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Episode 41: Can You Trust Your QuickBooks? The Monthly Health Check Every Business Owner Should Do
Episode 41 • 9th September 2026 • QuickBooks Mastery for Small Business Success • Erica Northrup & Lee Davis
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Episode 41: Can You Trust Your QuickBooks? The Monthly Health Check Every Business Owner Should Do

Before you hire an employee, buy equipment, or decide how much you can pay yourself, can you trust the numbers behind that decision?

In this episode of QuickBooks Mastery for Small Business Success, Erica Northrup and Lee Davis walk through a practical monthly QuickBooks health check for small business owners. The goal is not perfect bookkeeping. It is understanding whether your financial reports reflect what is actually happening in your business—and knowing which questions to ask when something does not make sense.

From bank reconciliations and old bank feed transactions to accounts receivable, accounts payable, payroll liabilities, and your Profit & Loss, this conversation gives you a repeatable way to review your books. You will also learn why unexplained balance sheet balances and rising expenses deserve attention before you use your reports to make a business decision.

Key Takeaways

  • Reconcile every bank and credit card account. A connected bank feed is not the same as a completed reconciliation.
  • Investigate old or unexplained bank feed items rather than assuming the books are current.
  • Review accounts receivable for money you realistically expect to collect and accounts payable for bills you actually owe.
  • Understand payroll liabilities. A balance is not automatically wrong, but its timing and amount should be explainable.
  • Look at the balance sheet as well as the Profit & Loss. Negative balances, old balances, and unfamiliar accounts can signal questions worth asking.
  • Compare your Profit & Loss with what happened in the business. Look for missing costs, unexpected changes, and expenses that have crept up.
  • Treat “I don’t know” as a useful starting point. Write down the question and work through it with your bookkeeper or accountant.
  • Finish with the question that matters most: do you trust these numbers enough to make a business decision?

Questions to Reflect On

  • Which report or balance do you currently find hardest to explain?
  • Does your receivables total represent cash you expect to collect—or invoices that need attention?
  • What costs have increased without you noticing?
  • What decision are you postponing because you are unsure about your numbers?
  • Who will help you investigate the first “No” or “I don’t know” on your monthly check?

Mentioned in This Episode

  • The 10-question Monthly QuickBooks Health Check.
  • Bank and credit card reconciliations and bank feed review.
  • Accounts receivable and accounts payable reports.
  • Payroll liabilities, balance sheet warning signs, and Profit & Loss comparisons.
  • Mystery balances, uncategorized transactions, and Ask My Accountant accounts.
  • The free QuickBooks Clarity Scorecard.

Recommended Resources

Timestamps

00:00 - QuickBooks Mastery Podcast Intro

00:56 - Episode 41: Can You Trust Your QuickBooks?

03:20 - Trustworthy QuickBooks Does Not Mean Perfect QuickBooks

07:27 - Start the Monthly QuickBooks Health Check

09:29 - Bank Feed Warning Signs and Unexplained Transactions

11:29 - Accounts Receivable: What Will You Actually Collect?

13:58 - Accounts Payable and Cash Planning

15:40 - Payroll Liabilities and Balance Sheet Red Flags

19:33 - Does Your Profit & Loss Pass the Common-Sense Test?

22:15 - Cost Creep: What Has Changed?

23:44 - Mystery Balances and Uncategorized Transactions

25:23 - Can You Make a Business Decision From These Numbers?

26:59 - The 10-Question Monthly QuickBooks Checklist

32:05 - Your 30-Minute Challenge and the Free Clarity Scorecard

36:09 - Closing and Podcast Outro

Call to Action

Set aside 30 minutes this month and answer the health-check questions with Yes, No, or I don’t know. Choose one item to investigate, identify who can help, and set a follow-up date.

Start with the free QuickBooks Clarity Scorecard, and email [email protected] with the question you would like us to cover next.

Follow QuickBooks Mastery for Small Business Success in your podcast app and share this episode with a business owner who wants more confidence in their numbers. If you leave a review, a few words about what helped—or what could be clearer—give us useful feedback for future episodes.

Transcripts

Erica:

Welcome to QuickBooks mastery for small business success.

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I'm Erica Northrup.

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Lee: And I'm Lee Davis.

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Erica: I handle the tech, and he

handles the numbers, and together

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as a father-daughter team, we bring

decades of experience helping small

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to medium-sized businesses thrive.

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Lee: We know that as a business owner,

your time is best spent mastering

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your craft and growing your business,

not getting lost in QuickBooks.

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Managing finances can be confusing,

and you don't have hours to waste

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sorting through spreadsheets

or fixing bookkeeping mistakes.

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That's where we come in, helping

you streamline QuickBooks so you

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can focus on building your business.

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Erica: Each week, we break it all

down into simple, actionable steps

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so you can focus on growing your

business, not fixing your books.

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Lee: Let's embark on this journey together

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Erica: Welcome back to QuickBooks

Mastery for Small Business Success.

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I'm Erica Northrup, and I'm here with

my papa, Lee Davis, and this is episode

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41, Can You Trust Your QuickBooks?

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The monthly health check every

business owner should do.

