Fixing a QuickBooks Mess

by Tamara
(St Catharines, ON Canada)

What the heck!<br>Why don't these QuickBooks records match the financial statements?

What the heck!
Why don't these QuickBooks records match the financial statements?

How do I correctly fix a badly managed set of QuickBooks that hasn't been properly managed since 2010.

Specifically, how do I get the QuickBooks records/data and the financial year end statements to match?

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Hi Tamara,

Whew, now that's a big question ... which I'll answer with it depends.

It depends on what is causing the differences. Were the books kept by the owner then given to an accountant to prepare the year-end statements?

If yes, then perhaps the differences are simply that the year-end adjusting entries prepared by the accountant were never entered into QuickBooks.

Were the bank account(s) and credit card(s) reconciled? If no, then perhaps what needs to be done first are account reconciliations.

If the problems with the record keeping are because the actual bookkeeping itself stinks, then sometimes it is faster and cheaper to just start fresh. The question then becomes, do you go back and redo the past years to have clean records, or do you just start fresh with the current year.

Personally, if an accountant prepared the year-end financials, I'd wouldn't worry about past years and just start fresh. If an accountant didn't prepare the financials, then I'd redo past years. If you think the accountant may have understated income or overstated expenses due to the less than accurate set of books, then I'd redo the past years and notify the accountant as tax adjustments for prior years may be necessary.

Of course, this should all be discussed with the owner of the business first. Under no circumstances would you just go ahead on your own. You need to discuss the problems with the owner and come up with a solution.

How do you determine if the bookkeeping stinks? Well here are few clues:

1. The chart of accounts is/was not properly set up for the correct business structure.
2. The chart of accounts has too many accounts listed for the size of the business, has duplicate/separate accounts for similar charges, and/or has expenses accounts by name of provider; for example accounts are labelled Telus or Bell instead of Telephone.
3. The balance in the Undeposited Funds account has been growing, income looks high for the size of business, and accounts receivable has a huge amount of 'Over 90 Days' invoices.
4. Accounts Receivable and Payables have unapplied payments.
5. Accounts Payable has a huge number of 'Over 90 Days' bills; when you look at the expenses, they seem unreasonable for the size of the business.
6. Credit card details were not entered individually but lump sum.
7. Sales tax payments were not run through the Sales Tax Module or sales tax codes were not setup properly.
8. If there is payroll, the Payroll Module was not used to pay the source deductions but run through 'Write Cheques' instead.
9. Inventory balances are out of whack ... too high or maybe even negative.

What small business owners sometimes don't realize when they do their own books instead of hiring a bookkeeper, is that it usually takes longer to go in and figure out what they did, then do correcting entries and (re)reconcile accounts than it does to just reenter the data correctly and reconcile accounts.

P.S. I would like to remind you there is a difference between information and advice. The general information provided in this post or on my site should not be construed as advice. You should not act or rely on this information without engaging professional advice specific to your situation prior to using this site content for any reason whatsoever.

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Aug 27, 2013
QuickBooks is a Mess
by: Anonymous

I just started working for a small business that has been without a bookkeeper for 2 years. The last year end was 2010. Someone was doing data entry in AP and AR.

First issue is a negative balance in AP as a result of using 'Write Cheques' to pay the Receiver General rather than using the 'Manage Sales Tax' option. How do I correct this??

The AR has a negative balance as well as an account called Office Salary classified as an expense account. I need to know what would be the best course of action to rectify the books to close 2011-12 and prepare for YE 2013.

Any help would be greatly appreciated. Restarting a whole new set of books isnt an option....unless its the only option! LOL

Aug 27, 2013
Some Tips
by: Lake

Before you do anything, make a backup first. If you screwup you can just restore your file and start again. I do recommend you try your transactions in the sample file first so you understand what's going to happen and if the result is what you wanted.

You didn't say whether the bank and credit card accounts were reconciled.

IF the bank hasn't been reconciled, take note of all the details of the problem transaction(s) ... one at a time, delete a transaction then use 'Manage Sales Tax' to reissue the cheque using the pertinent details you jotted down before you deleted the transaction.

IF an invoice was paid through 'Write Cheque' rather than 'Pay Bills', delete the 'Write Cheque' entry and redo the transaction using 'Pay Bills'. This will clear some/all of your outstanding A/P balances.

IF the bank reconciliation has already been done, do NOT delete the cheques. Instead go in and edit them. change the coding from the expense account to 'Accounts Payable', input the vendor name under the 'Customer:Job' column ... then go to 'Pay Bills' and apply the credit the outstanding vendor invoice.

For your A/R, see if this chat helps, as I'm not sure what you are saying is your problem.

You should talk with your boss and explain some of these problems. Perhaps you should recommend a QuickBooks Advisor come in, look things over and get you on the right track if you don't have the expertise at this time to come up with a solution. It is much easier to do a set of books correctly than try to fix other people's bookkeeping errors.

Again, the owner needs to be brought into the loop. I'm not sure how you are being paid ... so starting over sometimes is cheaper than 'fixing' things.

Good Luck.

Aug 27, 2013
QB Mess
by: Tamara

Hi, I am starting to think I may have to start over. The bank recs have been done. There are pages of uncleared bank transactions that date back to 2010.

An accountant did do the taxes but apparently it was on the QB financials which clearly were inaccurate. They currently have a negative balance of $400,000 in AP mostly as a result of writing cheques for RG instead of the manage sales tax option as I mentioned. I'm not even sure where to start with that!!

The AP and sales tax are a complete mess and there is no way I can decipher what has been done or how things have been allocated. I have put together a package outlining the problems and have asked to speak to them but they are telling me to do what I have to do to get it right. I'm thinking it may be better for me to make a new set of books and start fresh for 2014. The previous bookkeeper stunk and they got rid of her in 2010 and had a young girl who's accounting skills are self taught this is where the issue lies.

How do I manage the remainder of 2013 and feel confident the numbers I'm providing the accountant are correct?

Aug 28, 2013
Talk to the Accountant
by: Lake

Reread my post regarding your AP question(s).

I would see if you could speak with the accountant and ask for direction from the accountant to see what s/he recommends on how to proceed.

Feb 04, 2014
Undeposited Funds Negative
by: Glow, Surrey, BC


I'm running into a huge problem with Undeposited Funds. It is 40G negative.

Previously, I've been transfering funds to the bank account to match up with bank statement for reconcilation. For this company, I came in 3/4 of the way before year-end. It was already a mess to start with. Missing payments were not recorded.

I really need your help in this. Would the accountant be able to fix this problem when given the file for year end? Or do I have to go back and tear everything apart? Or is there a simple journal entry that can just make things work?

Any thoughts would help.

Feb 04, 2014
Undeposited Funds Negative
by: Lake

Hey Glow,

What I'm hearing is that the bank reconciliations for this company was never done. This means you need to roll up your sleeves and do the reconciliation. As you are aware, it will involve matching your customer payments received and booked to Undeposited Funds with all the bank deposits.

If the bank reconciliations have been done and the Undeposited Funds account is negative, then I'm guessing that the Accounts Receivable account is also high. When you run the A/R Aging report, there are probably a lot of old outstanding invoices. If this is the case, then income is probably overstated as well.

Run the Open Invoices Report. If you see invoices that have a payment applied netting the amount owed to zero but the invoice is still open in accounts receivable, the customer payment was applied incorrectly.

Find each incorrectly applied deposit and recode it to Accounts Receivable instead of Income. You will need to enter the customer name in the appropriate field. You will then have to apply the payment to the invoice in the Receive Payment form.

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