Automatic Bank Feeds in QuickBooks Online

There’s a trend among some users of QBO to consider automatic bank feeds as a way to eliminate reconciling of the accounts. This is wrong, so wrong, and I’d like to tell you why.

1. You can’t trust them. They work well, when they’re working, but too often I see bank activity downloaded into QBO that leaves out transactions.

2. The automatic features in QBO make for simple use, but if you just accept all transactions as they download, there’s the potential for misclassification. For example, QBO will remember what the previous expense was for a vendor, and will fill it in. However, that may not be the correct expense at all.

3. Income downloading is especially tricky if you’re unfamiliar with it. If you issue invoices, you should be receiving payments from the Transactions menu. If you don’t, and QBO downloads those deposits, it won’t have anything to match to. Many times I’ve found that these transactions have ended up as Income, when there’s already an invoice for it. This will quickly double your income, in ways that we don’t want it to double. (We want to double it by increased sales, not by tricking the books.)

4. If you have multiple deposit items on a deposit, such as several checks, QBO will need you to manually match those deposits to the received payments. For example, if you receive large numbers of merchant deposits, QBO will enter those as income if you don’t match them. I will often just exclude the credit card deposits because if everything else is done properly, they’re already accounted for. If they match, even better.

5. If you have many transfers between bank accounts, there’s a high likelihood QBO will be so confused that these will not end up in the right place without intervention. Often these transactions will show up as an Other Asset, or an Uncategorized Expense, and if you have multiple accounts with transfers between them, you must verify the transactions before accepting it into your books.

6. And last of all, you can’t trust them. I know I said this before, but it’s such an important detail. Even with all the technology working in our favor, we need to verify. We need to reconcile. We need to look at what’s showing up, and we need to make sure it’s properly classified. Otherwise, we might as well be entering random numbers.



There’s a reason us accountants do the things we do, and it’s not because we like to fill our time with busywork. It’s because verifying and reconciling are the best methods we have to ensure that every transaction in our books is proper, classified correctly, and is placed where it belongs. It may seem time consuming, but it takes twice as long to fix past errors than it does to get them right the first time. More time = more money, and there’s much to be said for having accurate financials when you need them.

Clearing and Suspense Accounts

What are these? There can be a lot of confusion about how to use a clearing account, or why. A clearing account may be referred to as a suspense account, or an Ask Accountant account, or an Ask Client account. On your own books, you can call these accounts whatever you wish. There are really two different ideas around these terms:

A SUSPENSE account is often used as a temporary holding account for transactions, such as when we have a question about what a transaction is for, and therefore which account it should go in, or we need to talk to the client about it. (Or your bookkeeper, if you’re on the other side.) QB will often call these Uncategorized Income or Uncategorized Expense, or Ask My Accountant, depending on the QB version. At year end, this account should be at zero. Even better is to have this account zeroed out at every month-end close.

If I’m entering transactions for a client and have only check numbers and amounts from a bank statement, I’ll put these transactions into a suspense account until I can get the information on who the checks were written to. I’d rather have the amounts entered and be able to reconcile and fill in the blanks later. It’s faster, for me, than waiting for all the information.

A CLEARING account is used when we’re cleaning up accounts but due to the type of transactions, we need an account to run transactions through. For example, if you have barter transactions we would use the clearing account to post the income and expense transactions. A clearing account is also very useful to clear AR and AP transactions. Since QB does not allow multiple AR or AP accounts in one journal entry, using a clearing account to post to can be a lifesaver. It’s a valid work-around for some of the limitations we run into when using software.

The difference in the Suspense and Clearing accounts is that the suspense account transactions will be changed to their proper account, leaving no transactions in this account. In a clearing account, however, the transactions will remain in the account but the account balance will be zero at the end of the reporting period. QB uses Opening Balance Equity as a clearing account when setting up a new file.

Most of us who do this every day have our own methods for where we want to put these accounts in the chart of accounts, and what we call them. Some of us like to keep them as an expense or income account, and as long as the account is zero at the end of the reporting period, that’s fine. Others like to put them on the balance sheet, so they’re very obvious. These accounts should not be on the financial statements because they don’t tell us any useful information, except that there issues that need to be resolved.

What is the Cloud?

Follow my blog here

And what does it mean when your business is in the cloud?

We keep hearing about the cloud, as if it’s some sort of amorphous thing that’s hanging out there. I’ve heard people use the term who aren’t exactly sure what it means, but it sounds like something they should know about. Cloud computing encompasses a wide range of services, but I’ve enough to do with focusing on accounting programs, so I’ll stick to that.

