Common QuickBooks Mistakes

Throughout my years working with QuickBooks and doing bookkeeping I have observed that problems with year end and interim financial statements can be boiled down to simple input error. Many business owners do not have the ability to hire a bookkeeper with extensive knowledge of the software and find themselves (as usual…) doing everything.  So here are a few common mistakes to avoid while doing your books…

1. Make end-of-the-year journal entries.  Most CPA's after reviewing the books for official consolidated financial statements and tax returns will come up with a few adjustments to the books and give the adjustments to the owner for entry. A common pitfall is to fail to make these adjustments.  Failure to make these adjustments will mean that your year end will not match what is filed for taxes and the next year your CPA will have to spend additional time to reconcile the balance sheet. This can get expensive.

1. Do not change entries from a prior year.  Similarly to the first common mistake that owners will make is to change an entry in a prior year.  This will again throw off the balance sheet, which will need to be reconciled before new data can be interpreted.  If you feel a change from a prior year is necessary, talk to your accountant first! They will be able to tell you if the corresponding change will effect what was reported to the IRS or if you may do a simple journal entry as of January 1^st of the current year.  It can be easy to make a mistake at the beginning of a new year when entering a date. Luckily, QuickBooks has user preferences that can be used to prevent these mistakes. First you can set a closing date that will prompt you to enter a password before you can make any changes to a prior year. Or you can set a range warning that will prompt you if the date you entered is a certain number of days in the past or future of the current date.  Both of these options can be found under the EDIT > PREFERENCES tab.

1. Pay attention to dates. Do we see a theme starting? Timing is a very important aspect of accounting/bookkeeping. It is important to record transactions when they occur.  If you wait to enter data into QuickBooks at the end of every month or every other month, that is fine but make sure not to use the current date for every transaction.  Using the current date will make it very difficult to reconcile your bank account. For example, if you have two transactions with the same amount you may not actually know which has cleared. Using the current date for all transactions will also prevent you from having good data to analyze business performance.  For example you will not be able to tell which months perform well vs. poor, which expenses have risen, and the cause and effect of external factors on your financials.

1. Be consistent. Bookkeeping is about processes. Therefore if you use the QuickBooks accounts payable function make sure you always enter the invoice before paying the bill.  Writing a check against the accounts payable account without entering a bill will give you negative accounts payable.  If you use the accounts receivable function, make sure to enter an invoice before receiving payment or you will throw off undeposited funds.  If you use the class function, make sure to always enter a class before saving a transaction or you may not have accurate reports by class.  QuickBooks has many defaults that create warnings when you start doing things out of order or forget something; don't turn these off, they will help you.

1. Don't be afraid to ask for help. Your accountant/CPA is there for you, if you have a weird scenario or just a question, call them.  They see weird transactions everyday and a quick call could save you a lot of money in the long run.

Hopefully spelling out a few of the common mistakes will help you save time and money. For any general questions, questions about outsourcing your bookkeeping, or questions about getting some QuickBooks training give us a call. We have many years of experience with QuickBooks and would be happy to help.