For many small businesses, the most common bookkeeping errors are also the easiest to fix.     Start up businesses typically make these mistakes:

Use the right accounting system.     Most businesses use either cash-based or accrual-based accounting.    If you use the cash method, you count income when you receive it and expenses when you pay them. Under the accrual method, you count income and expenses when they happen, not when you actually receive or pay them.   Most businesses use the accrual method.

Maintain daily records.    Whether you are starting a business, or growing a business,  small business typically don’t keep accurate daily records.       By neglecting this area, you lose an accurate way to track  the financial condition of your business.     There are many different types of record-keeping systems; what matters is that you have one and use it every day.   Once you have a good system set up, accurate record keeping will take just a few minutes a day.

Banking.     Start up businesses typically fail to use a deposit book or deposit slips, this is critical.     You can’t go back and check your records if you haven’t got a paper trail giving you the details of your deposit on a particular day.    If you deposit 5 customer’s deposits that day, and only recorded 4, you have no way of checking the missing information.      Many banks will only provide this information online within 30-60 days.    You may not notice this issue in that time frame.

Be careful with cheques.     Keep in mind that cheques are as good as cash.   If something goes wrong, you – not the bank – will be on the hook for the money.    Remember to write void across a cheque that was written in error, do not throw it in the trash.    It is a good practice to include your voided cheques with your bank statement.     Your accountant may ask to see them.   It is also a good idea for a partnership to require at least one of the partners to co-sign the cheques.

Accounts Payable is the term used by your accounting software to track the money owing to your vendors.   You would post your vendor's invoices to accounts payable if you don't intend to pay them right away (for example if you pay that vendor in 30 days then it would be posted to A/P.     Note:  immediate payments would be handled through your banking module.

Accounts Receivable is the term used by your accounting software to track the money owing from your customers.    Typically, you post your sales invoices to receivables, then record their payments when you receive them.  

Bank Reconciliation.     Once you receive your bank statement, you need to perform a bank reconciliation.   Basically this is the act of matching up your payments and deposits on your books with what the bank has on record.     Once you agree to the bank statement, you print out the bank reconciliation report.   Review the outstanding cheques and payments shown on your bank reconciliation report.   Look for anything over 30 days old as  this is likely a bookkeeping error.