by Melissa Doran, CPA, Quickbooks ProAdvisor, Peridot Consulting, Inc.
A lot of our time is spent working closely with small business owners to help them get their finances in order. More often than not, that entails cleaning up their Quickbooks files. Quickbooks Online is a very useful tool for tracking your financial data, but only if you know how to set it up correctly and avoid these common mistakes.
Mistake: Duplicates in vendor, customer, and chart of accounts
Problem it creates: Duplicate customers can throw off a company’s accounts receivable.
Quickbooks Online will not allow you to create more than one identical list item (ie, vendor, customer, employee, account category) however it can still happen when there are slight variations in the name. Duplications like this can create all kinds of problems. Duplicate customers can throw off a company’s accounts receivable. For example, Imagine Customer A gets an invoice created under one customer name (Customer A) but the payment is applied to the duplicate customer name (Cstomer A). That invoice will continue to show up as unpaid. Similar problems could occur with duplicate vendors when a bill is created under one and the bill payment is applied to the duplicate. The best way to fix this is to Merge the duplicate items. When you edit/rename one of the duplicated items to identically match the other one, Quickbooks will let you know you already have an item by that name and asks you if you want to merge them into one. Doing this not only combines the two items but also moves all the transactions together under one customer, vendor, or account category.
Common Mistake: Duplicate transactions
Problem it creates: Overstatement of income or expenses or double transactions
Another common mistake that can cause a big mess in Quickbooks is duplicate transactions such as transfers between accounts, deposits, and checks. There are several ways this can happen. If you are a Quickbooks Online user, you probably know about the bank feed and use this to post the majority of your transactions. The bank feed, once connected, pulls transactions from your bank for you to review and post into Quickbooks. It can save a lot of bookkeeping time but be sure to match your transactions correctly.
These are the most common causes of duplicate transactions:
Not matching transfers between accounts
If you have multiple bank accounts or credit card accounts, then you probably have transferred money from one to the other at some point. Since the Quickbooks bank feed pulls transactions for each account separately, that transfer will appear in both accounts. Quickbooks uses a Match feature, which tells Quickbooks that this is the same transaction and should not be posted again. The trick with a transfer is to post the transaction from one account then match the other one to it.
Not matching deposits to invoices/customer payments
If you are using Quickbooks Online to invoice customers, you might run into this problem. It usually happens when a deposit is posted from the bank feed directly to an income account (like Sales) when it should have been matched to an outstanding invoice. This mistake will cause an overstatement of income on your Profit & Loss Report. The best way to avoid this is to have clearly defined procedures of the invoicing process. 1. Create Invoice 2. Record Customer payment 3. Match deposit to customer payment.
Not matching checks in the bank feed to bill payments
The Bill feature in Quickbooks Online can help you manage expenditures, however you might get duplications if you aren’t careful. Just like with matching deposits to invoices, the best way to avoid a problem is to have clearly defined procedures for recording bills and payments. 1. Create Bill 2. Record bill payment 3. Match check from bank feed to the bill payment.
Common Mistake: Income items posting to wrong accounts
Problem it creates: negative Profit and Loss Report
The invoicing feature uses items from the Products and Services list. Its important to make sure these items are mapped correctly. A common mistake when invoicing for costs you want to pass on to the customer is mapping that item to an expense account rather than an income account. Doing so will result in a negative amount for an expense category on the Profit and Loss report.
Common Mistake: Editing or deleting transactions from a previously reconciled month or year
Problem it creates: discrepancies with prior year reports
Sometimes it is necessary to edit or delete a transaction from a previous period. If that period has already been reconciled, doing so could cause discrepancies to a month or year that has already been closed out. As accountants, we spend a lot of time correcting prior year balances because of this. The best thing to do is to reach out to your accountant and let them know of the change you need to make. They can advise you of the best way to make the correction without causing an issue with a reconciliation or a discrepancy in the prior year balance.
Some mistakes are not as obvious to spot until a problem arises. One of the best ways to find a problem before it gets out of hand is to reconcile your bank and credit card accounts monthly. Doing so will catch a majority of bank account related mistakes. This will help you catch duplicate transactions.
When in doubt, call your accountant when you notice something in your Quickbooks files that doesn’t look quite right. It could save you hours of troubleshooting.
We hope you found this information helpful. For other Quickbooks help, check out our free Quickbooks ProAdvisor taught workshops here - Peridot Workshops