Watch for expense categories that swing wildly month to month, a sign of sloppy bookkeeping. An Amazon purchase might get logged as office supplies one month and computer equipment the next, hiding your real costs and making it impossible to spot trends.
What are some bookkeeping red flags to watch out for? First one, you want to run a profit and loss statement by month. So when you're looking at it, it'll show January, February, March, April, however many months you're looking at in separate columns. You want to notice trends. Inconsistent trends means you're likely not categorizing your expenses consistently the same way. As an example, let's say I purchase supplies on Amazon.com, so it's office supplies. Well, let's then say I buy computer equipment on Amazon. What happens if I book that to office supplies when it really should be equipment? What my books will show is maybe there's one month where office supplies is a lot higher, maybe there's a month where office supplies doesn't exist at all, but Inconsistent trends is a flag to look out for because it means you can't make informed business decisions based on the numbers.
