The first bookkeeping mistake we want to discuss is bank and credit card reconciliations. Most people are happy checking off the transactions that cleared the bank; however, the transactions that did not clear the bank are important to review too. For example, if the accounting system shows a $5,000 deposit on the 15th of the month but that transaction hasn’t cleared it means the bank is short $5,000! Where is the money? A few possibilities to consider – it could be a duplicate deposit, or the money didn’t make it to the bank or the money was deposited into the wrong account. List all areas you want to review immediately.

On the expense side of things, a check or an expense debit should not be outstanding for more than two banking cycles.  In situations like this, you want to confirm it isn’t a duplicate transaction first, then follow up with the vendor or employee to make sure the check has not been lost or misplaced.

Bookkeeping Mistakes To Avoid#2: Step Away From The DELETE Button!

If you are ever thinking of hitting the “DELETE” button or selecting the “Delete Transaction” option, we are going to go on the record and say, “ABORT MISSION, ABORT MISSION.” When it comes to accounting systems, we need you to step away from the button!

The second tip for bookkeeping mistakes to avoid: when is it ok to delete a transaction? The answer is almost always never! Accounting and accurate records are all about timing. Once we have reconciled and reported on that period, changes should not happen to that information. A lot of the times, we find transactions that were once reconciled have now been deleted. A reconciled transaction has usually already affected your bank or credit card in some way. If you realize there was an error with the reconciled transaction, please contact someone (preferably us) who can walk you through ways to clear the error.

Bookkeeping Mistakes To Avoid#3: Liabilities

The last bookkeeping mistake we want to discuss is liabilities, such as loans and credit cards. Loans and credit cards balances are monies you owe, usually for a longer period than 30-60 days and are handled differently than an expense like the Spectrum bill. When you make a loan payment, you have two parts, the principal payment, and the interest expense. Record the principal portion of the payment against the loan listed as a liability on the Balance Sheet.  List the interest expense portion of the payment in the Profit and Loss as an interest expense. This allows the business to know at any given moment the balance of their liabilities. Recording the transactions correctly will allow you to have an accurate balance sheet and accurate profit and loss report. 

If you’re looking at your financial reports and find yourself with more questions than answers, remember we offer complimentary consultations. Contact us now to stay in line with these bookkeeping mistakes to avoid.

At KEM, our goal is to empower the business owner, and sometimes that means we need to teach them what NOT to do. We’re breaking down common bookkeeping mistakes to avoid.

One of the unique things about being in our profession is we get to see what is going on across a variety of businesses, which also means we see recurring bookkeeping mistakes. Here are the top three recurring bookkeeping mistakes to avoid before they become costly errors.

#1: Bank & Credit Card Reconciliations

The first bookkeeping mistake we want to discuss is bank and credit card reconciliations. Most people are happy checking off the transactions that cleared the bank; however, the transactions that did not clear the bank are important to review too. For example, if the accounting system shows a $5,000 deposit on the 15th of the month but that transaction hasn’t cleared it means the bank is short $5,000! Where is the money? A few possibilities to consider – it could be a duplicate deposit, or the money didn’t make it to the bank or the money was deposited into the wrong account. List all areas you want to review immediately.

On the expense side of things, a check or an expense debit should not be outstanding for more than two banking cycles.  In situations like this, you want to confirm it isn’t a duplicate transaction first, then follow up with the vendor or employee to make sure the check has not been lost or misplaced.

Bookkeeping Mistakes To Avoid#2: Step Away From The DELETE Button!

If you are ever thinking of hitting the “DELETE” button or selecting the “Delete Transaction” option, we are going to go on the record and say, “ABORT MISSION, ABORT MISSION.” When it comes to accounting systems, we need you to step away from the button!

The second tip for bookkeeping mistakes to avoid: when is it ok to delete a transaction? The answer is almost always never! Accounting and accurate records are all about timing. Once we have reconciled and reported on that period, changes should not happen to that information. A lot of the times, we find transactions that were once reconciled have now been deleted. A reconciled transaction has usually already affected your bank or credit card in some way. If you realize there was an error with the reconciled transaction, please contact someone (preferably us) who can walk you through ways to clear the error.

Bookkeeping Mistakes To Avoid#3: Liabilities

The last bookkeeping mistake we want to discuss is liabilities, such as loans and credit cards. Loans and credit cards balances are monies you owe, usually for a longer period than 30-60 days and are handled differently than an expense like the Spectrum bill. When you make a loan payment, you have two parts, the principal payment, and the interest expense. Record the principal portion of the payment against the loan listed as a liability on the Balance Sheet.  List the interest expense portion of the payment in the Profit and Loss as an interest expense. This allows the business to know at any given moment the balance of their liabilities. Recording the transactions correctly will allow you to have an accurate balance sheet and accurate profit and loss report. 

If you’re looking at your financial reports and find yourself with more questions than answers, remember we offer complimentary consultations. Contact us now to stay in line with these bookkeeping mistakes to avoid.