QuickBooks is a powerful tool for managing your small business finances, but even an experienced user can make a mistake! Here are 10 of the most common errors and how you can avoid them!
Edited 2/4/2025 by Alex Horvath
The Problem: Incorrectly categorizing expenses (e.g., meals as entertainment) can skew your financial reports and lead to inaccurate tax deductions.
Solution: Make sure to use a consistent and detailed chart of accounts (a list of all of your accounts), and create subcategories in your expense categories (for instance, "Meals - Client Meetings" or "Meals - Entertainment").
The Problem: Missed transactions and duplicate entries can significantly impact your financial records and make reconciliation difficult.
Solution: Make sure to reconcile your bank and credit card accounts regularly! Take the time to implement a system for tracking and entering all transactions promptly, and consider working with a bookkeeper to help identify duplicate entries and errors.
The Problem: Inaccurate inventory tracking can lead to incorrect cost of goods sold (COGS) calculations, which can impact profitability and tax liability.
Solution: Regularly perform physical inventory counts, and take the time to utilize QuickBooks' inventory tracking features effectively.
The Problem: Incorrectly calculating or reporting sales tax can result in penalties and fines from tax authorities.
Solution: Set up sales tax rules within QuickBooks correctly. Regularly review and adjust sales tax rates as needed.
The Problem: Unrecorded bills can lead to late payment fees and damage your credit rating.
Solution: Enter bills promptly when received. Set up reminders for upcoming payment due dates.
The Problem: Data loss due to hardware failure, software glitches, or cyberattacks can be devastating.
Solution: Regularly back up your data to a secure external hard drive, cloud storage, or both. QuickBooks Online takes the security of your data seriously. Read more here
The Problem: Mixing personal and business finances can complicate bookkeeping, make tax preparation difficult, and increase the risk of audit.
Solution: Maintain separate bank accounts and credit cards for business use.
The Problem: Unreconciled accounts can lead to inaccurate financial statements and make it difficult to identify and correct errors.
Solution: Reconcile all bank and credit card accounts monthly.
The Problem: QuickBooks offers a variety of valuable reports, but many users fail to leverage them.
Solution: Explore the different reports available (profit & loss, balance sheet, cash flow) and use them to track key performance indicators (KPIs) and make informed business decisions.
The Problem: Not fully understanding QuickBooks' features and functionality can lead to errors and missed opportunities.
Solution: Utilize QuickBooks' online resources, attend training sessions, or consider hiring a QuickBooks ProAdvisor for support.
By avoiding these common errors and utilizing QuickBooks effectively, you can improve your financial accuracy, streamline your bookkeeping process, and make more informed decisions for your small business.
Alex Horvath
American Bookkeeping Services LLC