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QBO Bank Feed
OK so after many years of keeping this largely to myself, I have to ask - what is the point of a bank feed? We have numerous clients where the accounting records consist of nothing more than what ends up on the bank statement. The bank balance is miraculously reconciled to the statement each month. Some clients enter some, but not all transactions, so that leads to transactions being matched. Other clients do a pretty good job of using the memo line to describe a transaction. What if we end up accepting the bank feed entry? Does the thoughtfully-written memo disappear into the ether?
My employer thinks I have a closed mind over this (and other) topic. He wishes to be more than a tax shop and to sell added value services to clients. I have tried to explain to him that I do not understand why relying on the bank feed facilitates that (which is what provoked the closed mind comment, I think). It seems to me that if a client desires quality information, it is just as easy to get into a regular pattern of posting to the accounting records and doing a proper reconciliation.
I am working through the QBO certification, in the hope it will give me a better understanding of the software. So maybe I just haven't learnt why bank feeds are important. Can anyone enlighten me, please? I should mention that I learned accounting at high school in Scotland using pen and paper and the first few years of my working life were with manual systems.
I haven't worked with QBO bank feeds, but I imagine they work the same as desktop.
The point of them is to eliminate manual keypunching, pure and simple. If someone enters all their transactions manually, great, but look at all the time spent, and the possibility of typos and other errors, which hopefully will be caught in the reconciliation process.
The "rules" that you can teach to Quickbooks for processing bank feeds can make data entry very easy. Based on the info downloaded, the transaction can be assigned a payee and account automatically, and of course the date and amount are also captured.
re: matching. If the transaction has already been entered, usually QB can match the import data to the existing transaction and then it will skip the import for that transaction (so no, it won't overwrite the memo field). So, you can effectively use bank feeds in a hybrid fashion (part manual entry, part auto download).
For example, I use QB for my own personal financials. I manually enter the "big" transacts as I make them, but I would be bored mindless if I had to manually enter every grocery store and gas station transaction by hand, and I probably wouldn't do it in detail. Downloads makes very quick work of that.
For several decades last century, I had my own double entry bookkeeping system (written in the venerable R:base system, a competitor of dBase back in the day). I collected all my receipts and then once a week or so had to keypunch them in. I'd never want to go back to doing that again, I regret the hours of my life I wasted doing it.
The thing about bank feeds is they are excellent when they work properly AND they are being managed by someone that knows what the heck they are doing. They become an absolute nightmare when the opposite is true. I use bank feeds for my personal and business accounting, but really dislike seeing clients use them in almost every case. Why? They create problems by not paying sufficient attention to the account activity. Worse, unlike QBD, QBO will automatically create adjusting entries to force a reconciliation and those entries get posted to an income statement expense account called "Reconciliation Discrepancies." Sure, they should be cleared out, but no one ever does. Intuit does an excellent job of promoting terrible bookkeeping by allowing everyone with an ability to buy software to think "I got this."
Back to a scenario where the feeds work properly and there is a brain attached to the arm moving the mouse. If a transaction is already entered, it will typically automatically match up and the bank feed transaction is disregarded. Sometimes, you need to look for an existing transaction to match up, such as if it was posted to wrong account or dollar amount is off. Also, if it is a recurring transaction and a rule has been created, you will be able to tell when that rule has been applied, but it takes a look of the eye to pay attention and notice, because sometimes the rules end up being overridden by a click-happy user, or no longer applicable.
Now let me give you an example of when I HATE bank feeds, or any automatic feeds into an accounting system, when not done routinely by someone that understands what to look for and why. I have a client who relies on their POS and merchant processor feeds to automatically post sales transactions to QBO, and bank feeds for three bank accounts and two credit cards. During 2018 (and likely 2017, but that is not my concern at the moment), easily over half of the transactions that are on the bank statements are completely missing from QBO. They either never made it into QBO through the feeds, or were deleted (former is likely culprit, which I have seen happen many times). Deposits are not matching up, and instead just end up sitting in undeposited funds for perpetuity.
