Episode 21
Episode 21: What to Fix First in Your QuickBooks (If Your Numbers Feel Off)
Episode 21: What to Fix First in Your QuickBooks (If Your Numbers Feel Off)
In this episode of QuickBooks Mastery for Small Business Success, father-daughter team Erica Northrup and Lee Davis break down what small business owners should fix first when their QuickBooks numbers do not look right.
If you have ever looked at your books and thought, “Something feels off, but I do not know where to begin,” this episode gives you a practical starting point. Erica and Lee explain why cleanup should never begin with random changes. Instead, they walk through the right order: start with the chart of accounts, move to the cash side, review categorization, check products and services mapping, and then run reports again to see whether the numbers finally make sense.
This episode is especially helpful for business owners who feel overwhelmed by messy books, duplicate transactions, bank feed confusion, or reports they do not trust. You will come away with a clearer way to approach QuickBooks cleanup so your numbers become more reliable and more useful.
Key Takeaways
- The first sign that something is wrong in QuickBooks is often the best place to start.
- Your chart of accounts is the foundation of accurate financial reporting.
- Bank feeds, duplicate transactions, and reconciliations must be cleaned up before reports can be trusted.
- Inconsistent categorization can quietly distort your Profit and Loss and Balance Sheet.
- Products and services mapping can send income to the wrong place and skew reporting.
- Progress matters more than perfection when cleaning up QuickBooks.
Questions to Reflect On
- What is the first thing in my QuickBooks that made me feel like something was off?
- Does my chart of accounts actually reflect how my business operates?
- Are my reports believable, or do they just exist?
Mentioned in This Episode
Free QuickBooks Clarity Scorecard
Download at: https://lee-davis-and-company.aweb.page/unlock-clarity-free-scorecard
Send Us Your Questions:
support@leedavisandcompany.com
Recommended Resources
- QuickBooks Clarity Scorecard
- Profit and Loss report in QuickBooks
- Balance Sheet report in QuickBooks
Timestamps
00:56 – What to Fix First When Your QuickBooks Numbers Feel Off
07:22 – Start With the Chart of Accounts First
16:45 – Clean Up Bank Feeds, Duplicate Transactions, and Reconciliations
23:16 – Review Categorization and Fix Uncategorized Transactions
27:52 – Correct Products and Services Mapping for Accurate Income
36:55 – Run the Profit and Loss and Balance Sheet to Check Your Cleanup
Call to Action
If you enjoyed this episode, hit subscribe and stay connected with us at leedavisandcompany.com.
Download our free QuickBooks Clarity Scorecard to see whether your QuickBooks setup is giving you the financial insight you need.
Have a QuickBooks question? Send it to support@leedavisandcompany.com — your question may be featured in a future episode.
Transcript
Welcome to QuickBooks mastery for small Business Success.
Speaker A:I'm Erica Northrup.
Speaker B:And I'm Lee Davis.
Speaker A:I handle the tech and he handles the numbers.
Speaker A:And together as a father daughter team, we bring decades of experience helping small to medium sized businesses thrive.
Speaker C:We know that as a business owner,.
Speaker B:Your time is best spent mastering your craft and growing your business, not getting lost in QuickBooks.
Speaker B:Managing finances can be confusing and you don't have hours to waste sorting through spreadsheets or fixing bookkeeping mistakes.
Speaker B:That's where we come in, helping you streamline QuickBooks so you can focus on building your business.
Speaker A:Each week we break it all down into simple, actionable steps so you can focus on growing your business, not fixing your books.
Speaker B:Let's embark on this journey together.
Speaker A:Welcome back to QuickBooks mastery for small Business Success.
Speaker A:Hey guys, I'm Erica Northrup, here with my papa, Lee Davis.
Speaker A:This is episode 21, what to fix first in your QuickBooks if your numbers feel off.
Speaker A:Over the last few episodes, we've talked about how financial reports can be misleading.
Speaker A:The numbers of business owners should understand and why clarity matters so much.
Speaker A:But for a lot of business owners, the big question is this.
Speaker A:Where do I start?
Speaker A:Start.
Speaker A:If you're looking at your QuickBooks and thinking, I know something's off, but I have no idea what to fix first, this episode is for you.
Speaker A:Today we're going to walk through the order of operations, not how to fix everything overnight, but what to look at first so your numbers can start becoming more accurate and more useful.
Speaker A:I think this is where a lot of business owners actually begin.
Speaker A:They're in QuickBooks, they're looking at their numbers and they may not know exactly what is wrong yet, but they can tell something is off.
Speaker A:Maybe they see a negative balance, something that does not make sense.
