Just Saying

What's Wrong With This Picture?

Finally! Our new website is up and all of the links work. The world of web design, SEO, and trying to figure out why people “bounce” from the website is beyond me. I’ll stick with things I know more about and let the experts work on the website.

My plan with the first entries of this new blog was to talk about each of the Top 10 Errors that we most commonly see in QuickBooks in numerical order 1 to 10. I saw something last week that has caused me to jump right to number 5.
We received the QuickBooks file for a new client from their previous bookkeeper. While reviewing the Profit and Loss Statement I discovered the following.


Do you see anything wrong with this picture?

There are two huge red flags.

1. Checks written – expense

2. Credit Card Expense – expense

My first thought was “This came from a paid bookkeeper. A professional. Really? No way? “ (bang head on table) but yes indeed, it did. Number 5 of my top ten is not tracking credit cards correctly. The checks written error will have to be covered in a different blog post. No worries. I won’t forget.

So….credit card expense. There is no such thing. Credit cards for the business should be entered in QuickBooks as a credit card account. Just like a bank account is entered and tracked. The business credit card even needs to be reconciled monthly, just like a bank account.

I believe the confusion that causes this type of error is this: a lot, and I do mean A LOT, of small business owners use their personal credit card for business expenses. They pay for the monthly payment on that personal credit card with the business bank account. But since that card is not in the QuickBooks as a credit card, they don’t know how to post the payment. Ta Dah! Credit card expense is born. It’s an understandable error if you’re a business owner doing your own books with no training. It is NOT understandable if you’re a professional bookkeeper. Shame on you!

Here is what should be happening: if the business owner is using their personal credit card to pay for business expenses, it’s a loan from the owner or equity. The items paid with that personal card; such as fuel, meals, advertising, or office supplies are entered into QuickBooks as the correct expense matching what they were. The funds to pay for them comes from the equity account or a loan account. Then, the payment made to the credit card company monthly is posted toward that equity or loan account.

Getting a credit card for the company, entering it in QuickBooks, and only using it for business will definitely help with this issue. Although, that’s not always an option for the microbusiness or startup, so learning how to track properly will save a lot of time, money, and heartache later.

Hop over to the website and check out The Flight Club. Being a member will not only help with answers to challenges like this in your business but we will actually show you how to do it correctly at no extra charge.

While you’re on the site stay a while so my bounce rate looks better, would ya?

Just saying.