QuickBooks blunders can sink your Summit business
Special to the Daily
I spend a lot of my time helping clients review their QuickBooks files for errors and inefficiencies, and there are a few that I come across most often. If you’re a QuickBooks user, or you work at a company that uses QuickBooks and you’re just looking for some good water cooler topics, then read on! If you’re an owner or manager of a business that relies on QuickBooks, but you don’t know how to use the software yourself, then you cannot afford not to pay attention.
Without a doubt, the most common error I’ve seen is people over detailing their transactions. For example, a common category is telephone expense. However, some bookkeepers tend to break accounts into too much detail, and in this example they would also have accounts such as cellphone expense, landline expense, fax line expense, etc. The beauty of using computerized software is that you can drill down to get to any level of information that you desire, so it’s not necessary to use separate accounts.
I’m a big believer that the more concise a financial statement, the more valuable it is to serving your purpose. On a one-page financial statement, you can visually compare numbers, such as your expense items versus your income amount. If the report is two, three or even four pages long, chances are you’ll forget what you saw on page 1 by the time you’ve moved forward to the other pages.
Another common error I’ve seen over the years involves shortcuts. One of the keys to using QuickBooks correctly is following the same set of steps for every transaction. So, if you decide to manually enter invoices into the software using the vendor functionality, then you must enter all invoices using that same method. The moment you start entering some transactions through the vendor function and entering some directly on the register, you will find yourself either missing transactions or duplicating transactions.
Perhaps my favorite of errors comes from one of my first clients many years ago, which I’ve seen time and time again since. When I asked if they reconciled their accounts, they said absolutely yes. But, when I looked at their QuickBooks file, the books showed no sign of reconciliation. It turned out that their bookkeeper was just reconciling the bank statement to itself, and telling her boss she was accurate. The books themselves were hundreds of thousands of dollars off, and the manager never thought to check.
If you’re a manager or business owner, how do you know if your staff is reconciling? QuickBooks software automatically displays checkmarks next to reconciled transactions which makes it easy for you to visually check. If you look at the check register and don’t see these checkmarks, or your bank balance doesn’t pass the reasonableness test, then you need to question them.
I wish I could say these are one-off situations, but I work with two to three companies a week that have these issues. If you don’t think it could ever happen at your company, think again. Worst case, you end up learning more about your financials. Best case, you can stop a problem before it grows into something harder to fix.
Michele Knight, owner of Knight Accounting & Technology, is a CPA and QuickBooks ProAdvisor based in Dillon. For more info and to contact her, visit http://www.cpamichele.com.
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