5 Financial Red Flags I Spot All the Time (That You Might Be Ignoring)
When you’re running a small business, the financial side can easily take a back seat. But sometimes the biggest issues aren’t the obvious ones. They’re the slow build-ups that start with something small and grow into something stressful.
Here are five common red flags I see often as a bookkeeper, along with what you can do if any of them sound familiar.
1. Using One Big “Miscellaneous” Bucket
When you’re not sure how to categorize something, it can be tempting to just toss it into “miscellaneous.” The problem is, when everything ends up in there, it becomes hard to understand where your money is actually going.
What to do:
Look back through your expenses and see if anything can be moved to a more specific category. Most accounting software makes it easy to customize categories. Cleaning this up can make a big difference in how useful your reports are.
2. Relying on Your Bank Balance to Measure Success
If there’s money in the bank, things must be going well, right? Not always. Your bank account tells you what’s available right now, but it doesn’t show the full picture. You might have upcoming bills or payments that aren’t reflected there yet.
What to do:
Make it a habit to review your Profit and Loss reports regularly. They help you understand how your business is truly performing and can help you make more informed decisions.
3. Mixing Business and Personal Expenses
This one is easy to fall into, especially if you’re just getting started. But when business and personal expenses are mixed together, things get messy fast. It also makes it harder to track performance and prepare for taxes.
What to do:
If you haven’t already, open a separate business bank account and start running all business transactions through it. It keeps things cleaner and makes bookkeeping much easier.
4. Not Knowing What You Spend Each Month
If you don’t know your average monthly expenses, it’s hard to plan ahead or make confident decisions. You might be undercharging for your services or overspending in areas you hadn’t noticed.
What to do:
Take a look at your past few months of expenses and calculate your average. Look for patterns in where your money is going. Knowing your numbers gives you more control and helps with budgeting.
5. Always Playing Catch-Up on Your Books
If you’re only updating your books at tax time or when it feels urgent, you’re not alone. But staying behind on your books can create stress and make it harder to see how your business is doing.
What to do:
Try setting aside regular time each week or month to stay on top of things. If it still feels overwhelming, you don’t have to do it all yourself. Getting a little help can go a long way.
Final Thoughts
Bookkeeping doesn’t have to be perfect. But keeping an eye out for small red flags can help you stay in control and avoid surprises later on.
If anything in this post sounds familiar and you're not sure what to do next, reach out. I help small business owners get organized, stay tax-ready, and feel more confident in their numbers.
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