Bookkeeping errors may cost a business owner money. Below is a list of common bookkeeping mistakes that should be avoided.

1. Not saving all receipts. The IRS doesn’t require business owners to keep receipts under $75 for travel, entertainment, gift or transportation expenses, though it does require that lodging receipts be maintained. If a receipt isn’t kept on file and the IRS decides to come aknockin’, a business owner will have to provide the IRS with the: amount, date, place and business purpose of the expense. Plus, the IRS may ask for additional documentation to verify the expense. Keep it simple and save every receipt.

2. Miscategorizing expenses. Here’s an example of miscategorizing an expense: A business owner purchases stamps at the post office for $8.80 and categorizes the expense to advertising. When, in fact, the expense should be categorized to a postage/delivery expense account.

3. No system for petty cash. Using a petty cash fund allows business owners to avoid writing checks when making small purchases. A system should be setup such that each purchase is accompanied by both a receipt and a petty cash slip. When the petty cash fund is depleted, the receipts and petty cash slips should equal the original amount of the fund. To replenish the fund, simply write a business check to “Cash” for the desired amount, such as $100.

4. Improperly classifying employees. A federal crackdown on employers who are improperly classifying employees as independent contractors is underway and is expected to yield more than $7 billion through 2020. It is a business owner’s responsibility to determine whether an individual is an employee or an independent contractor. Many factors play into the determination. For more info, visit the IRS website.

5. Not reconciling books with bank statements. Reconciling bank statements on a monthly basis ensures the business books are consistent with the amount of cash according to the bank’s records. It is a must!

6. Mixing business and personal funds. Don’t pay for personal expenses out of the business checking and vice versa. Avoid this as much as possible, as it generates additional bookkeeping work. If a business owner does pay for business expenses with personal funds, ensure an expense report is submitted to the company for reimbursement- see #7.

7. Not tracking reimbursable expenses. If business expenses are paid with a business owner’s personal funds, an expense report should be generated and submitted to the company for reimbursement to the business owner. Sometimes, business owners overlook this and do not reimburse themselves rightfully for such expenses.

8. Not leaving an audit trail. Sure, we all love a paperless office. Maintaining documentation to backup your electronic files is necessary, however, in the event of data loss. Also, it’s a good idea to maintain original docs in a secure location in the event of an audit.

9. Maintaining books without knowledge of accounting principles. Software programs such as QuickBooks make business owners think accounting and bookkeeping is so easy. The QuickBooks interface looks nice and empowers business owners, giving them the warm fuzzies in taking control of their finances. Oftentimes, however, a business owner who doesn’t have knowledge of solid accounting principles, coupled with the time to properly maintain the books, ends up making mistakes that cost more in the long-run in having to be cleaned up by an accountant or a bookkeeper.