10 Biggest Mistakes in QuickBooks
Gita Faust
Get the Best Results from Your QuickBooks Accounting Package
Member of Intuit Trainer/Writer Network Intuit Premier Reseller
www.FastTracConsulting.com
How to Avoid The
Over my 10+ years of experience in QuickBooks consulting, coaching, and mentoring, I’ve come across all kinds of QuickBooks mistakes.
Usually, it’s the seemingly harmless mistakes that cause major discrepancies in your financial reports. If your financials are off, it will reflect inaccurately in your tax returns and could lead to an IRS audit.
I decided to write this guide to help you avoid such mistakes (and the IRS), as well as empower you with some knowledge that will help you better utilize your QuickBooks software.
Start taking steps to financial freedom!
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Get the Best Results from Your QuickBooks Accounting Package
Situation:
Even though you use QuickBooks, you spend countless hours entering information into elaborate Microsoft Excel Spreadsheets.
Solution: Eliminate spreadsheets by customizing reports
You may think that QuickBooks is only useful for accounting purposes; however, QuickBooks is actually a multifaceted program that can eliminate the necessity of keeping spreadsheets. Think outside the box! Use QuickBooks as a database and customize reports to fit the needs of your company. For example, you can keep customer lists with contact information, as well as generate job and mileage reports. You can track your fixed asset inventory using QuickBooks, too. Once you learn the capabilities of QuickBooks, Microsoft Excel will almost become obsolete.
Bonus Tip:
Do you wish to track additional information for customers, vendors and the items you sell? Use 7 custom fields under the Additional Info tab for each Customer, Vendor, or Employee to result in more specific reports. Use 5 custom fields for items.
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1
Unnecessary Recordkeeping in Microsoft Excel 速
Situation:
It has been a few months since the end of last year, and you have already filed your tax returns. But, you just realized that you accidentally added an extra zero to a transaction, or an asset or liability was incorrectly classified.
Solution: Enter the closing date and learn to properly adjust entries If you make an entry after an accounting period has ended, your adjustment could result in incorrect financials. Within QuickBooks, you can set a period closing date and even password protect the books before this date. Click here for step-by-step instructions. The accuracy of your tax return and any year-end statements will be tainted if the correct procedures are not followed.
Bonus Tip:
Do not change any transactions in the prior accounting period without speaking to your accountant! If your tax returns have been filed, ask your accountant for the necessary adjusting entries so your financials accurately reflect your tax returns. Verify the accuracy by comparing your tax returns with QuickBooks financial statements.
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2
Posting Transactions to a Prior Accounting Period
Duplicate Names Situation: You enter a new customer as Smith Painting. The next time you go to record a transaction for the same company, it doesn’t show the exact name, so you enter it again – only this time as Smith’s Painting Supplies. This may sound like it won’t be a big deal, but in reality, you just created two different companies, and will end up with a history for two different names.
Solution: Merge the names You can use the merge lists function to integrate the duplicate names together, but try your hardest to avoid this mistake in the first place. Having multiple names for one company could completely throw off your sales, purchase, and payment reports. Don’t get stuck in the position where you look bad to your customers for a harmless naming mistake. Look professional in your customers’ eyes!
Bonus Tip:
For accurate customer information, you can always check the company’s website or business cards. Do not merge your inventory item lists. Duplicate names due to spelling mistakes can occur in accounts, classes, items, vendors, etc.
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3
Situation:
You bring in Mike, an outside contractor, to come repair the computers at your office. Mike works for you for one week and you pay him $1000 for his efforts, and then you go to your QuickBooks software and enter in Mike as an employee of your company. Mike is not an employee, but a contractor, and unfortunately, QuickBooks will not catch the mistake. Mike’s pay will NOT appear on the 1099 report.
Solution: Submit 1099 Form
If you hire a vendor or outside contractor and pay them more than $600 in a given year, you have to file a 1099 form to the IRS and give a copy to the contractor. If you enter the vendor or contractor as an employee, customer, or under an account other than an expense, your books will have errors. So look at the conditions for submitting a 1099 form and make sure you adhere to them. It could save you money and the frustration of figuring out what went wrong.
Bonus Tip:
How do you determine if the work is being done by a contractor or employee? Click on this link to the IRS website to help you out. For vendors or contractors, get a W-9 form filled out. To find out the IRS rules and regulations and print out the form, go to this link. Only after you receive the form should you let them start working.
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4
Misclassifying Outside Contractors
Manually Writing Checks Situation:
We’ll pick up with Mike from the last example. It’s the end of the week and it’s time to pay Mike for fixing your computers. You decide to pull out your checkbook and write him a check, but it being Friday afternoon, you forget to enter it into QuickBooks before you leave for the weekend. At the end of the month, for a reason you can’t remember, your bank account has $1000 less than what your bank account balance appears in QuickBooks.
Solution: Print your checks directly from your QuickBooks software By printing your checks directly from your QuickBooks software, you’ll avoid duplicate data entry or no data entry at all. This saves time and avoids potential posting errors or bank reconciliation nightmares at the end of the month.
