from Brokstein & Associates CPA's LLP
QuickBooks Online is a powerful platform, but its flexibility can make it easy to overlook tasks or develop inefficient habits. Stepping back to reassess how you use it can help you spot mistakes and find better ways to manage your books. Here are 10 common missteps that business owners should watch for and how to fix them.
1. DELETING PERSONAL TRANSACTIONS
If the financial transactions you import into QuickBooks Online are a mix of business and personal, don’t just delete the personal ones. This will cause problems with tax preparation and compliance because they’re a part of your bank statements. Instead, leave them there and categorize them as Owner’s Draw or Owner’s Contribution, two sub-accounts located under Owner’s Equity in the Category list.
However, the best solution is to have separate checking and credit card accounts for your business transactions.
2. CREATING EXCESSIVE CATEGORIES
QuickBooks Online allows you to create new categories. This can be beneficial, but it can also cause confusion. For example, you might have categories for Office Supplies and Miscellaneous Supplies. To deal with this, you could combine categories, rename any unclear ones or delete unneeded ones.
3. OVERLOOKING THE UNDEPOSITED FUNDS ACCOUNT
You may have incoming payments routed to your Undeposited Funds (or Payments to Deposit) account. You should be checking this account regularly to see if you need to set up a deposit. Not doing so can cause duplicate payments and incorrect bank deposits.
4. MISCLASSIFYING TRANSACTIONS
Your records, reports and tax filings won’t be accurate unless you always assign transactions to the correct categories and accounts. For example, a loan repayment shouldn’t be classified as an expense; instead, it should be split to reflect the principal and interest.
5. FALLING BEHIND ON INVOICES AND BILLS
Open invoices and overdue bills should be addressed as soon as possible. Besides creating problems with your vendors and customers, neglecting these items will make it difficult to accurately assess your cash flow.
6. LETTING PURCHASE RECORDS FALL SHORT
This is especially critical for large purchases. Even if you enter and categorize these items correctly in QuickBooks Online, you might not remember what you bought later. That can cause problems come tax season or if you’re audited.
QuickBooks offers two ways to create a reminder when you fill in an expense form. You can add Notes at the bottom of the transaction and/or Add attachment. You can do the same if the expense was imported as a bank transaction.
7. FAILING TO CLEARLY DEFINE RULES
Creating rules for managing similar transactions can save time. But set them up so they affect only the transactions you’re targeting. Always use the Test rule button.
8. NEGLECTING ACCOUNT RECONCILIATION
QuickBooks Online simplifies this task so that it’s much easier than the traditional paper statement and checkbook register method.
9. SKIPPING CLASS AND LOCATION SETUP
QuickBooks Online lets you group related data in your transactions. You can use Classes, for example, to isolate segments such as product lines or departments. Locations can define individual stores or geographical areas. To set these up, click the gear icon and go to Lists | All lists | Locations or Classes.
10. CHOOSING A QUICKBOOKS ONLINE VERSION THAT DOESN’T FIT
QuickBooks Online offers several versions to meet the varying needs of small businesses. If your current software isn’t providing the features you require, it may be time to upgrade. Contact the office with questions.
***
Please call us at (925) 954-4477 if you have any questions.
Brokstein & Associates CPAs LLP
2300 Contra Costa Blvd, Ste 230
Pleasant Hill, CA 94523
broksteinassociates.com
(925) 954-4477