Just because it is advertised as user-friendly doesn’t mean it is… Quickbooks is a great example of this. It can be tricky! What seems to make sense isn’t always the right way to do things.
A very common mistake is over-reporting income. I see this most often. Expenses are reported correctly but your income is reported twice. This usually happens when more than one person does the books or you have someone inputting part-time. Self-employment taxes on money you didn’t make is no fun… and wondering why there isn’t more money in the bank when your profit statement is showing you are making a good profit is frustrating. Luckily, this can be prevented and avoided through proper Quickbooks training. Usually this mistake occurs when a payment is taken against an invoice and recorded as income and then the deposit is recorded as income a second time for the same payment. Another way income can be overreported is by reporting an owner contribution as income. Sometimes an owner will put money in to keep the business bank accounts at a certain level. If this is counted as income, you will pay more taxes than you should be paying. This also can happen when money is transferred between accounts. It’s important that whoever is inputting your receipts and transactions knows what is going on so they know which accounts are income and which are transfers or contributions.
Obviously the opposite of overreporting income is underreporting expenses. This can be avoided too, by reconciling regularly and making sure that the receipts you have entered match up to your bank account. Sometimes I see people do things like mark a credit card charge on the account credit card. This is not an expense and won’t help you out with your taxes.
Sometimes expenses are overreported, this happens when a receipt is entered and then the expense is entered again when the credit card is reconciled since the receipt was put in the wrong account. This is a problem too. While it helps you out with your taxes, if you get audited, you may end up paying money in. It also gives you an inaccurate financial representation of your business.
These are just some examples of things that can happen without proper training and when Quickbooks is set up wrong. Especially if you don’t have accounting/bookkeeping training, it is a good idea to hire a professional at least to make sure your chart of accounts is set up correctly and to work with you on questions you have as they come up and help with year end closeout. When you look for a bookkeeper, it’s good to find one that is Quickbooks certified or a Quickbooks ProAdvisor. They will have the knowledge of the ins and outs of Quickbooks combined with the accounting background to make sure you are taken care of correctly.
With the right training and support, you can always know what the financial position of your business is, and what your response should be to it.
Written by Laura R Fleig,
www.fleigfinancialsllc.com
