Posts Tagged ‘QuickBooks’

Can accounting be fun?

The stereotype is well-established.  SmileAccountants are often portrayed in the media with glasses, a pocket calculator, and the personality of a rock.  Prior to studying accounting, people warned me of it being the most boring profession there is.  While I admit that doing accounting will never be on par with a trip to Disneyland, I’ve learned that accounting can be fun because of the people and the technology. I work with people more than numbers.  My days are full of meetings and phone calls.  The joy of accounting comes from advising people and improving their lives financially; I have those opportunities every day.  Plus, I’ve worked with many in the profession who are fun and interesting people.  From trampoline dodgeball, go-cart racing, and a Mini-Masters golf tournament, I’ve been part of a lot of fun activities with other CPAs. Technology can make accounting fun (or at least less boring).  Many will agree that mind-numbing data entry and bank reconciliations are tedious tasks; few enjoy them.  I have helped friends move from traditional manual accounting systems to bank-connected online accounting software, greatly reducing the amount of time they spend doing their accounting.  Their feedback included:
  • “This is as fun as accounting can be,” and
  • “I’m actually looking forward to doing my accounting.”
Accounting software has become more beautiful and fun.  QuickBooks Online has a nice new look and simplified interface.  FreshBooks proclaims “Yo!” on its website and has some creative instructional videos that are actually fun to watch.  Xero touts itself as “beautiful software” and claims accounting can be fun (even addictive). Do you want to make your accounting more fun?  Let me know.  I’ll have fun helping you. Maybe your idea of “fun” is letting someone else handle the accounting.  I understand.  I have friends who would rather poke out their eyes than be the banker in a game of Monopoly.  In that case, I can help you too.

The QuickBooks shortcut every accountant should know

Like many accountants, my mind thinks in debits and credits.*  As a double entry accounting system, QuickBooks works in debits and credits, though it does a good job hiding it from non-accountant users with its use of items and user-friendly input screens such as a “write checks” window that looks like a paper check.  Below is an example of an invoice entry screen.  I might have a good guess about the debits and credits working behind the scenes of this invoice, but probably wouldn’t know the specific accounts affected. QuickBooks Invoice screen Crtl + Y is the shortcut that displays the transaction journal (in other words, the debits and credits, as you can see in the screenshot below).  The accounting entry that was abstract within the invoice entry screen now becomes clear in my mind. QuickBooks transaction journal *I recall several confused students in one of my college accounting classes asking, “what does debit and credit mean?”  Our SrbijaFail: Sta je al culturismo calidad varios ingredientes a base de hierbas con el envio este chico perdió 165 libras y se convirtió en un campeón de culturismo wise accounting professor explained that debit meant left and credit meant right.  That explanation oversimplifies it, but I got the point: don’t get caught up in the jargon.  While my mind seems to differentiate left and right very well for accounting, I seem to have two left feet when I try to dance.  Why is that?

Social media fields in the QuickBooks 2012 Lead Center

I have been experimenting with the new features of QuickBooks 2012 and was pleasantly surprised when I noticed that the new Lead Center contains optional contact information fields for LinkedIn, Facebook, Twitter and Skype. Social Media in Lead Center Apparently, Intuit has recognized the value of these social media tools for marketing and added them as a means for QuickBooks users to connect with prospective customers.  It is cool to see accounting software become a little more social.

Are Bank Import Features Driving Reconciliations to Extinction?