Speaker A:Maybe the checking account looks wrong, maybe something just feels out of order.
Speaker A:Papa, when someone has that feeling, I think something is wrong with my QuickBooks.
Speaker A:What should they pay attention to first?
Speaker C:Well, I think the first indicator is whatever has caused them to have these feelings that they should quantify it, they should write it down and because it's oftentimes very helpful when they call me, if they have their thoughts in writing, then we can look at it and quantify it and identify it.
Speaker A:Yeah, I mean, gut instinct is a real thing and it's good to tap into that intuition as a business owner because you know your business and the numbers that you're looking at, there just might be something that is just disconnecting, that doesn't feel right.
Speaker A:So being Able to tap into that and realize, okay, you know what, something is wrong.
Speaker A:And that is the key to start digging into things and start looking at things.
Speaker A:And we're really going to lay out a good foundation for people on what to do when they feel like something is off in their books.
Speaker C:Yeah, that's a really good point, Erica, because they're the ones that have been working in it.
Speaker C:Yeah.
Speaker C:So they know what they've done and they will have a better idea to explain it.
Speaker A:Yeah.
Speaker A:And I'm sure some of those red flags could be negative balances and accounts that should not be negative.
Speaker A:Maybe it's a checking account balance that does not make sense.
Speaker A:Or perhaps the numbers that look multiplied or duplicated.
Speaker A:Right.
Speaker A:It's like, what is that?
Speaker A:What is going on here?
Speaker A:Okay, so a lot of people call and say, I think something is wrong with my QuickBooks, but I don't know how to fix it.
Speaker A:Usually is there something they saw or tripped them off?
Speaker A:Is that often the best place for them to start?
Speaker C:Yes, sometimes.
Speaker C:You know what, while they can reconcile their bank account.
Speaker C:Sometimes.
Speaker A:Yeah.
Speaker C:But their checking balance in their chart of accounts is way off.
Speaker C:And so they don't know what to do with all of those transactions.
Speaker A:Yeah.
Speaker C:That are sitting in their chart of accounts and they're just multiplying.
Speaker C:So that's usually one of the main indicators that people have.
Speaker A:So good.
Speaker A:So really, instead of ignoring that feeling, that nagging feeling that something is wrong, they need to stop and ask, what actually am I seeing?
Speaker A:That does not make sense.
Speaker C:Yeah, that's right.
Speaker C:Again, it's helpful to document it.
Speaker C:And you know, some people say, well, I've googled it and I still don't understand what to do.
Speaker C:They say, you do this, this, this and this.
Speaker C:And I oftentimes say pay no attention to Google.
Speaker C:A lot of that information is error filled.
Speaker C:You just do this and this and it's fixed.
Speaker A:I think you laid down a key fact and that is to write down what it is that you feel like is wrong.
Speaker A:To keep a good record of what you're looking at and what you're seeing and what just is not making sense to you.
Speaker A:I think that is key there.
Speaker A:And I would imagine that depending on how long the problem has been going on, the effects, whether something can be cleaned up or whether someone is looking at starting all over again.
Speaker C:Yeah, it really does.
Speaker C:Sometimes people will pick up and put down their QuickBooks and yet the problem continues because it doesn't exactly get shut off.
Speaker C:It continues to multiply in the transactions for Example, if they set up the bank feed.
Speaker A:Right.
Speaker C:Or they have intermingled accounts, or there could be a number of reasons that accounts are incorrect.
Speaker C:And sometimes they're multiple problems and the decision is whether or not how far down the road they are in their QuickBooks messages with the help of the business owner, if they're willing to accept part of the work to fixing it.
Speaker A:Yeah.
Speaker C:Then oftentimes it's a good training tool for them to fix it and they understand their problem and they can go in and work on it.
Speaker A:Yeah, that is a key point right there.
Speaker A:I'm sure if you can identify what first made you think something was wrong, that usually then gives you the first area to focus on when you start to clean up.
Speaker A:That is excellent.
Speaker A:So that is such a helpful place to start because it takes this from a vague feeling of everything is wrong and everything's going up in flames to a much more practical question of what exactly am I seeing?
Speaker A:That tells me something is off.
Speaker A:I think that is the key.
Speaker A:And once you know where that red flag is showing up, then you can start working through the cleanup in the right order.
Speaker A:So with that in mind, when someone knows something feels off, what is the first foundational area they should actually look at?
Speaker A:Papa.
Speaker C:Quite frequently they want to look at their chart of accounts, because when they set up their chart of accounts, either somebody did it for them or they did themselves.
Speaker C:And they didn't understand some of the foundational issues about how to classify accounts.
