July 2025 Managing the Money with Megan Schmitke

The 3 Biggest Mistakes I See Business Owners Make when DIY-ing Their Bookkeeping

by Megan Schmitke

I was recently a guest on Ciara’s podcast (if you missed it,  you can listen here!), and I covered a few different mistakes I see business owners make while doing their own bookkeeping. I thought I’d take this opportunity and elaborate a little more on those mistakes, and what you should be doing instead if you’re currently making them.

Mistake #1: Recording your Shopify/Paypal/Etsy deposits as generic “Sales” revenue

It’s important to note that the amounts that are actually deposited into your bank account are the net amount of several different pieces:

Deposited Amounts = Gross Sales - Discounts - Refunds + Shipping Income + Sales Tax - Processing Fees

If you’re just recording those deposited amounts as “Sales”, you’re missing out on recording all these other pieces of the puzzle, and are likely overstating your income.

Instead, ensure that you are accurately recording each of those pieces individually so your bookkeeping records will match your point of sale system. My favorite way to do this is in a weekly or monthly journal entry, and then you can reconcile your payment processors to make sure that the net amount you’re recording is actually what’s being deposited.

Mistake #2: Recording Inventory Purchases as an Expense

As a product-based business, one of the largest spending categories you likely have each month is your inventory purchases. But, those purchases should not be directly recorded as an expense on your P&L - they should first be recorded as an ASSET on your balance sheet.

If you are expensing these purchases right away, your gross margin on your P&L will be inaccurate, which won’t allow you to see the profit you’re earning on the products you’ve sold in the current month. If possible, make sure that you are entering your product costs into your point of sale system, and then you can easily move the cost of the products you’ve sold (i.e. your COGS) from your Inventory asset on your balance sheet to your Cost of Goods Sold expense line on your P&L.

Mistake #3: Not doing it

Okay, this is kind of a no-brainer, but I know that many business owners have good intentions of doing their own bookkeeping. But, we all know that business owners are BUSY and this is a task that tends to get pushed further and further down the to-do list until it becomes a massive project that gets avoided.

If you are committed to doing your own bookkeeping, make sure you schedule time each week to stay on top of it. Once your bookkeeping is caught up, a simple 15 minutes each Monday morning, and then maybe an additional month at the start of each month to reconcile your accounts and review your prior month financial reports is all it takes!

If you need help correcting any of these mistakes in your own bookkeeping, feel free to connect with me and I’d be happy to give you some guidance! You can find me on Instagram @findingfreedomfinancial, or email me at [email protected].