QuickBooks Online (QBO) is an amazing cloud-based service for your small business accounting needs. It is very flexible and can be utilized by most small businesses and startups. Unfortunately, one of QuickBooks’ greatest strengths is also one of its biggest liabilities, you can customize it to death.
While QuickBooks can help you avoid many mistakes, it can only work with the information it’s provided. Some of the errors, of course, you can/will catch on your own, like having a transaction going to the wrong expense account. But some errors you might not even know you’re making. Those mistakes can cost you big if you don’t correct them early on. When tax season rolls around, you might have to pay your CPA to redo a year’s worth of journal entries or you could even submit your taxes with errors and end up with some steep penalties!
But, with a little knowledge and some time, you can identify and fix the most common QuickBooks errors. Here are the Top 5 Errors made in QuickBooks Online.
Error 1: Missing Transactions
You are a small business owner, not a bookkeeper. You run a hair salon, a ranch, a law firm, nail salon, coffee shop, tech start-up or any other small business you can think of. You’re busy running your business, and it‘s easy to fall behind on your recordkeeping. But, when your books no longer reflect the current state of your finances, it’s hard to gauge how healthy your business is.
The best solution is to get in the habit of recording every transaction the week it takes place. The best practice would be the same or next day, but life may get in the way. This can be a pain, but if you to do it at the end of a quarter or at the end of the year you are almost certain to miss transactions. By setting aside a little time each day or week, you will not only always be caught up, you will also be able to know where you stand financially if opportunity arises.
Error 2: Same Item, Two Different Spots
Sometimes the opposite of #1 will happen. A busy business owner will enter the item twice. Let’s say you buy a new client dinner on your credit card, for $100. you log it as an expense to your business. Later on, you pay off your credit card balance and you log in the same $100 as a different expense. The same expense is now in the books twice and they won’t reconcile or balance. Your accountant will likely bill you for tracking down the transaction.
Error 3: Not Using Undeposited Funds Account
This is a really common mistake. The Undeposited Funds account is used to make reconciling QuickBooks and your bank feed easier. The most common mistake is that people uncheck this and have the payments and sales receipts going directly to the checking account on the date that the payment is recorded. This will cause problems when trying to reconcile the checking account as the bank statement will only show the total deposit amount on the day it was deposited, but if there were two or more checks in that one bank deposit, they will show up as separate items on different days, in the reconciliation. It makes it very difficult to reconcile your account. By using the Undeposited Funds, all of the sales receipts will be available and you will easily see the amounts deposited into the bank.
Error 4: Not Using Bank Feeds
People, this is a no-brainer. You can connect your bank directly to QuickBooks Online and it will sync with your account. This will GREATLY speed up your reconciliation, as QuickBooks Online will look at your journal and assist you with reconciliation. You are still in total control, but it will mark transactions that match what you have in QBO and it is a simple click of the mouse to reconcile. This will also make it easier to reconcile your deposits as well, as you can match them to your Undeposited Funds account.
Error 5: Too Many Accounts for Vendors and Expenses
Ok. You don’t need a separate expense account for every gas station. You can create a Fuel Expense account. You don’t need a separate account for every restaurant. You can call it a Meal Expense. That way if you eat at McDonald’s or Taco Bell, you just put the expense in one category. You would be surprised at how many people have a huge vendor list because of this. A vendor should only be added if it is directly related to your business, or if you need to track specific spending amounts. Examples would be a supplier that you use to purchase goods from for resale, or if you use a specific company for fuel, and you pay on account. In those cases, you would want to have specifics on the vendor so you can track your cost of goods sold and specific accounts payable. It won’t matter in the long run if you record you had a burrito or a burger for lunch, so Meal Expense is plenty of information.
In the long run your biggest mistake is not biting the bullet and letting a professional take care of your bookkeeping. They run their business so you can have the freedom to run yours. Find a professional bookkeeper to help you and you will gain time and profit.