8 Signs you are Underutilizing Quickbooks
Jaime Rodriquez is an Entrepreneur and Startup bookkeeping advisor. He is the owner of Paralledger where having a passion for investing and bookkeeping makes him an excellent partner for your business.
8 Signs you are Underutilizing Quickbooks:
Recent studies have shown that QuickBooks users are underutilizing the system to its full capacity or using it incorrectly altogether. Here is a list of 8 signs that your company is underutilizing QuickBooks. If you can identify with any of these, it is the right time to make a change in your business.
- Creating a messy chart of accounts – If you don’t create your chart of accounts that is right for your company, you will be feeling the consequences of it in the future. You can pull out financial reports and gather no data on the financial state of your company. Using a “one-size-fits-all” chart of accounts as QuickBooks suggests, will lead you to a path of confusion and frustration.
- Having a jumbled item list– QuickBooks defines all the things that you sell in the form of items and every item is linked to a certain account on your chart of accounts. You can imagine the mess it can create for your company’s books if your item list is a mess a long with your chart of accounts. Like the chart of accounts, QuickBooks will suggest a “one-size-fits-all” approach, for anything from selling on an E-commerce store to an attorney selling his/her services. This can be tragic and would be best to set up an item list before starting your business.
- No purchasing order system – Many companies that hold inventory tend to not use the purchase order system that is provided to them by QuickBooks. If you don’t receive the products against a specific purchase order or don’t create a purchase order every time you purchase a product from a vendor, you could be paying for products you did not receive. Although it may seem time consuming to create a purchase order for every inventory purchase, it could save you thousands of dollars in a year’s span.
- Not reconciling the bank / credit card accounts– Reconciling a bank account can be a daunting task. Luckily, QuickBooks works with most bank accounts and can receive bank feeds directly from your bank accounts and even credit card accounts to assist in the time consuming task of reconciling, Reconciling your accounts is the most important task in keeping up with your company’s books. If no reconciliations is done, none of your financial reports will be accurate.
- Not creating users– With QuickBooks, it is possible to provide different access levels to different users. However, most of the people who use QuickBooks tend to stick to one profile and use that same profile for all of its employees. There should be a system of checks and balances within your company. Of course the larger the company the more security you are able to have. You do not want your lower level employees having access to certain reports such as the Income Statement or Balance sheet. These types of reports should be limited to the owner of the company and the accountant working with the owner.
- Deleting transactions– This is one of the most critical mistakes that are being made by QuickBooks users. While more complex accounting systems will deny the ability to delete transactions, QuickBooks chooses to allow you to do so to avoid complexity within your business. However, it can make you wish you were not allowed to delete when an error is found. Many times one transaction is linked to others, and deleting just one can leave your books a mess. To save you from headache and hard work, the best practice when needing to remove a transaction is to create an adjusted transaction that offsets the one that is to be deleted.
- Not locking the period– When you get the books clean and create financial statements, it is important to lock a period to a certain date. The best practice is to lock your books two months prior to the current date. Some companies will never close their books and realize that a financial statement pulled from a prior period will not match with the report that was used for tax purposes. This could cause your company to overpay or even have to pay heavy penalties.
- Not applying payments against specific bills– The payments should be made in QuickBooks against specific bills. Simply making payments and not linking them to bills will cause your accounts payable accounts to show incorrect balances. The business owner will never truly know how much the company owes to its debtors.