Speaker C:And.
Speaker C:And furthermore, they may have also set up the bank feed, which started downloading and they put a lot of information into their QuickBooks that was fraught with errors.
Speaker C:So it starts with understanding the foundation like anything else.
Speaker C:And we've talked about this before, simply the chart of accounts.
Speaker C:Because that's the backbone of the financial report.
Speaker A:Yeah, absolutely.
Speaker C:If the structure is wrong, everything downstream is wrong.
Speaker C:And we talked about another podcast.
Speaker C:You know, it's not too late to clean up your chart of accounts.
Speaker C:It's never too late.
Speaker C:Just get the schedule C off of the IRS.gov and take a look at what winds up on your tax return.
Speaker C:Because quite frankly, that's the basis that I oftentimes start with when I'm setting up a chart of accounts for a business.
Speaker C:It gets rid of a lot of duplicate transactions.
Speaker C:And sometimes people think they need the same account for multiple companies or multiple classes, where if they have divisions, they wind up having accounts the same account for multiple divisions.
Speaker C:And QuickBooks handles that in a totally different way.
Speaker C:One account, it uses classes so you can Eliminate a lot of accounts.
Speaker C:And sometimes people put in duplicate accounts because they set up.
Speaker C:Sometimes they put in office supplies, and sometimes they put supplies office.
Speaker C:So you have similar accounts, and yet you don't need all those accounts.
Speaker C:You simply need to go through your chart of accounts and clean it up, understand what you're going to keep, and once you're going to deactivate.
Speaker A:Yeah.
Speaker A:I feel like most business owners, when they start to think about cleaning up their QuickBooks, they have to do everything all at once, and they get really overwhelmed.
Speaker A:And I think the goal should never be perfection, but reliability first.
Speaker A:It's just honing in and starting with the biggest rocks.
Speaker A:And I think the chart of accounts is one of those big rocks.
Speaker A:It's definitely a place where you should definitely start and look at and address all the aspects that go into the chart of accounts.
Speaker C:Right.
Speaker C:I think.
Speaker C:You know, Erica, I don't know about you, but I do know a little bit about you because you'd be our oldest daughter.
Speaker C:But I. I think that lots of times the way I work is sometimes I should tackle the task that I least want to do.
Speaker A:Oh, yeah, Absolutely.
Speaker C:Okay.
Speaker C:And I need to be in the right attitude and not be discouraged.
Speaker C:Okay.
Speaker C:So when you're starting something, and I think that's where you're going with this whole episode is don't think it all has to be done in 20 minutes or an hour or three hours.
Speaker C:It can be done as you create a plan.
Speaker A:Yeah.
Speaker C:And get on the right track.
Speaker C:Just start down the road.
Speaker A:Yeah.
Speaker A:Randomly cleaning things up usually creates more confusion.
Speaker A:And I find this in so many aspects of my life, whether it's working on this business, which I absolutely love.
Speaker A:Although one of the things I am not the biggest fan of is editing the podcast.
Speaker A:That's a little bit of a chore.
Speaker A:I've gotten better at it, for sure.
Speaker A:But it's something I do.
Speaker A:First thing Monday morning is I just get in there and I tackle the episode.
Speaker A:I get it ready so that can be launched on Tuesday.
Speaker A:Tuesday is the podcast day.
Speaker A:That is the day we launch the podcast.
Speaker A:So, yeah.
Speaker A:It's when you create systems in your life for whatever it is.
Speaker A:I do a lot from home.
Speaker A:I have these four bonus children that I love and I do a lot for and running household, and we're doing this renovation and this business and other aspects of my life.
Speaker A:I have found when I have systems, when I have places for everything, everything just seems to go that much smoother.
Speaker A:So if you have a plan and a system to clean up your QuickBooks.
Speaker A:Everything just works that much better.
Speaker C:Well, I can tell you from getting feedback from some of the people that have downloaded the podcast.
Speaker A:Yeah.
Speaker C:They love your work.
Speaker C:Okay.
Speaker C:So whatever you're doing, keep doing it, because people love your voice and people love listening to the podcast.
Speaker A:Yeah.
Speaker A:And we were talking about this just earlier.
Speaker A:It has just been such a joy to do this project.
Speaker A:It's something I've wanted to do for several years.
Speaker A:And the timing just was right last year and we started recording.
Speaker A:We didn't know where this was going to be going.
Speaker A:And to date, we are close to 3,000 downloads.
Speaker A:And that, to me, is amazing.
Speaker A:I didn't know what to expect when we started this.
Speaker A:And so, I mean, shout out to you listeners, thank you for tuning in.
