When I'm working with our clients every month there are certain concepts that ring true with each business I deal with. Whether it's a yoga studio, restaurant, manufacturer, or a service based business they can all apply these core values to their bookkeeping environment in QuickBooks. By using these best practices I help myself stay organized, keep efficient, and provide accurate reports in a timely manner. Best of all, at year end, I've set myself up for success by following these QuickBooks best practices I created for myself. They should be straightforward so here it goes, my top ten best practices for QuickBooks:
- Ask My Accountant - This is not only a time saver but also a lifesaver. If I'm not 100% certain on where a transaction should be coded you can bet it's going into Ask My Accountant. When I have transactions in here it either means I need to do research, propose a tax question for a CPA or a questionable charge and or deposit that I'll need further information from my client to answer. Also, I set this account up as an Other Expense to make it stand out on the Profit & Loss just in case I forget to review the account.
- Reconcile - I know our blog talks about this function a fair bit but it really is one of the most important parts to my day to day. By reconciling in QuickBooks I know I have all of the transactions in for a particular month and can move forward to the next. I reconcile checking & savings accounts, loans from cars, houses, lines of credit, payroll liability accounts (which should always be zero if you outsource your payroll), & credit cards. Some people may call this over kill but it saves me time and keeps me efficient in QuickBooks month in and month out.
- Using the Correct Name Type - Using the correct name types in QuickBooks helps you stay organized for larger financial projects at year-end, helps you quickly locate vendor payments quickly, and keeps your payroll function separate from your vendors.
- Sub Accounts - One of my bigger pet peeves is seeing transactions coded to the parent account when there are sub accounts. Always, always, always code to the sub accounts and never the parent accounts. You have effectively coded the charge as "other" when coding to the parent account if sub accounts are available. Either create a 'General' sub account or merge the accounts to the parent account
- Reviewing Reports Monthly - Always review your reports on a month
to month and year to date basis both for an understanding of the financial health of your company and integrity of the data that has been put into the file. Let's face it, we make mistakes, we're human. Reviewing your P&L by comparing it to last month helps show any anomalies in your work.
- Backup QuickBooks - Always backup QuickBooks to an external source such as DropBox or a thumb drive. It's never a question of if but when with a computer before disaster strikes. Be proactive and not reactive with backing up your company file. Backup to an external source and save the file every time you make changes to it.
- Password Protect - This is such a simple step that I see far too often overlooked. Your company file has a lot of valuable information readily available to cause undue harm to your business. Do you print checks from QuickBooks? Do you pay bills from QuickBooks? Do you download transactions into QuickBooks? I won't go into detail as to why these may cause problems but if an employee is crafty with the computer it can easily result in major fraud to your business.
- Payments Over $1,000 - This is a general rule of thumb and it's best to consult your CPA (as this amount may differ) but if a payment is over $1,000 and it's either spent on equipment for your business or a new fixture that wasn't a repair your CPA might want to depreciate the expense. Flag these in QuickBooks to either Ask My Accountant or a Fixed Asset account that all new questionable assets are coded to.
- 1099's - Just giving yourself the ability to track which vendors are a possible 1099 contractor is half the battle when you need to send out 1099 information at year end. If a vendor comes into QuickBooks who is a possible 1099 contractor click the box "Vendor Eligible for 1099" in the additional info tab. At year end when you run your 1099 reports all potential 1099's have already been flagged.
- Use Journal Entries Sparingly - Attempt to keep the amount of journal entries to a minimum. Journal entries are great for making changes to a previous closed year, entering daily sales reports, or putting together massive entries that are organized best in the journal entries screen. Think it through, QuickBooks has a myriad of options available to avoid most journal entries.
That's about it on my end for suggestions. I didn't make this list to be all encompassing as depending on the specific industry I have a further set of rules I tend to follow to ensure I'm delivering month in and month out a consistent service to my clients. Do you have any other suggestions that you believe should be on this list or perhaps taken away? I would love to hear it.