Fixing QB problems

Fixing QB problems by Deleting or Voiding Transactions – Don’t press delete just yet.

For a lot of new clients that come to us they struggle with trying to figure out how their last year statements changed or how an already reconciled bank statement is no longer reconciled.  Sometimes it can take hours of reviewing transactions to figure out what has happened.

Full disclosure, I am old school and learnt accounting software starting with ACCPAC for DOS.   And I have to say, I loved the software, it had an incredible audit trail and forced the user to fix problems in very specific ways that ensured logical transaction tracking.

Fast forward to today and most small business accounting software does not rely on batch accounting, it is updated on the fly and doesn’t have the same type of audit trails that the older software used to have.  Most of the time this provides some great time savings and makes it much easier to find and fix our mistakes. But let’s back up a minute, just because it easier to delete or void an incorrect entry, should we do it?   Yes is the answer sometimes and NO is the answer under certain circumstances.

Never delete or void transactions when:

  • The transaction relates to a prior year and year end accounting has been finalized.
  • When a bill or invoice has been paid and therefore has related transactions.
  • When the transaction appears on a bank reconciliation that has been completed and posted.

Doing any of the above can create problems with prior year retained earnings, AP and AR sub ledgers, and posted bank reconciliations.

Reversing transactions by creating an offsetting entry, instead of voiding or deleting, gives us an opportunity to 1) ensure that the transaction will be processed in the fiscal period/year we need it be processed in and 2) allow us to add notes to the transaction that will explain to our future selves why we did what we did.

Example QB- Writing off Bad Debts:

A very common transaction that often spans more than one fiscal year is to Write off Bad Debts. It would be very easy to just go into the invoice and VOID it, but if the invoice is from a prior year this will affect your Accounts Receivable Balance and also the Retained Earnings Account.  Your year-end Financial Statements will be modified.  The reports you used to file your tax return will be changed.

A better method is to:

  1. Set up a Product/Service “Bad Debts”
  2. Make sure in your Settings you have Unselected “Automatically Apply Credits”
  3. Create a Credit Memo using the current date and “Bad Debts” Product/Service
  4. Apply the Credit Memo to the outstanding uncollectible invoice.

Just this small change will make it much easier and quicker for you and your bookkeeper to track transactions.

Lastly, once year end has wrapped up go into to Company Settings – Advanced and “Close the Books” – QBO.  This will stop accidental transaction entry to prior years.   

If you need some help getting your accounting system to perform the way you need it to, contact us.

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