Making QuickBooks Quicker Tips for Efficiency and Effectiveness

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1 Making QuickBooks Quicker Tips for Efficiency and Effectiveness Presented by: Edgar Rollins, CPA Accountency, LLC Hosted by: Paychex About Edgar & Accountency, LLC Edgar Practicing accountant since President, Accountency, LLC Certified Public Accountant QuickBooks Certified Pro Advisor (2001, 2002, 2005, 2006, 2007, 2008, ) Chairman, Local Practitioners Resource Committee of the Maryland Association of Certified Public Accountants. Accountency, LLC Peer-reviewed accounting firm providing the following services: Accounting Bookkeeping, Compilations, Reviews, Financial statement audits Tax preparation Business returns for sole-proprietors, partnerships, LLC s in all states Individual tax returns for businesses owners and others. QuickBooks QuickBooks cleanup (monthly, quarterly, annually) QuickBooks set-up Business advising Accountency, LLC 2 Contents Paychex, Inc. is a payroll and human resource service company serving approximately 600,000 businesses in the US. Paychex provides payroll processing, retirement services, insurance, and a fully outsourced human resource solution The company is headquartered in Penfield, New York and has more than 100+ locations across the country and has 12,000 employees. 1. Program Basics 2. Getting Started 3. Starting a New Company File 4. Organizing Your Data in QuickBooks 5. Refining the Chart of Accounts 6. Classes 7. Jobs 8. Lists 9. Items 10. Customer Database 11. Document Storage 12. Entering Bills 13. Paying Bills 14 Receiving Payments 15. QuickBooks Data Files 16. Add-In s 17. Tracking Time 18. Multi-User 19. QuickBooks Reports 20. Year-End 21. Preferences 22. Customizing QuickBooks 23. Tracking Cash Expenses 24. Budgets 25. Other Tips QuickBooks Are You Using the Right Edition? Online Pro Premier Accountant Simultaneous Users Program Basics Balance Sheet Tracking Yes Yes Working in 2 QuickBooks Files Yes Search for Transactions Yes Client data Review Yes Yes Yes 1

2 QuickBooks Editions QuickBooks Editions Premier Edition Accountant Edition Online On line Pro Premier Accountant Price $39/mo $184 $319 $319 Contractor Accountant Manufacturing & Wholesale Non-profit Includes all premier editions (Shows File/Toggle to Another edition) Everyone I know HATES the online version If you need to share your file online, there are better ways. Professional Services Retail Buying tips: Amazon.com normally has the best price. Don't be afraid of online downloads. If you need to reinstall, you can. Simple Start Too stripped down to be of much use. Mac I tried it. Too many limitations, missing features & quirks. Enterprise Too expensive Don't get it unless you absolutely need the Enterprise features like more concurrent users. QuickBooks 2013 The enterprise editions of QuickBooks are appropriate if you need 10,000 to 100,000: - Customers - Vendors -Employees - Inventory items Customer and vendor records are more flexible and thorough. You can attach todo's to them, assign multiple contacts and store more contact options, like Facebook addresses and Twitter handles. 2

3 QuickBooks The Home Screen Getting Started Task Bar Title Bar is the bar at the top Menu Bar is under the title bar Icon Bar is in the middle Navigation bar is on the bottom Bar is a is at the bottom The Home Screen is arranged by function and work flow Vendors Customers Employees Etc. Vendors Customers 3

4 Employees Company Banking and other info Live Community/Help I've found it to be rarely helpful and usually annoying. You can disable Live Community Try Google! 4

5 You can customize the Home Page Starting a New Company File The New Company Interview Don't use the QuickBooks sample company files as your company file! (or as a shortcut to Create a New Company File. ) Create a separate folder to hold each QuickBooks company file. (one folder per company) 5

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8 Setting up QuickBooks Stop and Think. What is my goal? Tax returns Financial management and decision making Other reporting Review income & expense accounts Best option have a good CPA or other qualified person set up an appropriate chart of accounts for your business. Otherwise carefully select only the accounts that apply to your business (you can add more later). 8