If you do your accounting “in the cloud,” your data is somewhere off-site. Where off-site depends on what sort of cloud based solutions you’re using. There are two main categories for accounting:

Hosted solutions: With a hosted solution, you use the same accounting program you use now, except a hosting company keeps the file on its servers, and you access the program through the host. This means you can access your QB file from any computer, and you can share the data file with other users. One of the drawbacks to this method is that you must pay for the hosting, and for a QuickBooks license for each user. Hosting per user per month starts around $50 and up. However, it’s the same program you’re used to using, whether it’s QuickBooks or Peachtree or another software. It works just like your desktop version because it IS the desktop version.

What other drawbacks are there? A plus is that should your servers go down, or your computer system, your data is still safe with the host. But if the Internet goes down, you can’t access it.

Hosting is a good solution if you want the same functionality as you have with your desktop software, and if you have multiple users at multiple locations, or if you just want your data somewhere else.

If you have QuickBooks, you need to use a QuickBooks Authorized Host. There are several that are highly rated, and make sure you do your homework first.

A different solution to hosting a desktop program is moving to an online solution. QuickBooks has QuickBooks Online, which is not at all like working with QuickBooks desktop. The interface is different, and the apps that work with it are different. The marketplace is growing for online accounting solutions, and all providers are improving their software on an ongoing basis. The cost for several users can be less than one hosting license, depending on which program you select. QuickBooks Online has several versions, with the lowest cost one not much more than a check register. Other online accounting programs include Xero, Wave, Monchilla, Less Accounting, and Kashoo (which I’ve heard has been bought by Paychex). I haven’t yet found one that can do as much as QuickBooks Online, but I’m always looking.

An advantage to an online program is that you don’t have to worry about upgrades and keeping your software healthy – it’s all included in the monthly cost. You and multiple users have access from multiple locations, making collaboration easier.

A drawback is that, again, if the Internet goes down, you’re out of luck. There are times when people have not been able to login to QuickBooks Online, so it does happen. My experience has been that it happens infrequently. If you need to process payroll and you’ve waited until the last minute, you may have a problem.

Something else which may be either a drawback or a plus is that the online solutions will automatically download your bank and credit card transactions daily. This is a drawback if you’d rather enter them yourself, and a plus if you’d rather just classify the transactions that come in. Accounts still need to be reconciled monthly however, which I’ve found to be a common misperception. Don’t trust that just because it’s downloading that everything is correct – transactions are missed, things happen, and in accounting we like to reconcile everything to ensure nothing is missing.

Online accounting, whether hosted or an online solution, has benefits and disadvantages, like anything else. It works for me and many of my clients because we can work on the same file at the same time, which reduces my time and therefore their costs.



While QuickBooks desktop still has the most features, and I use it daily, the online solutions are making strides in improving their products. If it’s not right for you now, it may be later, or you may want to keep using your desktop solution. You have the freedom to choose what works best for you.

A Cloud Journey

First in a series about Cloud Accounting

CBS Website


I started my business in a haze of excitement and enthusiasm, unprepared but having no choice but to make it work. There was no cloud then, other than the type in the sky. Living in the Pacific Northwest, we had more than a few of those, and personally, I had a few dark clouds as well.

To take care of my clients, I traveled. I drove from one client to the next, often bringing back boxes of statements and receipts to my office, where I would attempt to put them in some kind of order and enter them into my QB Desktop software. Sometimes clients wanted me to work at their office, such as the weird guy out in the country who I eventually fired for inappropriate behavior. Sometimes clients wanted to stand over me and watch what I was doing instead of tending to their own business. After a series of increasingly responsible corporate jobs I found this both insulting and time consuming – I can work so much faster when I’m not being surveilled.

Sometimes clients wanted me in their office, in a separate room, where I would use generous amounts of Red Bull and chocolate to keep myself awake while I tried to figure out why the CPA changed my ending bank balances. (Has anyone else experienced this? CPA’s who change the bank amounts to coincide with their year-end ideas? And then never reversed their entries?)

Not only was this method of working annoying, it was time consuming. Clients weren’t always right around the corner from me, and since I was starting out and needed the money, I took every job that came along, whether it was a good fit or not. So I drove, a lot. I drove into downtown Seattle, where at least the client paid for my parking, and I drove down the 405 to Bellevue at rush hour, and I drove to Gold Bar, which is rather like driving from Earth to Mars.

Sometimes I would pull over to the side of the road and take a nap.

And then I started hearing about online applications that would do everything we could do with the desktop. A NetSuite rep met with me, and wanted me to promote their software. But I didn’t understand how it worked, and I didn’t have time to learn anything new, so I let it pass by.

I kept working like I had been.