I guess I’m an “old school” guy when it comes to accounting for my personal finances.Shot in the back by Bank Import I enter transactions into QuickBooks in real time.  Whenever I write a check or pay a bill online, they immediately go into QuickBooks.  I save all of my receipts, put them in a folder, and enter them in batches at least once a week.  These are important processes for me because I am always aware of the amount of cash I have available despite the balance that shows when I log into my bank’s online banking website. Once a month, the bank statements come (electronically, of course).  I reconcile the transactions I entered manually to the bank statements.  Whenever there is either a discrepancy or an transaction on my bank statement that is not in QuickBooks, I investigate it.  Usually, it is because a receipt is still at the bottom of a plastic bag from a grocery store.  Sometimes, though, I have discovered errors or other things that resulted in me getting a refund during the process of reconciling bank statements. Recently, I have been experimenting with a few SaaS (web-based) accounting software tools (go to fellow CPA blogger Shane Eloe’s blog for some useful reviews).  Most of the SaaS accounting systems I have tested do not have the ability to reconcile bank accounts, but they do import and/or sync with bank transactions.  So, are we near the time to say goodbye to the bank reconciliation as we know it? I think the bank import and sync features can be big time-savers and eliminate much of the drudgery that goes along with redundant data entry.  Data such as the date, payee, and amount are automatically imported, leaving it up to the user to classify the transactions.  With some of the SaaS software packages, the program learns from past experience to automatically classify transactions and matches up the data being imported with what the user has already entered to eliminate duplicate entries.  Awesome stuff. My concern is that over-reliance on the online banking features and not reconciling bank accounts will lead to problems.  A user that imports bank transactions instead of entering them as they happen will not have the same grip on cash flow.  That user would probably also be more inclined to just accept what is on the bank statement rather than verifying that the bank activity is correct.  For a user that uses one of these SaaS accounting software packages for a business, it raises all sorts of questions for the CPA or accountant who prepares the tax return:
  1. What if the cash balance on the balance sheet is significantly different than the ending balance on the bank statement?  Without a bank reconciliation, determining the reason for the difference would be a nightmare.
  2. How does the tax preparer know that there were outstanding checks or online transactions that occurred and are deductible in a given year, but did not clear the bank (and therefore not imported) until the next year?
If you’ve discovered a solution to these problems and questions, I’d love to hear from you.  Please leave a comment below.
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A Refund from my Overfunded Escrow Account

Assorted international currency notes.
Image via Wikipedia
As I wrote in an earlier post, I use QuickBooks to organize my household finances.  Like every good accountant, I am detail oriented and keep meticulous records.  I keep every receipt, reconcile each of my accounts monthly, and split the expense categorization of grocery bills between food, cleaning and baby products (OK, just kidding on the last one). One transaction that I do split out every month is my mortgage payment.  My mortgage payments are made up of three parts: loan principal, interest, and escrow.  In case you don’t know what an escrow account is, it’s a cash account that the lender holds and maintains to pay property taxes and hazard insurance. To keep track of my escrow account balance, I created an account in QuickBooks for it under other current assets.  When taxes and insurance payments are made by the bank, I enter those in QuickBooks as expenses out of the escrow account.  I frequently tie out my escrow account balance in QuickBooks to the loan statements. Lenders usually do an escrow analysis every year to adjust the amount of the escrow payment so the balance in the account is sufficient to cover the expenses.  Usually, the amount of the mortgage payment goes up as tax and insurance rates increase.  However, in my case, I significantly decreased my insurance payments (a good subject for another blog post) and my property tax payments have also decreased due to the crash of the Las Vegas real estate market. Recently, I noticed that my escrow account had a large balance despite barely having made payments for taxes and insurance.  I sent the following e-mail to the bank:
I think our escrow account is overfunded. I’d like to request an analysis and receive a refund of any overfunded amount.
The next morning, I was delighted to receive the following e-mail from the bank:
Per your request, we have analyzed your escrow account based on the current escrow balance. Your new mortgage payment is $X effective September 01, 2010. Also, an overage amount of $X has been mailed to your mailing address.
Sometimes having organized financial records pays off.  I’ve got the check to prove it.
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Customizing the Icon Bar in QuickBooks to Work for You

Do you use the icon bar at the top of your QuickBooks screen?  Do the icons represent the tasks you perform most often in QuickBooks?  If you’re using the default icons, the answer is probably no.

I recently began changing the icons to my most frequently used functions.  It makes a big difference in efficiency when the shortcuts are just a click away rather than three or four clicks away navigating the menus.

Before

Let’s do a quick analysis of a few icons on the icon bar above (in my case, it was the default, though yours may be different).  Let’s say that I don’t use memorized transactions (MemTx) so that icon does me no good.  The register icon (Reg) is a little inconvenient because after I click it a box appears asking me to select which account I want to use the register for.  I don’t really have any use for the add services or payroll buttons (and if you’re worried that you won’t find those options after removing them, don’t worry – you can find them all in the menus).

Take a look at your icon bar.  If you see icons that you have never used or will rarely use, it’s time to give it an extreme makeover.

After

Now here is an icon bar that I can really use!  Let’s say that my business has two cash accounts that are used frequently, so I put two icons on the icon bar that link directly to the register for each cash account.  As an accountant, I look at balance sheets and profit & loss statements daily, so I have those icons there, as well as the general journal to make adjustments.  I think having a backup icon is good just as a reminder because most people don’t backup their QuickBooks files enough. There are a lot of different ways to customize the icon bar:
  1. Right click anywhere on the icon bar and then click on “customize icon bar.”
  2. In the view menu you’ll also see “customize icon bar.”
  3. Make a window appear that you want to have on the icon bar, then go to the view menu and click on “add [window] to icon bar.”
In the “customize icon bar” screen, you can change the icon’s picture to whatever you like.  There’s even a funny picture of a pig (see below) among the icons that I’m trying to figure out a use for … maybe transfers to a savings account?

