Setting up QuickBooks takes an afternoon. Fixing a bad setup takes considerably longer, and most of the damage is done in the first week without anyone noticing.
Here’s what goes wrong most often.
Running personal money through the business account
This is the most common one by far.
You open the LLC, the business account isn’t funded yet, so you put a few things on your personal card. Then a personal expense goes on the business card because it was in your hand. It feels harmless in month one.
By month twelve, nobody can tell which is which without going line by line, and separating your business from your personal spending is the entire point of having an LLC in the first place.
Separate accounts from day one. When you put your own money in, record it as an owner contribution. When you take money out, record it as an owner draw. Both are normal. Neither is income or an expense.
Treating owner draws as an expense
Paying yourself out of a single-member LLC is a draw. It doesn’t reduce your profit and it doesn’t belong in your expenses.
One exception worth knowing. If your LLC has elected S corporation treatment, you have to pay yourself real wages through payroll, and those wages are a genuine business expense. That election is something you file on purpose, so if you are not sure whether you did it, your tax preparer can tell you in a minute.
Categorize draws as expenses and your business looks less profitable than it is, which distorts every decision you make and creates a mess your tax preparer has to unwind.
Connecting every account and then not reviewing anything
Bank feeds are helpful and they are not automatic bookkeeping. QuickBooks guesses at categories, and it guesses badly on anything unusual.
Accepting the suggestions without reading them is how businesses end up with a year of transactions filed under whatever the software felt like. Worse, once accepted they look reviewed, so nobody goes back.
Building a chart of accounts with fifty categories
New owners often create a category for everything. Twelve months later there are three near-identical accounts and no report that means anything.
Start with the defaults. Add a category at the point you need to see that number on its own.
Recording a loan payment as one expense
A loan payment is two things: interest, which is an expense, and principal, which pays down what you owe.
Book the whole payment as an expense and you overstate your costs and leave a loan balance on your books that doesn’t go down.
Ignoring the opening balance
When you connect an account, QuickBooks needs to know where it started. Get this wrong, or let it default, and your account won’t reconcile no matter how correct everything after it is.
This is the most common reason a new file won’t balance, and it’s frustrating to chase later.
Skipping it because the account is new
“The account is new, there’s nothing to check.” Then it’s six months old and nobody has ever verified it against a statement.
Reconcile from month one. It takes a few minutes when there are twenty transactions, and it builds the habit while it’s easy.
If you have not set it up yet
Every mistake above happens during setup, which means the cheapest time to get this right is before there is anything to undo. If you would rather not learn all of this on your own file, Clean Start Setup is a one-time $499 build: I create your QuickBooks company from scratch, matched to how your business works, and hand it back with a written guide so you can run it yourself from there.
See how Clean Start Setup worksIf it’s already messy
None of this is a disaster and it’s all fixable. Fixing it early is a smaller job than fixing it after a year, because there is less to unwind.
If you want to know how yours looks, the free 12-question quiz takes about two minutes and gives you a clear answer.
Take the free Books Health Quiz