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So Papa, I want to start today with a

question that I think every business

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owner should be able to answer.

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Imagine you're about to make a

major decision in your business.

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Maybe you're thinking about

hiring another employee.

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Maybe you're considering buying

a $50,000 piece of equipment.

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Maybe you're deciding whether you

can afford to increase your own pay.

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Maybe you're wondering whether the

business can handle another location,

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or maybe you're simply trying to

understand why you feel like you're

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working harder than ever, but there

never seems to be enough money left over.

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So you open QuickBooks, you pull

up your profit and loss, you look

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at your balance sheet, and now you

have to decide, do I trust these

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numbers enough to make the decision?

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Because I think that's really

what everything we've been talking

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about over the last several

episodes has been leading toward.

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We've talked about the chart of accounts.

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We've talked about reconciliation.

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We talked about what happens when

something needs to be corrected.

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We've talked about payroll and

why the amount leaving the bank

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isn't the whole payroll story.

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We've talked about watching expenses and

costs creep, but none of those things

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matter very much if, at the end of the

day, you still look at your financial

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reports and think, "I have absolutely no

idea whether these numbers are right."

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So today, I don't want to teach

another isolated QuickBooks feature.

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I want us to step back and

look at the entire file.

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If you were doing a monthly

health check on your QuickBooks,

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what would you look at?

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What are the warning signs?

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What are the questions a

business owner should be asking?

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And most importantly, how do you know

when your QuickBooks is healthy enough

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to actually help you run the business?

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So Papa, let's start with the big

question for today, for this episode.

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When you look at a client's

QuickBooks file, what makes you

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feel confident that the numbers

are reasonably trustworthy, Papa?

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Lee: It's a very good question because

recently we had a client who was

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planning to do a major expansion of her

business, and, you know, she looked at

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her QuickBooks, and she knew she could

not make the decisions she needed to- Mm

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based on the information she had.

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So I think the first thing to

understand is that trustworthy

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doesn't necessarily mean perfect,

and it could mean a lot of things.

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Like, you've stared at something long

enough on your QuickBooks file- … and

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you know you're kind of working around it.

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Erica: Mm-hmm.

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Lee: But it's just not complete.

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Mm-hmm.

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And there's a lot of information

that needs to be cleaned up.

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Mm.

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There may be transactions

that need to be reviewed.

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There could be the question, like

this particular client wants to

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know whether they should start over.

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And, you know, we've

talked about that before.

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That's a very real question that, in

some cases, will be important to answer.

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But, you know, whether you're

looking for a complete re-overhaul-

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Mm … or you can work with exactly

what's happening in your business.

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So you, you wanna actually be able to

get a hold of your data that will support

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what's happening in your business.

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Erica: Mm.

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Lee: Are the bank accounts accurate?

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Are transactions being recorded correctly?

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Are the major balance

sheet accounts reasonable?

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Erica: Mm.

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Lee: Do accounts receivable and

accounts payable make sense?

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Are payroll liabilities

being handled correctly?

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Does the profit and loss reflect the

income and expenses of the business?

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And are those accounts

being reviewed regularly?

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The more regularly you review those

things, the more confidence you will

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have in the financial information.

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There are some key reports that we

should start exploring to begin to

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analyze how your business is doing,

such as the profit and loss comparison.

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You know what, I'd also suggest reviewing

your accounts receivable reports.

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I know we're gonna talk

about accounts receivable.

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And a report we haven't discussed, and

it's beginning to be that time of the year

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where people should start thinking about

their:

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expenses on a weekly or a monthly basis.

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A client that I just recently

met with felt like that, you

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know what, he needs a budget.

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He needs to project his income and

expenses, and it needs to be looked at

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on a monthly, if not a weekly basis.

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He wants that report used.

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Erica: Mm.

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Absolutely.

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No, I like that because I think

my books have to be perfect can

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become another reasons business

owners avoid looking at them.

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I know I feel like that about my own life.

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If I feel like something has to be

perfect, for instance, going to the gym,

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if I don't have 45 minutes to go to the

gym or exercise or whatever the case

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may be, sometimes I won't even do it.

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Where now I've gotten to

a mindset, you know what?

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Five minutes is better than no minutes.

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Mm-hmm.

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Yep.

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And sometimes you can get a lot

accomplished in five minutes more than

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you think you can get accomplished.

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Lee: Absolutely.

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I think starting somewhere

is better than going nowhere.

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Erica: Yes.

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Absolutely.

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Oh, so good, Papa.

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Okay, so we're not saying every

transaction has to be flawless before

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you're allowed to look at a report.

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We're saying there should be

a process for knowing that the

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major pieces are accurate and for

identifying the things that aren't.

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Isn't that what we're saying, Papa?

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Lee: Uh, yes.

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I think financial records should help you

understand and manage the business, and

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I think as we work with clients that are

going through this process of cleaning

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up, many of them would like it done right.

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It starts with the foundation,

the chart of accounts.

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So the financial records should help

you understand and manage your business.

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You need to answer the questions that

are being asked and be able to feel

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confident that you're building toward

that answer, even if you're not there yet.

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Erica: Absolutely.