Another issue is the banks themselves. Some support QBO, but not QBD. Some charge for a QBD feed but not for a QBO feed. There is no consistency, and banks also update their systems with no regard for what customers will face when their feeds are broken. What happens more often than not, in my experience, is the customer(s) create a mess trying to resolve a broken feed rather than getting their accountant involved where it can be kept as clean as possible.
When done correctly and routinely used, they are an absolute life saver in terms of efficiency. When done in the hands of someone that does not understand how and why they can create issues, they can be a nightmare. I encourage bank feeds when used by competent bookkeepers and accountants, yet highly discourage them being used by clients unless they have a solid grasp of bookkeeping, at minimum. Bank feeds make bookkeeping/accounting appear too simple, and people tend to then treat it as such and miss critical steps, INCLUDING actually reconciling the accounts.
Intuit does an excellent job of promoting terrible bookkeeping by allowing everyone with an ability to buy software to think "I got this."
About the only good thing is the account called "Ask My Accountant". At least I can find all those entries, rather than posting/hiding them somewhere in the GL.
I agree 100% with the entire previous post! Reconciliation discrepancies with more than $15,000 per month (really?? cash is off by $15,000 and you don't know why???). A gazillion vendor names such as "transfer to XXX 112018", "transfer to XXX 113018", etc. Ridiculous! Makes 1099 reporting a nightmare. And again, the undeposited funds account. Nightmare!
Thanks for the comments. My employer outsources bookkeeping to India and, today, we have told them not to do bank feeds for our largest client. We had duplicate entries for a very large credit card bill for almost all of 2018 which buggered up the numbers for state extensions due today. They also dumped about $300,000 in expenses straight into Ask My Accountant, which they were specifically told not to do.
Cornerstone, you articulated many of my concerns. Your last paragraph, in particular, resonates with me.
I just read through this thread. I have a client using an industry specific software. Earlier this year the software company started offering bank download capability, but at least the client has to sign up for it, it's not automatic. They use PO's and proposals extensively and all of their transactions relate back to those two processes. Entering data in the program is not simply a matter of debit or credit something, almost without exception all transactions are tied to either a PO or a proposal. The bank just can't do that and I discouraged them from allowing the automatic bank feed for that reason. I can't imagine how much time would be wasted trying to correct all of that work every month. Sometimes when there is an error it's so difficult to get it fixed, trying to do that with a high percentage of the transactions would be a horrible nightmare. Usually once a new process like a bank download has been implemented, there is no going back, you can't change your mind.
I worked with a large consumer goods company that, like your client, almost everything tied back to sales orders and purchase orders. Anything concerning bank accounts was manually entered and reconciled on a daily basis, too much volume to deal with otherwise. Bank feeds would have been an absolute nightmare, though they have gotten better in terms of what you can do with them.
I 100% discourage use of bank feeds by anyone except those that truly understand accounting and how to correct issues that those feeds may create.
"When done correctly and routinely used, they are an absolute life saver in terms of efficiency. When done in the hands of someone that does not understand how and why they can create issues, they can be a nightmare."
Completely agree. But unfortunately, it's like driving an automobile -- probably a third or more of the car-driving population has no business being behind a steering wheel, yet they think they know what they are doing, and in order to provide them with the illusion of increased efficiency, the rest of us must suffer the consequences.
This topic strikes a nerve with me. I have always maintained the crux of the problem for most clients is not the mechanics of the program (i.e., entering invoices, etc.) but lack of accounting knowledge. Some clients seem to think any idiot should be able to buy the program and be up and running - like the old Quickbooks commercial "I have QuickBooks now I can fire my accountant". And that is exactly the issue; just because you can generate invoices and pay bills doesn't mean you know accounting. If the set-up is wrong, transactions are categorized incorrectly then guess what your taxes will be wrong, any financials provided to internal and external parties will be wrong, your cash flow won't be accurate and so on. S
Most of my clients under 40 don't know what a bank reconciliation is and of course they simply accept the bank feeds transactions.
