The 10 Most Common QuickBooks Online Mistakes (…and How to Fix Them!)
QuickBooks Online (QBO) is an indispensable tool for many business owners, streamlining accounting tasks and offering real-time insights into financial health.
However, even the most seasoned users can fall into traps that compromise their business’s financial management.
When we start working with a client for the first time, it never fails… there is a long list of clean-up that needs to be done in QBO before anything else.
The 10 Most Common Mistakes (and solutions!)
Here are the 10 most common QBO mistakes we see, and how you can fix them in your business.
1. Not Customizing the Chart of Accounts
The Chart of Accounts is the backbone of your financial system, categorizing transactions to give a clear picture of your business’s health. A mistake often made is sticking with the default accounts provided by QBO without tailoring them to your specific business needs.
Fix: Review and customize your Chart of Accounts to reflect the unique aspects of your business. Add accounts relevant to your operations and remove those that are unnecessary. This customization will lead to more accurate financial reporting.
2. Overlooking Recurring Transactions
It’s easy to forget about those monthly or annual subscriptions and recurring payments. This oversight can lead to unexpected cash flow issues or inaccuracies in financial statements.
Fix: Utilize QBO’s recurring transactions feature. Set up automatic entries for regular expenses and incomes to ensure they’re always accounted for on time. This will help maintain an accurate cash flow forecast.
3. Neglecting Bank Reconciliations
Failing to regularly reconcile your bank accounts in QBO can lead to discrepancies and inaccuracies. It’s crucial for detecting fraud or errors in your accounts.
Fix: Schedule monthly bank reconciliations. This practice will help you catch and correct errors promptly, keeping your financials accurate and up-to-date.
4. Incorrectly Tracking Expenses
Business owners often miscategorize expenses or fail to track them properly. This can lead to inaccurate financial statements and potentially troublesome tax filings.
Fix: Make sure to categorize each expense accurately and take advantage of QBO’s features that allow you to attach receipts directly to transactions. This not only ensures accuracy but also prepares you for tax time.
5. Not Utilizing the Projects Feature
QBO’s Projects feature is invaluable for tracking project-specific incomes and expenses, yet many business owners overlook it.
Fix: Use the Projects feature to monitor the profitability of individual projects. This will give you insights into which projects are financially viable and which are not.
6. Underestimating the Power of Reporting
QBO offers a wealth of reporting options, but not fully utilizing this feature means missing out on valuable insights that could inform decision-making.
Fix: Regularly review and analyze the various reports QBO offers. Custom reports can also be created to meet your specific business needs, providing deeper insights into financial performance.
7. Improper Use of the “Undeposited Funds” Account
The “Undeposited Funds” account is a temporary holding spot for payments received but not yet deposited in the bank. Misusing this account can lead to confusion and inaccurate reporting.
Fix: Ensure that you correctly move transactions out of the “Undeposited Funds” account once the actual deposit is made. This keeps your books aligned with your bank statements.
8. Not Keeping Personal and Business Expenses Separate
Mixing personal and business transactions is a common pitfall that can lead to a tangled financial web, making it difficult to discern the true financial state of your business.
Fix: Always use separate bank accounts and credit cards for business and personal transactions. If personal expenses accidentally get recorded in QBO, make sure to categorize them appropriately to keep your business finances clean.
9. Forgetting to Set Up Sales Tax Correctly
Handling sales tax improperly can lead to significant compliance issues and potential penalties.
Fix: Set up your sales tax in QBO accurately from the start, ensuring you’re collecting the correct amounts and reporting them properly. Regularly review your sales tax settings to accommodate for any changes in tax rates or laws.
10. Not Backing Up Your Data
While QBO is a cloud-based platform, assuming your data is immune to loss or corruption can be a costly mistake.
Fix: Regularly export and back up your QBO data. Though QBO does maintain its own backups, having your own can be invaluable in case of a data retrieval issue or for historical analysis.
Wrapping it Up
QuickBooks Online is a powerful tool that, when used correctly, can provide comprehensive financial management for your business.
Avoiding these common mistakes not only ensures smoother operations but also enhances your financial oversight and decision-making capabilities.
With these fixes, you’re well on your way to mastering QBO and keeping your business’s financial health in peak condition.
Let Cap3 review your QuickBooks Online management
Managing your finances through QuickBooks Online is vital… but it’s not always straightforward.
At CAP3, we understand the challenges you face as a business owner, especially when it comes to working through the ins and outs of QuickBooks Online.
Contact our team of accounting & finance professionals today for recommendations for improving your QuickBooks management.