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You know, and maybe that's the distinction

between bookkeeping being something that

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happens to your business versus QuickBooks

becoming an actual management tool.

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Lee: Absolutely.

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Erica: Yeah.

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You know, I suppose the financial

report should help you understand and

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manage the business, shouldn't it, Papa?

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Lee: Absolutely it should.

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Erica: Yeah.

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Okay, so let's build our

monthly health check.

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If I'm sitting down at the end of the

month and I want to decide whether I

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trust my QuickBooks, what's the first

thing, Papa, you want me to look at?

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Lee: So I'd start with the bank

and credit card transactions.

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Are there any of these transactions

that may need attention?

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Are they ready to be reconciled?

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We've talked about reconciliation

before, but it's foundational because

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you're comparing what QuickBooks

says happened with an outside record.

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Mm-hmm.

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The bank or the credit card company.

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If your bank statement says you have one

balance and QuickBooks says something very

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different, you need to understand why.

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Erica: You know, and I want

to remind people of something

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we talked about in episode 37.

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Having the bank connected to

QuickBooks is not the same thing as

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reconciling the account, is it, Papa?

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Lee: That's correct.

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Erica: Yeah.

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Lee: The bank feed helps you

bring in and process transactions.

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Reconciliation verifies that

the activity in QuickBooks

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agrees with the bank statement.

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So, you know, if information is

still sitting in the bank feed-

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Mm … that could definitely be

a indicator that there could be

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some information that needs to get

corrected, or some needs to get entered.

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It's a really a good indicator that

there needs to be some work done.

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Erica: Absolutely.

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So our first monthly question

is, are all my bank and credit

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card accounts reconciled through

the most recent statement?

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And if the answer is no,

that's a yellow flag.

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Would you call that a yellow flag, Papa?

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Lee: Yes, or maybe a red flag.

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Especially if you're significantly behind.

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Erica: Yeah, absolutely.

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Because if I'm six months behind,

I'm now trying to figure out

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something that happened six months

in the past, six months ago.

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Lee: Exactly.

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Erica: Mm.

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Lee: You know, that's much more

difficult than reviewing transactions

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that happened in the last 30 days.

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Erica: Yep, so good.

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Okay, so our bank accounts are reconciled.

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What's next, Papa?

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Lee: I think you have to understand that

you want to, while your accounts may be

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reconciled, there may be transactions

that are still sitting in the bank

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feed, and that could be either have been

categorized incorrectly or unmatched.

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There could be a problem still sitting.

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If you've got additional transactions

and you've reconciled your

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accounts- You have some transactions

that either don't belong there-

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Mm-hmm … or need to get addressed.

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There could be old transactions

that have been ignored.

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There could be duplicates.

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There could be activity

that nobody understands.

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Yep.

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And this could be a red flag that some

transactions haven't been entered,

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or they've been entered incorrectly.

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In some cases, some people have

opened up other bank accounts.

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Mm.

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You know, they just had

decided to start over.

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Yep.

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And, you know, instead of trying

to fix their old bank account, they

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just opened up a new one, so now

they've got extra bank transactions

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sitting that need to get addressed.

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Erica: Absolutely.

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You know, I think this one is sneaky,

because your QuickBooks can look like

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everything is current until you click

into that bank feed and realize there

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are 147 transactions waiting for review.

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That can be a little

overwhelming, can't it, Papa?

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Lee: Uh, yes.

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And, you know, everybody has a

story to tell about in some cases

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they could have forced the bank

reconciliation- Mm … to balance,

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but QuickBooks has an audit trail.

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I can quickly see that, you know, so

that, yeah, that's information that

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hasn't necessarily been completely

dealt with in the accounting records.

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Erica: You know, and I want business

owners to ask another question here.

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Do I recognize what

these transactions are?

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Because if I see a vendor I've never

heard of, a subscription I don't remember

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signing up for, or something that's

twice the amount I expected, that isn't

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just bookkeeping information, that's

management information, isn't it, Papa?

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Lee: Absolutely.

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Erica: Yeah.

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Okay, so let's move to

accounts receivable.

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What are we checking there, Papa?

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Lee: Accounts receivable should represent

money your customers actually owe you.

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Mm.

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So I look at the aging report.

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You know, I think-

Okay … that's a great report.

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Who owes you money?

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Yeah.

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How long has it been outstanding?

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Are there old invoices that

aren't going to be collected?

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Are there customer credits that

haven't been applied correctly?

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Are there balances you don't understand?

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And if you've got invoices sitting there

from two or three years ago that nobody

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expects to collect, then your accounts

receivable isn't really telling you the

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truth about what you're likely to receive.

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If you've created estimates for

clients and they have been prepared

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and accepted, then do you need

to take care of that invoicing?

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Can I be more efficient in creating

invoices that happen each month?

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So looking at your accounts

receivable, both from a what's coming

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in perspective, but also are you

invoicing timely and efficiently?

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Erica: Yeah, you know, that phrase

is so important because technically

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QuickBooks can say your customer owes

you $180,000 But if 60,000 of that

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is old, uncollectible garbage nobody

cleaned up, I don't actually have

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180,000 coming to me, do I, Papa?

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Lee: I think that's right.