The other issue with the bank feeds arises when the program is used for job costing. Transactions coded with items can't be matched with the downloaded transactions from the bank. So yes that means entering the transactions by hand.
Know what you don't know and find someone who does and get on with the business of running your business...
Know what you don't know and find someone who does and get on with the business of running your business...
DING DING! That is the fundamental issue. Overall, people do not want to admit what they do not know. They do not want to focus on their core competencies, even if it means they can succeed at a far higher rate by doing so and leveraging the core competencies of others.
In some ways, I have found it lucrative to just educate my clients about what they do not know. They appreciate that I am not trying to take over the work, and I earn money in the process. Eventually we reach an equilibrium where they are doing what I need them to do (and properly), I do what they need me to do, and it just "works."
dsocpa wrote:This topic strikes a nerve with me. I have always maintained the crux of the problem for most clients is not the mechanics of the program (i.e., entering invoices, etc.) but lack of accounting knowledge. Some clients seem to think any idiot should be able to buy the program and be up and running...
Yes, that is Intuit's sales pitch: "Accounting is simple. The less you know the easier it is." Most clients seem to be pretty receptive when I tell them that buying the program does not give them accounting knowledge. I also had problems with especially credit card feeds. About a third of the transactions was missing. Bank feeds can create time consuming problems. One client paid invoices but slightly different amounts. Now we have to adjust all the invoices to match them to the payments. QBO is quite inflexible. Accounting problems we can solve have been replaced by software problems we can't always solve. QBO and bank feeds works best for a small business, cash basis, who doesn't use it for invoicing and vendor bills.
Now add merchant accounts into the mix, with an inexperienced user. What a damn mess when bank feeds are used. I have a client that uses Intuit Merchant Services, Square, Stripe, and Poynt. Intuit is used for wholesale, Poynt for POS, and Square/Stripe for events. All feed into QBO in one way or another, but then the friggin' bank feeds import the settlements, too. It is impossible to determine which transactions make up settlements from any merchant account but Intuit Merchant Services. I am in process of cleaning up this client's accounting, so if it is Square, Stripe, or Poynt, I am doing my own entries and will wipe out everything that was fed in from bank feeds and the QBO integrations.
Andrew's comment about credit cards strikes a nerve. Just finished the manual data entry from credit card statements for a client. The carrier separates the charges on the statement into the categories the company presumes they should be in. This person does repair work on small engines, most of the purchases on that particular card are for parts for the repairs, so in QB they are a COGS item. The statement has them all over the place - car repair, home improvement, retail purchases, even a couple in restaurants. If that were simply imported to QB, it would be a nightmarish mess. I never recommend bank feeds.
actionbsns wrote:Just finished the manual data entry from credit card statements for a client. The carrier separates the charges on the statement into the categories the company presumes they should be in. [...] The statement has them all over the place - car repair, home improvement, retail purchases, even a couple in restaurants. If that were simply imported to QB, it would be a nightmarish mess.
Are you still talking about QBO (that was Andrew's comment)? If so, ignore the following as I am not sure exactly how it works in QBO, having never done it.
But for desktop QB, it is false that "If [they] were simply imported to QB, it would be a nightmarish mess." The import goes into a holding area and is NOT automatically dumped into the various transaction registers. The way the items are sorted on the CC statement is irrelevant to how the data is imported. Once in the holding are, you can freely discard or revise transactions any way you want, and add them one at a time or in any grouping you wish to the main database.
What the import accomplishes is that dates and amounts are input and (if you have set up rules) vendor names and accounts are automatically suggested -- it's still up to you whether to accept them as is or not. Why anyone would think keypunching in dates and amounts (including typos) is superior to importing them is beyond me.
The only "gotchas" I can think of are (a) the bank may only offer, say, 90 days worth of transactions, so if you wait too long between downloads, you will miss some, and (b) if you have to manually download, you have to keep track of the date through which your last download included transactions, not hard if you simply make the date part of the download file name.