9 QuickBooks uses the double-entry system of accounting Every transaction must have two sides with equal debits and credits Never, ever, ever If you only enter one side, what happens to the other side? enter beginning balances in an account Example of Double-Entry Accounting (How Debits and Credits work) Cash sale for $100 Bank account is Increased (debited) for $100 Income is Credited (increased) for $100 In double-entry accounting, all transactions must have equal debits and credits. The above transaction has: Debits: $100 Credits: $100 Assets: Bank, accounts receivable, other current assets, fixed assets, other assets Liabilities: Accounts payable, credit cards, other current liabilities, long term liabilities Equity: Equity Income: Income Normal balance (to increase) Debit Credit Credit Credit Organizing your data in QuickBooks Cost of Goods Sold: Cost of goods sold Debit Expense: Expense Debit 9

10 Setting up QuickBooks Stop and Think. (Again.) What is my goal? Tax returns Financial management and decision making Other reporting Entering: - Checks - Deposits - Invoices All are Fun! The Real power of QuickBooks (like all databases) is the reports that show your data in different ways. QuickBooks gives us multiple ways to organize our data: Chart of accounts Classes Items Refining the Chart of Accounts Reporting Considerations Some standard reporting needs: Income tax returns Financial statements for banks Financial statements for owners/investors Reports for regulators Reports for management to run the business Business planning Reports for analysis Assume you will be audited. You will probably be correct. 10

11 Examples of Accounts Needed: Income tax returns Examples of Accounts Needed (cont'd) Sales tax returns Penalties (not deductible) Federal income taxes (not deductible) State income taxes (deductible) Sales by type (product vs service) Sales by state Think: ITEMS Travel (deductible) 1099 Misc Meals (50% deductible) W-2 labor 1099 labor Other special needs Reports by business location Reports by line of business Reports by partner Think: CLASSES What accounts are needed for your tax return? Depends on: Your Industry Your Entity type Schedule C Form 1120S Form 1120 Form 1065 Sole-proprietor/single-member LLC S-Corporation Corporation Partnership/multi-member LLC Schedule C is used by sole proprietors and single-member LLCs Sample accounts: Sales Advertising Insurance (other than health) Interest Mortgage Other Legal and professional Office expenses Repairs and maintenance Form 1065 is used by partnerships and multi-member LLCs Sample accounts: Sales Salaries Guaranteed payments to partners Taxes and licenses Interest Other 11

12 Don't create more accounts than you really need Do split up accounts with large balances (could help avoid an audit) Look for other ways to get your information rather than creating new accounts Think: ITEMS! Think: CLASSES! Many people choose entities that limit their liability That limitation will be compromised if you mix business and personal expenses Keep business & personal separate! QuickBooks Account types QuickBooks Account types Bank Accounts receivable Current assets Fixed assets Accounts payable Current liabilities Credit cards Equity Income Cost of goods sold Expense Long term liabilities Assets: Bank, accounts receivable, other current assets, fixed assets, other assets Liabilities: Accounts payable, credit cards, other current liabilities, long term liabilities Equity: Equity Income: Income Cost of Goods Sold: Cost of goods sold Expense: Expense Normal balance (to increase) Debit Credit Credit Credit Debit Debit Account Numbering Examples of numbering schemes: MD Suggested Account Numbering 1000 Assets 2000 Liabilities 3000 Equity 4000 Revenues 5000 Costs of sales 6000 Expenses 9000 Other income 9500 Other expenses 12

13 Account Types - Bank Checking 1120 Savings 1130 Petty cash PayPal CDs Checking Accounts with Multiple Check Sequences If you use different sequences of checks in your account (Manual checks, payroll checks, checks printed from QuickBooks) you can create subchecking accounts to hold them. When reconciling, reconcile the parent (main) account. GAAP Account Ordering Basics Accounting principles generally accepted in the United States Varies by industry GAAP generally requires listing accounts from most current to least current. Checking (demand deposit) Certificate of Deposit (time deposit w/restricted availability) Loan to owner GAAP: Accounting principles generally accepted in the United States Varies by industry Current A current asset is an asset and can either be converted to cash or used to pay current liabilities within 12 months. Current liabilities are all liabilities of the business that are expected to be settled with 12 months. Account Types A/R Accounts receivable 1290 Allowance for doubtful accounts* * Required by GAAP 13

