BGH Blog Series: QuickBooks  Most Common QuickBooks Mistakes - Banking

BGH Blog Series: QuickBooks Most Common QuickBooks Mistakes - Banking

For many business owners, managing finances is the scariest aspect of owning a business. If you don’t know how to keep your finances in order, you could run into serious financial difficulties.  When you own a business, you need to learn how to perform accounting and record keeping for small businesses.  Most of your day-to-day accounting details can be easily tracked online via your credit card and banking records. However, it’s important to keep all this information compiled and reconciled so you can review it at a glance. Two common banking mistakes are failure to use bank feeds and not using transfers.

Bank Feeds

Bank Feeds is the online banking feature in QBD that lets you connect to your financial institution so you can download transactions and use other online services. In QBO, Bank Feeds, is also known as “Online Banking” or “Downloaded Transactions”.

Through Bank Feeds, you can process bank and credit card transactions efficiently giving you extra time for your other business needs.  It is surprising how many users either just don't know about bank feeds in QBD or don't want to use them.

Whether in QBO or QBD, the goal is to match anything already entered in QBs or to add what is missing. This "clears" each transaction and marks them as tentatively reconciled. The advantage to this is that it makes reconciliations so much easier. In QBO, everything that has cleared gets automatically checked and there is even a cleared date column where transactions that cleared past the statement ending date can be unchecked. In QBD, the reconciliation is not as slick, but at least by downloading transactions into QBs, you won't be faced with trying to figure out why there is a difference due to anything missing. Bank Feeds will also confirm if payments and deposits are being done correctly, as any deposit or payment downloaded into QBs should be a match if it has previously been entered into QBs.

Not Using Transfers

Most people like to pay their credit cards using a checking account online. And sometimes both the checking account and credit card are under the same bank and thus the same login. This is what is called transferring funds when making a payment. But even if they are not under the same bank, both accounts should be in QBs. Besides writing an actual check and mailing it to the credit card company, any online payment should be replicated by the same transaction in QBs: Banking | Transfer Funds in QBD and Quick Create + | Transfer in QBO.  

QBD even has the functionality to initiate the transfer if both accounts are with the same bank. The biggest problem I see in QBO is that users tend to rely on Banking to accurately categorize their transactions.  One flaw in QBO tends to cause a nightmare in the books. QBO isn't smart enough to know that funds going out of the checking account are connected to funds being received by a credit card account. Therefore, in the checking account, the suggested transaction is an Add (Expense) and in the credit card account, it is a credit card credit. It gets worse if it is between two checking accounts. One side suggests the transfer as an expense and on the other side, a deposit. Essentially, what happens is that both transactions are coded to erroneous accounts rather than to each other, thus duplicating the same transaction. This creates a bigger problem when reconciling one account and then finding the duplicate in the other account when reconciling. So one has to be deleted and the other, usually re-reconciled or marked with an R in the register. Until QBO gets smarter, I always recommend just creating a manual Transfer transaction at the same time that the online transfer is made. That way, it just shows up as a match in both accounts in Banking when it posts. 

For further assistance on any of these issues or with QuickBooks, please contact our office.  410-792-7259

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The Cultural Alliance of Greater Washington has worked with Bormel, Grice & Huyett, P.A., since 1988. Their knowledge of the arts and the arts community make their services invaluable. They can translate accounting terminology into a comprehensive language. For many organizations, the accounting firm of Bormel, Grice & Huyett provides the financial "information bridge." We whole-heartedly recommend Bormel, Grice & Huyett, excellent accountants who care about our arts organizations.
Jennifer Cover Payne, Executive Director, Cultural Alliance of Greater Washington

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