Most small business owners use QuickBooks today either online or the desktop version. Do you ever get the nagging feeling that you are doing something wrong in Quickbooks? Listen to that nagging feeling, unless you are an accountant you just might be doing something wrong.
The bad news is those errors in QuickBooks will come back to bite you come tax season. Most errors are in the ledger and balance sheet. You might have to hire a bookkeeper or a CPA to fix a year’s worth of bookkeeping mistakes.
Don’t worry though, here are the top mistakes that DIY bookkeepers make in Quickbooks.
#1 Missing Transactions
When you are the business owner you are also the salesperson, worker, bookkeeper etc.. This will catch up to you because you might not be so hot on the bookkeeping. It is easy to fall behind on your records. The problem with letting things get behind is you don’t have an accurate picture of the health of your business.
The solution to this problem is start being diligent in recording transactions every day, other day or weekly. Pick a schedule and stick to it. This can be a pain, but playing catch up at the end of a quarter or half way through the year is much harder.
#2 You Entered The Same Item More Than Once
The opposite can happen with entrepreneurs where they are super diligent and end up entering things more than once in your books.
It is very easy to do. Say you take a client out to dinner and you pay $100 with your credit card, then you log it as a business expense. Later in the month, when you pay off the credit card balance, you accidentally re-enter it again as $100 business expense. Now that you entered it twice you books won’t balance.
#3 Chart of Accounts
The chart of accounts is a list that has all categories for your income, assets, liabilities, receivables and operating expenses. These categories are the raw material for you financial statements. If you don’t have them set up properly your bookkeeper will have to go back and recategorize them and you’ll pay a hefty bill.
When you set up your chart of accounts, make sure they are clean and understandable. Simple is better. You don’t need a million sub-accounts. Group things together when creating your chart of accounts. It’s also a good idea to line up your categories with what you will have on your taxes.
#4 Using Accrual Instead of Cash Basis Accounting
You should choose how you are going to run your business before you start your bookkeeping. You can run as a cash-basis or accrual accounting. This affects how you file your tax return at the end of the year. Cash basis is often better for most businesses that are starting out or ones that don’t have any inventory.
#5 Missing Adjustments
In accrual accounting, you need to adjust journal entries at the end of the quarter, half-year or end of the year. Make sure your statements reflect the expenses and revenues that you have.
Merchant adjustments because you accept credit card adjustments account for fees that are charged to you from companies like square, PayPal, etc.. Your records should reflect the total amount the customer received, as well as the fees you were charged to process any refunds.
#5 Losing Old Records
Maybe you switched accounting platforms or change or shut down a business. Remember if you are not using the desktop version of Quickbooks you only have access to your files for one year, then they disappear. It is critical to export your QuickBooks file to save them. When you need historical files for random audits, securing a loan, or proving to investors that your business is worth investing in, these records will be important.