14 Account Types Other Current Assets Inventory 1400 Prepaid expenses 1500 Deferred income taxes 1600 Other current assets Account Types Fixed Assets Office equipment 1720 Furniture & fixtures 1730 Machinery 1740 Vehicles 1750 Leasehold improvements 1760 Land 1790 Accumulated depreciation General IRS Rule Fixed Assets All fixed assets over $ (Yes it's crazy. Don't blame me.) Internal Revenue bulletin , V, D De-minimis rule The depreciable cost of a fixed asset is: The cost of the asset Sales tax Delivery Installation by seller Installation by your staff Accessories required to put the asset into use Inspections. Put vs. Keep Test Example Fixed Asset or Repair Put vs. Keep Test If the expenditure is to put the asset into useable condition, it is a FIXED ASSET. If the expenditure is to keep the asset in working order, it is a REPAIR. You buy a truck that is up on blocks with no tires. The depreciable cost of the vehicle is the cost of the vehicle and the cost of the tires. When you need to replace the tires, that is a repair. 14

15 Splitting the cost of multiple assets You go to Best Buy and buy a computer for $1,000 and a printer for $250. Your 2 items ($1,000 & $250 = $1,250) will cost $1,325 at checkout (sales tax!) When entering the check or credit card charge, enter a split transaction and show each item (computer and printer) on a separate line. DO NOT include a separate line for sales tax. The cost of the computer should be $1,060. The cost of the printer should be $265. This split is easy. In a more complicated transaction with multiple items or additional charges like delivery, just make an approximate allocation of the costs to the individual assets. Don't worry about the split if it's close and the total comes out to match the bill. Income statement accounts hold a balance for the current year only. (Income statement accounts close to retained earning at year-end. The beginning balance at the start of the new year is $0.) Balance sheet accounts never close. They contain a running balance from the beginning. Some balance sheet accounts will contain zillions of transactions. (ex: Bank, A/R, A/P) Many balance sheet accounts are infrequently used. (ex: Vehicles, notes payable) When possible, minimize the activity in the seldom used balance sheet accounts. That will make it easier for you when you are reviewing account balances. You have a contractor build a bathroom for your office for $10,000 payable in 4 installments. Instead of using the check writing screen and posting the 4 checks individually to Leasehold Improvement, enter a bill from the contractor for the full amount. (You can change the bill amount later if it changes.) Now you can look in the history for Leasehold Improvements and see the one entry showing $10,000 for the cost of the bathroom. 15

16 Opening Balances Never enter an opening balance for: Accounts Customers Vendors Inventory items Never let QuickBooks make an adjustment when a bank reconciliation doesn't balance. Account Types Other Assets Non-current notes receivable 1900 Non-current assets other Examples of other assets: Franchise rights Non-compete agreements Goodwill Patents Accumulated amortization Account Types Accounts Payable Accounts payable. (Note: There is rarely a need to have more than 1 A/R account) Account Types Credit Card American Express 2260 Visa, Bank of America Account Types Other Current Liabilities Accrued expenses 2400 Payroll payables 2500 Income taxes payable 2600 Deferred income taxes 2700 Other current payables Account Types Long-Term Liabilities Non-current notes 2900 Non-current other 16

17 Account Types Equity Equity Accounts for Corporations Common stock Preferred stock Additional paid-in capital Distributions Tax distributions Retained earnings Accounts in Blue on the previous slide should be zeroed out ( closed ) every year on the first day of the next year. They should show only the current year activity. Equity Accounts for Partnerships, LLC's, Sole-Proprietorship s Member's equity Edgar Beginning equity Investments Distributions Earnings For corporations, close to retained earnings. For other entities, close to the beginning equity account Account Types Retained Earnings Not an appropriate account for non-corporations, but QuickBooks leaves you no other choice. Account Types Revenues (Income) Sales Rarely is more than 1 sales account needed. Think: ITEMS Account Types Costs of Sales Costs of sales or Costs of goods sold Direct costs attributable to the production of the goods or services. Costs of Sales Purchases (physical product that is part of the sale) Costs of labor Other costs: Subcontractors Direct rent Direct utilities Costs of Goods Sold Purchases Costs of labor Other costs: Factory rent Factory utilities Subcontractors Warehousing Transportation-in Account Types Expenses Labor costs 6500 Occupancy 7000 Variable expenses 7500 General business expenses 8000 Discretionary 8500 Owner's compensation 17

18 Expenses Account Types Other Income Labor Costs Wages Payroll taxes Employee benefits Payroll service fees General Business Expenses Everything else Occupancy Rent Utilities Repairs (to office) Condo fees Office cleaning Discretionary Travel Meals Entertainment Contributions Business gifts Variable Expenses Expenses that vary depending on level of production or sales volume Owner's Compensation Salary Commissions Benefits (medical, retirement, etc) Interest income Purchase discounts (optional) Gains on sales of assets Account Types Other Expenses Interest expense Losses on sales of assets Depreciation Most lists allow you to group items into Parent-Child groups. Sub Accounts Collapse/Expand Financial Statements Collapse hides sub-accounts and shows the total of the sub accounts in the parent account. Expand shows all accounts and sub accounts. - Check (or uncheck) subaccount of box - Pick parent account 18