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And, you know, you don't wanna

keep going over and over reports

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that have bad information.

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No.

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So you need to take a look

at it and get some cleaned up

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Erica: And now that bad information

can start influencing decisions.

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I might think we've got plenty of

cash coming in, when in reality

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some of that money isn't coming,

and you can make some really bad

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decisions based on that information.

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Lee: Well, exactly, and you want

your financial reports to be able

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to be used by the people who are

going to help you make decisions.

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Mm-hmm.

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So it's really important to have good

information, and because we're talking

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about accounts receivable, that's the

lifeblood of the company, of what you've

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got coming through the door in the

next month, two months, three months.

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Uh- Mm … so it's really important

that the information is correct.

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Erica: Yeah, so health check

question number three becomes, does

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accounts receivable represent money

we reasonably expect to collect?

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And then who owes us money, and are

we actively doing something about it?

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Lee: Absolutely.

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Erica: Yeah.

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Okay, so let's look at the

other side, accounts payable.

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So what can you tell us

about accounts payable, Papa?

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Lee: It's the same.

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When we look at accounts payable,

it should tell the business how

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much is owed- Mm … to its vendors.

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Again, I look at the aging.

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Mm-hmm.

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Uh, do those bills actually belong there?

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You know, have some already been paid,

but the payment wasn't properly applied?

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Are there duplicate bills?

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Are there vendor credits

that haven't been applied?

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Are there old balances

that no longer make sense?

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Mm.

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So it's really important to handle

both your accounts payable and your

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accounts receivable on a kind of a

month-end basis to look at them- Mm

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and be able to deal with

those issues timely.

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Erica: Yeah, and this one matters for

cash planning because if QuickBooks

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says I owe $80,000 over the next 30

days, I need to know whether that's real

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and that I actually owe that because

I gotta come up with that $80,000.

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Lee: Absolutely.

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Erica: Yeah, and the opposite is true too.

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If QuickBooks only shows $20,000 due,

but we've got another $60,000 in bills

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sitting on somebody's desk that were

never entered, now QuickBooks is making

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the business look much healthier than

it actually truly is, isn't it, Papa?

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Lee: Yeah, that's correct, and if you

wanna run a cash flow report, you've

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gotta be able to know money in, money out.

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It's the foundation for QuickBooks.

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Erica: Right.

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Absolutely.

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So now we have, does accounts

payable accurately represent

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what the business owes?

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Not what we hope we owe, not what we

remember owing, what do we actually

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owe, and I think that's where the

rubber hits the road, doesn't it, Papa?

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Lee: Absolutely.

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Erica: Yeah, so let's talk payroll

because we just did an episode explaining

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why payroll isn't simply one expense.

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What should somebody look at in a monthly

health check in regards to payroll?

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Lee: You want to be able to look

at the payroll liability accounts.

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If you've withheld taxes or other

amounts from employee payroll-

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Those amounts may be sitting as

liabilities until they're paid.

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You want those balances to make sense.

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If you've got old payroll liabilities

sitting on the balance sheet that should

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have been paid months ago, there's

something you need to investigate.

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And that same thing applies to

retirement contributions and

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other payroll-related liabilities.

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Erica: Yeah, and I feel like the

balance sheet is where a lot of

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business owners stop reading.

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They look at the profit and

loss, they, then they open the

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balance sheet and think, "Nope."

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Not doing this.

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Not happening And then

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Lee: that's probably true because it

could have been two bookkeepers ago- Yeah

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… that those liabilities were created, you

know, and, and no one knows what happened.

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So yeah.

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Erica: But this is exactly why we

keep saying the balance sheet matters,

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because the profit and loss can tell

me, "Here's what you spent on payroll."

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The balance sheet can tell me,

"By the way, here's the payroll

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money you may still owe someone."

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Is that correct, Papa?

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Exactly.

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Exactly.

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Yeah.

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Yeah.

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So let's stay on the balance

sheet for just a moment.

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If I'm not an accountant, which we

know I'm not, but I am getting better.

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I'm learning.

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So if I'm not an accountant, what am

I realistically looking for, Papa?

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Lee: Well, you don't have to understand

every technical accounting detail to

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notice something that doesn't make sense.

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Yeah.

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You know, look at the bank accounts.

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Do the balances look reasonable?

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Are there old bank account

balances just sitting there?

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Look at the accounts receivable

and accounts payable.

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You know, look at the payroll liabilities.

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Look at loans.

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Have you reconciled those loan balances?

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Here's where you may find some

expenses, such as interest,

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that needs to be entered.

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Do the loan balances roughly

agree with what you know you owe?

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Just eyeballing them.

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Mm-hmm.

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Uh, look for negative balances

where you wouldn't expect them.

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Mm.

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You know, if your cash has

a negative balance, then you

349

:

know something is not right.

350

:

Erica: Yeah.

351

:

Right?

352

:

So true.

353

:

So true.

354

:

You

355

:

Lee: know, if you look for

unusually large balances, then

356

:

oftentimes that's very helpful.

357

:

Mm-hmm.

358

:

Look for accounts you don't recognize.

359

:

You know, say, "I, I

don't know what that is."

