I see a lot of QuickBooks company files that are in complete disarray and the funny thing is
that most have some or all of the same mistakes in their QuickBooks file. The cool thing is though our blog has short guides on most of these mistakes. Even if you don't see one I'd be more then happy to talk about any of these QuickBooks mistakes in a new blog, just request it!. Enough talk though, here is a list of common QuickBooks mistakes and maybe you too can learn from the mistakes of others.
1.) Not Reconciling Accounts - This is the first on the list for a reason as the integrity of all of your accounts depends on reconciliation. Without reconciling your accounts in QuickBooks, and I mean all of your accounts, you have no assurance that what is in the account register is correct. Make sure to reconcile not just checking and savings accounts but liabilities that include loans and taxes paid to state and federal governments. Don’t stop here either; even asset accounts such as mortgage escrow account can be reconciled!
2.) Not Using Credit Card Accounts – Time and time again people forego putting their credit card in QuickBooks. When they make a payment to the credit card from their business checking account they might create an expense account called credit card or itemize the expenses in the check window, THIS IS WRONG. Just like a checking account every charge should be entered into the credit card register and payments to the account are just a transfer of funds from the checking to the credit card.
3.) Not Reviewing the P&L - A lot of business owners if they do get to their bookkeeping on a monthly basis still fail to review their P&L. One, this report can provide valuable insight to the health of your business and should be checked regardless. Two, it can be a great tool to review your QuickBooks file for mistakes. With the P&L you can compare previous periods to ensure expenses and income seem in line with the norm. If not, find out why, a majority of the time it stems from improper coding if not maybe you've over spent.
4.) Not Reviewing the Balance Sheet – Just like scanning over the P&L, reviewing your small business's Balance Sheet can provide some serious insight into the health of your business. Most balance sheet items reflect your current balances on your assets (checking accounts) and liabilities (loans). Check your statements from these accounts and they should match up. If they don’t match find out why.
5.) Using Too Many Accounts & Sub Accounts – A lot of bookkeepers create too many sub
expenses and income accounts. I’ll perhaps see the Office Supplies expense account have over 10 sub-expenses for paper, pens, ink, and or other related items. Why does a company need this broken down? For most small business one blanket parent account suffices. Keep it simple and you’ll save more time and also produce meaningful reports.
6.) Payroll is Not Done Correctly – If you use QuickBooks payroll I’d highly advise to move to an outsourced payroll service as problems with having payroll in house begin to compound very quickly. If you do have an outsourced payroll source the number one problem I see are that pay checks, tax payments, and direct deposit withdrawals are all coded to one single account ‘Payroll Expense’.
7.) Using Name Types Wrong – Many fail to use the name types in QuickBooks correctly. They might use the Other Name type constantly for customers and vendors, classify employees as customers, or even forego using a name at all when paying a vendor! Learn how to use name types correctly in QuickBooks.
8.) Not Backing Up The Company File Daily – A good habit to be in with QuickBooks is that whenever you use the QuickBooks company file make sure to backup QuickBooks. Things happen in life and they’re usually unexpected. An even better habit is to backup via DropBox as well to prepare for a computer crash.
9.) Leaving Open Bills and Invoices in AR/AP – Yes, you know the bill sitting in your Accounts Payable is paid or that your customer has remitted payment for the open invoice in Accounts Receivable but no one else does. If you have open invoices remove them, they’re doing no good sitting there. All this will do is throw off reports, misrepresent where your company currently stands, and confuse any using the company file.
10.) Booking Loans Improperly – A loan that your business has taken out must be kept track of on your books and this means booking the principal & interest breakdown of each payment and reconciling the monthly loan balance. Follow these procedures on how to book a loan in QuickBooks.
QuickBooks at face is a simple program that allows every day users to be accountants for their business. Problems quickly begin to pile up though when they fail to understand how to actually use the program. Without buying a book, taking a class, or even asking us to come in and teach you how to use your program you put the financially integrity of your business at risk.