Issue 13 - September 2004

How to avoid the 6 worst accounting mistakes
By Susan Gunn

It’s OK to admit it: You are not “in love” with your computer and would prefer to do almost anything except bookkeeping. But regardless of how much you dislike your computer and tracking payables and receivables, computerized accounting is a business fact of life. It’s important to use your computer and accounting software right to avoid making costly mistakes in time and money.

So — take a deep breath, turn on the computer and take a look to see if you have been making the top six mistakes I’ve seen in hundreds of practices. Incidentally, I assume you are using practice management software, along with accounting software.

MISTAKE #1:
LUMPING ALL DEPOSITS TOGETHER
If you lump all deposits — cash/checks and credit cards — together, you will have a difficult time accurately reconciling your bank statements. This mistake generally occurs because accounting software manuals and training classes are not geared toward professional practices. Both advise users to enter one daily deposit.

The solution: This solution requires several steps:

• Create a main income type, “Deposits”, and create sub-accounts for “ Cash and Checks”, “Mastercard/VISA”, “Discover”, and “American Express.”

• Enter each of these deposits separately from the practice software’s day sheet, with the date of the day sheet.

• Clear out the credit card terminal at the end of the day; attach the credit card summary and the physical deposit slip to the day sheet.

• Request all the credit card companies to take their fees as a total at the end of the month instead of each daily transaction. Your accounting entries will then match your bank statements. Be firm in your request; they will meet your demands!

MISTAKE #2:
ENTERING PATIENT REIMBURSEMENTS incorrectly
Because your accounts receivable is maintained in your practice software, whatever you enter as income into your accounting software becomes “cash basis.”

Long after the patient has written a check and it has been deposited, the insurance company may pay more than the estimated amount. The common mistake is to write a reimbursement check to the patient and designate it as an expense. If this happens, your year-end income total is more than you have actually earned!

The solution: Write the patient reimbursement check from an income account, “Patient/Insurance Reimbursements.” Doing this deducts the reimbursement — the amount previously entered as income — from your total income and keeps your true income accurate for tax purposes.

After all, you really don’t want to pay taxes on income you didn’t earn, right?

MISTAKE #3:
ENTERING A BILL, THEN WRITING A CHECK
Accounting software generally allows you to pay vendors in two ways: either write a check or enter a bill then pay the bill. The latter method creates outstanding accounts payable. Though most offices write checks without entering bills, some choose to enter bills to better plan future payments. Once the bill has been entered, if you write a check without going through the accounts payable window, the bill appears to be unpaid.

The solution: If you use the accounts payable method, once you enter a bill, pay through the “Pay Bills” window. If you find you have already made this error, the easiest way to correct the outstanding accounts payable is to delete the bill. Just make sure the bill has really been paid prior to deleting.

MISTAKE #4:
CREATING SEVERAL DATA FILES
When accounting software users want to work on their accounting in another location, for instance at home instead of the office, problems tend to happen.

You may ask, “What’s the danger?” It’s this: If multiple data files exist at various workstations, no one is certain which file to use!

The solution: Keep your accounting software data file only on the server or on a central computer. If you insist on working on it at another location, make sure you backup and restore with the same data names and to the same locations.

MISTAKE #5:
NOT UPGRADING YOUR SOFTWARE
Data compatibility conflicts occur if you don’t upgrade the accounting software often enough. For instance, waiting more than three years to upgrade your accounting software invites problems and your accounting data can actually become corrupt.

The solution: Most accounting software companies produce a new version every year. Because practices use a small portion of the accounting software’s capabilities, you do not need to upgrade to every new version. Usually upgrading to every other new version will suffice.

Depending on additional services utilizing your accounting software, such as payroll, you may be required to upgrade annually.

If you are upgrading more than three versions, please speak with a computer consultant regarding any potential conflicts, especially if you are also upgrading your operating system (such as Windows 98 to XP). You may need to “stair step” your upgrading using previous versions.

MISTAKE #6:
NOT PROTECTING ACCOUNT INFO
On a recent visit to my chiropractor, I asked if he had begun using his accounting software. He hesitated and told me several chiropractors had their identities stolen using accounting software.

The solution: Use passwords on your accounting file. All accounting programs have password protection capability. Use it. Choose passwords that are not obvious, creating them with both alphabet characters and numbers.

Write down the passwords and keep them in another location. If you forget or misplace your password, you may have to send the data file to the software company for recovery — for an additional fee, of course.

If your computer is connected to the Internet, use a firewall or router to protect your computer from unwanted predators. Use free programs to rid your computer of tracking cookies or other nuisances that report your activity back through the Internet.

Always keep your anti-virus program updated.

And keep your software updated. All software programs provide updates. These updates will fix reported problems and provide new features. Every new software version has glitches and the software provider makes those patches/updates available. Updating software also applies to your operating system, especially Microsoft.

In summary, these are a few of the most common areas in accounting software to make mistakes. Mistakes can be corrected — do not become distressed! It’s all a part of the learning process. Happy Accounting!

Susan Gunn has been a Certified QuickBooks ProAdvisor since the program began and has more than nine years of professional practice experience. Author of QuickBooks In Your Practice products, she has set up or trained hundreds of practices with QuickBooks and leading practice- management software. For more information on her workshops or workbooks, visit www.GunnConsulting.com or call 817-994-3167.