The QuickBooks Profit & Loss Report provides a snapshot of your business for a designated period of time. Easy access to the Profit & Loss Report is one of the main benefits to using QuickBooks. With QuickBooks Profit & Loss Reports, you can see if your business is operating at a loss or profit. The report can be run as often as desired to get insight on your business. However, the information you get out of that report is only as good as the information that is entered into QuickBooks.
If there is an error in your reporting, it could be due to some common mistakes listed below. It is always good to double-check your work and with these quick tips, you can find the source of your errors and go about your business. Here are two common areas in which errors can be made:
Net income can be understated (due to expenses being overstated) on the P&L when users create a check using the “Write Checks” feature rather than clicking “Pay Bills” and creating the check in the “Pay Bills” window.
One way to catch this mistake is to look in the Accounts Payable Aging. If you see many old payables due, this is likely where you went wrong.
“Undeposited Funds” is a place to hold funds received so that you can group them together in the same way they would appear on the bank statement. Think of “Undeposited Funds” as your pants pocket: One customer pays you $100 in cash, while another customer pays you with a $200 check. You hold both payments in your pants pocket (or “Undeposited Funds) until you get to the bank. Once you get to the bank, you take both payments out of your pocket (or “Undeposited Funds”) and make one deposit in the amount $300.
The “Undeposited Funds” feature in QuickBooks is often misunderstood. Here is what can go wrong:
Invoices are created and then marked as payment received. This amount then goes in to “Undeposited Funds.”
If this amount is left in “Undeposited Funds” untouched, it will not show up on the bank statement.
At this point, business owners might wonder why the deposit is not on the bank statement since the deposit was, in fact made. To fix this, they might add the deposit to the bank account register.
This creates twice as much income in QuickBooks, thus overstating income and throwing off the Profit & Loss Report.
Here’s how to see if this mistake was made:
If you see a suspicious amount of old deposits in the “Make Deposits” section, this could mean that you made duplicate deposits.
Since the Profit & Loss Report can provide such insight to the heath of your business, you should review this report on a regular basis, whether it is to find the root cause of bookkeeping errors or simply to see the condition of your business.