When you DIY your accounting, you get to save money—but since we’re all human, errors happen! Knowing about common accounting errors helps you prepare for them and address them. That way, you won’t experience any huge issues at the end of the quarter or year when it comes to your business finances.
Even the most attentive people make mistakes. And when you’re using software like QuickBooks Online, you decrease the chances of making a mistake…but accounting errors still happen!
If you don’t catch accounting errors early, they can be costly. But luckily, with a little expertise and some awareness on your side, you’ll be able to remedy these issues as soon as possible and protect yourself.
7 Common Accounting Errors (& How To Fix Them!)
We all hope that bookkeeping is quick, easy, and accurate. But sometimes, our account balances are off, transactions are incorrectly categorized, or other account errors happen. That’s okay!
The good news is that you can educate yourself about common accounting errors. You’ll be able to address them, prevent them, and remedy them quickly. This will majorly save you headaches down the line!
For service providers and product-based businesses alike, here are seven of the most common accounting errors I see in QuickBooks Online.
1. Using PayPal To Collect Payments Can Cause Accounting Errors
PayPal is a great way to collect payments from customers because it makes it easy across numerous currencies. But from a bookkeeping standpoint, it is often a headache!
The good news is, issues with PayPal tend to repeat themselves. If you have PayPal on your bank feeds, here are three common issues.
General Currency Conversion Errors
First, there are “general currency conversion” errors. Scroll to the bottom of your monthly PayPal statement and check whether you received any payments in another currency. If you did, find the transaction in the USD transaction list and make sure the number in QBO is the same as the USD amount!
Transfers In and Out Of PayPal
The other issue is transferring funds in and out of PayPal. When you make a payment via PayPal, but use a funding source like your checking account, there is a transfer from the checking account to PayPal and the actual expense transaction out of PayPal. Oftentimes, people categorize both of these transactions as the expense, duplicating the expense!
To remedy this one, categorize the checking account to PayPal transaction as a transfer and then the actual payment out of PayPal as the expense.
The other issue with PayPal is fee refunds. When you refund a payment to a customer, sometimes the PayPal fee shows in QBO as another expense rather than a deposit back into your account.
To remedy this one, check the fee refund in QBO. If it’s showing as an expense, delete that transaction and add it as a deposit into your PayPal account!
2. Not Addressing Differences In Dates Between QBO and Your Bank Statements
Another of the most common accounting errors is not addressing differences between your bank statements and QuickBooks Online! When you’re reconciling your accounts, remember: the dates on transactions in QBO can differ slightly from dates on transactions on your bank statements.
If your balance is slightly off when reconciling, check the transactions at the beginning and end of the statement period to see if there are any transactions (one or multiple) for that amount. Sometimes they show in QBO on the 1st, for example, but in your bank account, they show on the 31st! This is an easy fix but makes a huge difference when it comes to knowing your numbers.
3. Incorrect Categorization of Transactions
Next up, we should talk about the incorrect categorization of transactions. Sometimes, transactions get categorized incorrectly—it happens!
An easy way to check this is to review your Profit & Loss report. You can click on the numbers on the right side of the report and see what transactions make up that total number. Scroll through the list – is everything in the right place?
This is also a great way to review your expenses and evaluate them. Make sure you’re seeing a return on investment in time, money, or emotion.
4. Missing Transactions
As a business owner, you’re…well, busy! Especially if you’re not so keen on handling your bookkeeping, it’s all too easy to fall behind on taking care of it.
But bookkeeping is so important! If your books don’t reflect what’s really happening in your business finances, you can’t gauge the financial health of your business. And one of the biggest accounting errors that accompany a lack of bookkeeping is missing transactions.
To remedy this, record every transaction for your business right away. Set aside time each week that’s devoted to entering transactions and double-checking your books.
This might seem like a big commitment, but even a few minutes each week makes a huge difference! Plus, it’s going to save you TONS of stress, time, and headaches—you won’t have to play catch-up at the end of the quarter or year.
5. Duplicate Transactions
On the flip side, we can accidentally enter transactions twice! Duplicate transactions are one of the most common accounting errors, but luckily, they’re simple to fix.
Lots of entrepreneurs accidentally enter transactions twice. Let’s say you log an expense right away (go, you!) but forget you logged it and add it in again later when you pay your credit card bill.
If this happens, your books won’t be balanced. Make sure to be clear about what transactions you enter!
Honestly, the solution mentioned for missing transactions is helpful here. If you’re 100% staying on top of your transactions each week, you shouldn’t have any worries about entering things twice.
6. Not Getting Support As You Need It (Or As You Grow)
If you’re feeling overwhelmed by handling your own bookkeeping, it’s time to outsource. Whether your business is super small, or you’re scaling and need support, hiring a bookkeeper can save you stress and time.
Plus, you’ll be freed up to focus on what moves the needle forward in your business! Just remember: DIYing your accounting is totally fine, but it’s also okay to outgrow that strategy (or realize it isn’t serving you).
And if you’re struggling with consistent accounting errors, you can save yourself headaches by getting some serious support. Even educating yourself is a great place to start!
7. Losing Your Accounting Records
The last of the DIY accounting errors we’re going to cover is losing your accounting records. This is a huge hazard…but hopefully, it will never happen to you!
This error tends to happen when you switch accounting platforms or cancel your QuickBooks account. You’ll lose access to your records after a certain period of time…which isn’t good!
Make sure you export and save copies of your books for future use. Sometimes, we need historical financial records for various reasons (like securing a loan or gaining investors). You should be prepared!
Dealing with accounting errors doesn’t have to be so challenging. Now that you know about common issues with your DIY accounting using QuickBooks Online, you can take steps to prevent and address errors. This will save you tons of headaches and time later!