360

:

Right.

361

:

Well, it's time to research it,

and look for the balances that

362

:

haven't changed in a very long time.

363

:

And you might find that if you compare

the activity from the previous year.

364

:

Uh, that's oftentimes a very good

indicator that balance has been

365

:

the same for a year or two years.

366

:

So-

367

:

Erica: Right.

368

:

That's-

369

:

… Lee: a balance

370

:

… Erica: that's definitely a problem.

371

:

If the balance- Mm-hmm … stays

the same for two years, we need

372

:

to have a conversation, for sure.

373

:

Right.

374

:

Okay, so now I'm not asking a business

owner to audit their own balance sheet.

375

:

I'm asking them to develop enough

familiarity that they notice

376

:

when something looks strange.

377

:

And you know your business.

378

:

If something does not look right,

follow that intuition, follow that

379

:

gut feeling and, and look into it.

380

:

Dig into the big rocks, right, Papa?

381

:

Lee: Exactly.

382

:

Erica: You know, it's the

same way I know my house.

383

:

I may not be an electrician, but if I walk

into the kitchen and half the lights are

384

:

flashing, I know something isn't normal.

385

:

I was actually thinking about that

with our lights in our front house.

386

:

We're having just issues.

387

:

We've had issues since we moved into

there with the lights, and, you know, I'm

388

:

ready to do something about the flickering

of our lights in that front house.

389

:

But yeah, I don't have to be

an electrician to know that

390

:

something isn't working.

391

:

You know your business.

392

:

You know when something isn't right.

393

:

Lee: Yeah, that, that's a good analogy.

394

:

Erica: Yeah.

395

:

You know, and that's really what

we are developing with QuickBooks,

396

:

financial pattern recognition.

397

:

Isn't it, Papa?

398

:

Lee: Exactly.

399

:

Erica: Yeah.

400

:

Okay, now we finally get to

the report everybody likes

401

:

the best, the profit and loss.

402

:

What should I look at there, Papa?

403

:

Lee: They really need to ta- look

at, first of all, the income.

404

:

Mm.

405

:

Does the amount make sense on

what you know about your business?

406

:

Then look at the major expense categories.

407

:

Mm.

408

:

Are all costs reasonable?

409

:

Rent, advertising, insurance,

software, materials, cost of

410

:

goods sold, professional fees.

411

:

Y- you don't need to memorize every

number, but what you're looking

412

:

for are changes in unusual items.

413

:

Erica: Mm.

414

:

Lee: Here again, to run

a comparison report.

415

:

I, oftentimes I was just working with

a client last week, and they feel

416

:

like they can't compare their numbers

to the previous year because they

417

:

had perhaps some theft that went on.

418

:

Erica: Mm.

419

:

Oh dear.

420

:

Mm-hmm.

421

:

Lee: So I think when you're looking

at your profit and loss, you need

422

:

to look at it through the lens

of, what do I know is correct?

423

:

Mm.

424

:

And go from there.

425

:

Erica: Yeah.

426

:

Absolutely.

427

:

You know, this ties directly into what we

talked about in our cost creep episode.

428

:

I may not notice one vendor increasing

from 499 a month to $599 a month, but

429

:

if I compare periods, those changes

start showing up, don't they, Papa?

430

:

Lee: Absolutely.

431

:

And I think what you want to

be able to compare is- Mm-hmm

432

:

this year to last year, actual-

Yeah … results on what you expected,

433

:

and this gives you some sort of context.

434

:

Erica: Yeah, absolutely, because a

profit and loss with no comparison

435

:

is basically one photograph.

436

:

A comparison starts giving

me a movie, doesn't it, Papa?

437

:

Lee: That's a good way to put it.

438

:

Erica: Yeah, absolutely.

439

:

And here's another question I

think business owners should

440

:

ask themselves, does the profit

QuickBooks is showing feel believable?

441

:

If QuickBooks says we made 300,000 this

year and there's never any cash, that

442

:

doesn't automatically mean the profit and

loss is wrong, but it certainly gives me a

443

:

reason to investigate where the cash went.

444

:

Lee: Exactly.

445

:

I think with that kind of illustration,

about $300,000 in profit, there should

446

:

be something that needs to be looked at.

447

:

Mm.

448

:

In other words, particularly

if you've got cash flow issues.

449

:

And because it could be that you're

running the reports on the accrual

450

:

basis, it could very well where that

sits is in your accounts receivable.

451

:

So it's not that the

information may be not correct.

452

:

It may be that you've got some

underlying issues like we've talked

453

:

about in the accounts receivable.

454

:

Erica: Absolutely.

455

:

Okay, so let's make this one

its own checkpoint, because

456

:

I think this is important.

457

:

What has changed?

458

:

Lee: Yeah, absolutely.

459

:

I think looking at what's changed is

an excellent question, because when you

460

:

review expenses and looking at cost of

goods sold, are vendors charging more?

461

:

Have subscription costs increased?

462

:

Has a discount expired?

463

:

Have material costs changed?

464

:

Has insurance increased?

465

:

I was working with a client who was

looking at their profit and loss

466

:

report, and their analysis is that

they were in trouble and needed-

467

:

Mm … to make some significant

changes on their benefit plans.

