Journal Entries, Transfers, Deposits…stop the insanity!
Journal Entries, Transfers, Deposits…the best direction.
Do you use journal entries? Are you using the transfer feature to move money from one account to another in your books? Do you deposit money into the bank without an invoice? If so, you may want to stop after you read this article. I certainly advise you do.
A typical day with LIOS tackling your books is auditing companies to make discoveries, improvements, or research an issue that may have arisen. Doing this has certainly opened my eyes to the flaws in report-results within your books. This article is to help you make it easier in the future, should something go wrong.
One that has some minor impact on special reports is a Transfer. The main reason I do not recommend using transfers is the lack of details being able to reference (aside from the “memo” line). You can’t select a customer or vendor to which the transfer may pertain. Instead, the best practice is to write a check from one bank account and select the deposit-account in the bottom of the check. In a check, you can reference all sorts of details that can later be discoverable when doing reports. It also can be seen in the vendor or customer list screen.
If you are depositing money into the bank, make sure that you create some document to apply that payment, even if you hadn’t before, even if its not in reference to a customer (like an Owners Equity deposit). This again comes back to details, details, details. Remember, memos are not “searchable” or “report”able. When you use invoices and bills, you can apply as much details as you want which will show up in other areas of your books.
Lastly, Journal Entries which really should be a “last resort” kind of thing. While Journal Entries certainly show up in P&Ls and balance sheets, there are some customized reports that these journal entries won’t figure or factor.
Unfortunately, because these reports are “customized”, I cannot reference those reports to you. What I can say is that in my experience, they have failed to show up, cause numbers to be off and harder to find the details I need when auditing a company. It’s in your best and future interest to avoid these. Use other means to get those details in your books, yes, even if it’s the “long way around”.
The best thing you can do for the future of your company is to ensure that you do as much detailing as you can. Utilize every aspect of invoices, bills, checks, etc.
by Angi Ingalls, Lost In Office Space