Speaker A:Thank you for listening to this podcast.
Speaker A:We truly enjoy bringing you these every week and just really wanting to know how can we serve our clients in even a better capacity?
Speaker A:And.
Speaker A:And that is the theme that is the backbone of Lee Davis and Company is how can we serve our clients and do more for you in a way that's going to serve you and just help you to grow your business?
Speaker A:Because at the end of the day, that's what we are all about.
Speaker A:We want you to reach whatever level in your business that you want to grow to.
Speaker A:We want to help you get there.
Speaker A:And I think if you have accounts and books that are organized and that are easy to follow and that are cleaned up, it just makes everything that much easier.
Speaker A:So this is why we really feel strongly about talking about this particular topic this week.
Speaker C:Yeah, Eric, a couple weeks ago, I did a consult for a church, and I worked with a gentleman who's the financial guy and wears many hats.
Speaker C:You know what?
Speaker C:He gave us some valuable feedback in his Google review, and that is that our podcast is helping him be able to get organized.
Speaker C:Mm, that's an interesting feedback.
Speaker A:Yes.
Speaker C:I love that, that it's helping as we handle topics in the podcast that he really could use.
Speaker A:Yeah.
Speaker A:And that's what we want.
Speaker A:We want this to be something that's actionable and something you can take away and that you can improve your business, because that is why we are here.
Speaker A:So, getting back to the chart of accounts, I do feel like the chart of accounts is really the backbone of your financial reporting.
Speaker A:That's what it really feels like.
Speaker A:And if it's not structured properly, the reports won't reflect reality, and that's really what it comes down to.
Speaker A:So what are a few signs that the chart of accounts may be part of the problem?
Speaker A:Bubba.
Speaker C:Well, it may start like I see something from the beginning, QuickBooks, both the desktop and the online version.
Speaker C:And the online version is probably more challenging to choose the type of company you have, whether it's manufacturing or your cell services, or it may not have been set up right in the first place.
Speaker C:So you have to work with your setup, with what you've got.
Speaker A:Right.
Speaker C:So in some cases, looking at your setup and then determining what is the standard accounts, type of accounts you have to have, and QuickBooks doesn't give you a choice.
Speaker C:In some accounts, for example, undeposited funds, that's not a choice you have.
Speaker C:That's an account.
Speaker C:As soon as you enter a sale you have to, it automatically triggers undeposited funds.
Speaker C:And sometimes people don't understand that because they don't understand the order in which QuickBooks sets up a chart of accounts.
Speaker C:So I think that sometimes that's a really helpful piece of advice and that there's no roadmap for setting up a chart of accounts that you can just point to.
Speaker C:Say here, this is a standard chart of accounts.
Speaker C:Everybody uses it.
Speaker C:No, your chart of accounts should be customized to your business and how you plan to use it.
Speaker C:But it has to be based on the standard accounting principles.
Speaker A:That is truly what it all comes back to, for sure.
Speaker A:You know, that makes a lot of sense, Peppa, because you can trust the reports.
Speaker A:The structure underneath them has to make sense first.
Speaker A:So once the foundation is in place, then what comes next?
Speaker C:Well, it's the cleanup.
Speaker A:Here I go.
Speaker C:I joke about Walmart cleanup in aisle seven.
Speaker A:Let's get in there with the mop and the broom and the push cart.
Speaker C:Yeah.
Speaker C:And you start with the cleanup on the cash side.
Speaker C:You know, the bank feeds, the duplicate and the reconciliations.
Speaker C:And quite frankly, accountants have a tool in QuickBooks that I use all the time and.
Speaker C:And that gives me a snapshot on their business so I can see if they've got a particular problem that I want them to focus on.
Speaker C:And I'll zoom in and get my investigative hat on.
Speaker A:Yeah.
Speaker C:And I think one of the things, Erica, that I find is useful is people don't need to be ashamed of what they've got, and they don't need to be concerned about what they did in the past.
Speaker C:It's now we're going to fix it and we're going to move forward.
Speaker C:So, yeah, you know, I tell people, I don't judge anything.
Speaker A:Yeah.
Speaker C:It's all that.
Speaker C:What we can do now and help you get to be most efficient with your QuickBooks?
Speaker A:Yeah.
Speaker A:I mean, mistakes are.
Speaker A:The fastest pathway to growth, is we learn more from the mistakes we make than our wins.
Speaker A:I mean, that is just the honest truth.
Speaker A:I am building this range hood cover.
Speaker A:Maybe I'll put a picture to what I'm doing in our show notes.
Speaker A:That would be fun, so you can get a visual of what I'm doing.