468

:

This is a good time of year to

review your health insurance- Yes

469

:

and the options, right?

470

:

Erica: Yeah, absolutely.

471

:

Lee: And are there services you're

paying for that you don't need anymore?

472

:

Mm.

473

:

And then ask whether you, your own

pricing has kept up with those increases.

474

:

Erica: Yeah, because that's

how profit quietly disappears.

475

:

It isn't necessarily one

dramatic $50,000 mistake.

476

:

It can be 20 expenses that each

creep up a little bit at a time.

477

:

Lee: Exactly.

478

:

Erica: So part of our monthly health check

isn't only is QuickBooks accurate, it's

479

:

also what is QuickBooks trying to tell me?

480

:

You know, are you paying attention?

481

:

Are you listening to the information

that QuickBooks is dishing out for you?

482

:

Lee: Yeah, that's right.

483

:

And when the accounting starts

becoming useful- For management.

484

:

Erica: Yeah.

485

:

So here's one that drives me crazy, Papa.

486

:

If I open QuickBooks and see

something with a name I don't

487

:

recognize, what do I do?

488

:

Lee: I think you need to

investigate it, right?

489

:

Erica: Yes.

490

:

Look into it.

491

:

Lee: If you don't want mystery balances

sitting in the books indefinitely,

492

:

if you have an account called Ask My

Accountant, for example, and it has

493

:

continued to accumulate transactions,

somebody needs to determine what

494

:

those transactions actually are.

495

:

Look at the uncategorized transactions,

transactions without payees.

496

:

Undeposited funds is a good place to look.

497

:

Yeah.

498

:

Sometimes money just sits there.

499

:

Yeah.

500

:

And unapplied payments.

501

:

Somebody says, "Well, what's

an unapplied payment?"

502

:

Good question.

503

:

Yeah.

504

:

Right?

505

:

Yes.

506

:

Unapplied payments need to get addressed.

507

:

Mm.

508

:

Um, as well as unapplied income.

509

:

So making sure that you investigate

those, what you call mystery balances-

510

:

Erica: Mm

511

:

… Lee: could lead you to more accurate data.

512

:

And if you see uncategorized income or

uncategorized expenses, investigate those.

513

:

Mm.

514

:

The goal is to understand what

makes up the financial statements.

515

:

Erica: I think that's such a

good monthly question, Papa.

516

:

What in my QuickBooks do I not understand?

517

:

Mm.

518

:

Not can I pass an accounting

exam, just what balances or

519

:

transactions can nobody explain?

520

:

Lee: Exactly, and those are the

things that you can work through.

521

:

Erica: Absolutely.

522

:

Okay, we've reconciled the accounts.

523

:

We've cleaned up bank transactions.

524

:

We've reviewed receivables,

payables, payroll liabilities,

525

:

the balance sheet, profit and

loss, costs, mystery transactions.

526

:

Now I think we get to the most

important question of the whole

527

:

episode, can I actually make a

business decision from these numbers?

528

:

What does that mean to you, Papa?

529

:

Lee: It means you've

taken some positive steps.

530

:

Erica: Right.

531

:

Lee: You're now using the information.

532

:

Can you see whether the

business is profitable?

533

:

Can you see whether

expenses are increasing?

534

:

Can you see who owes you money?

535

:

Can you see what you owe?

536

:

Mm-hmm.

537

:

Do you understand your cash position?

538

:

Erica: Yeah.

539

:

Lee: Can you identify

areas that need attention?

540

:

Can you compare performance over time?

541

:

Can you use that information to decide

what the business should do next?

542

:

That's ultimately where you wanna get.

543

:

Erica: Yeah, because that's

the entire point, right, Papa?

544

:

I don't think anybody starts a

business because they're passionate

545

:

about reconciling bank statements.

546

:

I mean- … unless you're an accountant,

that's probably- Right … not

547

:

what you're passionate about.

548

:

Lee: Right.

549

:

Even accountants, I don't think,

are passionate with reconciling bank

550

:

statements, but yeah, probably not.

551

:

Erica: Yeah.

552

:

They start the business because

they want to build something.

553

:

They see a problem in the marketplace,

they see a need in the marketplace, and

554

:

they have a solution, and they wanna

help people fix things or answer that

555

:

need for that particular solution.

556

:

Like, this is why we get into business.

557

:

You know, they start the business because

they want to build something, serve

558

:

customers, create jobs, support their

family, make money, grow, and QuickBooks-

559

:

is supposed to help them understand

whether the business is actually

560

:

accomplishing those things, isn't it?

561

:

Yeah.

562

:

I mean, that's one of the driving

reasons for using QuickBooks.

563

:

Lee: Exactly.

564

:

Erica: Yeah.

565

:

Okay, Papa, I'm gonna bring all of this

down into 10 questions, and honestly,

566

:

if you're listening, this is the

part I would write down, and I will

567

:

drop it as a PDF in our show notes.

568

:

You can always download it as

well, but at least once a month,

569

:

ask yourself these 10 questions.

570

:

Number one, are all of my bank and

credit card accounts reconciled?

