“I don’t need a dedicated accountant; I’m just going to learn Quickbooks!”
Obviously we’re always going to argue, as a virtual CFO firm, that your energies are best expended spending time on your business instead of spending time on accounting. But if you are going to go the Quickbooks route, we want to help you avoid some basic pitfalls.
Pitfall #1: Failing to use the bank reconciliation feature
Again, our assumption is that accounting is not top of mind for you and like most business owners, you may not even be aware that this feature exists. But it’s there to make your life easy! If you click on the “banking” tab and choose “reconcile” from the dropdown menu, you’ll have an opportunity to enter in your bank account information and set up for electronic reconciliation. When you start the reconciliation process, Quickbooks will display discrepancies.
Be patient with yourself. We’re humans. We make mistakes. Reconciliation is the only way to make sure that there are no double entries or errors in your books. Take the time to fix these problems instead of using the amateur way out: allowing the discrepancies to just be a black hole where you zero things out (“ah, who cares why we are $27 off”) instead of fix and solve problems. Hopefully as time goes on, you will document the types of mistakes you are making so that you don’t repeat them over and over.
Be a professional: make sure that what goes into your books is solid. Then you’ll have solid financials (for the tax man) and solid reports (for you, so you can run your business better.)
Pitfall #2: Failing to separate deposits
Not only is it important to keep the types of transactions separate (what kind of product/service is being bought for that revenue) but also the character of those deposits (cash/check/credit card). We understand that in the early days, you might be so happy (and desperate) to get money that you’ll run right down to the bank, make a deposit, and perhaps dance an impromptu jig. All while forgetting to keep track of what was in the deposit. This makes for messy accounting later.
Make sure that you separate out your deposits in Quickbooks because later on when you reconcile (see Pitfall #1) you’ll have to anyway. On a separate note, try to make sure that your credit card processor isn’t taking their fees out of each transaction. Plenty of firms do this (credit card processing is truly the wild west – no regulation whatsoever) and the savvy business owner knows to tell those processors to take their fees at the end of the billing period in a separate lump sum. Otherwise the processor is pushing those problems downstream to you: you’ll have to separate out of every transaction the difference between a fee you’re being charged and the actual revenue you’re receiving for the product/service.
Pitfall #3: Using multiple copies of the working file
It can be tempting to copy the company file to a thumb drive to work on at home but this is a nightmare waiting to happen. Have a copy that you have backed up, one that your accountant has, and one that you work from. They should all be the same file – and you should have current versions backed up and to your accountant every month at the minimum. If you outsource to a firm like ours, we keep those updated every day!
We can’t tell you how many times we’ve had to try to make sense of 3-5 different files that the customer created and unwittingly worked from so that we have different entries across different files but not one of them could be said to be the “master copy.”
Pitfall #4: Don’t forget to back up!
We feel that with the dawn of ubiquitous cloud technology – even filtering down to things like music you keep in your smartphone – that preaching about the religion of backup might be a relic of a bygone age. But it never fails… we have a situation happen with a customer in which, despite numerous reminders to back up, a catastrophic event happens and they are without a backup, and then more expensive work has to go into rebuilding those books. Don’t get caught by this! Quickbooks has a feature that allows you to back up to their own servers (for a fee, of course!). We can also show you how to back up manually to your own cloud-based service.
In all these pitfalls, always remember – accounting may feel like an afterthought to you as a business owner but until you realize it has to be a forethought, you may let yourself take it casually and hence make these mistakes.