Speaker A:But let me tell you, this has been a big growth process because I've made lots of mistakes, never done carpentry before, and I'm tackling things I've never even come up against before.
Speaker A:And I will tell you, sometimes I want to quit.
Speaker A:Sometimes I'm just like, oh, I can't do this.
Speaker A:But I can't do that because this thing has to go up on the wall.
Speaker A:It absolutely has to go up on the wall.
Speaker A:But it's just helping me to learn so much.
Speaker A:And it's through my mistakes that I'm learning more than if I just got it right the first time.
Speaker A:So I think we have to flip the script on our mistakes and realize that it's all a part of growth.
Speaker A:There's no shame.
Speaker A:And the mistakes that we make, it's how we learn from those mistakes.
Speaker A:I know it is a cliche thing to say, but going back to a baby walking, you know, a baby falls down, it doesn't stay down, it gets back up again and keeps moving forward.
Speaker A:And I think that's how we need to be in our businesses.
Speaker A:We make mistakes, we fall down, we just need to pop back up and just keep moving forward.
Speaker A:So I think that is a great call out papa.
Speaker C:And you talk about baby walking.
Speaker C:So one of our clients has a new baby, and he's walking and he started to walk, and it's amazing.
Speaker C:You can probably use the same way we think about QuickBooks, people start smiling when they start to walk with QuickBooks and then they walk a little faster, and before you know it, they've got control.
Speaker C:So, you know, they start smiling instead of being avoiding it and.
Speaker A:Yeah, yeah.
Speaker A:Oh, yeah, absolutely.
Speaker A:So what would be some of those specific things that when you start to think about cleaning up in aisle nine of the cash side, the bank feeds and duplicates and reconciliations, what are some of those specific things that people should look for and start to clean up?
Speaker C:They need to look at their bank accounts, they need to look at their credit cards, and they need to understand if they can get a sense of what they felt the problem was, then we can focus on the bank account or the bank feed or the credit cards and we can look at some of their transactional work and we can check for duplicate transactions or making sure that the transactions were not entered twice.
Speaker C:And understanding that manual entry is probably the right thing to do before you set up your bank feed, just so you understand how the bank feed works, reconciling your account is critical bank reconciliation.
Speaker C:But lots of times, even after you reconcile your account, you've still got errors in your checking account.
Speaker C:So understanding if you've got a good reconciliation, but you've got a lot of duplicate transactions in your checking account on QuickBooks, then you know something is going to need to be fixed there.
Speaker C:And if the bank or credit card activity is not right, then the rest of the reports cannot be trusted.
Speaker A:Yeah, absolutely.
Speaker C:And to be honest, to get back to we're going to deal with in the next episode really is QuickBooks is operationally built around forms and lists.
Speaker C:The other piece that QuickBooks is built around is understanding when you use the general journal.
Speaker C:And so there are different types of forms and lists and information that control how the account winds up reporting on the profit and loss and the balance sheet.
Speaker C:So using the correct form matters.
Speaker A:I really feel like next week's episode is going to clear up so much for so many people, and I think it's going to be really powerful.
Speaker A:So tune in people.
Speaker A:It will help you immensely.
Speaker A:Absolutely.
Speaker A:So how important is reconciliation in this process and why does that matter so much, Papa?
Speaker C:I think reconciliation at the end of the day, you know what the bank says they have, and you want to get your books to equal what the bank has understanding or the credit card company or whatever entity you're using to do transactional work.
Speaker C:And I think that when you look at bank reconciliation, you can oftentimes catch missing items, duplicates and errors.
Speaker C:Frankly, that may not be entirely on you.
Speaker C:It Simply may be.
Speaker C:QuickBooks sometimes can be a little bit cloochy.
Speaker A:Right.
Speaker A:It is software, after all, and you.
Speaker C:Kind of fixing it in the bank reconciliation and going back and looking at the transactional level will help you fix a lot of things.
Speaker A:Absolutely, absolutely.
Speaker A:That is a huge one because I think a lot of business owners assume that if transactions are flowing in, everything must be fine.
Speaker A:But just because the activity is there does not mean it's accurate.
Speaker A:So once the structure is cleaner and the cash side is more grounded, what is the next thing to clean up?
Speaker A:What else do we need to send to aisle nine here?
Speaker C:Well, I think you want to review your categorization.
Speaker C:When I tell people that when you categorize accounts, don't Use the bank fee to categorize.
Speaker C:Use another source document, whether that's your bank statement or whether that is some type of data entry form that you're putting in.
Speaker C:Maybe you're using a checkbook or maybe you're using some kind of document, a source document.
