QuickBooks is a vital component to the success of many small businesses. This software helps effectively manage inventory, sales, and payroll, while also offering other important financial record-related items.
While this tool helps millions of businesses succeed, there are some common mistakes many business owners make, which costs their company time and money.
But luckily, these mistakes can easily be fixed! Learn more about some of the most common QuickBooks mistakes below, as well as ways to avoid and/or fix them.
This first mistake is huge, as the integrity of all of your accounts depends on it. From paying bills, making deposits, and payments against your customer invoices, every transaction your business makes needs to be checked and matched to bank records.
That process is called reconciling. Reconciling all of your accounts (checking and savings, loans, taxes, etc.) ensures that the business account register is correct.
Be sure to reconcile not only your checking and savings, but also your loans and state/federal taxes. Even asset accounts like a mortgage escrow account can be reconciled! To do this, click the Gear menu and then Reconcile. Choose the Account you’re reconciling, and hit Reconcile Now. QuickBooks will ask for your Statement Ending Date, as well as your Ending Balance.
After each item in the Checks and Payments column is checked off, the bottom right corner should (hopefully) read zero. If not, that’s a red flag to check your work.
Your P&L statement is valuable for many reasons. First, it provides insight to the overall health of your business, as it provides a summary of your revenue minus expenses for a specific period of time.
Second, it’s a great tool to help you find mistakes in your QuickBooks file. The P&L allows you to compare previous periods, to make sure your expenses and income align with the norm. If your expenses seem unusually high, you know it is something to look into further.
To add or edit the accounts and categories showing in your P&L on QuickBooks, click on the Gear, then Chart of Accounts, highlight the account, and click Edit.
If not closely monitored, your products, or “items” list can become overwhelming and outdated. QuickBooks gives you the ability to organize and print your lists, as well as export list items to a word processing program (if needed). Some general housekeeping tips for your items list include:
When it comes to organizing your lists on QuickBooks, you need to first make you are in single-user mode.
All versions of QuickBase allow you to have payroll for up to 10 employees. As payroll is processed in QuickBooks, it keeps track of how much payroll tax your business owes. It then records that in the Payroll Liabilities account. If payroll taxes are paid using the Write Checks window, it will not be properly deducted from the Payroll Liabilities window.
To avoid this, remember to pay payroll taxes directly from the Pay Liability window. This will ensure that everything is being properly tracked!
While creating accounts and further organizing them into sub-accounts can help organize your finances, think carefully about the logical ordering of your account information. Do you really need to break down your office supplies expense account with 10+ sub-expenses for paper, pens, ink, etc? For most small businesses, one blanket parent account suffices. The sub-expenses will just complicate the system.
To avoid this, think about what information you need to know about these income accounts. Sometimes, keeping things simple produces more meaningful reports. This can help save you time and confusion when you’re reviewing these reports later down the line.
Life is unexpected. No one ever wants to have their computer crash, but if it does, you’re going to wish you backed up all your files. QuickBooks is no different. Get into the habit of backing up QuickBooks daily. Hopefully you won’t ever need it, but if you do, you’ll be glad you did!
To manually back up your data files, you must first be in single user mode. From the file menu, select Backup Company and then Create Local Backup. In this window, select Local Backup and then click on the Options button. This will allow you to choose a location to save your backup copy.
It’s a good idea to save backups somewhere other than your main local drive in case of a system failure. Good places to save your files include Dropbox, a flash drive, or an external hard drive.
You don’t want to take any shortcuts when it comes to your finances. You want to make sure you follow protocol to inputting information so that you can use QuickBooks to properly manage your cash flow and plan for future expenses.
When a bill arrives, it’s important that your first step is to enter the bill in the Enter Bills window. Some business owners’ first step is to use the Write Check feature to pay the bill, but that does not create an accounts payable for that vendor. After you enter your bill, you can go to the Pay Bills window and indicate the bill you wish to pay. This small step can save you much time and trouble in the future!
While some of these mistakes seem minor, they can severely impact your financial results. Being aware of these common mistakes can help you maintain a cleaner, more accurate file on QuickBooks!