QuickBooks Tips Blog

Learning QuickBooks Basics

Many business owners call us wanting to learn how to use QuickBooks.  I think it is very smart for a business owner to have a good understanding of how to use QuickBooks.  Even if they will have an in house bookkeeper or a bookkeeping service it does help to have a general understanding of how to use the business bookkeeping software.  Here are a few options on how to get up to speed with using QuickBooks.

Go it on your own

QuickBooks does have a nice user friendly layout.  Many users may be able to get a general understanding of how to use QuickBooks just by playing around with it.  Also, the help index can answer many common questions.  In addition you can find answers to common questions by doing a web search and looking through various QuickBooks forums.

Take a Class

QuickBooks classes are readily available either in person or online.  Classes are offered for various levels of QuickBooks users.  This is a great way to get a basic understanding of how to use the software. 

Hire a Professional

Hiring a QuickBooks certified Pro-Advisor can be a great way to learn how to use QuickBooks.  You can find a QuickBooks Pro-Advisor near you on Intuit's website. 

Network with business colleagues

By tapping your business network you may find several business colleagues that already use QuickBooks as their business accounting software.  Many of them will be more than willing to give you a brief overview of how to use QuickBooks.

As a business owner starting to use QuickBooks for your business bookkeeping you are right to want to know how to use the software effectively.  How you go about learning how to use QuickBooks is up to you.

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QuickBooks Tip: Sending Statements with More Detail

In QuickBooks there is a way to add more detail to your statements.  A statement can be generated in QuickBooks by simply clicking on the 'Statements' button located on the customer section of the home screen.  Then you can select the statement options and customer(s).  If you hit preview you will then see the typical statement layout which shows all open invoices and statement charges for the customer. 

Add more detail to your QuickBooks statements

When you are selecting the options for a statement in QuickBooks you will see additional options on the upper right hand side of the screen.  By selecting the check box 'Show invoice item details on statements' you can show even more information on your customer's statement.  This will now show open invoices and statement charges and the detailed description of those charges.

Is there a way to send a QuickBooks statement along with the open invoices?

Unfortunately there is not a way to send a QuickBooks statement and the open invoices directly from QuickBooks.  However, there is a way to get this done with a few additional steps.  Locate the invoices you want to email along with the statement and save the invoice as a pdf.  You can save the invoice as a pdf by opening the invoice and then selecting File/Save as pdf.  You can then create a statement and save the statement as a pdf by printing it to a pdf file.  You can then create an email to your customer and include a statement and the related invoices.  If you have outlook linked to your QuickBooks file then you can create the statement and related email automatically from within QuickBooks and then attach pdf copies of your invoices.

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QuickBooks Tip: Linking Outlook to QuickBooks

There are only two options for emailing information from QuickBooks; either Outlook or QuickBooks email.  QuickBooks email allows you email invoices, statements etc directly from QuickBooks.  However, using QuickBooks email has one major flaw; it does not allow you to track sent messages.  If you need to reference when you sent out an invoice or statement to a customer via email and what the email message said you can only do this by linking QuickBooks to Outlook.

Creating a link between QuickBooks and Outlook

First, you must have Outlook set up on your computer with a valid email account.  Creating the link between QuickBooks and Outlook for emailing forms is simple.  Go to Edit/Preferences/Send Forms.  On the My Preferences tab under 'Send e-mail using': select Outlook Express.  QuickBooks will automatically close all windows and make the change.  

Test the link

Test the link between QuickBooks and Outlook by sending a test email to yourself.  Open an invoice and check to be emailed box or create a statement for a customer.  Click on the email button and QuickBooks will automatically launch a new outlook email message.  In the 'To' address field delete your customer's address that was automatically entered and put in a valid email address that you can check (a personal one would work fine).  Now check to make sure the email went through and that you have a record of the email being sent from within your Outlook 'Sent Items' folder. 

By utilizing Outlook to send forms from QuickBooks you will leave yourself a trail of messages, invoices, statements etc that were sent to your customers.  For more information on emailing various forms from QuickBooks read this blog article. 

