The most common mistake is mixing personal and business money. Using one bank account or credit card for everything means you’re constantly sorting transactions, questioning whether purchases were business or personal, and making your tax preparation harder than it needs to be. Open a dedicated business checking account and use it exclusively for business transactions. This single change eliminates hours of sorting and reduces errors significantly.

Not reconciling bank accounts regularly comes up constantly. Monthly reconciliation catches errors, fraud, and forgotten transactions while they’re still fresh. Waiting six months or a year means you’re reconstructing history from memory. By then, you’ve forgotten what that $147 charge was for, and small discrepancies have compounded into larger problems. Good ongoing bookkeeping includes monthly reconciliation as a baseline practice.

Categorizing expenses incorrectly affects your financial statements and your tax return. Putting office supplies into office expenses sounds harmless, but putting equipment purchases there too means you’re not depreciating assets properly. Classifying loan payments as expenses overstates your costs and understates your debt. These categorization errors ripple through your reports and can trigger problems during an audit.

Treating owner draws as expenses is common among sole proprietors and LLC owners. When you pay yourself, that’s not an expense to the business. It’s a distribution of profit. Recording it as an expense artificially lowers your net income and creates confusion about actual profitability. The IRS views this as incorrectly recorded and may question your returns.

Ignoring accounts receivable is a mistake that directly hurts cash flow. Sending invoices isn’t the same as getting paid. Without tracking what’s outstanding and following up on late payments, you end up with customers who owe you money for 60, 90, or 120 days while you’re struggling to pay your own bills.

Waiting until year-end to organize finances creates stress and missed deductions. The receipt you can’t find in March is definitely gone by December. The transactions you meant to record pile up into an overwhelming backlog. What should take an hour each week becomes a weekend project that still results in incomplete records.

Handling payroll taxes incorrectly has some of the steepest consequences. Late deposits and filings trigger penalties that accumulate quickly. The IRS is aggressive about payroll tax collection because it involves employee withholdings that you were legally required to remit.

Finally, trying to do bookkeeping yourself when you’ve outgrown your skills costs more than hiring help. The time you spend struggling with software, researching tax rules, and fixing mistakes has value. So do the errors you don’t catch and the deductions you miss because you didn’t know they existed. At some point, working with Andover, MA advisory services pays for itself through better accuracy, fewer penalties, and time you can spend running your business instead of fighting with spreadsheets.