Have you ever given any thought to knots? Unless you are a Boy/Girl Scout or captain of a boat, most likely not. (See what I did there?) But I’m betting that knots are in your life more than you realize…
- Garlic knots are delicious and keep hungry bellies full. Pretzels too!
- The bow knot keeps your shoes tied so you don’t trip. Unless you are among the shoe tying elite who uses one of the other 25 ways to tie your shoes (Who knew?)
- The slip knot makes grocery bags easy to carry without the contents spilling out.
If you are the more adventurous type:
- Trace Figure-Eight Knots keep rock climbers attached to the rope that keeps them from falling.
- An anchor hitch knot keeps a captain’s boat from drifting out to sea.
- Two half hitches keep a hammock suspended between two trees.
The trick to tying a successful knot is to first know what type of knot you need to do the job and then to know the step-by-step process to achieve that knot. If you know you need a bowline knot to hold a heavy load, but forget step 3 of the process, you’ll end up with a tangled mess of a knot that doesn’t hold weight.
When it comes to business finances, QuickBooks makes tying your financial knots seem easy, but things can sometimes get tangled and messy on the backend if you aren’t a financial expert. If there is a tangle hiding in QuickBooks, your financial reports are inaccurate and it’s causing you to make poor financial decisions for your business. Overall, Quickbooks is a helpful and reliable tool for small business accounting, but it’s important to know its shortcomings and how to maneuver around its lesser known features. If you don’t, you’ll end up with a tangled ball of yarn instead of a nice financial knot that supports the weight of your business goals and decisions.
As a Fractional CFO who has been in the financial industry for more than 25 years, I know financial knots inside and out. I’m ready to help you identify the financial knots you need and implement the strategy to successfully tie those knots for you. If your finances are a tangled mess, I can guide your Bookkeeper to the fastest way to untangle the knot and get you back on track to securely tying the knots you need. Schedule a free consultation with me today.
How QuickBooks Ties (And Sometimes Tangles) Financial Knots
A general ledger is made up of journal entries recording specific financial movement to accounts for specific debits and credits. At its most basic level, QuickBooks is a general ledger with a bunch of journal entries. QuickBooks has created a shorthand method of recording the most common type of transactions, making it simple and easy to use.
For example, if you are selling rope to a rock-climbing store (your customer), you are always going to debit “accounts receivable” and credit “revenue”. For this transaction, QuickBooks created a feature called “invoice” in the customer’s name. If you insert your customer’s name and the amount they will pay for the rope into the program, it completes the journal entry behind the scenes.
In other words, QuickBooks asks which invoice is getting generated, how much, and then completes the general ledger journal entry. Seems easy, right?
Unfortunately, with the way it simplifies financial actions, sometimes your financial knot can get tangled when transactions aren’t matched up or flowing properly. When the payment comes in for your rope sale, it’s possible for it to get entered as new revenue instead of applied against an outstanding invoice. Duplicated revenue is the result, and you now have an outstanding Accounts Receivable that has already been paid. You have to manually fix it for QuickBooks to reflect accurate bookkeeping. But what if you don’t know this has happened? You need to know how much you are really making and QuickBooks can be deceiving you if you have a tangled-up knot in the backend.
Let’s bring the importance of this financial balancing act to life: Let’s say you use a simple square knot to tie toy bears to your baby’s mobile that hangs above her crib. You didn’t tie one of the knots tightly enough and the vibrations of the spinning mobile unties the knot, and the bear falls on your baby’s face. Not only is your baby crying because a bear landed on her cute, squishy face, the mobile no longer does what it is supposed to do – spin and keep your baby entertained – because it dropped the ball…er, bear… and is off balance.
Don’t get hit in the face by a falling financial bear because you didn’t securely tie a financial knot in QuickBooks! (Also read Is Cash Basis Accounting Driving You Towards A Collision? Accrual Basis Can Save You, which eliminates the “QuickBooks made me do it!” excuse.) When it comes to your business finances, records need to be accurate at all times.
A solid foundational knowledge to tying financial knots is critical for building on them for future forecasting and strategy work. Accurate bookkeeping is the most basic but critical step to a strong and healthy financial foundation. As part of my Fractional CFO services, I offer light mentoring to bookkeepers to ensure they are following all of the steps to tie your financial knot correctly. Book a meeting with me to learn more.