Bonus Tip:
Buy a inexpensive printer for less than $100 so you can have a printer specifically for your check stock. That way you won’t have to deal with reprinting checks if you print them on the incorrect paper or switching back and forth from blank paper to check stock. Order check stock by clicking here.
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5
Situation:
You own a construction company and your company’s policy is to ask your customers for a 25% deposit for each job. You aren’t familiar with all of the accounting procedures, so you enter the 25% deposit as income, which ends up causing an overstatement of your income for that period of time.
Solution: Create an Item and Liability Account titled “Customer Deposit” This money received in advance is not income. When you receive a customer (or tenant) deposit, create an invoice using the “Customer Deposit” item which will reflect on your Balance Sheet. When the job is complete, create a credit memo with the “Customer Deposit” item and apply it to the open invoice. How much money do you owe your clients?
Bonus Tip:
When you receive a customer deposit, it is an unearned income. Therefore it is classified as a liability, in case the customer cancels the job.
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6
Incorrectly Posting Customer: Jobs Deposits and Retainers
Situation:
You probably know that at the end of each month, you should reconcile your bank accounts. This is not the most exciting task, but someone has to do it. When you reconcile, you check for inconsistency in withdrawals, fraud, and un-cleared checks, and perhaps you are doing it manually, even though all of your transactions are already posted in QuickBooks.
Solution: Bank Reconciliation through QuickBooks
You can reconcile your bank account from within QuickBooks with a click of a button! Why do it the hard way? Do not use the register; just go to the reconcile screen and within seconds you’ll know whether your bank account is on point or if you have some irreconcilable transactions. This will save you time and you’ll be able to check your bank balance at any time.
Bonus Tip:
Download your transactions with QuickBooks’ online banking feature; this will tell you your current balance according to your bank. On top of that, it will also compare the entered transactions with the bank’s cleared transactions. If they are cleared, a lightning bolt will appear. This way you find fraudulent transactions before it’s too late! When’s the last time you reconciled your bank, credit card, and customer deposit accounts?
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7
Forgetting to Reconcile or Are You Doing it Manually
Missing Details on Payments Situation:
It’s the end of the month and it’s time to pay your bills. You pay your electric bill online but weeks later, the company sends you a statement for late payment saying your power will be turned off in a couple days.
Solution: Include relevant account information If you enter the vendor bill in QuickBooks, you can track the reference number and its related payments. Include relevant account information, such as the account number, on the vendor’s name so when you print checks using QuickBooks, it will automatically print on your checks.
Bonus Tip:
Save $1.75 on each check you mail by using auto-withdrawal online bill pay. Think about how many checks you mail in a year. (That’s a lot of Starbucks Frappuccino's you could be drinking instead!) If you can switch to auto-withdrawal with multiple vendors, that adds up to a lot of money. For monthly online payments, take advantage of auto-withdrawal for just one vendor and see your savings grow!
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8
Situation:
Your construction company just bought a new truck by financing it for the next 5 years, but you were not sure if you should list the truck as a fixed asset, or how to record the loan. If you do not properly record the transaction, your financials will be inaccurate.
Solution: Record loans and split the payments
To find the true value of your business, you must properly record your assets! Record the financing as a liability. When recording a payment, accurately divide it into principle and interest accounts.
Bonus Tip:
If you sign up for auto-withdrawal, the payment will show as a one line entry. You will have to split the principle and interest payments while posting, but you’ll be able to view what your business is worth in real time. To confirm, check out your Balance Sheet report!
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9
Incorrectly Posting Principle and Interest Payments
Procrastination! Situation:
You have to make a couple entries, but you decide to push it off until Friday. On Friday you decide to wait until Monday, but then you decide that waiting until the end of the month is better. If the procrastination continues, you will be left with mounds of paperwork and several months’ worth of transactions to enter.
Solution: Make a weekly accounting checklist
Let’s face it: we know you’re not in love with accounting as much as we are, but don’t get in a situation where you have a year’s worth of paperwork to clean up at tax time! Set aside some time every day or every week to take care of your QuickBooks entries. Maybe you can handle customer entries on Mondays, vendors on Tuesdays, etc. Find what works for you! When you are playing catch up, you are more likely to make a mistatke. Reduce stress and run your business effectively by making your entries on time!
Bonus Tip:
Delegate! Hire a bookkeeper to allow you to concentrate on what you do best, making those sales and offering the best products and services to your customers. If you need help, we are just a phone call away at 215-579-1465.
Procrastination is like a credit card: it’s a lot of fun until you get the bill. — Christopher Parker
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10
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We Can Help You Jump Start Your Accounting System
We hope, after reading this, you will find it easier to avoid mistakes and begin entering day-to-day transactions accurately and quickly. Fast Trac Consulting can help you to avoid all of these mistakes and more, As well as help you find ways to save money, have more time, and run your business more efficiently. We invite you to contact us about any of our services or products.
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Start taking steps to financial freedom!
www.FastTracConsulting.com
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Gita Faust, founder of Fast Trac Consulting was selected as TOP 100 ProAdvisor by Intuitive Accountant in 2014
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