Archive for December, 2009

Why I Cringe When I See “Reconciliation Discrepancies” in QuickBooks

You’re near the end of a long and busy day, reconciling your bank account in QuickBooks.  You’ve checked off every deposit and check from the bank statement and thought you were done, but the bottom right corner of the reconciliation screen says “Difference: $20.00.” You need to hurry to make it to a dinner appointment, so you click on the “reconcile now” button anyway, and the following box appears:
QuickBooks Reconciliation Discrepancy

QuickBooks Reconciliation Discrepancy

You’ve cleared dozens of transactions totaling several thousand dollars, so a discrepancy of $20 is too small to be worth correcting, right?  So you click on the “enter adjustment” button, QuickBooks automatically creates a $20 transaction to Reconciliation Discrepancies expense, and congratulations, you’re done reconciling! Maybe you just missed recording a $20 bank charge in the books.  In this case, the adjustment for the discrepancy is inconsequential.  However, just because a discrepancy is small, it doesn’t mean it is not worth investigating.  Below are a few examples of what could have caused the discrepancy that might make you glad you looked into it further:
  1. You deposited $20 from a customer in your bank account, but forgot to record it in your books and missed it while reconciling.  The customer gets upset when he/she is invoiced again and claims that the bill was paid, but you have no record of receiving the payment.
  2. A bank error takes $80 out of your account, but the original check was for $60.  In your haste of reconciling, you didn’t catch the difference in the amounts.  If you discover the error, you’ll probably get $20 added back to your account (plus, you’ll score some points with the boss).
  3. You missed an unrecorded $1,000 deposit from a customer and an unrecorded $980 fixed asset purchase.  You might think that missing two large transactions that somehow happen to net out to a small amount would be very unlikely, but I have seen it happen many times!
You never know why reconciliation discrepancies exists.  That’s why I cringe when I see them. When you have a reconciliation discrepancy, you can’t blame the bank or QuickBooks.  You can only blame yourself for making a mistake in the reconciliation process.  You can blame your perfectionist accountant for telling you to start over and do it again, but you might thank your accountant for it later.

Taking Control of my Inbox with E-mail Rules in Outlook

Do you feel in control of your e-mail, or do you feel your e-mail controls you? This question was posed by the instructor in a session about Outlook that I attended at the 2009 AICPA Information Technology Conference.  The large volume of e-mail that I have to process every day certainly makes it hard to control, but I learned a few good e-mail management strategies at the conference that have helped. First, I am starting to use my inbox as a staging area rather than a storage container.  I found that I was not the only one who had this problem.  In the Outlook session, the instructor asked the attendees of the conference how many messages they had in their inboxes.  The answers began low starting at ten, but grew quickly to 2,200!  The inbox should be used much like how you use your mailbox at home where the post office delivers your mail.  It would be silly for me to open my mailbox, read my letters, and then stuff them all back into my mailbox.  So, why do I do this with my e-mail? When I bring my mail in the house, I generally sort it before opening anything.  The ads usually go straight to the trash, the bills accumulate on my desk until I’m ready to pay them all at once, and the magazines go on a table near the sofa.  The same process of sorting and organizing should also be used for e-mail. This process can be automated (to a certain extent) with what are called e-mail rules in Outlook.  I have begun using rules to automatically move e-mail messages to specific folders based on criteria such as the sender’s name and subject.  For example, I receive a large amount of e-mail from the AICPA like the CPA Insider newsletter and e-mails announcing what’s new for CPE.  None of these are what I consider to be junk mail because I want to read them, but they are not time-sensitive and have less importance for getting my attention than say, an e-mail from a client.  I established e-mail rules making anything from the AICPA automatically appear in a subfolder I created called “AICPA” rather than my e-mail inbox. To create a rule in Outlook 2007, click on Mail in the navigation pane, then on the tools menu, click on Rules and Alerts.  A box will appear similar to the one below.  The box below shows my AICPA rule.
Outlook E-mail Rules

Outlook E-mail Rules

E-mail rules have especially helped me with my e-mail on my cell phone.  My inbox on my cell phone syncs only with the inbox in Outlook and not the subfolders, so I am no longer interrupted by the new e-mail notification sound on my phone only to find that the AICPA is offering a new CPE course. I am committing myself to having a clean e-mail inbox for 2010.  How’s that for a new year’s resolution?

My First Lessons about Managing Debt Came from a Video Game

When I was fifteen, I played a computer game that simulates building and operating an amusement park.  The object of the game is to make money by thrilling patrons on the rides, taking care of their basic needs (extra sugar in the sodas), and making them happy enough to empty their pockets on souvenirs. The game begins with enough cash to build a park, but it is all debt financed. The first time I played the game, I paid little attention to the financial side of it.  I just wanted a really cool looking amusement park.  I blew almost all of the cash building a Ferris wheel, an inner tube water ride, and a roller coaster, all of them customized to be as tall, long, and fast as the game permitted. Then, expenses popped up that I wasn’t planning for.  I quickly figured out that my patrons couldn’t find any restrooms.  When I saw smoke coming out from some rides and kids were falling out of them, I had to hire mechanics.  Oh, and I had to hire janitors to clean up after a few kids that must have ridden my extreme roller coaster one too many times. Just when I thought I was making some money, my bank balance was mysteriously drained at the end of every month (a month in the game is about 20 minutes in real life).  After this happened for a few months, I decided to investigate my cash flow problem by looking at my financial statements (imagine that, financial statements in a video game – sounds like real fun) and found that the disappearing cash had gone to pay interest on the debt. Disappointed that my amusement park was headed to bankruptcy, I gave up on it and started a new one.  This time, I immediately paid the debt down to a minimal amount that I needed to frugally build my park with cheap rides like bumper cars and a merry-go-round.  I paid off the debt as soon as I was able to, and bought bigger rides when I had the cash to pay for them.  Without the burden of interest, I was able to slowly build a bigger and more profitable park than I had the first time. I’m grateful that I learned the importance of avoiding excessive debt and spending through a video game, rather than a real-life scenario. Now, I could talk about when I played SimCity and hiked the tax rates, but I’ll save that for another blog post.