Volume 23 September 2000

Transcription

1 OKLAHOMA COOPERATIVE EXTENSION SERVICE Volume 23 September 2000 In this newsletter: Quicken 2001 Should You Use Quicken or QuickBooks? Exploring the Investment Features of Quicken Should I Invest Money or Pay Off Credit Cards? Category Clean-up National Ag Risk Education Library Integrated Farm Financial Statements (IFFS) 2000 Training Quicken 2001 The latest Quicken release is on the store shelves. We are reviewing the new features and are updating the farm and ranch instructions. We will announce the release of the 2001 farm and ranch instructions in Quick Tips when they are available. You can also check our website in a month or so: The new features for Quicken 2001 Deluxe are primarily improvements to existing functions. One of the improvements is to the reconciliation process. The reconciliation statement information is now permanently stored, automatically. It is supposed to make identifying mistakes simpler. Other additions to the program are improvements on investing and online banking features. The Capital Gains Estimator allows you to estimate the potential capital gains or losses from selling investments. The investment feature includes over 30 new performance indicators. The online banking features are improving to allow you to download credit card and banking account information. It allows you to make online payments that will electronically transfer or Quicken will send a paper check. Quicken 2001 will search your registers for recurring monthly bills and add them to the scheduled transactions screen, so that all are shown in one place. (This is one of those improvements that so far is annoying (hopefully I ll soon figure out how to turn it off). For the tasks that we cover in our farm financial record-keeping instructions, such as using classes to denote transactions associated with different enterprises on the farm or ranch, there is no reason to buy a new version. Should You Use Quicken or QuickBooks? Deciding whether to use Quicken or QuickBooks is a matter of your accounting needs and abilities. Some accountants suggest clients use QuickBooks; however, not everyone is comfortable with accounting terminology or procedures. The following paragraphs highlight some of the differences in Quicken Deluxe 2000 (or 2001) as compared to QuickBooks 2000 Pro. These versions of either program offer the most features and flexibility. First, consider your computer and accounting skills. If you can navigate through basic computer programs and know what a file is, how to operate a mouse, know the X closes a window, and how to write a check, then you probably can learn to use Quicken. QuickBooks is fairly simple to learn, if you understand accounting terminology. However, it is important to get the set-up right from the beginning. Quicken is a little more flexible and can grow as you learn to use it.

2 Page 2 Next, consider what you need the program to do. If you need to track simple income and expense records on a cash basis then Quicken is easier to set up, simpler to use, and less expensive. QuickBooks can be used for single-entry cash accounting, but it is intended to function as a double-entry system for business. Some important Quicken features that are not available in QuickBooks: 1. The ability to record and track investments (including the capability to download investment information from the Internet). QuickBooks allows for no investment record-keeping. 2. The capability to create an amortized loan that records principal and interest components of loan payments. This feature makes tracking loan amounts and splitting payments into the correct categories more precise. 3. The ability to easily generate cash flow reports as well as budgets based on past transactions. QuickBooks has the following features that Quicken does not: 1. The ability to create invoices and track payments received. Likewise, you have the ability to create accounts payable and track the payments as they are made. (If you only need simple and infrequent invoicing features, then you may want to look at the Quicken Home and Business program.) 2. Payroll features provided as a for-fee service, ranging from downloadable payroll table updates to complete payroll services. Other payroll features include the ability to track time for employees and link the time spent with specific projects. 3. Inventory features. However, this system is rarely of value to farmers and ranchers. Retailers will find the inventory features beneficial. 4. The ability to accept credit card payments (with the use of QuickBooks Account Manager). What Quicken and QuickBooks both offer: 1. The programs are affordable. Quicken Deluxe is about $60 with a $20 rebate for previous users; QuickBooks Pro can be purchased for about $ Both have class features which allow you to track income and expense information by enterprise Quick Tips for better financial analysis. 3. Both include a variety of reports for tracking income and expenses and tax information. However, the QuickBooks reports are more business oriented and tend to resemble standard accounting statements. If you still aren t sure which is right for you, go to the Quicken.com or QuickBooks.com websites. You can try a trial version of QuickBooks. Exploring the Investment Features of Quicken Perhaps you ve had a brokerage account, but haven t used Quicken for any records associated with your investments. Or, you have had some experience with mutual funds and have decided that you now want to add individual stocks to your investment portfolio. If you are interested in monitoring and analyzing performance, you may not be satisfied with the monthly reports you get from the broker. Quicken s investment account features are capable of providing quite a lot of information that can be sorted and summarized in a variety of ways. To maintain your investment records for a brokerage account, you will need to add an additional account to your existing Quicken file if you want to be able to show transfers of cash between the brokerage account and a bank account. Click on: Finance Account List New (located in the My Finances: Account List menu)?brokerage Click on the Summary tab to directly enter the beginning information about the account (you can also use the EasyStep series to enter the information if you want):

