Top 6 QuickBooks Mistakes & How To Avoid Them

QuickBooks is an important solution for handling the financial aspect of your business, but its usage entails certain missteps that affect accuracy and efficiency.

These mistakes may include mistakes in capturing data, failure in updating data, and so on, which influence the financial position of the organization.

In this guide, typical QuickBooks errors are covered, and precautions are taken to maintain a proper accounting system.

Common QuickBooks Errors & Mistakes To Avoid

Below are some of the common QuickBooks mistakes you must avoid today!

1. Setting Incorrect Preferences

The main functioning of your QuickBooks starts with the preferences in your settings. It acts as the main powerhouse to carry your accounting functions. The better your preferences are, the more organized your accounts look down the road. Setting incorrect preferences is a sin, not just an accounting mistake.

While setting the preferences, you may:

• Regulate the finance charges for late payments from customers.
• Explain the reporting options.
• Setting up the email templates.
• Assigning default accounts for cheques and bill payments.

2. Confused Accounting Charts

If the accounts are not organized properly in the charts, you might curse yourself for the rest of the reporting. It looks fine in the beginning, but as you move on, it gets as chaotic as banging your head against the wall. The data will have a lot of discrepancies down the lane.

Here’s what you need to do to organize your accounting charts:

• Always group like accounts at the same place.
• Create separate accounts for different age groups like parents and children, wherever necessary.
• Use what is required in the charts. Keeping it simple will avoid any negative signs.
• Enter the data in the lowest level of accounts.
• Enter the details where they belong. Not later, but then and there!

3. Messing Up the Listing of Items

Anything that you sell is defined by QuickBooks as items. As you keep onboarding new clients, the items will start getting unorderly and confusing.

Create a proper listing of items  by doing the following:

• Anything that you no longer sell should be deleted from the charts.
• Everything that you set up under items needs to set up in categories of inventory, sellable inventory, non-inventory, etc.
• The prices of every item should be updated regularly as the inventory renews products.
• Costs and revenue of each item have to be tagged along with each item.

4. Cutting out Transactions

One of the biggest errors you can make in QuickBooks is to delete transactions. Linked transactions may mean that the transaction being deleted will affect the legitimacy of other records in the platform. This can lead to inaccurate entries, stock discrepancies, and, generally, wrong accounts in the books of accounts.

Here’s how to handle transactions properly:

• Each transaction should only be deleted if it is mandatory to do so. Instead, always void them in order to preserve the audit trail.
• Cross-check on interlinked transactions Check that the specific transaction you want to delete does not impact others.
• Remember never to remove any transaction with a closed period without notifying your accountant.

5. Incorrectly Applying Deposits to Invoices

One mistake that is easy to make is not allocating customer payments to the right invoices, which leads to inflating some accounts and creating confusion when one reconciles his or her reports.

Here’s how to correctly manage deposits:

• Match deposits to invoices. This parameter should always be turned on so that payments are posted to respective invoices to clean the reports.
• Check your accounts often. Search for the payments that have not been applied or the difference in the customer balances.
• Double-check details. Check down the invoices and payments allotted to the incorrect accounts in order to make sure everything is clear during the preparation of tax returns.

6. Wrong Usage of Undeposited Funds Account

Mismanagement of the undeposited funds account results in wrong reporting and imbalance on the general ledger. This accountability aids in holding payments for a short time before they are transferred to the bank.

Here’s how to correctly use the undeposited funds account:

• Ensure that the details of each customer account’s payment are well recorded. Combined with the deposits module, the ability to link payments should be tied directly to bank deposits.
• Maintain the frequency of checking the undeposited funds. It is good to clear this account once the payments are deposited to prevent double payments.
• Reconcile deposits. Check that the total of the undeposited fund account tallies with the total on the deposit slips.

Conclusion

These QuickBooks error codes will affect your financial management in decision making for business operations in the long run. You need to avoid these mistakes for the proper managerial structure of the company.

These are some of the simple slips which you can avoid in QuickBooks for preventing any penalties while filing taxes or calculating the business expenses.

Disclaimer: The information outlined above for “Top 6 QuickBooks Mistakes & How To Avoid Them” is applicable to all supported versions, including QuickBooks Desktop Pro, Premier, Accountant, and Enterprise. It is designed to work with operating systems such as Windows 7, 10, and 11, as well as macOS.