Neglecting your finances or making simple errors actively drains money from your company’s bank account. These “small” oversights can cascade into significant problems, including cash flow crises, missed growth opportunities, and even legal penalties.

Let’s explore the ten most common bookkeeping mistakes that are costing your business money right now and discuss how you can fix them.

1. Mixing Personal and Business Expenses

This is, without a doubt, the most common and damaging mistake new business owners make. This practice, known as “commingling funds,” is a nightmare for several reasons.

• It pierces the corporate veil. If your business is incorporated, one of the primary benefits is limited liability. This means you are not personally liable for the company's debts. However, when you consistently mix personal and business finances, a court can rule that your business is not a separate legal entity, “piercing the corporate veil” and putting your personal assets (like your house and savings) at risk in a lawsuit.

• It makes tax prep a costly nightmare. Come tax time, you or your accountant will have to spend hours—billable hours—sifting through bank statements, trying to remember if that $100 restaurant charge was a client dinner (deductible) or a date night (not deductible). This extra time costs you money directly, and the inevitable confusion means you will almost certainly miss legitimate deductions, causing you to overpay on your taxes.

• It hides your true performance. You cannot know your business’s true profitability if its accounts are cluttered with personal transactions. You might look at your bank balance and think you’re doing great, but in reality, half of that balance is propped up by personal funds, masking a critical cash flow problem.

The Fix: From day one, open a dedicated business bank account and get a business credit card. Only business income goes into the account, and only business expenses are paid from it. If you need to pay yourself, transfer the money from the business account to your personal account as a formal “owner’s draw” or payroll.

2. Not Reconciling Your Books Regularly

Bank reconciliation is the process of matching the transactions in your accounting software (like QuickBooks or Xero) to your monthly bank and credit card statements. Many business owners skip this, assuming that if the bank statement looks “about right,” everything is fine.

This is a high-stakes gamble. Not reconciling your books is like flying a plane without checking your instruments. You might be drifting dangerously off course and not know it until it’s too late.

The Fix: Schedule time on your calendar every single month (or week, for high-volume businesses) to perform a bank reconciliation. It's a non-negotiable business process. This single habit will catch mistakes, prevent fraud, and give you a crystal-clear picture of your exact cash position.

3. Poor Record-Keeping and Losing Receipts

The Canada Revenue Agency (CRA) and the IRS require you to keep thorough records, including receipts and invoices, to back up the expenses you claim on your tax return.

If you are ever audited and cannot produce a receipt for a $2,000 “business meal” expense, the auditor will disallow the deduction. That means you’ll have to pay the income tax on that $2,000, plus interest and potentially steep penalties.

The Fix: Go digital. Use an app like Dext or Hubdoc, or even the built-in app from your accounting software (like QuickBooks Online), to snap a picture of every receipt the moment you get it. The app will scan, categorize, and store it digitally, making it searchable and permanently backed up.

4. Mismanaging Petty Cash

Petty cash seems old-fashioned, but many businesses still use a small cash fund for minor, everyday expenses like office coffee, parking, or postage. The mistake isn’t in having petty cash but treating it like a personal slush fund with no accountability.

When cash leaves the box without a corresponding receipt, it simply vanishes from your books. This “cash leakage” is a common source of internal fraud and, at a minimum, represents un-tracked, non-deductible spending.

The Fix: Implement a formal petty cash system. Use a lockbox. Assign one person (a “custodian”) to be responsible for it. To get cash out, an employee must submit a voucher or receipt for the exact amount. When the fund runs low, the custodian reconciles the remaining cash plus all the receipts to equal the original starting amount.

5. Misclassifying Employees vs. Contractors

This is a high-stakes legal and financial landmine. In an attempt to save money on payroll taxes, benefits, and insurance, some businesses classify workers as “independent contractors” when they are, by legal definition, “employees.”

The government has very strict tests to determine this status. It generally comes down to control: Do you control how, when, and where they do their work? If you do, they are likely an employee, regardless of what your contract says.

