5 Red Flags in QuickBooks We Can Help You Fix
2021-03-22 | by Gene Reynolds
Small business owners often approach our CPA firm looking to improve their use of QuickBooks Online or QuickBooks Desktop. Perhaps your version of QuickBooks wasn’t set up properly or there are re-occurring issues that seem to cause headaches every month.
When our firm starts working with a business owner to address QuickBooks errors and other challenges, we often look for common red flags that pop up on a regular basis. We’d like to highlight these errors and show you how we can fix QuickBooks to support your business.
Common QuickBooks Small Business Errors We Can Address
We will break down each of these five red flags that we look for when starting with a new client’s accounting books in QuickBooks:
- Uncategorized transactions
- Negative numbers in reports
- Matching and Reconciliations issues
- Irreconcilable credit card statements
- Personal charges lumped in with business charges
1. Uncategorized Items
Every transaction that your business completes should be categorized in QuickBooks. What we often find is that a client’s Chart of Accounts (COA) was not properly set up in QuickBooks. This results in many transactions lacking a place to be categorized.
When we start working with business owners, we look for uncategorized income, assets, liabilities, and expenses. Then, we’ll ask questions about what each of these uncategorized items relates to. We want to categorize, clean up, and organize each transaction so that you can more easily track income and expenses, view financial performance, and produce accurate reports.
2. Negative Numbers in Reports
When our team sees negative numbers in things such as a P/L Statement or a Balance Sheet report that are generated by QuickBooks, then we know there is an error. We can tell right away that something is off. In theory, it’s possible to have something like a negative account balance, but the way QuickBooks is set up, it’s incorrect from an accounting standpoint.
Our team can adjust how QuickBooks is set up to capture inputs so that it leads to the correct outputs in a report. This way, you can avoid having trouble preparing financial reports for third parties, preparing tax returns, or achieving another end goal.
If you encounter this QuickBooks error on a regular basis and aren’t sure why a certain error occurred, ask us for help. We can help you take corrective action.
3. Matching and Reconciliations
Performing month-end transaction matching and reconciliations can be one of the most time-consuming and challenging processes for any business owner.
QuickBooks offers built-in functionality to support transaction matching and reconciliations, but, again, it goes back to making sure everything is set up correctly to make this process go smoothly.
When we start working with a client, we often find issues such as beginning balances not entered correctly, duplicate transactions, manual entry of some transactions, bank statements not matching up with transactions recorded in QuickBooks, transactions assigned to more than one account or client, and other common issues.
We often see a pattern of red flags that we will strive to address. Once these issues are addressed, then you will be better positioned to match transactions throughout the month. This leads to having to spend much less time performing a month-end reconciliation. In other words, if matching is correct on the front-end of the process, then it should be much easier to perform reconciliations and produce advanced reports at the end of the process.
4. Credit Card Usage
For many small business owners, there are gray areas about credit card usage that can create issues in QuickBooks.
- Do you use the same credit card for both personal and business use?
- Which transactions do you consider personal vs. business?
- Do you use personal funds or business funds to make credit card payments?
Improper credit card usage and payments can create repeated headaches in QuickBooks for business owners. We often find double entries of transactions, cash-on-hand being misstated, and the incorrect categorization of credit card payments.
We know it can be difficult to separate personal and business transactions, which is why we recommend opening up a separate business credit card account where you only use that card for business transactions. That way, when you swipe the card to make a business purchase, QuickBooks can match up the transaction to an account or client, and then when you pay the credit card bill, you know exactly which funds should be used to make the payment.
5. What To Do With Personal Charges
Many business owners want to be able to keep track of their personal expenses in QuickBooks to avoid having to use a second piece of software to record personal transactions.
Unfortunately, this can complicate things very quickly. Sometimes, business owners will tie together their personal credit cards or personal bank accounts to the business’ books. This can complicate your ability to produce accurate reports.
We recommend keeping everything separate, but if you still want to use QuickBooks to also record personal expenses, then make sure you do not tie your personal expenses to the company books. We can show you how to create this division to ensure that your QuickBooks is kept clean and organized.
Call Our CPA For Help Addressing Common QuickBooks Errors
We have highlighted five of the most common red flags in QuickBooks that we look for when working with a small business owner. Some of these may be exactly what your company struggles with on a regular basis. Or, you may be dealing with other QuickBooks errors that are costing you valuable time and effort.
Let us know how we can help! Reynolds & Associates is certified to provide a deep level of support and guidance using QuickBooks. Work with our team of QuickBooks ProAdvisors to clean up and organize your books so that you can operate as efficiently as possible.
Call us at 713-316-4560 to discuss your QuickBooks small business challenges. Or, email info@ReynoldsCPAFirm.com or fill out our website contact form. We look forward to hearing from you!
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