QuickBooks is a phenomenon in the software world. It was an immediate success and, nearly 40 years later, is still by far the most popular self-service accounting software. Intended to enable small and medium-sized businesses to do their own books, the software has been upgraded and improved many times and now offers a wide range of functions, even bill pay and payroll. But the fact that it is designed to be used by non-accountants is its strength – and its weakness. In the same way, you wouldn’t want to be sitting on an airplane flown by a non-pilot using instructions from a software program, you don’t want a non-accountant managing your company’s money. Even if it’s you. With aviation and finances, errors can have real-world consequences. As they say, sometimes a machine just can’t replace a human being.

Obviously, we – being human accountants – would prefer you hire Financial Optics to perform your company’s accounting. That said, there is a significant number of professional accountants who use QuickBooks to augment or automate part of their work. But it’s important to note that’s like a real pilot using piloting software. If you or your staff are happy with QuickBooks and simply want professionals flying the plane, we can help you with that.

Two complaints we hear about QuickBooks are customer service is slow and answers are often just plain incorrect. You won’t have those issues at Financial Optics. With us on your team, you get fast, correct answers from a real accountant, not a customer service agent researching answers while you’re on hold.

Here is our advice on how to avoid the most common mistakes when using QuickBooks.

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1. Reconciling Accounts

Reconciling is essentially like balancing your family’s checkbook. All transactions your business makes must match your bank’s records, from paying expenses to receiving invoices to taxes and loans, even assets. In QuickBooks, make sure you select “Reconcile” for every account and click “Reconcile Now.” You will be prompted to enter each statement’s end date and your end balance.

If you have reconciled everything correctly, once you clicked all items in the “Checks and Payments” column, the bottom right corner will total zero. If it does not, go back and do it again until all mistakes are corrected and all accounts have been properly reconciled.

2. Profit and Loss Statement

Your profit and loss statement is probably one you focus on fairly often. It shows the financial health of your company in revealing whether you’re making or losing money. It is also an excellent way to call out potential mistakes in your accounting. If there is a significant change in either expenses or income from one period to another, yet you don’t think there should be, chances are good you’ve made a mistake somewhere.

Go to the QuickBooks “Chart of Accounts” and click on the account in question and review the transactions for the period to find anomalies.

3. Items List

In QuickBooks, anything your company sells or buys is termed “Items.” This can include a lot of things, from products to inventory, even shipping charges and tax. If you do not keep this list updated, it can become clogged and inaccurate with things you no longer stock or sell or purchase. So, make sure to deactivate anything that is no longer relevant to or part of your business.

You can also move an item by clicking on the diamond-shaped icon next to it and dragging up or down to a new location. If you drag a sub-item left, it will become its own item. You can move an item beneath another item to make it into a sub-item.

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4. Payroll Taxes

Do not use the “Write Checks” function to pay your payroll tax(es). If you do, that amount will not be deducted from your “Payroll Liabilities.” When used properly, QuickBooks calculates how much payroll tax(es) you owe as you pay employees.

Make sure you use the “Pay Liability” window to pay your company’s payroll taxes.

5. Accounts

Don’t create confusion and clutter by creating more accounts and sub-accounts than you need. Often, simple is smarter. For most small businesses, many things can be grouped together as one account rather than broken down. For example, office supplies do not need to be itemized into pens, staples, etc.

Just make sure a general account comprises related things. You don’t want to include a one-time purchase of an expensive photocopier as routine or reoccurring office supplies.

6. Backup

QuickBooks offers a cloud version, which automatically saves your data on multiple drives at both QuickBooks and a third party with, as the company claims, the same level of security used by banks. However, the company also states that every time you make a change, your file is overwritten. In other words, QuickBooks saves only the newest version and cannot restore your file to a previous version. Anything in a previous version is gone forever.

If you are not using QuickBooks Online, it is very important to frequently back up your company file (to which you assign a name) in more than one place. Computers crash, drives get corrupted, mistakes happen. We suggest backing up your Company File on a second storage device that is not the computer your QuickBooks or accounting is on, such as an external hard drive.

In addition, you should think about what would happen if something like a fire destroyed everything in your office or business. You could take your backup drive home every night. But We suggest also using a cloud service, such as Dropbox, Google Drive, etc., to back up your company file and, while you’re at it, other important information.

If you do use QuickBooks Online, we suggest doing the same in the event you need to access a historical version of your Company File.

To perform a backup, you must be in single-user mode. Go to “Backup Company” and click “Create Local Backup.” In that window, click “Options” and choose a location to save your file in.

7. Bills

When you get a bill, it’s often tempting to quickly pay it with QuickBooks’ “Write Check” function. But that means you’re not creating an account payable for that vendor and, by doing so, creates an error in your cash flow calculation.

Be sure to first log every bill in “Enter Bills,” then use the “Pay Bills” function. This helps you keep proper track of expenses so you can properly manage cash flow and understand what is happening with your money.

Also, when you create bills and log the expense in the correct accounting period according to when the expense actually happened, your Profit and Loss statement will be much more accurate.

8. Adjustments

You can adjust transactions in QuickBooks but proceed with caution. Changing a transaction can alter the calculations for other transactions or totals and subtotals. For instance, if you have already reconciled accounts for the previous month but then adjust the amount of one transaction in that month, it changes this month’s balance.

Reconciling accounts can get complicated, and mistakes can be difficult to spot or correct. If you believe it is necessary to adjust a transaction, first be aware of how it will affect everything else. Sometimes, when you go to make an adjustment, QuickBooks will pop up a warning. If you’re unsure what the warning means or how it will affect your books, contact QuickBooks support.

Or us.

Want some help?

If you’re ready to talk about how Financial Optics can provide you with professional accounting and outstanding customer service, please give us a call or go here. We can’t wait to hear about your business.