7 Red Flags We See When Reviewing DIY Bookkeeping

Doing your own bookkeeping is incredibly common — especially in the early stages of business. Many business owners start out managing their books themselves to save money and stay hands-on.

But over time, DIY bookkeeping can quietly turn into a source of stress, confusion, and costly mistakes — not because you’re doing anything wrong, but because bookkeeping systems get more complex as your business grows.

When we are asked to review DIY bookkeeping, we see the same red flags come up again and again. Catching these early can save you time, money, and a lot of headaches.

Here are the seven most common red flags we see when reviewing DIY books.

1. The Bank Balance Never Matches the Books

This is usually the first thing we notice.

If your reports don’t match your actual bank balance, it’s a sign that:

• Transactions are missing or duplicated

• Bank accounts haven’t been reconciled

• Manual (or automated) entries were added incorrectly

Unreconciled books mean your numbers can’t be trusted — and decisions based on them are essentially guesswork.

Clean bookkeeping always starts with regular bank reconciliations.

2. Heavy Use of “Uncategorized” or “Ask My Accountant”

Seeing large balances in categories like:

• Uncategorized expenses

• Miscellaneous

• “Ask my accountant”

…is a major red flag.

These categories hide important details about where your money is actually going. When expenses aren’t categorized properly, your financial reports stop being useful.

At the very latest these transactions must be addressed at Year End.

3. Profit Looks Good, but Cash Is Always Tight

This one causes a lot of confusion for business owners.

Your income statement shows a profit — but your bank account feels constantly drained.

This often happens when:

• Income is recorded when invoices are issued, not when payment is received

• Large expenses are paid before income comes in

• Timing differences aren’t being tracked

For more on the top causes of (and the best fixes for) cash flow issues, check out our blog post Cash Flow: Why Your Business Can Be Profitable but Still Struggle to Pay Bills.

4. Personal and Business Expenses Are Mixed

This is extremely common with DIY bookkeeping and can quickly become a major mess.

Examples include:

• Personal purchases on business cards

• Business expenses paid from personal accounts

• Multiple cards and accounts with no clear system

Mixing personal and business transactions leads to:

• Inaccurate financial reports

• Stressful tax prep

• Difficulty understanding true business performance

Clear separation is one of the foundations of clean books.

5. Unpaid Tax Balances Sitting in the Background

The most problematic of red flags involve your business’ liabilities to the CRA and other agencies. What does that look like? Unpaid balances for:

• GST/HST

• Payroll source deductions

• Income tax

Often, this happens because:

• Tax liabilities aren’t tracked properly in the books

• Payments aren’t scheduled or monitored

• The full amount owing isn’t obvious

Ignoring unpaid tax balances can quickly lead to penalties, interest, and CRA notices — even when the business is otherwise healthy.

6. GST/HST Claimed Incorrectly (Especially on Exempt Items)

Another very common issue is GST/HST being claimed incorrectly, such as:

• Claiming tax on exempt expenses (insurance, foreign purchases, etc.)

• Claiming ITCs on zero-rated supplies

• Marking everything as “taxable” by default

This usually comes down to:

• Incorrect tax code setup

• Lack of clarity around what is taxable vs exempt

Overclaimed GST/HST can lead to CRA adjustments, repayments, and potential audits (yikes!).

7. The Books Don’t Match the Accountant’s Entries

This is a big one — and it often surprises business owners that don’t know where to look for it.

If your accountant makes year-end or adjusting entries and:

• Your books don’t have those entries put in

• Your reports are different than what was filed

• Changes were made to years that should have been closed

…it can quickly cascade into a snowball effect of incorrect balances carrying forward.

How?

• The new year starts with incorrect opening balances

• Reports become unreliable

• The same issues repeat year after year

Bookkeeping and accounting should work together.

The Good News: These Are Fixable

If you recognized your books in one (or several) of these red flags, it doesn’t mean you’ve failed.

Most of these issues come down to:

• System setup (QuickBooks Online, Wagepoint, Shopify, Square, etc.)

• Missing steps in the accounting cycle

• Outgrowing DIY bookkeeping

With the right support, bookkeeping becomes a solution — not a source of stress.

When Clean Books Change Everything

Clean, accurate bookkeeping helps you:

• Understand what’s actually happening in your business

• Stay compliant with tax requirements

• Avoid surprises

• Make decisions with confidence

If your bookkeeping feels overwhelming or unclear, you don’t have to fix it alone.

Contact us today for a free quotation or learn more about our File Clean-Up service.