19 Consider using Accounts/sub accounts to help see the big picture Labor Costs (parent account) 6110 Wages (sub account) 6120 Commissions(sub account) 6130 Payroll taxes (sub account) When collapsed, only Labor Costs will appear on the Profit & Loss statement (showing the total of the parent and all sub accounts). In the previous example 6100 Labor costs 6110 Wages 6120 Commissions 6130 Payroll taxes When entering a transaction, if you select the parent account it will show on the Profit & Loss statement as follows 6100 Labor costs 6110 Wages 6120 Commissions 6230 Payroll taxes 6100 Labor costs other Don't rename or delete the system accounts that QuickBooks automatically creates: Retained earnings Sales tax payable Cost of goods sold Estimates Inventory Assets Payroll liabilities Payroll expenses Purchase orders Undeposited funds Classes Classes Classes provide a way to group Profit & Loss transactions by: Department Office Location Partner Anything else you want to track. P & L by Class You can print the P & L by class (in separate columns) Better than cluttering the Chart of Accounts. 19

20 You might use classes to, for example, separate transactions that relate to different departments or locations or types of business. A construction company might want to track classes using New Construction, Remodel, and Overhead. Your customer types might help you isolate groups by characteristics like Industry or Geographical Location. For amounts that can't be efficiently split among classes, create a class to hold those entries and allocate periodically by journal entry. Example 1: If you have 2 partners and want to allocate income and expense items between them, create 4 classes as follows: Partner Partner Allocate Allocate 1 2 Equally By Sales Example 2: If you have 2 properties and want to allocate income and expense items between them, create 3 classes as follows: Property Property 1 2 Allocate Creating Classes Go to Edit Preferences Accounting Company Preferences. Make sure that Use class tracking is checked. If you want to be prompted for a class designation in transactions, check that box, too. Class Reports QuickBooks comes with two reports specially designed for tracking class-based transactions: Profit & Loss by Class and Balance Sheet by Class (both can be found in the Reports menu, under Company & Financial). Of course, you can filter other reports to include a class column. You can also create a QuickReport for individual classes. You can filter by class in QuickBooks reports. Jobs 20

21 Job Preferences Create The Job Type Create the Job Open the Customer Center. Right-click on a customer who needs a job tracked and select Add Job Job Reports You'll learn how each job is doing in terms of things like: Profitability The accuracy of your estimates Time and mileage Unbilled costs Job status Lists 21

22 Customers & Jobs Jobs are a sub-account of Customers Customer - Job 1 - Job 2 - Job 3 You can only create invoices for Customers or Jobs Vendors Everyone you pay Except payment to employees for payroll For non-payroll payments to employees, set them up as vendors with a unique name. You can only track A/P or issue 1099's to Vendors. Other Names List Optional You can just use one of the other name lists - customers - vendors - employees You can move other names to: - customers - vendors - employees YOU CANNOT UNDO THE CHANGE OR CHANGE OTHER NAME TYPES. 22

23 Some people use the other names for one-time use (ex: a vendor you will only every use once or very infrequently). It usually works better to just make the payee a vendor and mark it as inactive. Inactive Items Some lists give you the option to show inactive entries. If ABC Company is inactive, by default it will not show up when using the drop-down list on the enter-check screen. If you type ABC Company QuickBooks will give you the option to: - Use it this time (keep inactive) - make it active Creative use of lists are a good way to tweak QuickBooks. For Example If you don't use sales reps but want to track sales by referral source, you could set up the sources as sales reps. You can: Add Modify Delete Merge Mark in active Working with Lists Merging List Entries 1) Edit the item 2) Change the name to be the EXACT as another item 3) QuickBooks will ask you if you want to merge the items Price Levels List You may find that you have to offer a standard discount to one or more customers, use the price level feature, so that you don t have to remember to include a discount item on each invoice: QuickBooks Pro users can only establish Fixed % price levels, which are applied globally to all products. QuickBooks Premier users also have the option to create Per Item discounts, where you can selectively discount only certain items. 23

24 Price levels allow you to apply automatic discounts to everything a customer purchases. 24