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Thursday, September 22, 2011

The Most Common Mistake I See With New Quickbooks Users

It's a cute little commercial...

One thing I try to explain to new Quickbooks users is that the software IS user friendly but you still need basic knowledge of the software to avoid making mistakes, and basic bookkeeping knowledge to be sure your recording entries correctly.

The most common mistake I have seen in my freelance bookkeeping practice is with Customer payments & Bank deposits.  Quite often a new user will use Quickbooks to create an invoice to a customer and then enter a customer's payment to them as a bank deposit without  applying the payment to the outstanding invoice.  This will result in an ever-growing Accounts Receivable balance on the customers Balance Sheet as well as over-stated income on the Profit & Loss Statement.

On the other hand, they may properly record the customers' payment using the "Receive Payment" feature, but again, they record the deposit as income rather than linking the deposit entry to the received payment. The clear indicator of this will be a balance in the Undeposited Funds account on the Balance Sheet, that continues to grow, and a duplication of Income reflected on the Profit and Loss statement.

A simple way to be sure that you are not double posting income is to use the Sales by Customer Summary report and compare the total on this report to the income on the Profit & Loss Statement for the sale time period.  These numbers should be the same.

This assumes that all revenues are posted to customers in the company file either by invoice or sales receipt..  If you "deposit" a portion of your sales (for example small dollar cash sales at an event) directly to an income account without using the invoice or sales receipt option, this double-check will not work.

For basics on how to use Quickbooks software, the classes offered by Intuit are a good investment.  A local Quickbooks Proadvisor can offer individualized training that allows for questions specific to your situation and business.

If you think you have made these errors, DON'T PANIC!.  Quickbooks can be easy to mess-up but it is just as easy to fix.  Your Proadvisor can show you how.

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