7 Bookkeeping Mistakes Small Business Owners Make (And How to Avoid Them)

As an entrepreneur, you have to keep up with sales, hiring, and a ton of fires that break out each day, which is why financial recordkeeping is so often neglected. Many owners only find out about the damage at tax time, when missing receipts and mismatched accounts incur penalties. 

This is where the best online bookkeeping services are intended to fill in, providing the business owner with accurate books without adding to their workload. The first step in fixing up books for good is to understand where they are going wrong.

The 7 Bookkeeping Mistakes Costing Small Businesses Money

Most bookkeeping issues are not dramatic; they’re small, consistent practices that add up over time. The SBA’s nonprofit small business resource partner, SCORE, reports that even simple bookkeeping mistakes, such as not categorizing receipts, can add up to expensive mistakes by year-end.

SCORE, the SBA’s nonprofit small business resource partner. It is much more economical to identify these patterns early on than to deal with them later. These are the seven common errors that frequently appear:

• Combining personal and business bank accounts (difficult to reconcile and less audit protection).
• Not reconciling monthly accounts on time, but rather when they are small.
• Not keeping receipts, rather than scanning them on the spot.
• Misclassifying expenses, which can mislead profit and loss statements.
• Mixing up bookkeeping with tax filing results in deductions that are missed.
• Manually processing payroll without appropriate payroll outsourcing services faces the risk of compliance problems.
• Not reviewing the books until tax season.

Bookkeeping vs Accounting: Why It Matters

Bookkeeping and accounting are often mistakenly used interchangeably, but they solve different problems. The difference between bookkeeping and accounting is just scope: bookkeeping keeps track of day-to-day transactions, and accounting uses that information to inform tax and business decisions.

It’s easy to confuse the two, which can lead to hiring the wrong kind of help or no help at all. A bookkeeper maintains an up-to-date ledger, while an accountant uses that ledger to ensure taxes are filed properly and to make plans. This distinction is important to get right early on, as it will save the CPA time and effort in explaining disorganized records in the spring.

Bookkeeping vs Tax Preparation: Two Different Jobs

This confusion carries over to tax season in particular. The difference between bookkeeping and tax preparation is similar yet distinct, and needs to be understood by any expanding business.

Bookkeeping is done throughout the year to generate records, while tax preparation is done seasonally, based on those records, to prepare tax returns. Companies that do not keep clean books typically pay more because the preparer must spend additional time reconstructing the books before the return can be filed.

What Does a Bookkeeping Service Include for Small Businesses?

After owners have decided to seek assistance, the next question is what they are paying for. A bookkeeping service for small businesses usually offers more than just data entry and may encompass several services in a single package.

These layered services provide the owner with a complete financial overview, as opposed to a spreadsheet of numbers, which is most important once a business begins to scale.

Bookkeeping Cost for Small Businesses: A Monthly Pricing Guide

Owners tend to be hesitant about pricing, typically because the range is too broad and not explained clearly. The cost of bookkeeping for small businesses ranges from $300 to $1,500 per month, depending on the number of transactions and the level of services provided. 

According to NerdWallet’s research on bookkeeping pricing, flat monthly bookkeeping fees, typically beginning at about $200, are the standard for bookkeeping services, as they provide a more predictable budget than hourly fees

NerdWallet’s research on bookkeeping pricing. The price range for this monthly pricing guide is usually: startup businesses $300-$600, growing businesses $600-$1,200, and more complex operations $1,200 and higher. By comparing this range, owners can identify whether a provider is overcharging or underdelivering.

Advantages of Bookkeeping Services USA Outsourcing

Time saving and reduction in costly mistakes are the most common advantages that businesses experience when outsourcing their bookkeeping services in the USA. Outsourcing also eliminates the costs of recruitment, training, and replacement of an in-house employee.

This is the kind of knowledge that can be packaged into plans accessible to providers, such as The Accounting Express, to help owners level up their finances without paying a full-time bookkeeping wage. 

If you’re still considering your options, the best online bookkeeping services usually offer a combination of transparent pricing and human support, not just software.

Conclusion

Financial issues like mixed accounts, missing reconciliations, and DIY payroll might not seem like a big deal at the time, but they are a significant financial burden. Knowing the difference between bookkeeping and accounting, understanding realistic pricing, and knowing what a good service entails put the owners in a much stronger position. 

If the line of firefighting finances is something you aren’t willing to continue to do, then collaborating with one of the best online bookkeeping services can be the easiest way to have accurate, stress-free books year-round.