of you, bb girl). But for some reason your bank account just ain’t growin….

Have you ever taken the time to do a price-analysis of your services? If the answer is no, add that to your priority list right meow. It’s one thing to have organized bookkeeping, but price strategy (in combo with your budget) is where the benjamins live.

As a photographer, have you ever broken down your packages to see how many hours of work goes into them? Not just hours in your package, but also planning time, travel time, editing time, and that’s just your time. What about the cost of a second photographer or outsourcing to an editor? All of these things are factor into how much you get paid.

And if you’re a florist, what is your mark-up on florals? Are you factoring in the labor cost of your on-site designers when you send out proposals? Taking the time to analyze your prices can set the stage for your year-over-year growth.

We promise, 9 times out of 10, creative businesses are probably due for a price increase.

#12 – Ignoring everything and pretending the IRS doesn’t exist

IRS (aka IBS) can feel so dang overwhelming. Looking at your bank accounts may bring on a wave of nausea. Tracking what you’re spending might make you want to crawl inside a hole and cry (or die).

But it shouldn’t. Firstly, because you’re a bad-ass. Full Stop. You built a whole-damn business, are absolutely crushing it creatively, and your clients love you. Secondly, money education is seriously lacking, so it’s totes okay if this stuff feels totally confusing and overwhelming.

All that said, the unfortunate truth is, this stuff won’t go away if you ignore it. In fact, is tends to get a whole lot more expensive and challenging to unravel the longer you do. So if this is you, take a deep breath, give yourself grace, and get back up on that bookkeeping horse babe.

Recap: the 12 most common bookkeeping mistakes 

Here’s all that good shit summed up:

• #1: Don’t mix business with personal; separate your finances ASAP.
• #2: Instead of winging it with your cash, make a baby budget to plan out your important purchases.
• #3: Silly gooses forget to pay themselves, bad bitches don’t. Be a bad bitch and pay yourself first.
• #4: Figure out what counts as business expenses for your industry and track them accordingly.
• #5: Give a little extra attention to researching what things definitely don’t count as business write-offs (like gas or clothes).
• #6: Always make sure what’s happening in your bank account matches your accounting software/bookkeeping spreadsheet (AKA reconcile/double-check your work).
• #7: Find out if you need to collect and pay sales tax and stay on top of that bitch.
• #8: Pay attention to all your tax and filing deadlines.
• #9: Keep your receipts…for 7 years.
• #10: F*ck QuickBooks (and don’t try to do it yourself, ask for help).
• #11: Analyze the-funk out of your prices so you can put more dough in your pocket.
• #12: Though tempting, don’t ignore the Tax Man, because he ain’t goin anywhere anytime soon.

Oh, and another bookkeeping mistake?

Not talking to a bookkeeper before or during your DIY journey. And we’re not saying this because we’re bias, pinky promise.

We totes understand not being ready outsource your bookkeeping, and it is 100% possible to DIY until you are ready. However, it is sooo helpful to have a chit-chat with an expert so you can avoid accidentally screwing sh*t up.

(Like write-offs and sales tax and expenses that shouldn’t be expenses, oh my!) 

Find yourself a bookkeeper you vibe with that offers 1:1 calls or DIY services (oh say, like maybe some badass bookkeepers like us). You’ll give yourself way better odds of being in business for the long-haul.

Psst. If you liked the bookkeeping mistakes blog post, you might also like…

• This blog post on Bookkeeping Basics for Small Business Owners (and Bad B*tches)
• This blog post on Hiring a Profesh Bookkeeper or DIY Your Bookkeeping
• This DIY support service The BBGR Club
• This freeeeee Quarterly Tax Checklist

And if you’re interested in hitting these Double-Ds (the Dory Dimes) up for bookkeeping help, stalk our done-for-you services and our DIY support.