How to catch accounting and bookkeeping errors

By braniac

At some point, we all make a mistake. Well, accounting and bookkeeping are no exceptions. As someone who's been both a teacher and student of accounting, I know this firsthand. And will give you some helpful pointers to help catch and reduce errors and mistakes.



Why we make errors and mistakes

Let's begin with with perhaps the # 1 reason why people will make mistakes on the job. And that is: You're extremely busy!

You have so many things going on that your attention isn't entirely focused on any one task. And in bookkeeping and accounting, that's a receipe for disaster! These are fields that demand your close attention to details. So if you can, try to reduce or minimize the number of distractions.

For instance, set some time aside where you'll be able to work pretty undisturbed. Not having people constantly running up asking you questions. Or see if you can let your phone ring and go into voicemail so you can concentrate on the task at hand. Not checking emails, writing letters, and other things that take your attention away from the main task.

In fact, there are many bookkeepers and accounting professionals who work in a more closed or walled off area. That's so they can be free from others and distractions that take their attention off what they're doing. The same is often true for those who do payroll because their function is an accounting one.

With students, the same issue applies. They may have other classes, assignments, projects, etc that take their focus and concentration away. Or they may not be majoring in it, so they don't put lots of effort into it. Sometimes, you'll work on things at the last minute or in the "wee hours" of the day or night when your mind isn't very clear and focused.

Once again, these are receipes for disaster! With accounting and bookkeeping, concentration and focus are extremely important. So getting enough rest, eating enough, and working in a more quiet spot help a lot!

Wrong amounts part 1

A very common error happens when you write down or enter the wrong amount. Sometimes it happens because your finger hit the wrong key. Other times, it's because your eye wandered and you looked in the wrong spot.

For example, you have 20 lines of info to enter. Right now, you're on line 10. It's not uncommon for your eye to accidentially look at something from lines 9 or 11. This is especially true when you're getting tired!

And quite often, you'll enter info from the right line (10 in my example). But mixed in with it is something from a different line (9 or 11 in my example). This happens because your eye wandered as you're reading across. It can also happen when you're looking up or down. Your eye may periodically look towards the right or left, picking up a figure from there by mistake.

To deal with these sorts of mistakes, I suggest you take a break. Why? Because you may be getting tired, bored, or both. Taking a short break will refresh and energize you so you can focus your attention better afterwards. During this time, you can simply relax a bit before you go back to it. Or you can work on something else to combat boredom. I've gotten up and walked around a little or stretched. Maybe have a little snack or drink something.

In other words, use that time to focus your mind on something else! Then go back and work it a little later when you're more relaxed, focused, and energized. This will help you concentrate and lower the possibility of errors.

Wrong amounts part 2

Two more reasons why we'll enter a wrong amount is because of a slipped decimal point or hitting the wrong key.

For example, suppose the figure is really supposed to be 15,935.25

I may accidentially type 1593.525

Why? Because with spreadsheets and accounting software like Peachtree and Quickbooks, you don't have to type the commas in there. So most do not. And this can lead to errors because your eye basically gets confused and sees something else.

Example: Instead of 15 thousand, it sees 15 hundred. So 15925.35 becomes 1592.525

How do you combat this? Here's one very helpful solution: Slow down!

By slowing down, you'll concentrate and focus your attention more on the actual numbers. Going too fast makes it very easy to miss things. And by the time you may catch it, there could be tons of errors already there. Complicating thing more is when you try to fix, you may miss one or more.

But slowing down helps you see more errors and fix them. And it helps prevent them again because you're more watchful of what you're doing.

Also, taking a break isn't such a bad idea. It'll help refresh you, give your eyes a rest, and energize you.

Swapped or transposed numbers

Another common error in accounting and bookkeeping is transposing some numbers. This means putting them in the wrong order.

For example: Writting 15925.25 as 15295.25

They're extremely close and one could very easily miss the swapped 9 and 2. Especially when you have the same number(s) in other places. In my example, you have two number 2's and three number 5's. Your eye may be fooled into just counting how many there are, rather than focusing on the exact spot where they are.

To help catch these errors, I suggest you print things out and take a close look at the numbers to verify you've got them right. Sometimes that piece of paper helps us focus a litte better because we don't have that screen glare. It also allows you to use a ruler to help focus attention on individual lines of numbers.

If you prefer to look at it on screen, then I suggest increasing the zoom to make things larger. This will help things stand out better, making easier to spot.

