You rely on QuickBooks to tell you the truth about your business. But the reports are only as good as what has been entered, and small problems compound quietly. A neglected bank feed or a few miscoded transactions can leave your profit and loss statement wrong for months before anyone notices.
These are five red flags we see again and again in small business files. You can check for most of them yourself in about half an hour.
1. Transactions piling up in the bank feed
- The red flag
- A long "For Review" list, or a bank account that was last reconciled a long time ago.
- Why it matters
- Anything sitting in the feed has not been recorded properly. Your profit and loss statement is incomplete, so expenses may be missing (making profit look higher than it is) or income may be missing (making it look lower). Either way, decisions and tax estimates are being made on numbers that are wrong.
- The fix
- Clear the feed on a regular schedule, weekly if you can. Match each feed item to an existing entry where one exists rather than adding a duplicate. Then reconcile every bank and card account to its statement each month, line by line, until the difference is exactly $0.00.
2. Negative balances on the balance sheet
- The red flag
- A negative credit card balance, a negative payroll liability, or a negative Undeposited Funds balance on your balance sheet.
- Why it matters
- A negative balance in these accounts is a sign that something was recorded twice, recorded in the wrong place, or never matched to what it belongs to. The most common causes are credit card payments coded as expenses instead of transfers, customer payments not matched to the invoice they pay, and deposits that were never linked to the payments inside them.
- The fix
- Open the transaction detail for that one account and look at the most recent entries first. Make sure payments are linked to the bills or invoices they settle, and that money moving between your own accounts is recorded as a transfer, not as income or an expense.
3. Personal and business spending mixed together
- The red flag
- Personal charges on the business card or account, or business costs paid from a personal account with no record of it.
- Why it matters
- Mixing the two makes your profit look lower than it is and makes your deductions harder to defend if they are ever questioned. For an LLC or corporation, treating the business account like a personal one can also weaken the liability protection the entity is supposed to give you. Courts look at many factors, but commingling is a common one.
- The fix
- Keep separate business and personal accounts and cards. If a personal expense was paid from the business, record it as an owner draw or distribution rather than an operating expense. How it is recorded depends on your entity type, so ask your CPA which treatment applies to you.
4. Invoices left unpaid
- The red flag
- A large amount of invoices more than 60 days old.
- Why it matters
- Profit on an accrual basis report counts income when you invoice, not when you are paid, so a report can look strong while cash is short. Whether you owe tax on income you have not collected depends on your tax accounting method: cash-basis taxpayers report income when it is received, accrual-basis taxpayers when it is earned. Many small businesses use the cash method for taxes, but you should confirm which one you use.
- The fix
- Review the Aged Receivables report weekly. Set up reminders for overdue invoices, for example at 7, 14 and 30 days past due; QuickBooks Online and most invoicing tools can send these automatically. For invoices that are not going to be paid, decide whether to escalate or write them off, rather than leaving them on the books.
5. Growing "Uncategorized" and "Ask My Accountant" balances
- The red flag
- Any of these accounts with a balance that grows month after month.
- Why it matters
- Your reports cannot tell you where the money went, and your accountant has to sort it out at tax time. Expenses that cannot be tied to a category are harder to support as deductions, and may be reclassified by whoever prepares your return.
- The fix
- Review these accounts every month and move each item to the right category. For vendors that appear repeatedly, set up a bank rule so future transactions are categorized automatically. The goal is to bring these accounts to zero, or to a short list of items you are actively waiting on an answer for.
A quick way to check today
- Open the bank feed and count what is waiting for review.
- Run the Balance Sheet for today and scan for any negative amounts.
- Run the Profit and Loss for last month and look at the size of the uncategorized lines.
- Run the Aged Receivables report and total what is over 60 days.
- Check the date your accounts were last reconciled.
If two or more of those turn up something, your books are likely costing you accuracy, and probably money.
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