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Common Bookkeeping Mistakes to Avoid: A Guide for Accounting Professionals

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Bookkeeping Mistakes to Avoid

Bookkeeping is the backbone of any organization’s financial health, but even seasoned accounting professionals can sometimes make errors that may significantly impact financial records and reporting. Awareness of these common pitfalls is crucial for maintaining accurate and reliable financial information. Here are some of the most frequent bookkeeping mistakes and tips on how to avoid them.

Mixing Business and Personal Finances

One of the most common mistakes is comingling business and personal finances. When business owners or accountants use the same bank account for both personal and business expenses, it becomes difficult to track business profitability accurately. Moreover, it complicates tax calculations and can lead to compliance issues. To avoid this, it’s essential to maintain separate bank accounts and credit cards for business transactions. Implementing strict procedures for expense tracking ensures that personal and business expenditures are never mixed, making financial analysis and tax preparation much more straightforward.

Delaying Transaction Recording

Procrastination in recording transactions can lead to various issues, including missing entries, duplicate transactions, and tedious reconciliation tasks. Delays in data entry can also cause cash flow problems and hinder decision-making based on outdated financial information. Bookkeepers should establish a routine for entering transactions as they occur. Utilizing accounting software with automated transaction imports from bank accounts can significantly reduce the risk of delays and errors, ensuring up-to-date financial records.

Neglecting Account Reconciliation

Failing to regularly reconcile accounts against bank statements, receipts, and invoices is like navigating a ship without a compass. Account reconciliation is a critical practice that ensures every transaction is accounted for and helps identify discrepancies early. Without this step, unnoticed errors can grow into more significant issues, potentially leading to incorrect financial statements. Implementing a monthly reconciliation process for all accounts, including bank accounts, credit cards, and petty cash, can help maintain accuracy and prevent costly mistakes.

Incorrect Expense Classification

Misclassifying expenses is another common error that can distort financial statements and lead to inaccurate tax filings. For instance, categorizing a capital expenditure as an operational expense can misrepresent profitability and lead to non-compliance with accounting standards. It’s essential to stay informed about the latest classification guidelines and to review transactions carefully before recording them. Using accounting software with built-in expense categorization can also help reduce the likelihood of misclassifications.

Overreliance on Software and Lack of Professional Guidance

While bookkeeping software can automate many tasks, it cannot replace the expertise of a skilled accountant. Relying solely on software without consulting an accounting professional can result in overlooked nuances and best practices that are critical for an organization’s financial health. Engaging a professional accountant for regular reviews or audits ensures that the bookkeeping system is functioning optimally and that the organization is compliant with all regulations.

Inconsistent Record-Keeping

Consistency in record-keeping is vital for accurate financial reporting. Inconsistent application of accounting policies or procedures can lead to confusion and errors in financial statements. Bookkeepers should adhere to a standardized process for recording transactions and ensure that all team members are trained in these practices. Regularly updating internal controls and procedures can also help maintain consistency.

Ignoring Tax Deadlines and Obligations

Missing tax deadlines or failing to comply with tax regulations can result in penalties and interest charges, impacting the organization’s financial health. Bookkeepers should keep track of all relevant tax deadlines and ensure that the business meets its tax obligations promptly. Setting reminders and utilizing tax management software can help avoid these costly mistakes.

Maintaining vigilance against these common #bookkeeping errors is essential for the accuracy and integrity of financial records. By implementing strict procedures, utilizing accounting software effectively, and engaging professional guidance when necessary, accounting professionals can ensure that their organizations’ financial information is reliable and compliant. Diligence and awareness are key to mastering the art of bookkeeping and safeguarding an organization’s financial well-being.

Norene

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Accounting

IAASB tweaks standards on working with outside experts

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The International Auditing and Assurance Standards Board is proposing to tailor some of its standards to align with recent additions to the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants when it comes to using the work of an external expert.

The proposed narrow-scope amendments involve minor changes to several IAASB standards:

  • ISA 620, Using the Work of an Auditor’s Expert;
  • ISRE 2400 (Revised), Engagements to Review Historical Financial Statements;
  • ISAE 3000 (Revised), Assurance Engagements Other than Audits or Reviews of Historical Financial Information;
  • ISRS 4400 (Revised), Agreed-upon Procedures Engagements.

The IAASB is asking for comments via a digital response template that can be found on the IAASB website by July 24, 2025.

In December 2023, the IESBA approved an exposure draft for proposed revisions to the IESBA’s Code of Ethics related to using the work of an external expert. The proposals included three new sections to the Code of Ethics, including provisions for professional accountants in public practice; professional accountants in business and sustainability assurance practitioners. The IESBA approved the provisions on using the work of an external expert at its December 2024 meeting, establishing an ethical framework to guide accountants and sustainability assurance practitioners in evaluating whether an external expert has the necessary competence, capabilities and objectivity to use their work, as well as provisions on applying the Ethics Code’s conceptual framework when using the work of an outside expert.  

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Accounting

Tariffs will hit low-income Americans harder than richest, report says

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President Donald Trump’s tariffs would effectively cause a tax increase for low-income families that is more than three times higher than what wealthier Americans would pay, according to an analysis from the Institute on Taxation and Economic Policy.