Then I became accounting manager for a web-based accounting firm, and I found I never had to go anywhere. Eight hours a day, every day, I sat at my desk and directed activities, opened and closed numerous QB and Peachtree files we hosted, even a few programs I’d never heard of, and hoped never to again. My staff was spread out across the U.S., and so were our clients. We could be anywhere we were needed. Our clients were given scanners so they could easily upload documents, and I was sold.

It wasn’t perfect, partly because I was a manager and glued to my desk for the work day, but it was definitely an improvement. There was no traffic, no wasted time, no watching the cost of gas creep up until I wondered if it was worth it. There was just the work, available at all times.

And there’s one of the problems with working in the cloud: the work is always there, and, if you’re anything like me, sometimes you can’t resist logging in and doing it, even when I should be doing other things, things that would indicate I’m a well-rounded person, and not a workaholic.

I’m not a particularly well-rounded person, but neither am I a workaholic.



NEXT: What is the Cloud?

QB Tips - Don't Delete Users

There is a theory that if you CAN do something, there's no reason why you shouldn't. This is a bad theory, and sometimes can be harmful, especially when you're dealing with QuickBooks.

QuickBooks allows you to delete users. You have a user, you decide to fire said user, you go in to your QB file and it has an option to delete said user. So you select it.

Why wouldn't you?

You wouldn't because it's a bad idea. 

You can't delete accounts that have transactions in them, nor can you delete vendors or customers or employees with transactions. 

So why should you be able to delete a user? If the user has transactions, and you delete the user, those transactions will have missing links. When we have missing links, we're in an excellent position to end up with data corruption.

The best solution? Just don't do it. Change their password, and leave them there, with all the transaction history linked to that user. 

Intuit QuickBooks Mobile Changes

This just in: This will no longer be available on the web/browser, and will be an Android/iPhone app only.

More info here

Don't know why they do these things . . .

Why I don’t want to see Miscellaneous on your P&L

It’s not that I have anything against Miscellaneous. My life so far has been a collection of Miscellany. However, it’s not a tax deductible expense.

Look, I’ve seen a lot of tax returns. And nowhere on a tax return is there a line item for Miscellaneous. Or Uncategorized Expenses, the default QB account. It doesn’t exist because it doesn’t mean anything. As a friend of mine just said, “I’ve never gone into a store and bought miscellaneous.” (Thanks, Lori.)

Is the purchase supplies? Materials, office supplies, franchise fees, burritos for the overnight crew, cleaning supplies, fixtures, or what you have? Everything fits somewhere. If it doesn’t, is it really a business expense? And no, those tickets you bought to see Moby don’t count either, don’t think you can slip them under Miscellaneous and no one will notice.

This isn’t to say you can’t create new accounts for your expenses that don’t seem to fit anywhere. Of course you can – assuming they’re legit business expenses that you can support during an audit. But we want to be clear about what the expense is, and we want them to fit in a category that can help you see on your P&L how you’re doing at any given time, and sticking things in Miscellaneous doesn’t tell you a thing, does it? Except that your business incurred expenses for .  .  . well, who knows what for?  

You can’t run a business effectively with that sort of non-specific thing going on. At year end, I want to look at my P&L and see how much I spent on each category, and if I’m looking at Miscellaneous I’m still wondering, “What did I spend THAT on?” Then I’d have to go back and look. Rather defeats the purpose of doing the bookkeeping in the first place, doesn’t it?

In addition to having clean financials that mean something to you and whoever else has to look at them, there is no place for Miscellaneous on a tax return. This is even more important to you, since we really want to keep the IRS happy.

I recently met with an IRS auditor. You know, the official guys. We had a good time, telling tax jokes and sharing taxpayer stories. Of course, the tax return I handed him didn’t have Miscellaneous on it, or Uncategorized Expense, or anything that wasn’t specific. Since it was pretty clear, we went over franchise fees, just a quick calculation to see if the total could be easily arrived at from sales. And guess what! It was!

But I digress. If there had been a line item for Miscellaneous on there, I’m certain he would have asked for all the receipts. And this is because: Miscellaneous doesn’t mean anything. You might as well say, “yada, yada, yada,” for all the good it’ll do you.

Your bookkeeper’s job is to give you clean books from which clean tax returns can be prepared. If you don’t have a bookkeeper, that doesn’t mean the IRS doesn’t expect clean books just as they would from me.  Keep your books clean, your receipts in order, and your head above water. It takes just a little extra time, and is well worth the effort.

(About those pesky receipts, the kind you can’t see because they fade: Scan them, somehow. You can tape them to a sheet of paper and scan a full sheet. You can get a receipt scanner. You can use something like Concur Breeze, which allows you to scan your receipts when you get them, and it then uploads so you have easy access to categorize them and get them into QB. You can make a copy of them, if you’re into that sort of thing. But don’t count on a pile of faded receipts to keep you out of trouble if someone should come looking.)