What business owner wouldn’t like to save money and make their financial accounting easier, less stressful and more streamlined for year-end reporting?  None that we’ve ever worked with. There are things you can do to make this easier.  This is listing to help business owners understand what to do and not to do, as well as the why behind it to help the business owner focus more on their business and less on the mundane record keeping.


  1. Not keeping documentation
    1.  As business owners, you are expected to keep all the documentation organized and easily accessible to support the transactions.  There are multiple ways to organize this. 
      1. Scan them with software that puts a date on them automatically and keep in an electronic file. 
      2. Scan and attach the documentation to the accounting software transaction it relates to.  This can be done with standard pdf scan or photo from your phone. (keep the paper, keep the paper, keep the paper)
      3. The standard filing cabinet done by date or by vendor/customer. 
      4. A combination of theses.  An electronic file with all receipts, a paper file for the receipts that come in paper and an email folder for the emailed receipts.
    2. Keep track of deposits. If there is a deposit on the bank statement, where did it come from.   You’d be surprised how often that’s a difficult question to answer.  It should not be.  Many times, customers get calls saying they did not pay an invoice, yet they had.  It makes the business owner look careless and less professional to the customer. 
    3. Opening new bank accounts/lines of credits/credit cards/ loans.  Part of keeping your documentation is actually keeping it.  So often a business owner needs to go to the bank to get information.  If you have credit cards, loans or lines of credit – keep the statements in your files and not rely on the bank to keep giving you copies. It’s crucial that these transactions are posted correctly.


  1. Waiting until January to do a years’ worth of work.
    1. Bookkeepers and accountants are supremely busy this time of year.  Use our assistance thought out the year; monthly, quarterly, or bi-annually.  It really takes 5 minutes a day to do the proper accounting.  When there is a year’s worth of transactions to update, the business owner quickly enters the transactions without confirming each transaction is assigned to the correct category (account).  This creates an overwhelming task in a short period of time for the professional to straighten out before we can assess your liabilities.

Many online accounting software programs download from the bank directly to your software.  This is not where it ends.  When transactions are downloaded from the bank, the accounting software assumes categories and populates the entry for each transaction but is often not correct.  The downloaded transactions need to be reviewed, corrected if necessary and accepted, which then posts transactions.  Until this happens, the transactions will not be in the reports we use to file taxes and make business decisions.

  1. For the do it yourself-ers, contact your bookkeeper or accountant for out of the ordinary transactions.  Business owners may want to save money by doing their own bookkeeping instead of paying someone to do the work.  However, there will be transactions you may not know how to enter.  That’s the time to call your professional and get help. It’s easier to fix one month than a year of transactions. Waiting until January to enlist the professional can potentially cost you $3000 or more to fix, put you on extension and lose many opportunities to reduce liability because of lack of time. 


  1. Not Reconciling the bank accounts monthly
    1. So many times, I’ve heard that “yes everything is updated and reconciled” only to look and discover it is not.  Reconciling is a feature in accounting software that allows you to compare the ins and outs of any account in the software (most commonly the checking) to what appears on the bank statement.  Often, there will be a charge on the bank that is forgotten in the accounting software or a duplicate entry because someone doesn’t realize it’s already there and enter it again.  Reconciling will show you this as well as transactions that have not cleared the bank.  This gives you true numbers to use when making your business decisions as well as assessing liabilities.
    2. One benefit of proper reconciling is catching fraud in your bank account or credit card.  Banks have time limits to bring these transactions to their attention.  The fraud charges can be small or very large, $10,000 or more.  Missing the time parameter with the bank can be costly and well worth the price of a professional independent bookkeeper.



  1. Not knowing where to put things – and they go everywhere
    1. Bookkeeping doesn’t have to be hard.  Your Chart of Accounts is a necessary evil because your accounting software uses it to produce your financial statements. It can be confusing for business owners to decide where to put transactions, which leads to creation of multiple generic accounts (business expense, business supplies) or multiple accounts for the same expenses (Contributions, Charity, Charitable Contributions, Donations). This makes it harder than it has to be.  Accounting software usually starts you out with a typical listing of accounts (I sometimes call these categories for clients).  The typical list that is generated by Quickbooks is usually more than you really need, and there may be categories that need to be added that are specific to your business. We advise that you meet with your professional to help reduce the categories down to what is appropriate for you and your business.  In addition to the accounts/categories, you need to be familiar with what types of accounts/categories there are.  The income and expenses accounts are probably used the most.  However, you will need to know where the bank, asset and liability accounts show up to avoid mistakenly categorizing expenses to them.  This will make it so much less of a chore and more valuable in your business.  As a small business, your profit and loss report should fit on one page.


  1. Tracking down loan payments or transfers can be more time consuming than if you just paid someone to do it right the first time.  If you have multiple credit cards used for the business or multiple bank accounts, recording a transfer from one account to another is often entered in the wrong account which creates the bulk of our time to correct.



  1. No memo’s in fields so we cannot tell what the expense/transaction is.
    1. The memo is your friend.  This is your way to say what the transaction is.  Everything should have something on the memo, and I don’t mean a check number.  Yes, check number should be there for any checks paid, but also checks received.  There will be times when you will be asked what a particular expense was for. “I don’t know” is not an answer that serves you well.  Use the memo field to remind you what it’s for.  It also helps you keep your required information about the business expenses.
    2. Especially when a business owner makes purchases that can be construed as personal expenses.  Explaining in the memo why the purchase at Wegmans wasn’t personal will save you in the long run.
    3. Not knowing what the expense is for weeks after it’s made?  How are you going to justify expense when added if you have no clue?  Let that memo field work for you.


