Are you scared that you might make a mess in QuickBooks Online? You are not alone. Every new QBO user is concerned that they might mess things up.
Here are the top things you should know so that you can get off to a good start with QBO. After working with hundreds of QBO users, I’ll share with you my insider tips on how to avoid making a mess in QuickBooks Online.
Practice first and get training
Most new users want to jump right into QBO without having proper training. While many new software applications are intuitive and have a short learning curve, QBO is different. QBO is an accounting and small business management software application – it is very powerful and it has a lot of features. You should avoid jumping in and playing around in your own company file.
I recommend that you try it out first in a sample company. You’ll be able to practice on it without worrying about messing up your own company file. The sample company uses a company file called Craig’s Design & Landscaping Services. It can be accessed through the following link:
You do not need an account to sign in to access the sample company. Complete the security validation and click Continue.
This sample company is designed to test QBO. It is not designed to retain any changes made.
Build a solid foundation
The Chart of accounts and the products and services list are the foundation of everything in QBO. They control how most transactions are recorded and where they show up on reports.
If you want meaningful reports, I recommend that you focus on customizing the chart of accounts and the products and services list.
The chart of accounts
The chart of accounts is the foundation of every small business accounting system. It is used to organize and categorize your business transactions. The chart of accounts helps to organize your business transactions. Each accounting transaction must be assigned to an account. All accounts together make up the “chart of accounts”.
Thankfully, with QBO you don’t need to know how to set up a chart of accounts. QBO makes it easy to set up a chart of accounts in just a few simple steps. When you first set up QBO, your answers in the Startup Interview will help QBO set up the chart of accounts for you, based on your industry and company.
Watch these videos to learn how to customize and work with the chart of accounts:
The products and services list
The products and services list represents the list of products and/or services that you sell. You should set it up after you customize the chart of accounts. Watch this video to learn how to work with the products and services list. You will use items from the products and services list when you create customer invoices.
It’s all about the bank (and credit card) statement
Money in and money out transactions in QBO should mirror your bank and credit card transactions. Ideally, you want to enter money in/money out transactions in QBO that match your bank and credit card activity (or statements). This is a simple concept that will save you hours of time spent correcting entries.
Here is an example:
If your bank shows that you deposited $500, then QBO should show a deposit for the same amount.
If your bank shows that you paid a vendor $1000, then QBO should show a payment for the same amount.
Your bank and credit card statements should act as your compass. Each and every transaction on your bank and credit card statements should be reflected in QuickBooks Online.
Learn how to work with downloaded banking transactions
Most new users jump right into downloading banking and credit card transactions and end up making a big mess because they don’t know what to do. Downloading transactions is easy but you need to know a few key things before getting started.
Here are the 2 most important tips you should keep in mind:
- Downloaded transactions do not replace bookkeeping – it’s only a tool to help you save data entry time – this is a common misconception among new QBO users. They think that bookkeeping is only about downloading banking transactions. There is a lot more to doing proper bookkeeping for your business.
- Each and every downloaded transaction should have the correct vendor/company name and the Category (an account from the chart of accounts) assigned to it. The #1 mistake I see new QBO users make is that they start accepting transactions into QBO without verifying that each transactions has a name and category assigned. If QBO shows an expense as Uncategorized Expense or a deposit as Uncategorized income – it is only because QBO doesn’t know how to categorize the transactions. That means that you need to assign the proper expense or income category before accepting the transaction into QBO. Otherwise, your reports will show Uncategorized Income and Uncategorized Expense and you’ll have to spend a lot of extra time re-categorizing each transaction.
I know that working with QBO can be overwhelming at first. Take time to read this blog post and watch the videos so that you learn how to avoid making a mess in QuickBooks Online. Be patient with yourself and you’ll get there.
If you want to learn more about QuickBooks Online please sign up and download our free eBook “The Simple Guide to Getting Started with QuickBooks Online and Avoiding the Common Mistakes New Users Make”.