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QuickBooks Tip: Properly Recording Outsourced Payroll in QuickBooks

I have had a lot of inquiries lately about how to properly record payroll in QuickBooks when using an outsourced payroll company.  As we have stated before we highly recommend outsourcing your payroll to a trusted payroll company.  Many bookkeepers that don't know better record any payroll transactions that hit the bank account as a payroll expense and move on.  Unfortunately this is incorrect and causes inaccurate financial statements.  I will breakdown all the various transactions that typically occur with outsourced payroll and tell you how to properly account for them. 

Actual payroll checks

What I mean by actual payroll checks is those that are not issued via direct deposit into your employee's checking account.  Some payroll companies will take out one lump sum from your checking account to cover actual payroll checks, direct deposits, payroll taxes and their payroll fee.  If they do not then you will have to record each actual payroll check individually as that is how they will clear your checking account.  Record wages as a payroll expense and detail them out according to your chart of accounts detail (example: management wages, office wages etc).  Enter wages as a positive number in the check details.  All employee payroll taxes should hit a liability account called 'payroll taxes employee' and be entered as a negative number in the check detail.  Any deductions for 401K, cash advance etc should also be entered as a negative number and hit a payroll liability account.  The end result is that the amount of the payroll check should equal the amount that the check was written for (I know ingenious huh?)

Direct Deposits

There are two options for direct deposit checks and they will follow the same rules as actual payroll checks.  The only difference will be if you want to record each employee's direct deposit check individually or make one journal entry that details out all direct deposit payroll checks.  This will depend on your preference; if you want to be able to look up each individual employee's checks in QuickBooks or just rely on your payroll reports for this.  Again enter wages as an expense and a positive number, employee taxes as a payroll liability and a negative number and any other deductions as a payroll liability and a negative number.    

Payroll taxes

I have seen far too many bookkeepers complicate handling the payroll taxes portion of payroll.  It is actually quite simple.  Record the employee taxes portion as a positive number and hit the appropriate payroll liability account or accounts.  Record all employer payroll taxes as a positive number and hit the appropriate payroll taxes expense account or accounts.  That is it. 

Payroll service fee

Enter a check to a vendor to match the name of your outsourced payroll company.  Enter a check for the total amount of the payroll fee and enter it as an expense.

Check yourself

Obviously you would not be a good bookkeeper if you did not check your work right?  One way to check your work is to look at your chart of accounts and make sure all payroll liability accounts have balance of zero as they should.  Another way to check your work is to look at the amount your payroll company deducted from your checking account.  This should match the total of direct deposit checks, the amount paid out for payroll taxes (both employee and employer portions) and the amount of the payroll fee.  If your payroll company takes on the liability of actual payroll checks then the amount should also include that. 

This may seem like a lot of work to properly record your payroll in QuickBooks and you are correct.  You can save a lot of time by having your payroll company build a file that can import all payroll transactions into QuickBooks.  Once you get a payroll import file working it literally takes a few seconds to enter your payroll.  To find out more about payroll import files for QuickBooks read this.

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QuickBooks Tip: Understanding how to Handle Payments in QuickBooks

I wanted to explain the proper way to receive payments and record them in the bank account in QuickBooks since many users seem to struggle with this process.  I have come up with a simple way to explain this process to our clients so that they understand it.  I will break the process down into the three icons that QuickBooks uses: Invoicing, Receive Payments and Record Deposits.

Invoicing and Statement Charges

The first step in the process is creating an invoice or statement charge.  This is a pretty simple step to understand for most people.  The invoice or statement then needs to be sent to your customer so that they can pay it.

Receive Payments

A customer has sent you a payment in one form or another and now you need to record this payment in QuickBooks.  Click on receive payments on the home screen, select the customer, fill in all appropriate information and select the open invoice or invoices you would like to apply the payment to.  Many QuickBooks users think this is the end of the process.  However, you need to think of receiving payments as you working at your office and recording the payment for accounting purposes only.  You still need to physically deposit the money into the bank. 