Speaker C:Go in and put the transaction in and then go to the bank feed and match it.
Speaker C:That is one sure way that you're trying to be consistent in your categorization.
Speaker C:Because if the correct software that you're using in QuickBooks and you've set it up correctly, it will tell you how you've categorized previous transactions.
Speaker C:And that's a great tool to be consistent in your categorization.
Speaker C:And honestly, if you run your profit and loss, you'll see it will tell you right off the bat you've got some uncategorized transactions.
Speaker C:And so you need to go in and kind of look at those transactions and try and fix those, that your categorization issues and QuickBooks will be quick to try and use AI and technology to help you, but beware of it.
Speaker C:Okay.
Speaker C:Use AI technology where it makes sense.
Speaker C:Yeah, but I see people get way ahead of themselves in that particular technology and they think it's fine we do this, this.
Speaker C:No, it's not fine.
Speaker C:Go back to the beginning and get your procedure set up correctly and you'll find you'll have less headaches.
Speaker A:Yeah, I think that's a good call out, especially because this new wave of AI technology is still new.
Speaker A:So you still need to review it and look at it and make sure that what it's spitting out is actually accurate.
Speaker A:I think that is a really good call out, and it will get better over time as all technology improves.
Speaker A:But you still need that human element.
Speaker A:You still need to be in your books.
Speaker A:Because if you're in your books, you know what's happening, and that's how you're able to make better decisions for your business that are going to.
Speaker A:As the CEO, as the owner, it is your job to cast vision for your company.
Speaker A:So if you don't know your numbers, if you're not in your business, you can't possibly have all the data to then be able to make the decisions that you need to make as the business owner or the CEO.
Speaker C:Erica, I don't know if we've told this story before because you hit it right on the head if you know your business right.
Speaker C:I worked for a very large hospital system in New York on a big consulting project.
Speaker C:And the basis of this consulting project is that people were not trained in how to enter data initially, and they felt like they needed some training.
Speaker C:But there was one problem.
Speaker C:The chief financial officer kept throwing software at the front desk people.
Speaker C:And, you know, frankly, when I went out there to talk with them, they had seven updates on financial software and they weren't even working with the first one yet.
Speaker C:So people oftentimes think that here's the fix and they don't understand what the problem is.
Speaker A:Right.
Speaker C:All right.
Speaker A:At the core of it, that's where you need to get to, is what is the actual problem?
Speaker A:What is that big rock?
Speaker A:Before you start throwing solutions at it, you gotta understand at the core what is the problem.
Speaker A:And don't overcomplicate it.
Speaker A:Simplify it, because we tend to overcomplicate things.
Speaker A:And even the fixes are simple.
Speaker A:They're not complicated fixes.
Speaker A:I think that's what it comes down to.
Speaker C:That's very correct.
Speaker A:Oh, love that, Papa.
Speaker A:So good.
Speaker A:So even with a good structure, if transactions aren't categorized correctly, the report still can be misleading.
Speaker A:Would you find that correct?
Speaker C:Oh, absolutely.
Speaker A:Yeah.
Speaker A:That's what it seems like to me.
Speaker C:Yes.
Speaker A:Yeah.
Speaker A:Craziness.
Speaker A:Okay.
Speaker A:So what kinds of categorization issues tend to distort the reports the most?
Speaker A:What do you think, Papa?
Speaker C:You know, what I see the most, and particularly in the QuickBooks Online product, is when they're setting up their products and services, they didn't understand that QuickBooks is going to link a product and service, primarily the income, to an account in QuickBooks.
Speaker C:And if you've selected the wrong account or you've left the account the same for all the products and services in the income area, it's not going to help you.
Speaker C:It's going to distort your numbers and it won't put it into the correct income.
Speaker C:And quite frankly, if you've done that and you've already reconciled the accounts, it's oftentimes very difficult to clean up after the fact because QuickBooks Online is not all that forgiving.
Speaker C:You can fix it going forward, but when people want things fixed in the past, it may require journal entries to fix it.
Speaker C:And quite frankly, people don't really understand how the general journal is used.
Speaker C:But the end user wants the information to be correct, right?
Speaker A:Absolutely.
Speaker C:The end user may have the bank or their accountants or whoever, they want that information.
Speaker C:They don't really understand the mechanics of it.
Speaker C:Just fix it.
Speaker A:Just fix it.
Speaker A:That is the perfect line.
Speaker A:Right.
Speaker A:So good.
Speaker A:So this is where the numbers may technically be in QuickBooks, but they are still not telling the truth.
Speaker A:Clearly, because they are not being sorted the right way.