To help prevent these errors from happening again, work slower! By slowing down, you'll keep a more watchful eye on what you're doing. And that will lower the prospects of hitting or typing the wrong thing.

Incorrect amount

Some people actually prefer doing things the "old fashioned way," using paper and pencil to enter things. Why? Because they can write it their way without a computer's interference.

For example, I can setup Excel, accounting software, or a calculator so it automatically puts in the decimal point adjusting for dollars and cents. So all I have to type are the actual numbers.

For instance, if I were to type 1830, the system would display 18.30

However, some pefer to manually type the decimal point in there. Why? Because they can hit it exactly where it's needed. In other words, I know I hit it in the exact spot where it belongs. So there's no way the system can mess up.

In other words, the 1830 you just typed that the system took as 18.30 may really be one thousand eight hundred and thirty. So you should have typed 1830.

See the differenc? 1830 vs 1830.

That dot (decimal point) at the end makes all the difference!

a) 1830 = 18.30 b) But 1830. = 1,830

So it's the difference between eighteen and one thousand eight hundred.

Another problem with letting the system add in the decimal point is this. You may get so used to it that one day, when things aren't setup that way, you'll have a hard time adjusting to manually typing in the decimal point.

This happens quite often when people switch offices, companies, or jobs. The system may not be setup the same way that you had it and are used to. Plus, I could setup the system so it doesn't automatically adjust for the decimal point. You may incorrectly assume it would and miss the fact it did not.

So I suggest hitting that decimal point yourself rather than leaving it up to the system to put it in there for you. This way, you'll lower possible incorrect entries.

Wrong account

It's not uncommon for someone to accidentially record or post something to the wrong account. This happens mainly because you're busy and weren't concentrating hard enough. In other words, you chose an account that was either above or below the one you meant to select.

Once again, work slower to help prevent this from happening. And if you're posting manually, which many smaller businesses and offices do, then I suggest posting one account at a time.

In other words, don't post all transactions for a period of time. Focus your attention on doing one particular account. This way, your chances of posting an entry to one account to the ledger of another will be lower.

Another suggestion for accounting software programs like Quickbooks and Peachtree is to hide the inactive accounts. I've seen many students and workers accidentially pick an inactive account no longer in use when recording transactions. Why? Because it's in the list and they hit it by mistake.

But hiding inactive ones will remove them from view, so you won't see them at all. Nor will they be available when selecting accounts. In other words, they're completely unavailable for use!

And if you work at a place where they didn't even set certain accounts as inactive, which I've seen before, then change their status to inactive. Go into the chart of account feature, select the account, and make it inactive.

Wrong side

Another common mistake people will make is to enter something on the wrong side. In other words, they'll debit something that should have been credited, and vice-verse.

Sometimes this happens because you lost your concentration or became bored. Once again, working slower and taking a short break can be extremely helpful here!

But another reason why this can happen is you see the opposite side first.

For instance, I've had students who needed to record the following transaction: Sold $500 worth of merchandise on account.

They'll immediately see the "sold" first and say, "Ah ha, I need to credit sales." So that's exactly what they'll do: Credit the sales account.

Now as far as software like Peachtree and Quickbooks are concerned, they don't care if you enter the debit side first or the credit side. All they care about is that the two sides balance. So if you entered that 500 credit to sales first, the computer wouldn't have a problem with it. And your ledgers, trial balance, and financial statements would all be right because you did credit the proper account.

Yet we all know that in bookkeeping and accounting, debits come first! So when you record transactions, the debits to accounts would be entered before your credits.

In my example, the student would need to first enter the debit to accounts receivable. And then put in the credit to sales.

Now if you find yourself in a position where you've identified the account(s) to credit because that either jumped out at you or was easier to identify, write it down on paper.

This way, you won't have to go back and make a correction to the system later on. Believe me, you'll forget you made that mistake as time goes by. And when you look at your books, you'll focus on the fact that the debit and credit sides balance. So entering something on the wrong side can very easily go unnoticed.

But writing it down on paper will help lower these errors because nothing has been entered into the system yet. Once you've found your offsetting debit(s), then you can put those into the system, and then transfer what you wrote on paper to the credit side.

Now you're good!

Tip

Work in a more quiet spot whenever possible Take it slow and easy Don't allow the computer to do everything for you

Warning

Just because your debits and credits add up doesn't mean everything's ok! You can still have errors, like wrong accounts or incorrect amounts in there