7 Deadly Bookkeeping Sins: Avoid These Quickbooks Online Mistakes

Quickbooks Online can feel like “unfamiliar territory”, to newcomers and seasoned bookkeeping & accounting pros alike. So running into some pitfalls along the way is common. Even expected. Unfortunately, since you’re dealing with financial and tax information, a lot of these pitfalls can add up to a pretty deep (and costly) trench. So let’s see if we can side-step a few of these…

I’ve been using Quickbooks Online for more than a decade, and worked on hundreds of bookkeeping files. I just may have literally seen it all. But I’m going to narrow it down to the top 7 common mistakes that I see many business owners make in Quickbooks Online, and how you can avoid them in your own books.

Let’s count ’em down, shall we?

DISCLAIMER: The content provided is for informational purposes only. You should not construe any such information or other material as legal, tax, investment, financial, or other advice. Always consult with a professional.

#7 - Overtrusting QBO suggestions in the bank feed

If you’re familiar with the bank feed in QBO, you know that it makes suggestions on how to add or match your bank transactions. And that makes this part of the bookkeeping process more convenient. Perhaps a little too convenient…

Here’s the thing about the bank feed suggestion feature: It’s “wicked smaht”. But it ain’t perfect.

More often than not, it will suggest exactly the right account to add to, or the right transaction to match to. But sometimes, it’s a miss. Even a HUGE miss at times. Like, “you had one job” miss.

And if you’re not careful, or if you take the suggestions at face value, you could end up with miscategorized and mismatched transactions. This will not only affect the accuracy of your books, but could also trigger red flags your tax return.

Remember that the bank feed suggestions are just that: suggestions. Educated guesses. It shouldn’t be making decisions for you. Before you hit that add or match button, make sure you take just a second to verify the suggestion and correct it if necessary.

Pro tip: If you want to level up the accuracy of the bank feed suggestions, consider using Bank Rules. This helps QBO make suggestions tailored to your specific criteria, rather than “educated guesses”.

#6 - Half Reconciling

QBO has a fantastic Reconciliation tool that makes reconciling business bank and credit cards faster and easier.

Buuut…

The biggest issue with this tool is, if you didn’t know any better, you would think the whole point of reconciliation is to make the difference $0.

What a $0 difference in the recon tool really means is, all of the transactions that cleared your business bank (or credit card) account for the period have been recorded in Quickbooks. But that’s only one-half of the recon process.

But what about all the transactions that are recorded in Quickbooks that didn’t clear the bank?

A true reconciliation is a two-way street.

So before you press that Finish Now button, make sure you complete the 2nd half–review the “unchecked” transactions. These are the ones that never made it to the bank. You want to investigate each of the unchecked transactions and think about, why didn’t this clear?

Often times, especially with older transactions, these are usually signs of something gone wrong. For example, it may be you paid a bill (and recorded the payment), but your vendor never got it. That would mean your payment never cleared, and your account is delinquent in the eyes of your vendor.

The more usual culprit with unchecked items are duplicate or erroneously entered transactions. That would mean you have non-existent transactions that are messing with your books. Plus, you could end up with an inaccurate tax return.

It would be almost impossible to catch of any of these warning signs if you don’t review the uncleared transactions. So make this step a part of your reconciliation process. Be sure to check up on those “unchecked” transactions.

#5 - Not matching customer payments to the deposit

Inflating income in QBO is one of the easiest things. So easy in fact, that it shows up in majority of the books that I’ve performed cleanup on.

Here’s how it works: when they receive payments from their customers they record their customer payments in Quickbooks (as an invoice payment or sales receipt). So far so good. But then when the deposit of these payments clears the bank and shows up on the bank feed, and you they ADD the deposit from the bank feed to the register. The result?

Quickbooks records twice the income you really have.

Unfortunately, this extremely common mistake can also be an enormously pricey one. It can lead to paying more taxes than is actually owed, or making a business look more profitable than it actually is (which may wind up with less than optimal decision making).

Instead of adding deposits in the bank feed, MATCH them to the previously recorded customer payments. To do that, click on “Find Match”. Then select all the customer payments that were included in that deposit. This links the deposit to those previously recorded customer payments, rather than adding phony income into your books.

