Common bookkeeping errors I see during cleanup work and what you can do differently going forward
As I work through cleaning up financial records for new clients, I see the same bookkeeping issues again and again. Not because business owners were careless, but because no one clearly explained why these details matter or how quickly small missteps can compound into larger problems. Most of these issues only come to light during cleanup work, often months or even years after the fact. By that point, the cost is not just financial. It shows up as stress, lost time, and uncertainty about whether the numbers can be trusted at all. If any of the following sound familiar, it may be time for a cleanup or a system reset.
Mixing Personal and Business Expenses
Personal meals, subscriptions, travel, or online purchases are often paid directly from the business account. Even when the amounts seem small, this muddies financial reports, makes tax deductions harder to support, and creates extra work later.
How to fix it:
Maintain separate personal and business bank accounts and credit cards. If a personal expense does slip through, reclassify it correctly as soon as possible. Waiting until year end almost guarantees confusion and missed deductions.
Payroll Set Up Incorrectly or Not Updated
Payroll is sometimes run using outdated tax rates or without accounting for new requirements. This can lead to underpaid payroll taxes, unexpected notices, and avoidable penalties.
How to fix it:
Review payroll settings regularly, especially at the start of each year. Confirm tax rates, thresholds, and filing requirements are current. Payroll is not something to set once and forget.
Large Purchases Expensed Instead of Depreciated
Equipment, vehicles, or major software purchases are often fully expensed in the month of purchase rather than tracked as assets. This distorts profit and can create complications in future periods.
How to fix it:
Flag large purchases early. Work with your bookkeeper or accountant to determine whether they should be capitalized and depreciated over time so your reports reflect the true financial picture.
Sales Tax Recorded as an Expense
Sales tax collected from customers is sometimes recorded as an expense, which incorrectly reduces reported profit.
How to fix it:
Sales tax is not income and not an expense. It is a liability. Record it separately and reconcile it regularly so filings are accurate and balances are correct before returns are filed. Also, don’t forget to pay your sales tax on schedule.
Loans Recorded as Income
Business loans or lines of credit are occasionally recorded as revenue, inflating income and creating a misleading picture of business performance.
How to fix it:
Loans should always be recorded as liabilities. This ensures financial reports reflect true operating income rather than borrowed funds.
Accounts Not Reconciled Regularly
Bank and credit card accounts are often months behind, allowing small errors to pile up unnoticed. By the time someone takes a close look, the cleanup becomes far more time consuming than it needed to be.
How to fix it:
Reconcile accounts monthly. This simple habit helps catch mistakes early and keeps reports reliable throughout the year.
When financial reports are inaccurate, it becomes difficult to price services confidently, plan for growth, or know whether the business is truly profitable. Clean books are not just about tax compliance. They are the foundation for informed decision making. If you recognize your business in one or more of these examples, you are not alone. These are some of the most common issues I see across businesses of all sizes and industries, especially when owners are trying to manage everything themselves.
If you want your business finances to feel more organized, more confident, and more sustainable, now is the time to address what is not working. A discovery call is simply a conversation. We will look at where things stand, identify what needs attention, and talk through next steps so you can decide what level of support makes sense.
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Two Rivers Bookkeeping – Your Trusted Creative Business Bookkeeper and QuickBooks Specialist for Artists, Makers & Creative Professionals
This blog post is intended for informational and educational purposes only and should not be construed as financial, tax, or legal advice. Every business situation is unique, and tax laws and regulations are subject to frequent changes. Please consult with a qualified accountant, tax professional, or attorney before making decisions about your business structure or bookkeeping practices. The information provided here is based on current understanding at the time of publication and may not reflect the most recent changes in tax law or regulations.