Record Deposits

The record deposits function needs to be thought of as you physically taking payments to the bank and making a deposit.  You click on the record deposits button in QuickBooks and select all payments (from step 2) that you intend to bring to the bank to be deposited.  You then need to tell QuickBooks which account you will be depositing into and on what date.  This is a crucial procedure as you need to make sure you are accurate during this process to make your checking account reconciliation easier. 

In Summary:

Invoicing = billing your customer

Receive Payments = applying customers payments to open invoices in QuickBooks

Record deposits = you physically going to the bank and making a bank deposit

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Importing Payroll into QuickBooks

Many bookkeepers and businesses are not aware that it is possible to import payroll data into QuickBooks.  As I stated in a previous post we always recommend that our clients outsource payroll for a number of reasons.  Entering payroll data into QuickBooks accurately can be tricky and time consuming.  Finding an outsourced payroll company that not only handles all aspects of payroll, but also can provide you with a file that will import the payroll data into QuickBooks is essential.  Here are a few tips for accurately importing payroll data into QuickBooks.

Find a reliable payroll company that has proven experience with importing payroll data into QuickBooks

We have worked with several companies that promise they can provide us with a file that can import payroll data into QuickBooks.  However, not many of them can do it effectively and it becomes more work than it is worth.  I will highly recommend Qqest as a payroll company that has provided us with a great working import file and excellent customer service.  You can contact our Qqest sales rep, Brad Rich by emailing him. 

Communicate with the payroll company to have the import file match the checking account activity

To make it easy on you and your payroll company you want to find out how the payroll data will hit the checking account and have the payroll company mimic that flow.  For example: will actual payroll checks clear the bank or does the payroll company take out one lump sum to cover the entire payroll.  I have seen every type of situation.  The most common set up I have seen is this: actual paychecks clear individually, there is a direct withdrawal for payroll taxes, there is a direct withdrawal for direct deposits and there is a direct withdrawal for the payroll processing fee.  Just talk it out with your payroll service to figure out how to properly build the import file. 

Backup prior to importing data

I'm pretty certain of one thing; the first payroll import will not be perfect.  The lesson to learn here is to backup your QuickBooks file prior to importing your payroll data (or any data for that matter).  Then you can figure out what changes you need your payroll company to make and rework the import file.  You can then restore your QuickBooks file to the backup prior to import and try again.  Perfecting your import file with your payroll company is going to take patience, time and communication.  However, once you have a good import file it will be more than worth the effort. 

A few other tips and tricks

Here are a few tips I have learned that I feel are worthy of passing on.  Have your payroll company give check numbers to the direct deposit checks that follow this format: DD followed by year, month date.  For example if you had a payroll on 8/31/11 label those direct deposit checks as DD110831.  This makes it easy to identify and match up direct deposit checks for multiple payrolls.  Follow the same procedure for your payroll tax check but replace the DD with TAX.  When your payroll company builds an import file for your payroll data all fields must match up to QuickBooks exactly for punctuation, capitalization etc.  Most mistakes occur when the chart of accounts do not match up.  The solution is to export your chart of accounts to excel and email it to your payroll company so they have all data as it reads in QuickBooks.  You can export your chart of accounts by going to Reports/List/Account Listing.

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How To Get Paid In QuickBooks

There are many options on how to get paid within QuickBooks.  The question is which method or methods will work best for your business.  I will outline some of the more common methods of getting paid within QuickBooks and introduce a new online method.  All payments can be applied by using the Receive Payments button located on the QuickBooks home screen

Cash or Check:

Checks seem to be becoming a less common type of payment method, with most businesses preferring credit card or direct bank transfer.  The reason is checks are a pain to deal with and are labor intensive.  You need to receive the check into QuickBooks and then take it to the bank for deposit.  Also, you always run the risk that the check will bounce and then you will have a whole new headache.  For certain types of businesses I would recommend not accepting checks.  One place where I have seen the practice of not accepting checks become more and more common is restaurants.  Some types of businesses though will not be able to avoid accepting checks.  Most people and businesses are not opposed to payments in the form of cash

Credit Card Processing Options:

Many businesses like accepting credit cards as it is a quick and reliable way to get paid.  Though credit card processing fees can be costly for some businesses, for others it is the way to go or more time would be spent chasing down unpaid invoices thus increasing labor.  Processing your credit cards directly in QuickBooks is extremely easy, though processing fees may be higher than other credit card processors.   However, you won't have to spend time entering manual payments and credit card batches, which can be very time consuming.  I have not seen a credit card processor be able to import credit card payments into QuickBooks and apply the payment to a customer's open invoice(s) in QuickBooks.  However, I'm sure a sure that a service like that exists I'm just not sure how well it works. 

