Do you have an accounting mess on your hands? It happens! Here are a few tips and tricks for finding and fixing the loopholes in your accounting program.
Financial Tips and Tricks:
- Understand and accept that it may be you.
I often hear something along these lines, “That number wasn’t there yesterday! It must be a QuickBooks problem.” That odd dollar amount in your financial reports probably has a very simple explanation. Somebody, maybe you, entered the wrong information. Typos happen!
- Check the date.
A wrong date or date range can cause headaches.
- Go line by line down the Balance Sheet and Income Statement.
Look for “weird” things. Work with your bookkeeper and accountant. Your goal is to get every account accurate and current. Here is a list of “weird” things that may need some fixing:
• A negative asset.
Unless it is accumulated depreciation or amortization. Those numbers are “contra” accounts and serve to reduce the value of the associated assets.
• A negative liability.
Pay particular attention to your payroll liabilities. I recommend using a payroll service like ADP or Paychex.
• A negative sales account.
Unless it is the customer refunds or discounts (contra accounts).
• A negative expense account.
Now, an account may look weird but be right. For instance, if you enter a rebate for your Insurance, it will show up as a negative expense for that month. Drill down on the details and make sure.
• An account that is very different from last week or last month.
If all of a sudden your advertising expense went from about $2,500 per month to $300,000 this month, that is a red flag! Have your accountant help you. Make the weird things right with an appropriate journal entry or reversing entry. If you can, find out how it got weird and update the data entry procedure.
• If you don’t know how it got weird, at least get it to right.
If it is a small dollar amount, create an adjusting entry and watch to make sure it doesn’t get weird again.
• Utilize forensic accounting!
If it does get weird again, look through the previous week’s transactions for that account to find the entry.
- Run a transaction register report and look for patterns.
Look for the detail trial balance or the general ledger journal to find the “guts” of every transaction. Look for patterns and entries that look different from the other entries in that account.
- Study up on double-entry accounting.
Gain understanding of how debits and credits affect each type of account. The ‘Help’ feature in your software is a good place to search for assistance. So is YouTube.
- Look for before-and-after differences.
If you are not sure of what is happening at a particular data entry point, try this:
• Run the Balance Sheet and Income Statement.
• Enter ONE transaction.
Run the Balance Sheet and Income Statement again and see if you can locate where the dollar amounts ended up. This is a street smart way to discover the “set up” behind the data entry screen.
- Learn to trust your intuition.
As your understanding of double entry accounting increases, trust your gut feeling that a dollar amount is wrong or “weird.” So often, I help someone fix a loophole and they respond, “I thought that might be the problem!” If you have that thought, follow it and see what you uncover.