Accounting System Input Determines Accounting System Output

The first thing I learned about computers back in the days when programs were written on punch cards, was garbage in garbage out. This old adage is even truer today than it was when I learned over 40 years ago.

I was reminded of this fact the other day when a new client gave me access to his QuickBooks files and told me it was up to date. The problem was all of the data had been directly imported from his bank account. Most of the data was for items paid or receive through Zelle or using a business debit card. What was missing was the name of the person or business he paid, along with exactly what was paid for.

Without this information it was impossible to tell what was revenue and hence income for tax purposes and what were business expenses, along with how they should be classified for tax filing. Worse yet while all bank transactions were reported and we have a record of anything that went into or came out of the bank account, we had no way of know if any unauthorized transactions had taken place.

In today’s world we see fraudulent transactions in bank accounts on a weekly basis when we reconcile our client’s bank accounts. This has led us to help our clients recover tens of thousands of dollars for their banks.

There is a right way and a wrong way to use an accounting system. QuickBooks and other software are nothing more or less than accounting systems and just like the old adage if what you put in or import is garbage that when you get out will also be garbage (and of very little value).

Follow us to learn more about the proper use of accounting systems in a future post.