  1. Personal expenses all over the business books
    1. Just because the business pays for an expense doesn’t make it a business expense.  If I had a dollar for everytime I heard about what your neighbor does or “someone you know” does, I’d be living in a mansion.   In my experience, one business had too much profit, so they went out and bought new TVs for home, thinking they could write them off. This is not an allowable write off.
    2. You’re on vacation in Vegas and go out to dinner.  First, it shows on the receipt where you are.  Can you justify this as a business expense?  Discussing your business with your spouse at dinner doesn’t constitute a business expense, unless your spouse is actually knowledgeable in your field, which is possible just not probable.  Business meals receipts should have the names of the attendees and the purpose of the business meeting.  
    3. There are reporters writing newspaper articles that will tell you to bury personal expenses in the business.  There are so many ways to find them, is it worth the risk? Penalties and Interest can often be larger than what it would have cost to pay tax on personal purchases when filing tax return.
    4. Separate business transactions from personal transactions.  This means get a business bank account and business credit card/debit card and run all business expenses through the business account.  Often new businesses do not generate enough cash to pay all the business expenses.  We recommend transferring funds into the business account to pay them.  When business owners put business expenses on a personal card, or personal purchases on a business credit card, co-mingling business and personal expenses, important deductions are often missed.  And no, before you ask, no you cannot take a deduction from one year that you forgot and put it on the next years return.
    5. When we see all this, it’s just going to cost you more. It’s so much harder to separate business from personal on a Bj’s receipt.  What business purpose was that box of dog bones?  It makes the cost of your bookkeeping 3 to 4 times higher. 



  1. Not using the Accounts Payable (AP)/Accounts Receivable (AR) features properly

Accounts Payable is what you owe

Accounts Receivable is what is owed to you


Business owners often use half of the Accounts Payable or Accounts Receivable feature.  They like to “pay bills” when paying for their business expenses (because that is what they are doing) only to find out from their professional that nothing is categorized correctly. AP and AR features work function like a “box”, you put something in it and then you take it out.  Before you can “pay bills” with the AP feature, you will need to enter the bills first.  Yes, this is twice the work but it is necessary and beneficial for businesses that have cash flow issues and want to keep on top of what bills are owed and when they are due.  For businesses that pay the bills as they come in, they should just use the “write a check feature” instead.


  1. Sales Tax  (is complicated, but if your accounting software is set up properly, it doesn’t have to be that hard)
    1. Some business owners are so vehemently against sales tax, but, unfortunately, it is a necessary evil, legally.  It’s not an expense of your business (if done right) but is required to be held in trust for the state.  However, many businesses are caught by NYS charging sales tax but not turning it over to the state, which is not only a bookkeeping nightmare but a public relations nightmare, not to mention a financial nightmare as penalties and interest accrue from the date the sales tax was originally due.
    2. Sales tax is calculated using Accrual basis accounting method, unless NYS Sales tax tells you that you can use the cash basis accounting method.  Accrual basis means that you pay NYS sales tax when you bill your client and not when you receive the payment from your client.  Accounting software calculates all this for you, but you will need to save a copy of the reports you used each time you file a sales tax return. 
    3. What do you do when you need to change an invoice already sent to a client that was submitted in a prior sales tax period?  Sometimes, the documentation to not charge sales tax is now submitted, or you need to change the locality of the sales tax rate.  If you already filed the sales tax return for the period covered by the invoice you need to change, I recommend you adjust the current sales tax period for the adjustment.  Another alternative would be to file an amended sales tax return for the original sales tax period.
    4. There are multiple counties in NYS, most of which have the same sales tax rate, but there are some that have different rates.  Your sales not only need to be recorded in your accounting software, but kept by counties for sales tax reporting.  Yes, the software does this for you.


  1. Updating Passwords
    1. Many banks have security protocols in place that don’t integrate well with Quickbooks Online or other software programs.  Some banks now require multiple security levels to log in (ie: call or text a secure code to continue logging in.  It can be frustrating to have to keep entering your password into the program and reconnect the banking to your accounting software.  Just remember this it to keep your banking safer, so take a deep breath and update the password.
    2. There are times when the bank download feed will download transactions more than once.  Yeow, what to do?  No worries, there is an easy way to remove the duplicates and not cause year end problems.  Completing monthly bank reconciliations can help you figure out what is being duplicated and correct it before the problem becomes overwhelming.  Spend 5 minutes with your professional to review the monthly bank reconciliation report, correct any errors, which will save so much time and confusion in the end.


  1. Not valuing your own time.  Every business owner in every stage of their business needs to evaluate the best use of their own time.  Is it better, more cost effective for you to do your own bookkeeping, which is the duty you actually hate to do, or should you spend that same amount of time adding value to your own business?   When I say adding value, I mean:
  1. taking a class to update or increase your skills. 
  2. Learning technology that adds to your business. 
  3. Find and test software that makes your client appointments easier. 
  4. Learning more features of Excel, Word or particular software used for your clients.
  5.  Writing a blog. 

What could make your business grow?  I’m sure doing your own bookkeeping wouldn’t.  When beginning a new business, you may have more time than money and want to do your own bookkeeping.  Great!  But if this task is sitting for months at a time, that is a sign that maybe you should get some help here.


We hope this will continue to keep you on a nightmare free accounting path that will allow you to focus more on what you do really well. 


Dawn Hampsey is a CPA, business owner with her own tax practice and over 30 years’ experience working with individuals and small businesses. 

Lynn Kerr is an independent bookkeeper, helping small businesses set up and maintain good bookkeeping practices since 2011.  She helps clients understand the reasons for the things that must be kept track of to translate to the financial reporting so they can make good decisions about what they can and cannot do financially.