Category: Business Strategy

Bookkeeping Mistakes That Drain Your Profits — And How to Fix Them

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⚠️ Are bookkeeping errors quietly costing you money?

For many small business owners, bookkeeping feels like a back-office chore — something to “get through” rather than a strategic tool. But messy books don’t just create confusion… they can lead to missed deductions, inaccurate reports, and costly tax surprises.

Here are the Top 5 Bookkeeping Mistakes we see most often:
1️⃣ Mixing Personal and Business Expenses
Using one account for everything might feel convenient, but it’s a recipe for audit risk and missed deductions.
Fix: Open a dedicated business account to stay organized.

2️⃣ Ignoring Bank Reconciliations
If your books don’t match your bank statements, you’re flying blind.
Fix: Reconcile monthly to catch errors, duplicates, or missing transactions.

3️⃣ Forgetting to Record Small Transactions
Coffee with a client? A quick app subscription? These add up — and they’re deductible.
Fix: Use a mobile-friendly tool and log expenses on the go.

4️⃣ Misclassifying Income and Incorrect expense categorization
Not all revenue is created equal. Mislabeling income and using the wrong categories can distort your financial reports and impact your tax filings.
Fix: Set clear categories and review them monthly with your bookkeeper.

5️⃣ Not Reviewing Monthly Reports
Your Profit & Loss, Balance Sheet, and Cash Flow reports aren’t just paperwork — they’re decision tools.
Fix: Schedule a monthly review to spot trends, plan ahead, and stay tax-ready.

Avoiding these mistakes means fewer headaches and clearer insight into your business health. Remember, clean books are not just for taxes — they’re for strategy.

🧹 Need a Cleanup? We’ve Got You.
If your books feel more “Before” than “After,” don’t wait until tax season to fix it.
CMCPA Services offers fast, accurate cleanup and ongoing support — so you can focus on growth, not spreadsheets.

📊 At CMCPA Services, we help business owners understand their numbers, not just record them.
📩 Message us today to get started!

 Profit ≠ Cash Flow: Know the Difference

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Many businesses celebrate a “profitable” month—only to realize they’re short on cash at month-end.
Here’s why:
📊 Profit shows what you earned on paper.
💵 Cash flow shows what’s actually in your account.
You can be profitable and still run into cash problems if:
✅ Customer payments are delayed
✅ Inventory ties up funds
✅ Expenses aren’t aligned

🔑 Tip: Always review your cash flow statement alongside your profit & loss report.

📌 At CMCPA Services, we help businesses stay on top of both profits and cash flow so you can make smarter financial decisions.

The Idea Behind Profit First by Mike Michalowicz

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Profit First Book by Mike Michalowicz

What is Profit First Method by Mike Michalowicz?
Profit First Method is based on the idea to pay yourself first before paying your expenses. The goal is to grow a more profitable business, not a cash-eating monster. To run your business based on what you can afford now, not what you hope you can afford someday. 

Profit First Principles
By taking your profit first, the money available for expenses is artificially reduced. It flips the old adage accounting formula;
Sales – Expenses = Profit into Sales – Profit = Expenses. Hence, you are forced to be innovative, strategic and be mindful of your spending.

How Profit First Method Works
It was inspired by a fitness advertising on tv where in order to reach the goal, one must:
1. Use small plate
2. Serve sequentially
3. Remove temptation
4. Enforce a rhythm

Actionable steps:
1. Set up five different accounts for these purposes.
-Main income
-Profits
-Owner’s salary
-Taxes
-Operating expenses

2. Use those accounts for that purpose only.

Profit First method could be a tool to a more profitable business but the downside;
Maintaining the books of the business can sometimes be a daunting task. Having too many accounts to maintain can be burdensome. Not to mention that if the purpose of some of these accounts is served, you need to revert it to the business main depository account. And it is also important to note that Profit First method is not an accounting method but rather a more cash management system.

How to implement it in the books, particularly, Quickbooks Online and how often? It really depends on what type is your business and how often you want it to be.

How much percentage will you take from your business? This requires assessment of the health of your business. Remember that, money taken out of your business is money you cannot use for the business. You may adjust your percentages along the way should you find yourself unable to cover your expenses.

The biggest question is how will you use the profit you have saved? You decide.

Recommendation (Steps We Can Do)
Profit First can be very useful but let’s make it simple for books purposes, to save you time and money. We can talk about it, contact us now!

P.S. For now, Quickbooks Online is not integrated with Profit First method. Maybe because it is not an accounting method and used for internal purpose only.

Best,
Melchie