Careers Business Ownership Accounting Errors Small Business Owners Make Save Time, Money and Headaches by Avoiding These Common Mistakes Share PINTEREST Email Print Business Ownership Operations & Success Accounting Sustainable Businesses Supply Chain Management Operations & Technology Marketing Market Research Business Law & Taxes Business Insurance Business Finance Industries Becoming an Owner By Glenn Tyndall, CPA, PA Glenn Tyndall, CPA, PA LinkedIn Certified Public Accountant University of North Florida Glenn Tyndall is a certified public accountant (CPA, PA) located in Florida. He owns his own accounting and tax firm that services individuals, small businesses, real estate associations, and more. Glenn is a member of the American Institute of Certified Public Accountants (AICPA) and is a former writer for The Balance Small Business. Glenn graduated from the University of North Florida. Learn about our Editorial Process Updated on 11/20/19 While it can be helpful for a small business to process transactions quickly with a high-powered accounting software program, paying to correct mistakes is something you’d like to avoid. Understanding the types of accounting mistakes that are commonly made can make a difference between having to pay to fix an error and getting it right the first time. Here are eight common accounting mistakes that business owners make and suggestions on how to fix them: 01 of 08 Accidentally Recording Transactions in a Prior Period Cultura / Frank van Delft / Riser / Getty Images Once you've "closed the books" for a fiscal year, you really shouldn't go back to change them. Still, some accounting applications, such as QuickBooks, don't allow you to lock a prior period financials so you can post current year's entries in a prior period if you're not careful. Other accounting software programs allow you to make this mistake if you haven't configured the software to lock prior period financials. Review Prior Period Balance Sheet for ChangesIf you've recorded transactions in a prior period, the balance sheet will change. Therefore, you can check your prior period balance sheet to make sure it hasn't changed since you last closed your books. If it's changed, you'll need to investigate. 02 of 08 Incorrect Balance in Asset or Liability Balance Asset accounts should have debit balances, while liability accounts should have credit balances. The most common causes of having an incorrect balance in these balance sheet accounts are posting entries to the incorrect account, misclassifying accounts, and duplicating adjusting entries. Check Your Balance Sheet for ErrorsCheck your balance sheet to make sure assets and liabilities have the correct balances. If there's an account with an incorrect balance, you can pull up the detail of that account to find the entries that caused the error. This check should be performed at least monthly. 03 of 08 Incorrect Balance in Revenue or Expense Balance Revenue accounts should have credit balances, while expense accounts should have debit balances. Some causes of this error are posting entries to the incorrect account, misclassifying accounts, and duplicating adjusting entries, which are the same reasons for having incorrect balances in balance sheet accounts. Check Your Income Statement for ErrorsYou check your Income Statement to make sure revenues and expenses have the correct balances. If there's an account with an incorrect balance, you can pull up the detail of that account to find the entries that caused the error. This check should be performed at least monthly. 04 of 08 Misclassifying Expenses Small business accounting systems save time because entries can be posted quickly and easily. When information is entered, it can be easy to pick the wrong expense account or expense description. Misclassifying expenses not only means that the accounting system may not properly reflect what's going on in your business but can cause real headaches if financial and tax reporting isn't accurate. Look Over Your Expense Statements PeriodicallyAssign someone to scan your expenses periodically to make sure the data appears reasonable. For example, if a meal expense is booked in the lease expense account, it'll usually stand out because of the entries description. Another indication that expenses may be misclassified is unexplained budget-to-actual differences. 05 of 08 Not Seeking Help When Needed You've heard the expression "penny wise and dollar poor" in reference to people who'll spend a few hours of their time to save a few dollars. You've got to realize that your job is to run your business. A contractor builds, a painter paints, and a realtor sells. Sometimes it's just not worth your time to spend hours upon hours going over the details of your accounting records or researching how to correct an error you've made. Lean on a Professional Accounting ProfessionalIf you can, you'll make more than you'll spend by tending to other issues than your accounting issues, then you should consider outsourcing the problem to a professional accountant or bookkeeper. 06 of 08 Not Saving Receipts You diligently recorded all your expenses in your accounting records. Your expense statement is a work of art, without any errors or omissions. Then, you’re asked by the IRS; without receipts, your expense statements are useless. Keep Your ReceiptsSave your receipts or make scanned copies of all of them. 07 of 08 Failing to Schedule Backups Many small businesses rely on software to do the accounting work for them but don't account for system crashes or errors. One single problem can wipe out your files. Schedule Routine BackupsSchedule weekly automatic backups using cloud storage or a specific server set aside for this task. 08 of 08 Not Training Staff No matter how powerful your software is, your staff needs the training to be effective. An improperly trained staff member can wreck your records by accident, throwing off all of your expense and profit sheets. Perform Regular TrainingDuring the onboarding process, hold comprehensive training sessions and have quarterly refreshers to ensure all staff can enter and run information accurately.