5 Common Mistakes Small Businesses make with QuickBooks
by Bill Burnham, | October 19, 2021
In my work as a QuickBooks Online Pro Advisor and business consultant, I consult with many QuickBooks users. In working with these businesses I have seen a recurring pattern of mistakes small business users make when using QuickBooks. These mistakes often lead to inaccurate financial information, extra work for the business owner and a certain level of frustration. Here are the mistakes I most often see.
Because QuickBooks is so user-friendly many small business owners immediately start using the software without getting any training. This will usually lead to problems down the road which may be difficult to correct. There are many options available for training, provided by Intuit as well as third-party vendors. These training options vary in price from free to thousands of dollars so there is something available for every budget. Don’t make this mistake. Take the time to get some training even if it is just the basics. You will be glad you did.
Building the Chart of Accounts
The chart of accounts (COA) is just a list of all the accounts created by a business to record the financial transactions of the business. Too often small businesses create new accounts unnecessarily. While detail can be good for analyzing the numbers, too much detail can become unmanageable. There is a fine line between too much and not enough. In this case size matters, if the transaction in question is a large dollar amount or the activity in question will reoccur on a regular basis resulting in numerous transactions, then perhaps a new account should be added to the COA. If the dollar value is a small one time occurrence, then look to add the transaction to an existing account.
Relying on QuickBooks Intelligence
Intuit continually improves its software to make it easier for the small business user. One such improvement allows the software to suggest what account a transaction should be assigned to when coming in from the bank feed. The software uses previous transactions, the vendor involved and other factors to guess the best account for the transaction. Many business owners accept these suggestions without any review, allowing the transaction to flow into the suggested account. Unfortunately in some cases these suggested accounts are wrong. Best practice is to review each transaction prior to adding it to the account register to ensure it is properly categorized.
Timeliness of Entries
Many times I have been assisting clients with QuickBooks issues and find that they have transactions that have not been entered into the bank register. In some cases there were hundreds of transactions covering several months. It is understandable that in the sometimes hectic small business environment where the business owner is also the bookkeeper that transactions may not be entered every day. However, all business decisions have financial consequences and because of this, having accurate and timely financial data is critical. It is best to set a schedule for how often you will update the register, letting the number of transactions per day or week be your guide. The larger the transaction count the more often updates should be made but, in my opinion, no less than once per week.
Not Reviewing Reports
The QuickBooks report feature is easy to use and can provide the business owner with valuable information on the financial performance of their business. Too often when I ask business owners how often they review the financial performance of their company the answer is at tax time or worse yet, never. Reviewing reports, including at a minimum, the Income Statement and the Balance Sheet on a monthly basis is a must for the small business owner so that they are knowledgeable about the company’s performance and can take corrective action if needed.
Did you see one or more mistakes on the list that you could relate to? If so, take the necessary steps to fix the mistake and you will undoubtedly have more accurate financial records and less frustration.
Bill BurnhamBurnham, Consultants, Growth Acceleration Consultants, Hernando, Tampa
Florida SBDC at USF, Tampa
Specialty: Accounting, Business Planning, Business Valuation, Cash Flow Management, Financial Management, Growth, QuickBooks
Bill Burnham is a lifelong resident of the Tampa Bay area. He is a graduate of the University of South Florida where he majored in accounting. He obtained his MBA from Florida Institute of Technology. Burnham has more than 25 years of experience working with Fortune 500 companies, nearly 20 of those years in management positions. During that time he managed more than 200 employees and spent time in accounting, finance, manufacturing, production control and strategic planning. He managed government contract budgets in excess of $50 million dollars and operating budgets of more than $25 million dollars. He prepared analysis for potential acquisitions, proposals for government contracts and conducted company-wide training programs on several different topics. Complementing his large company background, Burnham also has 15 years of experience as a small business owner in industries as diverse as dry cleaning and home health care. In addition to those endeavors he has also worked as a business broker and business valuator performing valuations and selling business throughout the state of Florida. He has hands on knowledge in business planning, budgeting, forecasting, profit and loss management, cash management, business sales, business valuation and franchise operations. Burnham is also a Certified LivePlan Expert Advisor, QuickBooks Online ProAdvisor, Strategic Management Performance Systems certified, and a Profit Mastery Facilitator. Burnham was the 2018 Consultant of the Year for the Florida SBDC at USF region.