5 Common Bookkeeping Mistakes Small Business Make (And How To Avoid Them)

There is something so exciting about starting your own business and being your own boss – something we all have dreamt of. So, when it finally happens, excitement kicks in but is followed by a realisation that this is now your source of income.

Doing your own books at the beginning of your business is very common. Saving money is a priority and having the time to complete your own bookkeeping may be doable at the beginning. But… as your business grows, time gets precious.

Getting booked and busy = no time for the books!

Receipts are piling up and then BAM! – BAS time has arrived.

The good news is – this is more common than you think, and they are all fixable once you understand what’s happening.

5 Most Common Mistakes

Mistake 1: Leaving bookkeeping until BAS time

We all have the best of intentions when starting a business.

In the beginning bookkeeping is manageable – receipts are kept, a few transactions are entered, and promises are made that we will stay on top of it.

Business gets busy. Client work comes first. Family life happens. Admin gets pushed to the side as a “just for now” moment.

I often see business owners spending late nights trying to catch up months of records, searching for invoices, guessing transactions, and hoping the numbers are correct just so they can lodge on time.

If this sounds familiar – you are not alone.

Why it’s a problem

Bookkeeping needs consistency. When it’s been several full moons and you’re playing “catch-up” – things get messy and mistakes do happen. Missed income, duplicated expenses, and incorrect GST coding.

The BAS then ends up based on memory rather than accurate records.

What it leads to

• Stress and overwhelm

• Unexpected BAS or tax bills

• Risk of ATO corrections… or penalties

How to avoid it

In simple form, the solution is:

• Regular routine (consistency is key)

• Monthly reconciliation (at least)

• A bookkeeper whose got your back

  
  

Mistake 2: Mixing business and personal money

This is MASSIVE with small businesses… especially at the beginning of the biz journey. It’s the most common mistake I see – using the same account for both business and personal spending.

It often starts innocently – paying for fuel, groceries, subscriptions, or a quick personal purchase from the business card, with plans to “sort it out later”. Over time, transactions become harder to track, and the business account no longer clearly shows what the business is actually spending.

While this can be manageable if you have a bookkeeper staying on top of this, majority of the time this area becomes neglected.

Why it’s a problem

When personal and business transactions are mixed together, the financial reports stop telling the truth about the business.

Expenses may be overstated, profit may look lower than it actually is, and GST can be incorrectly claimed on private purchases. It also makes reconciliation much harder and takes more time (and cost) to fix later.

What it leads to

• confusion about whether the business is profitable

• incorrect GST reporting

• messy records at tax time

• higher bookkeeping and accounting fees to clean up

  
  

How to avoid it

The simplest solution is separation.

Have:

• a dedicated business bank account

• a business card for business expenses only

• personal drawings transferred to your personal account instead of spending directly from the business account

Clear separation gives you accurate reports and easier BAS preparation

A little hot tip: put a business card on your phone wallet in case you ever forget to take your business card somewhere… you will never forget your phone!

Mistake 3: Not understanding cashflow vs profit

A very common misunderstanding in small business is assuming that if there is money in the bank, the business must be doing well.

It’s logic, right? You’ve been paid, the account balance looks healthy, and bills are covered. But the bank balance alone doesn’t tell the full story.

Not all the money sitting in your account actually belongs to the business (unfortunately)

Why it’s a problem

Within your income can be:

• GST you need to pay to the ATO

• tax you will owe later

• superannuation obligations

• upcoming expenses that haven’t been paid yet

  
  

So, while the bank account may look positive, the business may not actually be making a profit.

This is why many business owners feel blindsided when BAS or tax time arrives. The money has already been spent because it looked available.

What it leads to

• unexpected tax bills

• difficulty paying BAS on time

• cashflow pressure despite being “busy”

• feeling like the business is working hard but not getting ahead

  
  

This is one of the biggest causes of financial stress in small business.

How to avoid it

Good bookkeeping turns your numbers into information.

Regularly reviewing reports such as the Profit & Loss and monitoring upcoming liabilities helps you understand:

• what you’ve earned

• what you owe

• and what you can safely spend

When you understand your cashflow, you can plan ahead.

Mistake 4: Incorrect GST coding & claiming

GST is one of the areas small business owners find the most confusing.

The problem with GST is it isn’t always straightforward. It’s confusing and takes a lot of learning to know exactly what it is that is required.

Most business owners aren’t trying to do the wrong thing – they’re just trying to keep the admin moving. A transaction comes through the bank feed and may be coded quickly… and incorrectly.

Why it’s a problem

Not every purchase includes GST, and not every expense can be claimed.

I often see things like:

• claiming GST on personal purchases paid from the business account

• coding fuel or vehicle costs incorrectly

• recording larger purchases as everyday expenses

• missing GST on sales income

• trusting the bank feed without checking the receipt

• 
  

Because your BAS is created from your bookkeeping records, any mistake goes straight into what is reported to the ATO.

What it leads to

• paying too much GST or not enough

• having to amend BAS statements later

• confusion at tax time

• unnecessary stress if the ATO asks questions

  
  

These errors are very common and usually happen simply because business owners are busy and doing their best.

How to avoid it

Instead of guessing, slow the process down slightly.

Keep receipts, check whether GST is actually listed on the invoice, and review transactions regularly rather than all at once at the end of the quarter.

A little hot tip: Subscribe to ATO newsletters to stay up-to-date!

Good bookkeeping isn’t just data entry — it’s making sure the information is correct before lodging.

Mistake 5: Trying to do everything alone

If you’re a small business owner — especially in our deadly businesses — chances are you are used to figuring things out on your own.

You wear all the hats. You’re the director, admin, marketing team, service provider, problem-solver and sometimes even counsellor.

So of course, bookkeeping becomes one of those many hats you wear.

You don’t care about your numbers. But… you’re busy building something meaningful, so, at the end of a long day, sitting down to reconcile transactions is the last thing you feel like doing.

So, it waits… and builds up.

And suddenly it feels too big to tackle.

Why it’s a problem

When bookkeeping keeps getting pushed aside, it doesn’t just sit quietly.

It turns into:

• stress before BAS

• second-guessing your profit

• wondering if you can afford to hire or invest

• avoiding your bank balance altogether

• 
  

I speak to so many hardworking business owners who are doing amazing work — but feel unsure about their numbers.

Not because they’re not capable.Because they’re trying to do everything alone.

How to avoid it

Getting support doesn’t mean you’re not capable.

It means you’re serious about your business.

When your bookkeeping is up to date, you can:

• make decisions confidently

• plan instead of panic

• focus on growth instead of deadlines

  
  

If you’re feeling behind, overwhelmed, or unsure where things stand — that’s exactly why I offer a free bookkeeping health check. It’s simply a starting point to bring clarity back.

Final Thoughts

If you saw yourself in any of these, you’re definitely not alone.

Most business owners don’t fall behind because they don’t care — they fall behind because they’re busy doing the actual work of their business and everything else life throws at them.

Bookkeeping isn’t just paperwork. It’s what gives you clarity and peace of mind. When your records are up to date, you know what you owe, what you’ve earned, and what your business can actually afford.

The good news is these issues are very common and they are fixable.

If you’re unsure where your books are sitting, I offer a free bookkeeping health check. It’s simply a starting point to see where things are at and what needs attention — no pressure.

Running a business is already a lot.Your numbers shouldn’t be the part that stresses you out.

Let’s yarn when you are ready <3