QBO's feeds work almost identically to QBD--biggest difference is QBO connects to more banks. One of two three advantages over QBD: 1) anywhere access without more headaches 2) multiple A/R and A/P entries per JE 3) more bank feed options. Beyond that, QBO sucks. I use it because I have to for clients, but I might very well be switching to AccountingSuite and talk them into switching, too.
As for potentially importing duplicate data, it can happen but I have typically found QB intelligent enough to identify transactions already imported, automatically or manually. Sometimes it acts stupidly instead of intelligently. It is one reason why if I suspect a transaction could be duplicated, I keep it in the bank feed module to either be added or rejected as the account is reconciled. You can also use the "match" function if you know the transaction already exists. This is the best practice, not simply accepting any and all transactions pulled in by a feed as clients and inexperienced bookkeepers/accountants seem to do.
My comment about the credit card is more a comment about how unrelieable AI is when making decisions as to where to classify items. If the credit card statement can't get it right, why would you expect QB to get it right? I have one client using QBO, very simple with only a few checks each month. QBO is set up now so it does the bank feed whether you want it to or not. And, yes, if there were lots of transactions it would be a nightmarish mess. I discourage clients from using them and with this particular client, I just delete the bank feed transactions and do my own. Most clients use QB to write checks anyway so all of their transactions, or most of them, are in the program already so the bank feed is unnecessary.
actionbsns wrote:f the credit card statement can't get it right, why would you expect QB to get it right?
Because QB doesn't use "AI", it uses rules that you manually maintain. For example, if a downloaded transaction includes the string "Motel 6" (anywhere in the description), and if the first time you encounter such a downloaded transaction, you classify it as vendor="Motel 6" and account="Lodging Expense", then from that point forward QB remembers to do this for all matching transactions. If you can't make a global rule, then don't. If the rule changes, then change it or delete it. If you don't like the rule for one particular transaction, then override it. No "AI" involved, so I assert again, whatever classification your CC statement shows is irrelevant.
As I stated above, I use QB bank feeds for both my own business and my own personal finances, and the downloaded transactions are automatically correct I'd say about 99+% of the time for existing vendors,and I'm talking about anywhere from 50-100 transacts per month total, from half a dozen different banks, most of which you've heard of.
Bank feeds are great IF used correctly. The problem arises when the user(s) believe they simply need to check off the transactions or (even worse) have them automatically import with no oversight or review. Compounding the problem is when the program is used incorrectly in other areas such as - using invoices and making deposits directly to the check register, etc. Even worse, they don’t reconcile the accounts. There is a mistaken presumption by clients using the program, especially with bank feeds, they don’t need a bookkeeper. I use bank feeds personally and have no problem using them. But like I said used in the wrong hands the books become a tangled mess.
I’m seriously thinking to tell my clients I no longer recommend the banks feeds unless their books are either reviewed at least quarterly or better yet maintained by a professional. Anyone else tried that approach?
PS. I really think Intuit would be doing everyone a favor if at least there is a statement “consult with a professional before using”. I know, chances of that happening are just about zero.
OMG, just after I posted my comment below I received an email from a client (excerpts):
Duplicate deposits in QB -
"same check # and everything, which you would have thought Quickbooks would flag when entered. We wondered if it was some kind of a glitch, since this older version of Quickbooks seems like it has a few bugs."
"The other deposit is also mysterious because we can't find the invoice it was linked to, again another glitch in Quickbooks? We are not showing any open invoices with this client. So it must be some kind of strange Quickbooks glitch--in either event, these are not bank errors."
This is what I deal with on a regular basis. This particular client does not reconcile their accounts until they need to give me a copy of the file - which I received on 9/14/19.
Human glitch, not Quickbooks glitch. But, it is like talking to a wall with most clients as to why these issues exist, in the first place.
I really had to tame my response but still may have come across as abrasive. I just can't help it.
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