3 Costly Mistakes Made with QuickBooks

I have compiled a short list of the top 3 costly mistakes small business owners make with QuickBooks. Believe it or not, these are simple yet costly mistakes.It doesn’t matter the industry, they all require the same information and I do believe profits are important to every business, with the exception of government and not for profit.

1. Not Reviewing the QuickBooks Reports

Everyone gets busy, so I understand why these reports don’t get looked at. However, the bank wants financials when you need a loan or a line of credit and so do suppliers.

The reports should be run in order to make better business decisions. Here are top 5 reports that need to be looked at regularly:

  1. Balance Sheet: This financial statement shows your company’s resources (cash, inventory, accounts receivable) at a glance. It’s obligations (people you owe money to, payroll taxes, credit card balances, loans). Also it’s equity (capital contributions, distributions) on a particular date.
  2. Profit and Loss. This statement shows the company’s health (money coming in and expenses) at a particular point in time.
  3. Statement of Cashflows: This financial statement harmonizes your net profit (loss) to your ending cash. There are cash transactions that do not affect your Profit & Loss, such as loan principal payments, payroll taxes payable, and capital contributions or distributions.
  4. A/R aging summary (if applicable)
  5. A/P aging summary (if applicable)

2. Keeping Different QuickBooks Files on Your Computer

Some of my QuickBooks clients get into trouble frequently when they take a backup of the file at the office and take it home.

Then they forget to bring the backup in with them when they return to the office. The result is incomplete and inaccurate data.

Worse still, the accountant does the year-end adjusting entries, gives the file back and no one updates the books.

It is a good idea to be consistent where you keep your data files. Also, it would be a good idea to delete old copies too.

3. Not making the decision to outsource your bookkeeping

Let’s face it, bookkeeping is time-consuming and tedious. That is why small business owners leave it undone. I understand that the business owner would rather be out generating leads for his company.

However, lenders, investors, and suppliers require accurate and complete books before granting credit, or loans or raising capital.

If you require outside financing, this is the best reason to invest time and money in a bookkeeper.

Bookkeeping produces the financial information every small business needs to manage your company. Financial reports help you determine whether you can afford to buy that new piece of equipment for your business.

That is to say, a good bookkeeping system will enable you budget for new equipment or employees or to bid on bigger projects.

The bookkeeping reports will help you forecast for cash flow problems.

Many small business owners leave the bookkeeping until tax time. However, by that time it is too late to do anything about the health of the business.

“I’ll just leave it for my accountant to do at tax time” is a constant refrain I get from potential clients.

The problem with this is the “accountant” at tax time will bill you more; say $200 per hour to sort out That hinges on a big IF the accountant actually wants to take your file.

Maintaining up to date records will save you on accounting fees at tax time and file the taxes in a timely manner.  Bookkeeping saves on late penalties too.

If the business has to collect sales tax from customers, good reports will help calculate the tax due and prepare reports accordingly.

Mathew Jazenko loves helping businesses maintain a good bookkeeping system to help business owners make better business decisions. Call Mathew today 289-500-1978 or info@accountingprofessionals.ca to get started.