How to avoid making a mess in QuickBooks Online

Jasmine Jones recently purchased QuickBooks Online. Although inexperienced, she was eager to get started. But suddenly, something dawned on Jasmine. QBO looked much more complex than she initially though, which meant that there was plenty of room for error. Suddenly, Jasmine began to worry. If she jumped in, and started working in QBO without any prior experience, then she could eventually make errors. Over time, these errors could snowball into even bigger errors to the point where her QBO file would no longer be usable. Are you scared that you might make a mess in QuickBooks Online like Jasmine? Well, you and Jasmine are not alone. Every new QBO user is concerned that they might mess things up.

Here are the top things you and Jasmine 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, like Jasmine, 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 and Jasmine should avoid jumping in and playing around in your own company file.

Instead, I recommend that you and Jasmine try QBO out in a sample company first. The sample company is a place where you can practice with QBO 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:

https://qbo.intuit.com/redir/testdrive

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.

Check out my free QuickBooks Online tutorials page for all the QBO training we have available. We continue to add in-depth training each week. Check out also my YouTube channel for video tutorials.

For additional training, check out our master classes:

• Mastering QuickBooks Online Banking Transactions in 7 Days. This is a master class full of step-by-step video tutorials for working with QBO banking transactions.
• Get Started with QuickBooks Online in 7 Easy Steps. This class will show you how to get started with QuickBooks Online with confidence and peace of mind that your QuickBooks is set up the right way.

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 and Jasmine want meaningful reports, I recommend that you both 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.

To learn more about the Chart of Accounts, check out this blog post – QuickBooks Online Chart of Accounts: Frequently Asked Questions.

In addition, be sure to 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 and Jasmine 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 Jasmine’s bank shows that she deposited $200, then her QBO should show a deposit for the same amount.

If Jasmine’s bank shows that she paid a vendor $1200, then her QBO should show a payment for the same amount.

Your and Jasmine’s 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.

Did you know that the most popular blog post here on 5MinuteBookkeeping deals with downloaded banking transactions? Be sure to check out – Reconciling Accounts in QuickBooks Online (Banking Transactions Tutotial).

Here is a video showing you how to work with downloaded banking transactions.

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 transaction 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.

Final words

Jasmine knows that working with QBO can be overwhelming at first. But if you and her take the time to read this blog post and watch the videos, you can both learn how to avoid making a mess in QuickBooks Online. Be patient with yourself and you’ll get there.