If you are struggling with keeping your bookkeeping clean while using Quickbooks Online (QBO), this article will provide some ways to ensure it stays clean and ready for your year end tax returns. A little bit of effort now will save you money in the future.
Keep QuickBooks Online clean by the following:
- Downloading transactions from your bank feed on a regular basis
- Watching for double entries
- Not using Auto-add bank rules
- Reconciling the bank accounts
- Not using certain accounts like Uncategorized Assets
Let’s take a look at each of these items in more detail.
Downloading Bank Feeds On A Regular Basis
If you tend to do you bookkeeping once or twice a year, rather than on a monthly basis, you need to still go in and update the bank feeds in QBO. If you do not log into QBO on a regular basis, it stops the automatic download of bank and credit card transactions.
When this happens you may be missing a number of transactions and either have to enter them manually, or get your year end accountant to do this at an extra cost.
Watching For Double Entries
If you are transferring funds to another account or making a payment on your business credit card and those accounts are linked on Quickbooks, you will need to make sure those transactions are not being doubled.
For example, if you make a credit card payment from your Chequing account to your Credit Card account and both accounts are linked in QBO, the transaction is downloaded twice in the bank feeds. Once on the bank and once in the credit card account. The best way to avoid a double entry is to mark the transaction as a Credit Card Payment in the bank account- see screenshot below.
When you have done this, the transaction can then be matched on the credit card account. This matching does not record the transaction again, but marks it as already been done and recorded and then clears from the feed.
Do Not Use Auto-add In Bank Rules
While this sounds like a great time saver, and it certainly can be, it also can record transactions to the incorrect account. I have seen this many times in client books and can add needless time to year end work.
When you create a bank rule, uncheck the Auto-add box at the very bottom of the rule, see below. It still does the categorizations and tax amount, but instead of automatically recording it when downloaded, you just have to review it quickly in the bank feed and add it.
I only recommend that advanced users and those with many years experience bookkeeping use this feature or have someone set it up for you that can make sure it will go to the proper account each time.
Reconciling Bank And Credit Card Accounts
To make sure all the transactions are recorded for each month, you still need to reconcile the bank accounts, even though QBO is downloading the transactions.
As you have seen earlier in this article, there can be double entries or missing transactions. In fact earlier this year (2022), there was an issue with most QBO accounts not downloading the feeds properly and in some cases there was two months of bank transactions missing. This can be a costly error to fix at the end of the year.
Do Not Use Uncategorized Accounts
One of my pet peeves with QBO is the Uncategorized Asset accounts. These were to be used for transactions of an unknown nature, but instead can make more work for whoever is doing the year end.
For two reasons, this Uncategorized Asset accounts will show on the Balance Sheet, not the Profit & Loss statement (P&L). I know most clients will review the P&L statements and end up missing out on seeing what could be in that account. Secondly, if you do a transfer to the Uncategorized Asset and it turns out to be an expense, you cannot just go in and change the account, you have to do a second Journal Entry or Expense entry to clear it out.
My suggestion is to create an expense account called Ask My Accountant, this account will stand out to business owners and accountants when reviewing the Profit & Loss statement and ensure these transactions get looked after. You may have this account already in your chart of accounts as QuickBooks used to enter this automatically when creating a standard account list.
Other Suggestions
Another way to help keep your QuickBooks Online clean is to hire a bookkeeper to assist with some month end reviews or simply reconciling the banks each month. This can help to spot any potential issues early on and make it easier to fix, rather than at the end of the year.
Taking care of your QuickBooks file will take a little bit of effort, but will save you money in the end and provide you with the correct information you need for your business. While this article is QuickBooks Online specific, you can apply the same principles to other software such as Xero or Wave Accounting.