3 Quick Tips Page 3 with the lowest cost basis for gifts to charity (to avoid paying capital gains tax on those shares). And, at tax time, you can print a report for the accountant showing which shares were sold and the amount of gain. How do you want Quicken to track Hershey? If you are only watching it, choose Put it on my watch list; if you have bought it or will buy it, choose Track my holdings. Once you click on Done, you will be prompted to set up a security. Let s say that you love chocolate and have decided that your first purchase was going to be stock in Hershey s (hopefully, you have gone beyond the sentimental appeal and have done some research that indicates that your choice is a good company with solid income and/or growth potential, experienced and competent managers). Choose:?Stock Name: Hershey Ticker: HSY Note: If you have Internet Access, you can use the lookup feature to find the stock symbol. Click on Next?Single (or click on Download Asset Class if you have Internet access and want to download asset class information). Click on Next. The date you purchased this security: September 11 Next Number of shares: 20 Cost per share: 48 1/3 Commission/Fee: 12 Next You then get a chance to review your data entry, followed by a prompt to set up a new security. Enter as many additional securities as is appropriate. If you have online access you will be prompted to download historical price and class information. Entry of most transactions is straightforward. Let s say that Halloween candy sales were terrific, your stock paid a dividend on November 3 of $4, and the cash is going to remain in your brokerage account. In the account register (choose Finance, Account list or press Ctrl+A), double click on estock (the name of your brokerage account), then click on Easy Actions from the menu line in the window, Record an Income Event and enter: Now, you will choose the way that you want Quicken to establish the cost basis in the stock. Part of the motivation for tracking investments in Quicken is to be able to choose individual shares when you either sell stock or gift shares to charity. So, choose?lot Identification. This means that you have to enter all sell and buy transactions, which can be time consuming if you are making monthly purchases of a mutual fund, for example. But, if you enter the data, you can identify the shares with the highest cost basis for sale (to minimize capital gains tax) and also select the shares

4 Page 4 Quick Tips Click on OK. At Christmas, the company decides to give its shareholders a Christmas present in the form of a 2 for 1 stock split. To record a stock split, click on Easy Actions from the menu line in the window, Stock Split and enter: Click on OK. Now, it is February and you want to sell 100 shares to generate some cash to help pay your taxes. The stock price is now $31 per share. Click on Easy Actions, Sell/Remove shares, then click on the Summary tab (or use EasyStep): In this case, all shares will have the same basis, so there would be no particular advantage to clicking shares you wanted to sell from your holdings of 40 shares: First Shares In, Last Shares In, Minimum Gain, or Maximum Gain. You can view the outcomes of the different choices by clicking on one then choosing Reset and choosing another. Once you have selected your sale strategy, click on OK. Should I Invest Money or Pay Off Credit Cards? Adapted from an ihatefinancialplanning.com article If you have some available cash, the best thing to do for your financial future is pay off your credit cards. Since credit cards often have an interest rate higher than the average investment return, you actually lose money by accumulating more interest to be paid if you fail to pay off the credit card. For example, a thirty year old man has $5,000 invested earning a 10% return and $5,000 of credit card debt costing him 18% a year. He pays off his credit card debt over five years at a cost of approximately $1,600 per year. on Specify Lots. If you did have shares that were bought at different times, you would get a screen like the following graphic with shares purchased listed by date of purchase on separate lines. You could then use Quicken to select which 20 A thirty year old woman also has $5,000 invested at a 10% return and $5,000 of credit card debt costing 18% per year. She cashes in her investment to pay off the credit card debt. Over the next five years she invests $1,600 per year, the money she would have needed to pay off her credit