Speaker A:Now you've also mentioned before that the products and services can affect reporting to where does that fit into the process?
Speaker C:It does fit in when you set up your products and services because you have to link it to the correct income account.
Speaker C:When you look at the term products and services, they don't understand what it means.
Speaker A:It is a little confusing, let's be honest.
Speaker A:Right, let's be honest.
Speaker C:It's confusing, right, because they have inventory and non inventory numbers and.
Speaker C:And for the most part you're talking about services.
Speaker C:Okay.
Speaker C:That you're providing.
Speaker C:Now if you are tracking inventory through QuickBooks, that's a whole nother level, Eric, and we're going to have to talk about that on a whole different podcast episode.
Speaker C:But I think when you're handling for the most part products and services, you're talking about a service business that's not inventory related.
Speaker C:And frankly, I don't recommend the online product for people tracking inventory.
Speaker C:I don't think it's a good decision.
Speaker C:I think they need to use the desktop version.
Speaker C:Much cleaner, much easier to track.
Speaker A:Yeah, makes sense.
Speaker C:But it's important that the products and services are mapped correctly and that the income shows up in the right buckets on the report.
Speaker C:This matters a lot when businesses want to understand which services or revenue are actually performing.
Speaker A:Yeah, that is so good.
Speaker A:I'm sure if products and services aren't set up correctly, revenue can end up in the wrong place, which affects how you interpret your numbers.
Speaker A:Correct?
Speaker C:That's correct, yeah.
Speaker A:So what should a business owner actually check in that area?
Speaker C:Well, they should open their products and services.
Speaker C:You can run a report if you want on your products and services.
Speaker C:But the best thing is to go in and just look at if you have a few products and services that you know they're out of whack, just go in to that product and service and see how it was set up and then fix the setup.
Speaker C:Because sometimes it's not set up as a service, it's sometimes set up as non inventory and the right account is not being linked to it.
Speaker C:So just look at if you know which accounts seem to be out of whack, just focus on those first.
Speaker A:That is such a good point because now we're not just talking about whether money is coming in, we're talking about whether it's being reported in a way that actually helps you understand the business.
Speaker A:For someone listening, this may already feel like a lot.
Speaker A:I'm sure people.
Speaker A:So what would you say to the business owner who feels overwhelmed by all of this?
Speaker A:Papa.
Speaker C:You know, I'd say it might be helpful to have a consult to get them on the right track and help them fix a few of their nagging problems.
Speaker C:And then they could go off and work on some of the.
Speaker C:The data issues that the other things that they're facing, or they may have some things they gotta focus on in their business.
Speaker C:Yeah, but getting the right help.
Speaker C:And frankly, don't try and fix everything at once.
Speaker C:Just.
Speaker C:No, just focus on the highest impact areas first.
Speaker A:Yep, yep.
Speaker C:Start with the structure and understand how you enter data and then how things are categorized and talk about progress.
Speaker C:Progress matters more than perfection and how you feel about some of the changes and some of the systems that you're creating toward success in your quickbook.
Speaker A:It's not about trying to do everything all at once, but once you do start, everything becomes just a little more easier to manage.
Speaker A:So you just gotta start.
Speaker A:It's the same idea with cleaning a room that is just total chaos.
Speaker A:You might just be overwhelmed.
Speaker A:But if you just start with one little piece, just take this one little corner, start over here, and just start organizing, pretty soon you're gonna have a really well organized cleaned room.
Speaker A:If you do it that way.
Speaker A:It's the same idea with Quick Books.
Speaker C:I have a client who's a environmental guy.
Speaker C:He does a lot of work and design work and so forth, and he didn't have his products and services set up correctly.
Speaker C:So even though he kept deleting some transactions out of his accounts, when he put them back in, it went right back the way he had it set up, which is.
Speaker C:So he was extremely frustrated.
Speaker C:And he came to me and we solved that within minutes.
Speaker C:All right.
Speaker C:Because it affected his accounts receivable.
Speaker C:A lot of things are tied to products and services in QuickBooks Online, and people don't really sometimes understand how that fits together into the whole chart of accounts and the financials and the accounts receivable and so forth.
Speaker C:So it's really an easy fix.
Speaker C:And once they make it, they completely understand what to do.
Speaker A:Right.
Speaker A:I mean, again, you don't need to fix everything overnight, but once you start with the right areas, things begin to improve fairly quickly.
Speaker A:Just like with your client, once he did the right thing, it just everything fell in line.
Speaker A:I love that.
Speaker A:So what I'm hearing is that there really is a clear order to this.