The report from the progressive think tank outlined the outcomes for Americans of all backgrounds if the tariffs currently in effect remain in place next year. Those making $28,600 or less would have to spend 6.2% more of their income due to higher prices, while the richest Americans with income of at least $914,900 are expected to spend 1.7% more. Middle-income families making between $55,100 and $94,100 would pay 5% more of their earnings. 

Trump has imposed the steepest U.S. duties in more than a century, including a 145% tariff on many products from China, a 25% rate on most imports from Canada and Mexico, duties on some sectors such as steel and aluminum and a baseline 10% tariff on the rest of the country’s trading partners. He suspended higher, customized tariffs on most countries for 90 days.

Economists have warned that costs from tariff increases would ultimately be passed on to U.S. consumers. And while prices will rise for everyone, lower-income families are expected to lose a larger portion of their budgets because they tend to spend more of their earnings on goods, including food and other necessities, compared to wealthier individuals.

Food prices could rise by 2.6% in the short run due to tariffs, according to an estimate from the Yale Budget Lab. Among all goods impacted, consumers are expected to face the steepest price hikes for clothing at 64%, the report showed. 

The Yale Budget Lab projected that the tariffs would result in a loss of $4,700 a year on average for American households.

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Accounting

At Schellman, AI reshapes a firm’s staffing needs

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Artificial intelligence is just getting started in the accounting world, but it is already helping firms like technology specialist Schellman do more things with fewer people, allowing the firm to scale back hiring and reduce headcount in certain areas through natural attrition. 

Schellman CEO Avani Desai said there have definitely been some shifts in headcount at the Top 100 Firm, though she stressed it was nothing dramatic, as it mostly reflects natural attrition combined with being more selective with hiring. She said the firm has already made an internal decision to not reduce headcount in force, as that just indicates they didn’t hire properly the first time. 

“It hasn’t been about reducing roles but evolving how we do work, so there wasn’t one specific date where we ‘started’ the reduction. It’s been more case by case. We’ve held back on refilling certain roles when we saw opportunities to streamline, especially with the use of new technologies like AI,” she said. 

One area where the firm has found such opportunities has been in the testing of certain cybersecurity controls, particularly within the SOC framework. The firm examined all the controls it tests on the service side and asked which ones require human judgment or deep expertise. The answer was a lot of them. But for the ones that don’t, AI algorithms have been able to significantly lighten the load. 

“[If] we don’t refill a role, it’s because the need actually has changed, or the process has improved so significantly [that] the workload is lighter or shared across the smarter system. So that’s what’s happening,” said Desai. 

Outside of client services like SOC control testing and reporting, the firm has found efficiencies in administrative functions as well as certain internal operational processes. On the latter point, Desai noted that Schellman’s engineers, including the chief information officer, have been using AI to help develop code, which means they’re not relying as much on outside expertise on the internal service delivery side of things. There are still people in the development process, but their roles are changing: They’re writing less code, and doing more reviewing of code before it gets pushed into production, saving time and creating efficiencies. 

“The best way for me to say this is, to us, this has been intentional. We paused hiring in a few areas where we saw overlaps, where technology was really working,” said Desai.

However, even in an age awash with AI, Schellman acknowledges there are certain jobs that need a human, at least for now. For example, the firm does assessments for the FedRAMP program, which is needed for cloud service providers to contract with certain government agencies. These assessments, even in the most stable of times, can be long and complex engagements, to say nothing of the less predictable nature of the current government. As such, it does not make as much sense to reduce human staff in this area. 

“The way it is right now for us to do FedRAMP engagements, it’s a very manual process. There’s a lot of back and forth between us and a third party, the government, and we don’t see a lot of overall application or technology help… We’re in the federal space and you can imagine, [with] what’s going on right now, there’s a big changing market condition for clients and their pricing pressure,” said Desai. 

As Schellman reduces staff levels in some places, it is increasing them in others. Desai said the firm is actively hiring in certain areas. In particular, it’s adding staff in technical cybersecurity (e.g., penetration testers), the aforementioned FedRAMP engagements, AI assessment (in line with recently becoming an ISO 42001 certification body) and in some client-facing roles like marketing and sales. 

“So, to me, this isn’t about doing more with less … It’s about doing more of the right things with the right people,” said Desai. 

While these moves have resulted in savings, she said that was never really the point, so whatever the firm has saved from staffing efficiencies it has reinvested in its tech stack to build its service line further. When asked for an example, she said the firm would like to focus more on penetration testing by building a SaaS tool for it. While Schellman has a proof of concept developed, she noted it would take a lot of money and time to deploy a full solution — both of which the firm now has more of because of its efficiency moves. 

“What is the ‘why’ behind these decisions? The ‘why’ for us isn’t what I think you traditionally see, which is ‘We need to get profitability high. We need to have less people do more things.’ That’s not what it is like,” said Desai. “I want to be able to focus on quality. And the only way I think I can focus on quality is if my people are not focusing on things that don’t matter … I feel like I’m in a much better place because the smart people that I’ve hired are working on the riskiest and most complicated things.”

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