What To Do When Your Financial Knot Becomes a Tangle
If something is not working in QuickBooks or doesn’t look right, transactions are likely not being recorded properly. Try once to fix it. If it doesn’t work, stop and call your Controller to get it fixed. Don’t have a Controller? Call your Fractional CFO (that’s me!). If you try to fix it 6 times, you are making the knot worse instead of making it better. We now have 6 more layers of a tangled-up knot to unwind!
To help prevent a tangled financial knot, here are a few underutilized tips for using QuickBooks Online (QBO):
Automate recurring transactions | If you find yourself posting the same thing over and over, you can tell QuickBooks to automate it. This can speed up your month-end close process and reduce your bookkeeper’s workload.
Automate reminders for overdue invoices | If you set up reminders, you don’t have to manually follow up with customers about payment not yet received. It’s a lot easier to collect payment when it’s just a few days overdue instead of 6 months overdue. Let QuickBooks send an email on a set schedule (2 days overdue, 1 week overdue, etc.). Learn more about setting up a great customer payment policy.
Set up electronic payment options | Instead of printing and mailing checks, use QuickBooks electronic payment (or other bill payment apps that link to QBO, like Bill.com). It is a great option if you have a remote workforce or virtual bookkeeper.
Customize your dashboard with charts/graphs | There are lots of widgets in QuickBooks’ dashboard to give you a quick snapshot of the financial aspects that matter most. What widgets work best for you? If you aren’t sure, talk to me about the most important things to have in your dashboard and to learn important caveats to the information it’s showing you.
Manage all your “rules” for auto-categorizing transactions | Most people know you can link bank accounts and automatically import data directly to QuickBooks. QuickBooks Online “suggests” how to record these transactions, but this “suggestion” is frequently unhelpful or totally incorrect. For example, if you have an Amazon purchase (office supplies tag) and then a restaurant purchase (food), QuickBooks will suggest the most recent tag (office supplies) for the restaurant purchase, which is incorrect.
Don’t just accept what it suggests. Instead…you can tell QuickBooks the correct way to record those items. You can find your “rules” by navigating to Transactions → Rules. You can give QuickBooks parameters. For example, “if you see this vendor, you should suggest this account number.” If you take the time to set up the rules properly, QuickBooks will be correct more often and save you time.
Exclude duplicate transactions | You can tell QuickBooks to ignore transactions from your bank feed if there are duplicates, or match them if you already recorded them. This can be helpful if there are transactions more complicated than just a one-to-one match. For example, you buy an airline ticket for $200, and pay an extra $50 to pick your seat. You record this as one transaction for $250, but when the credit card uploads to QBO, it records two separate items: one item for $200 and one for $50. Since you know you already recorded the full $250, it’s best to exclude those two automatic transactions.
Use outside apps | QuickBooks offers connections and syncing with outside apps to automate processes and better handle large volumes of information. For example, SaasAnt is an app you can connect directly that allows you to upload spreadsheets of data instead of manually adding them. There are many options and add-ons like this to make QuickBooks a more powerful tool. If QuickBooks data entry seems time consuming, check to see if there is an outside app to help.
When Is It Time to Hire Financial Expertise to Navigate QuickBooks?
You may find that you can only tie a financial bow tie knot, when really you need to tie a financial anchor hitch knot. If that’s the case, it’s time to bring in more financial expertise.
QuickBooks offers accountant-only tools for more difficult and complex work, such as reclassifying large numbers of transactions. If you have 50 different client transactions in which you forgot to add its “class,” I can do it in bulk using the accountant-only features that you don’t have access to in QuickBooks. They don’t give non-accountants these advanced features because they can be dangerous when used by the untrained. What would happen if you asked a 5-year-old who is just learning to tie his shoes to tie an anchor hitch? You’d lose your boat to the sea… The same is true for some advanced financial features in QuickBooks. You are much better off letting a trained professional handle the complex financial tasks so you don’t lose your boat.
Instead of taking risks with your financial knots (wait, did I skip step 4 of the Halter Hitch?), hire a financial knot tying expert to do it for you. Finding and hiring the right people for the right jobs is the best way to ensure you are successfully managing your business’s time, money, and resources. A Fractional CFO is a great option to save time and money. Schedule a consultation today to ensure you are using strong financial knots.