Speaker A:It's not just randomly fixing things here and there.
Speaker A:It's structure first, then the transactions, then consistency, then making sure the reports are actually reflecting reality.
Speaker C:Yes.
Speaker C:Like Anything else?
Speaker C:There's a system.
Speaker A:Yeah, absolutely.
Speaker C:Order matters.
Speaker C:And that's where most businesses get stuck.
Speaker C:You know, once you kind of restructure or help them see the how they can fix their problem.
Speaker A:Yeah.
Speaker C:Everything starts to make more sense.
Speaker A:Yes, absolutely.
Speaker A:So once you follow a clear system, everything Papa does start to make sense, it becomes much more easier to manage, I am sure.
Speaker A:You know, before we close, I think one practical question people may still have is this.
Speaker A:How do I know if my cleanup is actually working?
Speaker C:Erica may go back to what we started the podcast with.
Speaker C:Because if you had a sense that something was wrong and you now see that problem has been fixed.
Speaker A:Yeah.
Speaker C:You can then feel more comfortable that you can start running the reports again or looking at that account and say, wow, that account's cleaned up.
Speaker C:And you check the numbers.
Speaker A:I love that.
Speaker A:Yes.
Speaker A:It does all go back to what we first started with.
Speaker A:It's like it is tuning into that gut intuition you have about your business that something is wrong.
Speaker A:And so once you address those areas and you, you take care of them, you fix them, and you really tap into the system that's going to help you clean up your QuickBooks.
Speaker A:You know, once someone has worked through those areas, what should they look at to tell whether their business is getting more reliable?
Speaker C:Specifically, we'll just start running some of the basic reports.
Speaker C:Run your profit loss, run the balance sheet, Just get a sense of your numbers.
Speaker C:Tie it back to the bank accounts and the credit card statements.
Speaker C:And does the cash account look.
Speaker C:And if it's cleaned up, is it closer to what the bank says?
Speaker C:Do your expense levels seem realistic?
Speaker C:Looking at your expenses on the profit and loss, is the income showing up where it should be categorized?
Speaker C:And.
Speaker C:Or there are some strange balances, unexplained negatives, or accounts that are clearly out of whack.
Speaker C:And sometimes things take a little bit more cleaning up than others.
Speaker C:But don't be discouraged.
Speaker A:Right.
Speaker C:And the reports should help you and then you can whittle down your list of what needs to still get worked on.
Speaker A:Love that.
Speaker A:I'm sure a good report should not just exist, it should make sense to the business owner who's reading it or the end user.
Speaker C:Yeah, the end user may be your accountant, maybe your banker, maybe the CEO, that they have to use the financials.
Speaker C:So just understanding that good reports help bring the organization to the next level, whatever it might be.
Speaker A:That is so good.
Speaker A:That was so helpful because I think for a lot of people, the biggest win is not just cleaning up QuickBooks, it's getting to a place where the numbers finally start making sense.
Speaker A:And I just, I love what you said about people when they start to walk with QuickBooks, they're starting to smile and it's starting to become enjoyable.
Speaker A:I think that is so key.
Speaker A:And something good to think about is, trust me, if you feel like you're in this just hole right now, it's not always going to be like that.
Speaker A:And when you tap into this system, everything is just going to start making more sense and it's going to be more enjoyable for you as a business owner.
Speaker A:I love that if you're listening to this and thinking my numbers may not be as reliable as I thought, do not keep guessing people.
Speaker A:Okay, grab the QuickBooks Clarity Scorecard in the show notes.
Speaker A:It's a simple way to spot where the gaps are, see what may be off, and figure out out what to fix first.
Speaker A:Because the goal is not to stay stuck wondering if your books are right.
Speaker A:The goal is to get clarity and move forward with confidence.
Speaker A:And in our next episode, we're going to talk about one of the foundational mistakes that causes a lot of confusion in QuickBooks choosing the right form.
Speaker A:Because knowing when to use a bill, a check or an expense can make a big difference in how clean and accurate your books stay.
Speaker A:So stay tuned you guys.
Speaker A:It's going to be a powerful episode.
Speaker A:We'll catch you next week.
Speaker A:Bye for now.
Speaker A:Thanks for tuning in to QuickBooks mastery for small Business Success.
Speaker B:If you enjoyed this episode, hit subscribe and stay connected with us at leedavis.
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Speaker B:And we'd love to hear from you.
Speaker B:If you have a QuickBooks question or a business challenge, send it our way@supporteadavisoncompany.com we might feature it in a future episode.
Speaker A:We're here to help you simplify QuickBooks and grow your business one step at a time.
Speaker A:See you next time.