QuickBooks Online Direct pay via PaymentNetwork:

QuickBooks introduced this new option in April of 2011 where you can send an invoice by email, your customers can click on the payment link and you get paid directly from their bank account into yours.  The fee for this service is $0.50 per payment received and it costs your customer nothing!  There are no set up fees, no monthly fee, no monthly minimum and no contracts allowing you to cancel at anytime.  You can watch a 2 minute demo of this service (video takes a few seconds to load).

Staying on top of and dealing with accounts receivable can be time consuming, costly to a business and a pain.  Some payment options are less labor intensive and time consuming but come with a fee.  Finding what works best for your business with handling payments in QuickBooks may not be the easiest thing to figure out so feel free to reach out to us for some advice.

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QuickBooks Tip: Job Costing Using QuickBooks

Job costing is a concern for any business that needs to track time and expenses as they relate to specific jobs.  Job costing is critical for any business that performs several jobs in a month or year.  For those that are not familiar with job costing it is essentially the cost of labor and materials that goes into completing a job. 

Why should you use job costing?

Job costing can be incredibly valuable to a business owner if it applies to their business.  By tracking the amount of labor and specific materials that go into completing a job estimates become much easier to complete.  Job costing will also help you determine job profitability, which may in turn drive you to focus or specialize in certain types of jobs. 

How do you implement job costing using QuickBooks?

Job costing is a fairly straightforward process to implement in QuickBooks.  All that is required is that you assign a Customer:Job to each expense that you incur and also to your labor.  Both expenses and labor give you the option to assign a job to them, but also allow you to make the charges billable to the customer or not.  You can make the item billable to the customer assigned to it simply by putting a check mark next to the box that says billable?  Some of the labor charges that you incur may not be billable to a customer, but are still a cost to your business.  I typically track this as non-billable time and also break that into several categories. To learn more about non-billable time read this blog post. 

Reporting on job costing and interpreting reports

In QuickBooks under Reports/Jobs, Time & Mileage you can find many job reporting options.  There are many options for reporting including job profitability, profit and loss by job, time by job and unbilled time by job.  These reports will help you identify both strengths and weaknesses within your business.  You can then use the information to tweak certain processes to make them more profitable.  You may also find over time that these jobs will help you identify your "sweet spot" or those jobs that are extremely profitable for your business.

Job costing is a simple process to implement into your bookkeeping procedures.  It does however take some additional work and careful attention to detail.  However, careful job costing will prove extremely beneficial to your business and its profitability.  For help with job costing or any other QuickBooks or bookkeeping issue please feel free to email me.

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QuickBooks Tip: Dealing with your Accounts Receivable

When reviewing financials with clients, they sometimes look at their Profit & Loss and almost immediately ask "Well, if I made $40,000 this year, where is it?"  Business owners usually assume that if they made money it should be in their bank account.  If it's not in the bank account, it can be because of a few different reasons.   If they are paying off loans, a line of credit, a large credit card balance from a prior time period, or some other liability the money generated from the profit is usually allocated to these Balance Sheet items.  If the business does not have any liabilities, it could be due to Equity Draws by the owners.  Well if it's not Equity Draws or paying down liabilities, then where is it?  It is most likely tied to your Accounts Receivable balance.  This is the balance that customers owe the business for the purchase of their product or service.

