10 COMMON QUICKBOOKS MISTAKES

10 Common QuickBooks Mistakes:

1. Account for outstanding bank account transactions.

If there was any interim time between the date of your statement and your beginning date in QuickBooks, make sure that you also recorded any checks or deposits that occurred in between.
For illustration, if your QuickBooks start date was 01/01/09, you would utilize the ending balance on your December 2008 bank statement as your opening bank account balance.

2. Pay bills in two steps

Not using Multiple Steps to pay Your Bills To pay bills in QuickBooks you should use a 2 step process. First step when you receive a bill enter it into the enter Bills window, this gives you the added benefit of being able to track how much money you owe. next when you are ready to make the payment for the bill choose the bill from the list in the Bill Payment window.

3. Deposit Your Receivable into the Undeposited Funds Account

When you use the Sales Receipt or Receive Payments forms to track receivables coming in to your commercial enterprise, you have the option to put payment into the “Undeposited Funds” account, which is like a cash drawer where you keep checks and currency in between trips to the bank. If you select this option on either form, QuickBooks won’t recognize the receivables into your bank account until you tell it that you have actually taken your money to the bank. When you do go to the bank, record it in QuickBooks by utilizing the Make Deposits window, and choose the payments you have just deposited. Do not record a separate deposit into your bank account register to show this money.

4. Incorrectly set up preferences to indicate when you owe sales tax .

If the amount of sales tax you owe appears to be incorrect, check to make sure you’ve set up your preferences right, telling QuickBooks when you owe sales tax. You may owe sales tax on an accrual basis, or when you make a sale, even if you haven’t received payment yet. Or, you may owe sales tax on a cash basis, or when you actually receive receivables from your client.

To verify your sales tax is set up correctly, follow these steps:

1. From the Edit menu, choose Preferences.
2. On the left side of the window, click the Sales Tax icon.
3. Select the Company Preferences tab.
4. Under Owe Sales Tax, select either “As of invoice date,” or “Upon receipt of payment.”

I highly recommend you choose Upon receipt of payment even if you are reporting on an accurral basis.

5. Don’t enter a credit card charge and a bill for the same expense.

If you charge a purchase and record it into QuickBooks through the enter Credit Card Charge window, do not record it again as a bill (in the record Bills window). If you do, it’ll appear like you owe twice as much as you actually do.

6. Use Sub-Items and Sub-Accounts.

If an account or item has sub accounts or items, do not designate your transactions to the parent item or account if you can help it. Always use the sub- items and accounts to increase your knowledge of your business. Sub-accounts and sub-items will show up on your QuickBooks reports as separate items, but will still be grouped together and sub-totaled.

7. Link Up Inventory Items with the Appropriate Accounts.

If you keep inventory, make sure that you assign your inventory items to all the right accounts. All inventory type item should have three: Inventory Asset account, Cost of Goods Sold, and a Sales account.

When you tell QuickBooks that you have inventory, it automatically sets up an Inventory Asset account (to track the current value of you inventory) and a Cost of Goods Sold account (to track how much you paid for your inventory items). You must also set up sales income accounts to track the income you make from selling your inventory items.

Here’s how to check yours:

1. From the List menu, select Reports, and then Items. QuickBooks will display your Item list, detailing each one’s name, description, type, posting account, and price.
2. Verify that each inventory item is associated with all three accounts – Cost of Goods Sold, Inventory Asset, and Income Account

8. Be Careful with Reconciliation Adjustments.

QuickBooks won’t normally make reconciliation adjustments automatically. However, if you’re out of balance in the Reconciliation screen and you select Reconcile Now, QuickBooks will make the adjustment, and post the positive or negative amount to the Opening Bal Equity account.
do not let QuickBooks do this! The correct thing to do with small differences you find when reconciling is to enter a check or a deposit for the amount, using the bank statement date for the transaction date and put it to an appropriate account set upon your best guess of where the difference arose. You can then mark that transaction as cleared and proceed with reconciling.
In fact, your Opening Balance Equity account is a clearing account, and should always display a $0 balance. If it doesn’t, your QuickBooks was not set up properly. You can check for these adjustments by looking at the account’s transaction detail:

From the List menu, select Chart of Accounts.
Double-click your Opening Balance Equity account.
If there are transactions in the account not related to your beginning balances, reclassify them

9. Paying Loans

Recording a Bill for the Monthly payment instead of recording and asset and a liability
When creating loan payments we often enter the monthly loan amount as a Bill.
Here is how you should process loan payments: Setup a Fixed Asset with sub accounts for the Cost and Accumulated Depreciation. Then, set up a liability account with the loan balance. Go to Banking> Loan Manager>Set Up New Loan. Follow the directions, then click the Set up payment option to have QuickBooks document the monthly payment.

10. Do Not Try to Do it All Yourself.

QuickBooks is easy to use, but it will be even easier and give you more peace of mind if you work with a QuickBooks Pro Advisor . Setting up your QuickBooks correctly is critical to getting the most out of your QuickBooks program. The HELP topics are also a great resource.

Certainly - you could simply allow the pros to do it for you - hire a bookkeeper or accounting professional to help you with your bookkeeping. Give us a call to speak with a Quickbooks Pro specialist at 214-250-0195.