571

:

Number two, is there anything old or

unexplained sitting in my bank feeds?

572

:

Number three, does accounts

receivable represent money we

573

:

realistically expect to collect?

574

:

Number four, does accounts payable

accurately reflect what we actually owe?

575

:

Number five, do my payroll

liability balances make sense?

576

:

And number six, is there anything unusual

on my bank sheet, negative balances, old

577

:

balances, or accounts I don't understand?

578

:

Number seven, does my profit and

loss make sense compared with what

579

:

I know happened in the business?

580

:

Number eight, what expenses

or costs have increased?

581

:

Number nine, are there mystery accounts

or transactions nobody can explain?

582

:

And finally, number 10, do I

trust these numbers enough to make

583

:

a business decision from them?

584

:

So Papa, if somebody could confidently

answer those 10 questions every

585

:

month, how much stronger would their

understanding of their business be, Papa?

586

:

Lee: I think if you looked

at those 10 questions-

587

:

Erica: Yep

588

:

… Lee: and whether you reviewed them

monthly, quarterly, or even annually-

589

:

Erica: Yep

590

:

… Lee: you would…

591

:

It would help you and lead you

to say, "I've got a few other

592

:

questions I want to get answered."

593

:

You might want to check for

personal transactions that could

594

:

be business-related or not.

595

:

Mm.

596

:

You might see something that you paid

out for your business that's, that

597

:

you know didn't get in the books.

598

:

You want to review your loan payments.

599

:

Oh, yeah.

600

:

Or you want to review cash transactions.

601

:

Um-

602

:

Erica: Mm

603

:

… Lee: so all of those can help you,

along with those 10 questions.

604

:

Yep.

605

:

They can help you really get

a good feel for your business.

606

:

Mm-hmm.

607

:

And because now you're actually

engaging with financial information,

608

:

instead of simply accumulating

transactions inside of QuickBooks.

609

:

Erica: Yeah, so good.

610

:

Now, let's talk to the person listening

who just went through our 10 plus

611

:

questions and thought, "I don't know.

612

:

I don't know whether we're reconciled.

613

:

I don't know what

accounts receivable says.

614

:

I've never looked at payroll liabilities.

615

:

I don't really understand

the balance sheet.

616

:

I don't know whether the

profit and loss is right."

617

:

What do you want that

person to hear, Papa?

618

:

Lee: I think they need to start somewhere.

619

:

Erica: Yeah.

620

:

Lee: You don't have to fix everything

at once, but you do need to

621

:

begin understanding the financial

information in your business.

622

:

Find out whether the bank accounts

are reconciled, review your

623

:

receivables, look at the balance sheet.

624

:

Mm-hmm.

625

:

Ask questions about things you don't

understand, and get help when you need it.

626

:

Mm-hmm.

627

:

The important thing is not to continue

running your business indefinitely

628

:

without understanding the numbers.

629

:

But, you know, just start.

630

:

Erica: Just start.

631

:

Just-

632

:

Lee: Take it…

633

:

Yeah, just put a stake in the ground.

634

:

Right.

635

:

And say, "I'm gonna work

on this this month."

636

:

Erica: Mm-hmm.

637

:

You know, I think that's

exactly right, Papa.

638

:

This isn't supposed to

be a shame checklist.

639

:

This is not, "You're doing

things wrong, people."

640

:

No, it's a clarity checklist.

641

:

It's showing you where you understand

your QuickBooks and where you don't.

642

:

Lee: Exactly.

643

:

Erica: Yeah, and I want to zoom out,

because we've really built something

644

:

over these last several episodes.

645

:

We started with the chart of accounts.

646

:

That's the structure

underneath QuickBooks.

647

:

Then we talked about reconciliation.

648

:

Does QuickBooks actually

agree with the bank?

649

:

Then we talked about adjustments.

650

:

When something is wrong, how

do you fix it appropriately?

651

:

Then payroll.

652

:

Why isn't payroll simply one expense?

653

:

Then we started looking at costs

and how profit can disappear

654

:

when nobody is paying attention.

655

:

And now we've gotten to the

question, can you trust the whole

656

:

picture that you're looking at?

657

:

And I think this is where QuickBooks

stops becoming bookkeeping software and

658

:

starts becoming a business management

system, almost a partner in your business

659

:

that can help you- Mm-hmm … really

make the right decisions and make

660

:

the right choices for your business.

661

:

Lee: I think that's exactly right.

662

:

Erica: Absolutely.

663

:

Okay, so my big takeaway

from today is this, Papa.

664

:

You don't need perfect QuickBooks,

you need trustworthy QuickBooks.

665

:

Trustworthy means the bank

accounts are being reconciled.

666

:

Your customer and vendor

balances make sense.

667

:

Your liabilities aren't full

of things nobody understands.

668

:

Your profit and loss passes

the common sense test.

669

:

You're watching what's changing, and

when something doesn't make sense, you

670

:

investigate it instead of ignoring it.

671

:

But most importantly, you can use

the information to make decisions

672

:

because if QuickBooks is only where

transactions go to die until tax

673

:

season, we're missing most of the

value of QuickBooks, aren't we, Papa?

