Dec 12, 2016
As an accountant, I have worked with many small businesses that purchase QuickBooks for their accounting software. Over the years, I have observed many of these businesses, large and small, make many of the same accounting errors. Here are just a few of the most common oversights and some tips to help avoid such mistakes.
Lack of accounting software understanding. QuickBooks is capable of offering meaningful reports and functions to assist small business owners. However, if the software is not set up correctly or wrong information is entered, reports will be incomplete. Your unhealthy reporting can lead to bad decision-making about the future of your organization.
Hiring the wrong person to handle your accounting. Be it a family member or even yourself, having the wrong person in charge of entering all the financial information into QuickBooks can be a disaster. It is essential to employ someone who understands general accounting principles, knows a debit from a credit, how to properly classify business expenses, and accurately record journal entries.
Not reconciling bank accounts on a monthly basis. Skipping routine accounting tasks due to an increase in business may seem like a good idea, but more often than not, it leads to wasting valuable time. At some point, you will have to address your accounting issues spend time reviewing prior months to check for errors. Take the time on a monthly basis to reconcile your general ledger.
Entering incomplete and delayed financial data into the software. In order to be able to reconcile your bank accounts, monthly posting of cash receipts and disbursements must be entered in a timely fashion. Simply recording cash receipts and disbursements into the bank without posting to the corresponding invoices will lead to critical errors on the financial statements. This brings to mind the adage “garbage in –garbage out” which will be no benefit in trying to make sound business decisions.
Underutilization of the accounting software. Many business owners use the accounting software to record their financial activity but never take the time to explore the various reporting options available. For example, accounts receivable aging will determine those customers behind in payment and possible issues with cash-flow. Profit and loss statements can help businesses determine if expenses are exceeding the budget and pinpoint the cause of excess costs. Making the most of your system and its report capabilities will guide you in the decision-making process and clearly state the profitability and efficiency of a company.
Not recognizing the need for accounting help. A business owner may have the next great product idea, but when it comes to the financial aspect they are clueless. An accounting professional is there to help you make sense of your financial data. Having a trusted partnership with an accountant will allow you to focus on what you do best, running a business.
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By: Christine Schultz, Accountant