338 - Common Bookkeeping Mistakes

Unf*ck Your Biz With Braden

On today's episode of the podcast we're talking about the most common bookkeeping mistakes we see and how to avoid them.

1. Going to Quickbooks too early

Unless your hiring a bookkeeper who knows what they're doing, this is not recommended and the reason why is because we see a lot of error. From the outside the bookkeeping looks good, but when we get in there we find that it can be a bit of a mess. A big one we see is accounts never getting reconciled and then we have to go back to the beginning of their Quickbooks to start reconciling. We spend so much time having to reconcile clients' Quickbooks that a lot of time it doesn't end up being worthwhile because that can cost you a few thousand dollars. In the beginning it can sound like DIYing your Quickbooks can save you money, but it can catch up to you in the long run so you should hire a professional from the beginning.

What I recommend people do is just use a spreadsheet. Log your income, log your expenses. If you need help with this, you can have us set it up for you through our Unf*ck Your Biz service or you can get all our bookkeeping, tax and cash flow systems inside the Profit Rx course https://notavglaw.com/profit-rx

2. Not having separate bank accounts

When you start your business, open a separate bank account. Bring all business income and expenses through this bank account and it will make bookkeeping exponentially easier, especially if you hire someone to do your bookkeeping. If you comingle your expenses, we have no way of knowing what's business and what's personal. The same goes for credit cards, PayPal accounts, etc.

If you spend something from personal, note it right away so you don't have to comb through your personal statements. Technically you should run a reimbursement through your business account and go through a more formal process if you have an S Corp.

3. Waiting too long to do your bookkeeping

Half the benefit of doing your books is to gain financial insights for your business. We do it because we have to for our taxes, but looking at our bookkeeping helps us better understand our numbers.

For example, to can learn if you're charging enough for your services or products. By looking at the numbers in my business, I learned that I wasn't even really breaking even on some Unf*ck Your Biz clients because I was paying our bookkeepers so much to reconcile years' worth of Quickbook accounts for clients. This helped me know I needed to raise the price, create custom pricing to add on extra services based on what a client needs, and create podcast episodes like this to help prevent these issues for you in the first place.

Bookkeeping also allows you to search by client and offer to see what is most profitable for you and when it might be time to raise your pricing. This also helps you determine what offers and programs do best during what time of year so you can better promote. If you aren't keeping your books regularly, you won't be able to make tweaks and changes as needed throughout the year.

4. Overcomplicating things

One of my mottos is: complicated systems are only as good as our ability to manage those systems. So before you setup some complicated fancy system, ask if you'll take the time to maintain it (speaking from person experience). The same applies to our bookkeeping. Start simple with a spreadsheet, divide your income and expenses into a few broad categories and once you start tracking it you can make it a little bit more complicated after you've proven you can stick with it.

5. Not using an actual bookkeeping system

A bookkeeping system is going to track everything you need to track. For example, CRMs (Honeybook, Dubsado, etc) are not bookkeeping systems, they have bookkeeping elements to them. I haven't looked at them in a while, but to my knowledge, they only really track your income.

6. Not knowing what you can actually deduct

We've been seeing this a lot recently with clients spending money from their business bank accounts to pay for personal expenses. Inside Profit Rx we give a Small Business Tax Deduction Guide (you can also get it for $10 on our website or inside my book, Unf*ck Your Biz).

Want to know the best next step for you? Take our quiz at notavglaw.com/quiz