Common Bookkeeping Mistakes New Businesses Make

Starting a business means juggling a hundred things at once, and bookkeeping often ends up at the bottom of the list. After years of working with small businesses, I see the same handful of mistakes come up again and again. None of them are signs of carelessness. They are simply things nobody tells you about until you have already made them.

Mixing Business and Personal Spending

This is by far the most common one. It happens innocently, paying for a business expense on a personal card because the business account was not set up yet, or grabbing some personal items in the same transaction as business supplies. Over time this makes it very difficult to get a clear picture of what the business actually spent and earned. A separate business bank account from day one solves most of this.

Not Tracking Cash Transactions

Cash payments and cash purchases are easy to forget about because there is no automatic bank record. A coffee bought for a client meeting, a small cash purchase of supplies, these add up and can throw off your expense records if they are not noted down at the time.

Ignoring Letters from IRD

It is tempting to set aside official looking mail when you are busy, especially if you are not sure what it says or worried it might be bad news. Letters from IRD do not resolve themselves by being ignored, and the situations they relate to rarely get simpler with time. Opening them straight away, even if you need help understanding them, is always the better option.

Not Setting Money Aside for Tax

When money comes into the business account, it is tempting to think of all of it as available to spend. Some of that money is GST collected on behalf of IRD, and some of it needs to be set aside for income tax. Spending it all and then being caught short when a tax bill arrives is one of the most stressful situations new business owners find themselves in.

Underestimating How Long Bookkeeping Takes

Many new business owners plan to do their own books in spare moments, only to find that bookkeeping takes longer than expected, especially in the early months while systems are still being figured out. This often leads to records falling behind, which then takes even more time to catch up later.

Not Asking for Help Early

There is a tendency to wait until something feels seriously wrong before reaching out for help. In reality, the earlier a question gets asked, the simpler the answer usually is. Waiting months to ask about something that has been confusing you the whole time usually means there is more to untangle by the time you do ask.

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If any of these sound familiar, you are in good company. Every business owner I have worked with has run into at least one of them. The good news is that all of them are completely fixable, and usually faster than you would expect.

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