Intuit’s QuickBooks software provides small business owners the ability to manage key accounting functions and monitor the financial health of their businesses. Some package options allow customers to process credit card payments and payroll. Many QuickBooks users do not have formal accounting backgrounds, so it isn’t unusual for a business to have one or more of these common mistakes impacting the bottom line. You can use the following information to help diagnose if your business also needs to address these basic errors:
• Keep your chart of accounts simple – If your chart of accounts is lengthy, take a closer look. If you have made entries in your QuickBooks software there’s a good chance that you may have setup the same account more than one time. Print out a chart of account and make sure it is a clear list of what you do to bring money in and what you spend money on.
• Pay bills correctly – Check your A/P Aging Summary Report. This report shows you a quick point-in-time snapshot of bills waiting to be paid at a given time. If you see bills that are extremely old or bills that you are certain you have paid, it is probably time to review your Accounts Payable process. When you pay bills, do not enter them in the system then move to the Write Checks function. Doing so will leave the bills open in QuickBooks. Instead, use the Pay Bills window and enter the appropriate checking or credit card information from there.
• Don’t leave money in the Undeposited Funds account – The Undeposited Funds account is where funds are posted after the system credits you’re Accounts Receivables for a payment. Many QuickBooks users do not understand that this account is a holding area, almost like a bank bag where funds sit until you complete a deposit to a specific bank account. If you leave money in a bank bag, it doesn’t deposit to your business’ account. If you leave funds in the Undeposited Funds account you won’t be able to use QuickBooks to reconcile your bank accounts.
• Check your reports – Many simple errors can be diagnosed by running the basic reports in QuickBooks. This is particularly helpful when you are a new user. Enter data, then run key reports like the Chart of Accounts, A/P and A/R reports, etc. If the numbers don’t look right, something may be wrong and it is better to get help early than let the problem continue.
• Update key information – This is particularly important when working with Quickbooks’ Payroll function. Federal and state tax tables change on a yearly basis. Don’t try to process taxes using last year’s information. Your software should remind you to download the new information, but another way to identify a problem is if the year at the top of tax forms is wrong. Annual forms should reflect the payroll update you have on your system, so a form that is old will indicate it is time to perform a payroll update.
• Back Up your QuickBooks data– Unfortunately, QuickBooks doesn’t have an “undo” feature. Changes are permanent. Before making a significant change in your accounts or correcting problems back up your data. This way, any unintended consequences can be undone by restoring to the backup. Likewise, QuickBooks company files stored on a pc’s hard drive can become corrupted due to hardware issues, viruses, etc. Setup a process to backup your QuickBooks data on a regular basis and keep that backup somewhere safe.
QuickBooks is a powerful tool, but it can be easy to make simple mistakes that have a meaningful impact on your company’s books. There are many organizations that offer daily bookkeeping services using QuickBooks, payroll accountant services, technical support and training on any of Intuit’s QuickBooks products. If you have more questions or concerns talk to a professional who understands both accounting and how to get the most from your QuickBooks software.
The information contained in this article is meant to provide general information and is not intended to provide tax or legal advice. Always consult your tax professional when preparing tax documents.
