Many small business owners utilize QuickBooks for their accounting needs, but many make the mistake of trying to learn about the program through trial and error. This often results in them using the program incorrectly. Here are the eight most common errors that QuickBooks users make.
Duplicating Accounts Payable
You should manage your Account Payable account by inputting each bill as you receive it from vendors through the “Enter Bills” window. Next, pay the bill through the “Pay Bills” window. By entering the bill and paying it with “Write Checks,” you will record this expense twice while still having an unpaid bill listed under accounts payable. Additionally, if you only use the “Write Check” feature, QuickBooks will not be able to manage your cashflow.
Duplicating Credit Charges and Bills
Some QuickBooks users make the mistake of entering a credit card charge and a bill for one expense. Rather than making this mistake, users should navigate to the Banking menu item. From there, they should make the selection of “Enter Credit Card Charges.” This is where information pertaining to credit card transactions should be inputted.
Paying Payroll Taxes with Write Checks
The Pay Liabilities window is utilized to pay payroll taxes, as well as other liabilities. This window should be used for taxes instead of the “Write Checks” option because this allows the program to track how many payroll taxes are due and records this information in the Payroll Liabilities account. Once you pay these taxes, the balance on the liability account will decrease.
Incorrectly Posting Funds Received
The “Receive Payments” tab should be used to record funds received from customers. Specifically, these funds should be tied to the original invoice. Simply recording this information under “Make Deposits” will not indicate that invoices have been paid.
Using Inventory Accounting
Inventory accounting should be reserved for only those times when you really have to use it. This usually only comes into play when you use accrual basis accounting method. Instead, use non-inventory items. It can be difficult to retroactively undo problems that are caused by erroneous setups.
Associating Inventory with the Wrong Accounts
If you do keep inventory, take the proper precautions to ensure that you assign inventory items to the proper accounts. Each inventory account should have a corresponding Asset, Sales and Cost of Goods Sold account. Once QuickBooks knows that you are using inventory items, it automatically creates an Inventory Asset that corresponds. However, you need to also create income accounts so that you can see the amount of income that is derived from your inventory.
Overcomplicating the Chart of Accounts
When you install QuickBooks, it will provide a variety of suggestions for your chart of accounts. However, you can opt to keep it simpler with a minimized account list. A QuickBooks ProAdvisor can go through each account and ask about the information that you want to see in your chart of accounts and modify it accordingly.
Doing It Alone
A QuickBooks ProAdvisor can help you with pitfalls that you may encounter.