Alternatively, you can also create your own deposit:

Left navigation->+New->Bank deposit
Select the customer payments and fill in the remaining information
Then, you can match the deposit to the bank feed to your created deposit.

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#4 - Sub-sub-sub...accounts

Sometimes we have large accounts in our chart of accounts that we want to break into more specific categories. Using subaccounts can be a fantastic way to accomplish that. But sometimes we can take them a little too far.

We start with one account, and nest a subaccount, then nest a subaccount into that subaccount…all of a sudden, we’ve created a Russian doll of subaccounts! These excessive levels of subaccounts not only eat into our chart of accounts usage limits. They also clutter up our reports and make them a headache to read and gather useful information.

The thing with nested subaccounts is, there’s usually a better way to achieve the result you’re looking for. In my experience, there are two main reasons why someone would be using nested subaccounts.

First, is that they want to drill down into the information and get more detail. In that case, using subcategorization tools like classes (Plus and Advanced versions) and tags (all versions) might be a better alternative. These allow you to group similar items at a transactional level. You might also look into customizing detailed reports.

Second, is that they want to track their various jobs separately. In that case, using the Projects feature may be what you need (Plus and Advanced versions).

Here’s my suggestion when it comes to subaccounts:

Use 1st level subaccounts when you want to break down a larger account, use 2nd level subaccounts sparingly, and if possible, avoid using 3rd+ level subaccounts.

#3 - Not tracking potential 1099 vendors

After the end of the year, you have one month. One. To get all your vendors and amounts organized to file 1099s. So why wait until then to figure out which vendors will need a 1099? Why not start tracking your potential vendors now?

Whether or not you’re planning to file 1099s within Quickbooks Online system, it’s definitely a good idea to at least use Quickbooks Online to track the amounts for the businesses or people that you may have to file 1099s for. And when the new year rolls around, you’ll easily and quickly be able to create a report that shows which one of these vendors you actually need to file for, and the amounts that should be reported. Think about how much stress you’ll save yourself, rather than waiting until January to figure all this out.

To track potential 1099 vendors, first you need would obviously be to determine which of your vendors are potential 1099 candidates. These would be vendors that meet the following criteria:

you pay for services or rent with checks (including e-checks), cash, or funds transfers
are lawyers
are both not lawyers and not taxed as an S corporation (you can get this info by requesting a W-9 from them)

Qhen you determine your potential 1099 vendors, edit their vendor detail, and select “track for 1099s”.

In the future, it’s good practice to check this every time you initially set up a new potential 1099 vendor. That lowers your risk of missing anyone who should be tracked.

#2 - Recording checks directly from the bank feed

Here is yet another way many business owners get a little too much convenience out of the bank feed. And I’ve seen this so many times. They will record their written checks by adding them from the bank feed. Here’s the problem with this.

If you record checks by adding them directly from the bank feed, only the checks that cleared the bank will get recorded. But what about the checks you write that have yet to be cleared? Sure, they might clear eventually. Then again, they might not. Like we talked about before, some checks to your vendors might get “lost in translation”. A mail mix-up. A vendor misplaced your payment. Either way you cut it, that check would never clear the bank. Then it would be as if that check never existed. The error may never get caught. And you may have a delinquent bill and and never know it (at least not until it’s too late).

That’s why you don’t want to wait until your check clears to add them from your bank register. Instead record each of your checks in the Check or Expense window (or Bill Payment if the check is for a bill you recorded). Then as they clear, MATCH them in your bank feed. Then you will be able to review and follow up on any uncleared checks. and not have to worry about any of them falling through the cracks.

#1 - Waiting until it's too late to get help

Ignoring mistakes and messes in your Quickbooks Online file doesn’t make them go away. And trying to figure things out on your own can make problems worse or more costly down the line. You’re busy running your business and you don’t have the time or the resources to waste. Investing in Quickbooks Online support can help you can save time, reduce errors, and be confident in your books.

We're here to help!

Whether you’re looking to gain confidence in your Quickbooks, or get your books back in order, we can help make that your reality. Check out our Quickbooks Online services to learn more.

Less wasted money. More reliable data.

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