Accounts Receivable Reporting

These reports are easy to find in QuickBooks.  Under Reports, look for Customer and Receivables, and choose Accounts Receivable Summary or Accounts Receivable Details.  This report will elaborate on the amount owed to the business, the customer who owes it, and the aging status of the balance.   You can drill down into further detail by clicking on the line item you want to research.  This will show the invoice associated with the balance.  If the balance is incorrect, edit the invoice accordingly.  This edit will do two things, lower your profit and lower your accounts receivable.  If the amount you are editing is from a prior tax year, talk with your accountant first about how to handle it.  My experience is that they want you to edit it within the current year, so this requires a bookkeeper who knows what they are doing.

Blame it on the mailman

Tracking down the money owed is where the headaches begin for owners/managers, it can be like pulling teeth.  If it's way in the past, they have usually forgotten about it, and don't feel the need to pay for what they bought.  If this is the case, you may end up having to take them to small claims court or hiring a lawyer.  Usually customers can be coaxed into paying, but it may take some leg work by your bookkeeper or office manager.  Customers may give you every excuse in the book, but they will eventually pay.  I've heard it all 'check is in the mail,' 'the post office lost it,' 'I'm waiting to get paid from someone else, then I'll pay,' and the list goes on and on.  9 times out of 10 the check is never in the mail, I've never actually heard of the post office losing a piece of mail (besides all of Christmas cards and Thank You cards I mail), and when you hear the excuse about waiting for a payment to come in you can assume they are robbing Peter to pay Paul. 

Bookkeeper to the rescue

Having your bookkeeper work on the receivables can be a great benefit for your business.  You can see direct results with your bank account balance increasing, the stress levels of the owners/managers decreasing, and time being freed up for the owners/managers to focus on growth and sales.  If you feel you money is tied up in Accounts Receivable and don't want to the hassle of tracking it down, get in touch with me and I would love to help.

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QuickBooks Tip: Using QuickBooks to Track Personal/Family Finances

QuickBooks can be a valuable tool for tracking personal and family finances, not just those of businesses.  Many people track their business income and expenses extremely carefully, but then pay less attention to tracking their personal finances.  Sure most people have a general understanding of their monthly expenses and income, they have a feel for how much debt they are carrying and they also know how much and where they are investing.  However, wouldn't it be nice to know exactly where you stand at all times?

Set up accounts to be tracked:

Decide which accounts you want to track and are also which are worthwhile tracking.  Obvious choices are: all checking and savings accounts, all credit cards, all investment accounts and all loans (mortgage, lines of credit etc).  Many of these accounts will offer the ability to download the activity directly into QuickBooks, which will save you lots of data entry time.  Make sure you track all the transactions that occur in each account.  Also, it is important to breakdown your loan payments into principal and interest.  Lastly, make sure to reconcile or balance each account to the most recent statement when you receive it.

What tracking this level of detail will do for you and your family

Tracking your personal finances with this level of detail will cause you to ACTUALLY care about your finances.  Another great benefit of tracking things this closely is you can use QuickBooks to help you get a handle on your cash flow.  Not only how much money do you have in the bank at this moment, but also a snapshot of money that will be coming in an out in the next few days and weeks.  You should automate as much of your banking as possible.  This includes: setting up paychecks to be directly deposited, monthly recurring bills being should be set up for automatic withdrawals and also funding to your investments automatically.  Figure out how to maximize your financial life based on your budget and then automate as much as possible.  The big things in life will be taking care of themselves. 

Why track your personal finances?

Many people argue that they don't want to track their personal finances this closely.  They are fine with knowing that they have a roof over their head, the bills are getting paid and they are investing for retirement.  I will argue that it's not good enough to have a feel for your personal financial situation.  It is nice to know exactly where all your money is coming from and going to, right down to the penny.  How can you identify overspending if you are not tracking it?  How much did your basement remodel cost?  How much are you spending each month going out to eat?  Could you reduce an expense and invest that money elsewhere?

Tracking your personal finances in QuickBooks has many advantages.  I think most importantly it makes you pay attention to and care about your finances. 

Want to give me some pushback or agree with me to a certain extent?  Feel free to comment.

For questions on getting your personal finances set up in QuickBooks feel free to email me.

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