Keeping your books accurate and up-to-date is crucial for understanding your business’s cash flow and making informed decisions. While it may be challenging to record every transaction as it happens, good bookkeeping is a powerful tool that provides insights into your financial standing.
Even with user-friendly accounting software like QuickBooks, there’s still room for QuickBooks mistakes. Your data is only valuable if it’s accurate and current. Some best practices are straightforward, like daily backups of company files and locking closed periods. Correcting missing or duplicate transactions and optimizing the purchase order system are also important steps.
In this post, we’ll look at common QuickBooks mistakes made in QuickBooks by businesses and offer suggestions on how to improve processes around them.
- Configuring QuickBooks preferences inaccurately
- Overlooking account reconciliation in QuickBooks
- Forgetting to record a bill before issuing a check
- Mistakenly assigning payments to bills
- Putting off reviews of profit and loss statements
Configuring QuickBooks Preferences Inaccurately
When you first set up your QuickBooks account, you probably set some preferences. It’s a good idea to revisit these settings as your business grows to ensure everything runs smoothly. Update email templates and reporting options to match your current needs. Review finance charges for late payments as your business relationships become more complex. Also, consider changes in how your business handles sales tax and take a look at the default accounts for paying bills or receiving checks.
QuickBooks can generate cash reports or accrual reports, depending on what’s more useful for your business at its current stage. Make sure the settings create the most helpful reports for you.
While QuickBooks allows you to set up bank feeds to import transactions automatically, be cautious. Sometimes, imported transactions are duplicates or may be missing. Always double-check your business account balances against the information in QuickBooks to catch any discrepancies.
As your business evolves, so do your employees’ roles and responsibilities. It’s crucial to review user roles, permissions, and passwords to ensure your team can work effectively and securely. Some business leaders may be hesitant to provide QuickBooks access beyond their accountant. In such cases, integrated third-party software solutions can offer additional access levels and transparency without compromising the security of your core financial information. For instance, you might want your accounts receivable team to track outstanding invoices or share upcoming transactions with an analyst for cash flow forecasts. An additional solution can leverage QuickBooks data without risking inadvertent changes to your financial records.
Overlooking Account Reconciliation in QuickBooks
Every transaction in your business should be entered into QuickBooks manually and verified against your bank accounts. The reliability and accuracy of your financial data depend on reconciling checking, savings, loans, credit cards, escrow accounts, and state and federal taxes.
To maintain a correct account register, always review and match each transaction. Confirm that every transaction is recorded in the right account and has cleared the bank. Watch out for any missed or duplicate transactions—even after reconciliation, there’s a chance something might be amiss.
Also Read : What Thing To Keep In Mind While Closing Your Financial Books
Forgetting to Record a Bill Before Issuing a Check
Have you ever paid a vendor and then checked an accounts payable aging report only to find out you still owe them money? If that’s happened, it means you might be applying payments to bills incorrectly.
QuickBooks keeps a good record of your financial bookkeeping transactions, but using a third-party solution that works with both QuickBooks and your financial institutions can make life easier by automatically applying payment details to QuickBooks.
Mistakenly Assigning Payments to Bills
When you get a bill, do you immediately use QuickBooks’ “write check” feature to pay it? You’re not alone, but it’s not the best practice. This method doesn’t automatically create an accounts payable entry for the vendor. The recommended approach when you receive an accounts payable invoice is to enter the bill first and then use the “pay bills” feature to compensate the vendor.
To manage your accounts payable process effectively, it’s crucial to post as soon as you receive a bill. If you delay, you might end up with an inaccurate picture of your liabilities, making it challenging, or even impossible, to forecast cash flow accurately.
Putting Off Reviews of Profit and Loss Statements
Your profit and loss (P&L) statement gives you a snapshot of your business’s overall health by showing the difference between revenue and expenses over a specific period. It’s a handy tool for spotting errors in your QuickBooks file. By comparing different periods and ensuring that expenses and income align with your business’s usual patterns, you can identify discrepancies. If your expenses seem unusually high, it’s a signal for further investigation.
Make it a habit to review your P&L on a monthly basis, and remember to use account numbers. Without them, your P&L might end up listed in alphabetical order without headings, making it trickier to pinpoint any discrepancies.
Also Read : Everything You Need To Know About Bookkeeping Services
Conclusion
Maintaining accurate and up-to-date records in QuickBooks is crucial for sound financial management. Regularly review and update preferences, reconcile transactions diligently, and utilize tools to streamline processes. Paying attention to details like proper bill payment procedures and thorough P&L analysis ensures the overall health and integrity of your business finances.
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