Bookkeeping may not be the most exciting part of running a business, but it is one of the most important. Clean books keep your taxes accurate, your cash flow clear, and your financial reports trustworthy. Unfortunately, I often see business owners in QuickBooks Online (and other software) fall into the same traps – mistakes that cost them money and peace of mind.
1. Negative Liabilities
Liability accounts (credit cards, loans, payroll taxes) should rarely show negative balances. A “negative liability” usually means payments were duplicated or expenses were posted to the wrong account.
2. Negative Assets
When bank accounts or accounts receivable show negative balances, it signals errors such as duplicate payments, misapplied deposits, or incorrect transfers.
3. Loan Principal vs. Interest
A common error is recording the full loan payment as an expense. Only interest is deductible; principal reduces the loan balance. Without proper breakdowns, financials misstate both expenses and liabilities.
4. Owner’s Equity and Basis Tracking
Equity accounts are often ignored or misused. For S-Corporations and partnerships, properly tracking shareholder or partner basis is essential for determining the deductibility of losses.
5. Mixing Personal and Business Transactions
Blending business and personal expenses creates messy books and IRS red flags. Keeping accounts separate is key to clarity and compliance. If personal expenses are paid from business account, it should be recorded as owners distribution.
6. Misusing QuickBooks Online Categories
QuickBooks Online makes it easy to mis-categorize such as recording transfers as income or leaving “Ask My Accountant” unreconciled. These small errors add up quickly.
7. Skipping Monthly Reconciliations
Bank and credit card reconciliations should never be skipped. Without them, duplicate charges, missing transactions, and fraud can go unnoticed for months.
8. Sales Tax Errors
Businesses subject to sales tax often misclassify taxable vs. non-taxable items, or fail to track liabilities correctly – leading to costly penalties or overpayments.
The Bottom Line: Accurate bookkeeping ensures you aren’t overpaying taxes, missing deductions, or making decisions based on bad data. If you notice negative balances, confusing loan entries, or uncategorized transactions in QuickBooks Online, it may be time for a professional review.
Contact Katerina Donckels, CPA from Woodland Hills, CA for expert bookkeeping clean-up and ongoing support. Proper books don’t just save you stress-they save you money.
