A Bad QuickBooks Setup is Costing You Money
With more than 7 million users globally, QuickBooks is easily one of the top accounting solutions for SMBs.
While the platform markets itself as user-friendly and easy to use, the setup can be quite complicated. Sure, you can use the default settings, but those settings may not be optimal for your specific business. In fact, in most cases, they’re not.
But a poor setup can be more than just an inconvenience. A bad QuickBooks setup can cost your business more than you think, both financially and strategically.
How to Tell if You Have a Bad QuickBooks Setup
How do you know if you have a poor QuickBooks setup?
Here are some red flags to look for:
- Aged undeposited funds. Revenue was recorded, but it was never linked to a bank deposit. This leads to artificially inflated profit.
- Unreconciled opening balances. Your “starting point” was never verified. This makes the entire ledger unreliable.
- Negative liability accounts. Payments were made to vendors without an associated liability or bill. As a result, your balance sheet is inaccurate.
- Your staff is confused. They’re guessing on categorization or stalling. The month-end close gets delayed, and the data is too old to be actionable.
The Tangible Costs of a Bad QuickBooks Setup
A poor QuickBooks setup can have very real and tangible costs that affect your business’s bottom line, such as:
Clean-Up Costs
The most immediate hard cost of a bad QuickBooks setup is the premium you may wind up paying to fix it. .
Retrospectively auditing and fixing 12 months of miscategorized transactions, unmapped classes, and broken bank feeds is a lot of work.
And here’s another issue: During a high-volume cleanup project, historical data integrity is often compromised. Transactions may be re-characterized to balance the books, which can lead to year-over-year inconsistencies.
If you ever need to seek external capital, these inconsistencies are a massive red flag.
Clean-up costs can, at times, be double or even triple the cost of hiring a professional to perform the initial setup.
Overpayment of Taxes and Lost Credits
A generic QuickBooks setup is generally designed for record-keeping and not necessarily tax optimization.
Without a bespoke Chart of Accounts that aligns with your industry and the current tax code, you will likely leave money on the table.
The Strategic and Operational Costs
A poor QuickBooks setup has more than just financial costs. It also has strategic and operational costs, including:
Decision Paralysis
One of the most expensive consequences of a bad QuickBooks setup is the opportunity cost of hesitation.
If a CEO can’t trust the integrity of their data, they lose their ability to act decisively when opportunities arise.
Without a strategic setup, QuickBooks will simply give you a global P&L (a single view of the company’s entire revenue and expenses). This is not ideal for strategy or business planning.
You need location tracking, class tracking, and project/job costing to get a granular view of your business’s performance.
Inefficient Staffing
When software doesn’t work as intended, staff winds up having to create manual workarounds to resolve the problem. In this case, staff would likely use Excel to fix what QuickBooks should be doing automatically.
That level of inefficiency can easily waste 10-20+ hours of staff time per month.
Here’s another problem with using Excel on the sidelines: It lacks the internal controls of QuickBooks. A single broken formula in a spreadsheet can lead to costly reporting errors that no one catches until the end of the year.
Tech Stack Failure
QuickBooks integrates with over 800 business apps, many of which make your life easier as a business owner.
But apps like Gusto or Bill.com may not integrate properly if your QuickBooks isn’t set up properly. You may wind up with:
- Duplicate data entry: An unmapped integration forces your staff to manually “match” transactions that the software should have handled. Effectively, you’re doubling your internal accounting labor costs.
- Reconciliation problems: When data flows incorrectly, it often lands in a clearing account that grows indefinitely because no one knows how to reconcile it.
- Internal control breaches: Automated syncs can wind up bypassing approval workflows, leading to unauthorized payments or unverified revenue being recognized prematurely.
Let’s say, for example, you run a business processing $50,000 per month through Shopify and Stripe. You connect Stripe to QuickBooks using default settings. The integration was mapped to record the net deposit as sales revenue.
But here’s the problem: Stripe takes about 2.9% plus $0.30 per transaction. If you record only the net deposit, you’re not recording the merchant fees as an expense. On $600,000 in annual sales, you’re missing tens of thousands of dollars in expenses.
A professional setup, in this case, would have utilized the gross-to-net mapping, where QuickBooks records the gross sale, merchant fee and sales tax liability separately.
Get Professional Help for Your QuickBooks Setup
QuickBooks can either make your life easier as a business owner or complicate things if it’s not set up properly.
Having a professional handle the setup process will lay the foundation for success. At Redmond Accounting, we offer expert QBO app help you can rely on.
To learn more about QuickBooks setup or how we can help you with your accounting needs, schedule a consultation now!