674

:

Lee: Yeah, absolutely you are.

675

:

Erica: Okay, you guys.

676

:

So here's your challenge for this week.

677

:

Set aside 30 minutes.

678

:

Doesn't have to be 30 minutes every day.

679

:

Just set aside 30 minutes in your work

week and open QuickBooks And go through

680

:

the 10 plus questions we just gave you.

681

:

You don't need to fix everything.

682

:

You're simply answering

yes, no, or I don't know.

683

:

And I actually think I don't know may be

the most valuable answer because now you

684

:

know where your next question needs to be.

685

:

And if you're listening to this episode

and thinking, "This is exactly my problem.

686

:

I use QuickBooks, but I don't

really know whether I can trust

687

:

it," I don't want you to just close

this episode and forget about it.

688

:

Take the next step.

689

:

We created the QuickBooks Clarity

Scorecard specifically to help business

690

:

owners figure out where they stand.

691

:

It walks you through the major areas

of your QuickBooks and helps you

692

:

identify where things are working,

whether there may be gaps, and

693

:

where you need more clarity, and

it's completely free, you guys.

694

:

Completely free, and you'll find it

in the link in our show notes, or

695

:

you can head over to our website,

which is leedavisandcompany.com,

696

:

and look for the QuickBooks

Clarity Scorecard.

697

:

Take the assessment.

698

:

Don't guess about it whether

your QuickBooks is healthy.

699

:

Find out for sure because the sooner

you know where the gaps are, the

700

:

sooner you can start fixing them.

701

:

And Papa, I think this episode probably

explains better than almost any

702

:

episode we've done why we're building

the QuickBooks training because we've

703

:

been working on that behind the scenes

because somebody can hire a bookkeeper

704

:

to enter transactions, or they can hire

an accountant to prepare a tax return.

705

:

But I still think the business owner

needs to understand what their numbers

706

:

are telling them, shouldn't they, Papa?

707

:

Lee: Absolutely.

708

:

The owner needs enough understanding to

ask good questions and use the financial

709

:

information to manage their business.

710

:

Erica: And that's really what

we're building towards, you guys.

711

:

Not memorize every QuickBooks

button, not become an accountant,

712

:

but understand your QuickBooks well

enough that you can trust your numbers

713

:

and use them to run your business.

714

:

We're working on something much more

comprehensive around exactly what

715

:

that idea is, and we'll be sharing

more about it as we get closer.

716

:

But if that sounds like something you

need, start with the Clarity Scorecard.

717

:

That's your first step.

718

:

And we've got a lot more

coming on the podcast.

719

:

We're going to continue moving beyond

simply where to click in QuickBooks

720

:

and spend more time talking about how

you actually use the information in

721

:

QuickBooks to make better decisions.

722

:

So if you've been following along with

this series, make sure you're subscribed.

723

:

There's a lot more we're going to

build on from this point going forward.

724

:

And Papa, if you could leave our

business owners listening today with

725

:

one question to ask every single

month, what would it be, Papa?

726

:

Lee: Guess, do I understand these

numbers well enough to trust them?

727

:

And if the answer is

no, then find out why.

728

:

Erica: Yeah, I love that

because ultimately, that is

729

:

what QuickBooks should give you.

730

:

Not more confusion, not a

pile of transactions, clarity.

731

:

And clarity gives you the

confidence to make better decisions.

732

:

If today's episode was helpful, share

it with another business owner who uses

733

:

QuickBooks, but isn't quite sure whether

they can trust what they're seeing.

734

:

Make sure you're subscribed to QuickBooks

Mastery for Small Business Success.

735

:

And you guys, we would love to

know your feedback on this podcast.

736

:

We would love to hear from you.

737

:

And most importantly, go grab the free

QuickBooks Clarity Scorecard in the

738

:

show notes or at leedavisoncompany.com.

739

:

Don't just assume your

QuickBooks is working.

740

:

Find out whether you can trust it.

741

:

Thanks for hanging out with us today.

742

:

It was so, so much fun.

743

:

Great job, Papa.

744

:

You have embraced this whole podcast

thing, and I think it's awesome.

745

:

Lee: Yeah.

746

:

Well, thank you, Erica.

747

:

Great job today.

748

:

Erica: Yeah, absolutely.

749

:

Okay, we'll see you next week.

750

:

Bye for now.

751

:

Thanks for tuning in to QuickBooks

Mastery for Small Business Success.

752

:

Lee: If you enjoyed this episode,

hit subscribe and stay connected

753

:

with us at leedavisoncompany.com.

754

:

Erica: We know QuickBooks can

be overwhelming, so we've put

755

:

together a free resource to

help you get started right away.

756

:

Grab your copy at leedavisoncompany.com,

757

:

and when you do, you'll also get

access to our VIP email list, where

758

:

we share exclusive QuickBooks tips,

business strategies, and support.

759

:

Lee: And we'd love to hear from you.

760

:

If you have a QuickBooks question

or a business challenge, send it our

761

:

way at [email protected].

762

:

We might feature it in a future episode.

763

:

Erica: We're here to help you

simplify QuickBooks and grow your

764

:

business, one step at a time.

765

:

See you next time.

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