Bookkeeping Mistakes That Make Small Businesses Look Less Profitable
Common bookkeeping mistakes that distort profit, including duplicate expenses, missing income, mixed personal spending, credit card payment errors, loans, sales tax, payroll liabilities, and unreconciled accounts.
Short answer
Profit can look wrong when books include duplicate expenses, missing income, personal expenses, credit card payment errors, owner draws as expenses, loans as income, sales tax as revenue, payroll liability errors, no reconciliation, or too many uncategorized transactions.
Checklist
- Look for duplicate expenses.
- Check for missing income.
- Separate personal expenses.
- Review credit card payments.
- Review owner draws and contributions.
- Review loans and sales tax.
- Review payroll liabilities.
- Reconcile every account.
- Clean up uncategorized transactions.
Common mistakes
- Recording credit card payments as expenses.
- Recording loan proceeds as income.
- Counting sales tax collected as revenue.
- Ignoring payroll liabilities.
- Trusting reports before reconciliation.
Examples for service businesses
- A landscaper may look less profitable if owner draws and personal charges are coded as job expenses.
- A contractor may look more profitable if subcontractor bills are missing.
- A home-service company may look less profitable if credit card payments duplicate expenses.
Profit depends on clean categorization
A profit and loss statement is only as reliable as the transactions behind it. Reconciliation, cleanup, and balance sheet review all matter.
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