5 Quick Tips Page 5 card debt. Fast forward thirty years to look at the impact on their financial position. Can you guess who had more dollars at age sixty-five from this financial scenario? The woman would be worth $187,363, while the man would be worth $140,512. By paying off the high cost debt, the woman was able to increase her savings at a faster rate. Another basic reason for paying off consumer debt, such as credit cards, is that in a financial crunch, you have a credit reserve available to you and may be able to obtain a loan at a better interest rate. Getting out of debt may seem impossible, but good planning and discipline can liberate you. If you are not making progress on your own, try working with the Consumer Credit Counseling Service. The website for central Oklahoma can be found at You may discover that you have two (or more) similar names that should be combined. For instance, you may have Int Exp and Interest Paid categories when only one is needed. Let s say that you want to delete the Interest Paid category. Highlight that category in the list and click on Delete. Then, select?replace Category and scroll through the list to select Int Exp (be sure that you don t select an interest category in the income section), then click on OK. Checking your category list is sort of like spring Category Clean-up Have you checked your category list lately? You may need to clean it up or eliminate unused categories and be sure that there is no duplication so that your reports are clear and meaningful. One way to determine the categories used is to print a cash flow statement with the categories as rows. With your Quicken file open, choose: Reports Spending Cash Flow Report and customize the dates to Include all dates. Print the report and have it at hand while you view the category list on screen (choose Finance, Category & Transfer List or press Ctrl+C). Delete any categories in the list that do not appear in the printed Cash Flow report. Highlight the category, then click on Delete?Delete Category OK If an unused category contains subcategories, the subcategories must be deleted before the category can be eliminated. (or fall) cleaning. It s not something you enjoy doing and it takes a little time, but it provides longer run benefits. If your category list is in order, you will have fewer corrections and changes to make when you want to print a cash flow statement for a lender or work on a budget for the coming year. National Ag Library Risk Education In a previous issue of Quick Tips, we gave you the address for the National Ag Risk Education Library. Enclosed with this issue of Quick Tips is a bookmark that lists the website address and topics of information included in the library. Tap into this valuable resource information to help manage the risk of farming and ranching.

6 Page 6 Quick Tips IFFS 2000 Training Integrated Farm Financial Statements (IFFS) 2000 is an Excel 97 based program that enables development of enterprise budgets and financial statements, including a balance sheet, income statement, and a monthly cash flow statement. Financial ratios and a financial stress test are also generated for your actual or projected financial situation. Sample printouts of some reports from the software were enclosed in the last newsletter and may be viewed at: A program to allow you to export your Quicken cash flow data to IFFS is currently being tested. Our plan is that you will be able to develop your balance sheet in IFFS, import your Quicken cash flow information, then view and print income statements and financial ratios from IFFS. Please help us save postage costs by notifying us of changes in address. Also, please let us know if your family or household is receiving more than one newsletter. While our database skills are improving, it is impossible for us to know, for instance, whether two different names at a Rt. 1 address are truly different households. Thanks! An IFFS 2000 hands-on training session is scheduled in Oklahoma City, Oklahoma on October 10, The one-day training (9 a.m. to 5:00 p.m.) will give participants a chance to become familiar with the features of IFFS Purchase of the software is not required to attend the training session. It is a relatively low cost way to explore the features of the program and decide if it is a tool that would benefit you in planning and managing your operation. Enrollment for the training is limited, so please contact Damona Doye or Laura Hedrick at (405) promptly, if you would like to attend training or order the software. If you are unable to attend the software training in Oklahoma City but would like to attend a future workshop, please let us know or contact your local Extension Educator-Agriculture or Area Extension Agricultural Economist to request that a training be held in your area. Lori J. Shipman, Extension Associate, and Damona Doye, Extension Economist 529 Agricultural Hall Stillwater, OK (405) ddoye@okstate.edu Oklahoma State University, in compliance with Title VI and VII of the Civil Rights Act of 1964, Executive Order as amended, Title IX of the Education Amendments of 1972, Americans with Disabilities Act of 1990, and other federal laws and regulations, does not discriminate on the basis of race, color, national origin, religion, sex, age, disability, or status as a veteran in any of its policies, practices or procedures. This includes but is not limited to admissions, employment, financial aid, and educational services.