The Fix: Be scrupulously honest and cautious. Use the government's official guidelines to determine worker status before you hire them. If there is any doubt, consult with an employment lawyer and a bookkeeping professional. The short-term savings are never worth the long-term risk.

6. Ignoring Your Accounts Receivable (A/R)

Your Accounts Receivable (A/R) is the money that your clients owe you for services or products you’ve already delivered. It’s your revenue. Shockingly, many businesses are terrible at collecting it. They send an invoice and just passively hope it gets paid.

A sale is not a sale until the cash is in the bank. An overdue invoice is just an interest-free loan you’re giving to your client.

The Fix: Be systematic. Invoice immediately upon completing the work. Use clear payment terms (e.g., “Net 15” or “Due on Receipt”). Use accounting software to send automatic reminders for overdue invoices. For large, consistent late payers, consider charging a late fee (make sure this is in your initial contract) or pausing future work until they are paid up.

7. Neglecting Your Accounts Payable (A/P)

The flip side of A/R is Accounts Payable (A/P)—the money you owe to your suppliers and vendors. Ignoring this is just as dangerous. Some business owners operate in “panic mode,” only paying bills when they get a threatening letter or their service is about to be shut off.

The Fix: Use a bill management system (most accounting software has this). Enter every bill into the system as soon as it arrives. Schedule payments to be made on time, but not necessarily early (unless there’s a discount). This lets you hold onto your cash as long as possible while still protecting your relationships and avoiding fees.

8. Doing It All Yourself for Too Long

In the beginning, DIY bookkeeping makes sense. You have more time than money, and the transactions are simple. But as your business grows, so does the complexity. You add employees, inventory, new service lines, and multiple bank accounts.

At some point, the time you spend trying to do your books (and the cost of the mistakes you inevitably make) becomes far greater than the cost of hiring a professional. You’re an expert in your field—not in payroll remittances, sales tax filings, and depreciation schedules.

The Fix: Recognize the value of your time. As soon as your bookkeeping is taking more than a few hours a month or you feel even slightly out of your depth, it’s time to outsource. Hiring our professional bookkeeper in Edmonton, for example, isn’t an expense but an investment in efficiency, accuracy, and peace of mind that pays for itself.

9. Failing to Track Reimbursable Expenses

This mistake is common in businesses where owners or employees incur expenses on behalf of a client or project. For example, a consultant pays for a flight and hotel for a client visit, or a contractor buys specific materials for a job.

The mistake is twofold: either you forget to bill the client for the expense, or you record it incorrectly, so you end up paying for it yourself and you don’t deduct it properly on your taxes.

The Fix: Use the “billable expense” feature in your accounting software. When you enter the expense (e.g., the flight), you tag it as billable and assign it to a specific client or project. The next time you create an invoice for that client, the software will automatically prompt you to add that reimbursable expense. This ensures you get paid back and that the transaction is recorded correctly for tax purposes.

10. Not Backing Up Your Financial Data

This final mistake is the digital equivalent of letting your only set of books burn in a fire. You might be meticulously tracking everything in QuickBooks Desktop or an elaborate Excel spreadsheet. But what happens if your computer's hard drive fails? Or if ransomware encrypts all your files? Or if a fire or flood destroys your office?

All that work—years of financial history—could be gone in an instant.

The Fix: This is the easiest fix of all. Use cloud-based accounting software. Platforms like QuickBooks Online, Xero, and Wave automatically back up all your data in real-time on secure, redundant servers. Your data is safe from hardware failure, theft, and disaster. If you must use desktop software, at a minimum, pay for a secure, automated, off-site cloud backup service that backs up your entire computer daily.

Taking Control of Your Finances with Starlight Bookkeeping

You don’t have to fix it all alone. To see how we at Starlight Bookkeeping can help you establish robust systems, clean up past messes, and turn your books into a powerful business tool, we encourage you to learn more.

(We also offer various resources to help in your business on our website to get you started!)

Your financial health is the foundation of your business. Stop letting these common mistakes cost you money.

Ready to get your books in order and protect your bottom line? Contact Starlight Bookkeeping today for a consultation at 1(780)-887-2404.