Here I am again, attempting to save you from Quickbooks features that can cause you headaches. Or, if not actual headaches, can make your accounting less than accurate.
Did you miss Part 1 of our series? Read up on these other most common Quickbooks mistakes!
Don’t “Automatically Apply”
In the last post, I told you why I don’t like Auto Fill. In the same vein, I also don’t like “Automatically Apply.” It has cost me some serious time when things have gone wrong.
To turn off Auto Apply, go to the Gear Icon in the upper right, choose Settings from the left-hand column titled Company Settings. Then choose Advanced from the left-hand menu. See above for the Advanced Setting screen. You want to edit “Automation.”
If there is a problem and you are attempting to unapply a payment from the incorrect invoice and you have told Quickbooks to automatically payments, Quickbooks does exactly what it was told and immediately applies that unapplied payment to an invoice. (I think it chooses which invoice by date.)
So, as you are carefully navigating Quickbooks trying to unapply payments, correct invoices, and apply payments correctly, Quickbooks is busy applying payments behind the scenes and you can’t keep up. The invoice you want to post a payment to? Well, Quickbooks helpfully already posted another payment to that one. Trust me, you can’t do this faster than Quickbooks can. Applying payments yourself does not take much effort and I think it saves you a whole heap of headaches when you have a problem.
“You Reconciled” Doesn’t Mean You Are Correct
I can’t begin to tell you how many Quickbooks files I have looked at where the Quickbooks Bank Balance is so inaccurate, but the user assumed everything was fine because Quickbooks had told them they reconciled.
I have seen bank balances off by over $75,000, which you can just imagine the conversation when I had to tell the user that I was going to reduce their bank balance by $75K.
Quickbooks pats you on the back when your reconciliation gets to zero, but does that mean it’s correct? No. It just means you can do the math to get from the bank balance to your register balance. But what if some of that math is garbage? Quickbooks doesn’t care. And, in defense of Quickbooks, it doesn’t know it’s garbage. Only a human does.
The example I show below is something I see all the time — an uncleared deposit. You should never have an uncleared deposit on your reconciliation that is more than 4 or 5 days before the end of the bank statement. If it’s 6 months old, I promise you, that deposit will never appear in your bank account. And, you are looking at your Quickbooks bank balance thinking you have more money than you do. It might be a duplicate, it might be a mistaken entry. It could be lots of things, but it is not an outstanding deposit and is not money in your account!
Okay, so you didn’t notice the uncleared items before you saved the reconciliation. You can’t get the screen above back, but you can view your Reconciliation Report.
To get to the Reconciliation Report, hit the Gear icon in the upper right, choose Reconciliation (under the Tools heading). Once in the Reconciliation screen, you will find in the upper right (circled in red below), a History by Account option. There you can select the account and the period to view the reconciliation report.
Scroll down in the report to the Section that is headed “Additional Information.” Look for Uncleared Deposits and other credits as of MM/DD/YY (the reconciliation date). Also, review Uncleared checks and payments before MM/DD/YY. Both of these categories did not make it onto the bank statement for this period. Is it because of timing, e.g., it will appear on a statement in the future? Or is it because the items didn’t happen and will never clear the bank? Only you know that answer to that. Quickbooks is unable to figure that out for you.
Erroneous uncleared checks also hang out on bank reconciliations, but at least those make you think you have LESS money than you actually have. Uncleared deposits will eventually cost you dearly.
So, review the reconciliation, don’t just accept congratulations from Quickbooks. And, write-off checks that are over a year old. They are considered stale by the bank and aren’t usable.
Stay tuned for the final post on Quickbooks errors. This one will focus on the bank feed, which is one of the greatest inventions since sliced bread but requires human judgment and intervention.