Do you have any ideas for using the icon bar?  Please leave a comment below.

Accounting for Credit Card Transactions in QuickBooks: What May Seem Easier is Harder

I have observed people using two methods of handling credit card accounts in QuickBooks:

  1. Recording individual credit card charges in a liability account (set up in the chart of accounts as the Credit Card type). Payments decrease the liability balance.
  2. Recording only the payments for the credit card and allocating the charges among many different expense categories (using splits in the write checks screen as shown below). No liability account exists for the credit card.
On rare occasions, I have seen other techniques, such as running the credit card expenses through accounts payable, but the two listed above are the most common. I have asked those using method #2 why they chose to record credit card transactions that way, and the answer is usually that they were unaware of any other way of doing it or that they thought it would be easier than method #1. Some say, “Why should I enter every single credit card charge when I can account for all of the charges in one transaction?” I concede that method #2 works okay when credit cards are paid in full every month, because each payment can be traced to the sum of the transactions on the statement. However, when cash suddenly becomes tight and the company can’t pay the credit card bill in full, you have to allocate, for example, $1,697.45 of credit card charges to a $200 payment. For each partial payment after that, you have to keep track of what transactions you’ve recorded so far and allocate a new set of expenses. This quickly becomes an accounting nightmare that you will experience every time you enter a payment! There is a second problem with method #2. How is your CPA supposed to know what the year-end balance is on your credit card? It won’t show up in your QuickBooks file. You’ll have to give your CPA the credit card statements and help him or her classify the unrecorded transactions. I strongly encourage method #1. It handles partial payments of credit card balances painlessly. It makes your QuickBooks file easier for your CPA to work with. Also, if you enter the transactions from your credit card receipts, you will always know how much you owe on your credit card by looking at the account in QuickBooks and you can reconcile the account to make sure all of the charges were processed correctly. It might seem tedious to enter every credit card charge, but it will probably save you time later! If you are a client (or a potential client) and want to improve your recording of credit card transactions, do not hesitate to contact me. (Note: If you still have your heart set on recording the expenses from a credit card statement in one big split transaction in QuickBooks, my recommendation is to set up the credit card account in QuickBooks, as in method #1, and enter the big split transaction from the statement using the “Enter Credit Card Charges” window instead of the “Write Checks” window)

Five QuickBooks Preferences That Could Make Your Life Easier

With one click of a mouse button, I’ve been able to help some clients be more efficient in their use of QuickBooks.  It’s worth taking the time to look through the preferences in QuickBooks and adjust them to your liking.  Below are my top five QuickBooks preferences that you should know about! QuickBooks Preferences
  1. Turn off pop-up messages for products and services (under General – My Preferences) – This is new in QuickBooks 2010 R5.  If you’re new to QuickBooks and want to know about other products and services you can use with it, you can leave this on.  If you’re like me and you know all about the other services QuickBooks offers, check the box to avoid the pop-up windows.
  2. Automatically recall information (under General – My Preferences) – This can be a big time saver for the information you enter regularly to one vendor for the same purpose like utilities.  Type in “power company” and the account Utilities:Electricity comes up automatically.  Be careful, though!  If you enter bills or write checks to the same vendor for different types of expenses and you’re not paying attention when you enter them in, you could have many misclassified expenses.
  3. Default date to use for new transactions (under General – My Preferences) – If you’re using QuickBooks in real-time, especially if you’re writing checks from QuickBooks, use today’s date as the default.  If you’re entering many transactions after-the-fact, the last entered date as default is generally better.
  4. Date warnings (under Accounting – Company Preferences) – So, is anybody besides me having trouble writing the year 2010 since we started the new year?  Check this box, and QuickBooks will warn you that the transaction you just entered is more than X days in the past.  QuickBooks will save you from writing a check dated 1/14/2009 when it should be 1/14/2010.  However, if you’re entering several old transactions, such as doing a year’s worth of bookkeeping, you definitely want this turned off.
  5. Desktop (under Desktop View – My Preferences) – Sometimes, when I open QuickBooks files from clients, dozens of windows open up automatically.  This happens because you either have the “save when closing company” preference selected, and all of the reports and input windows you had open the last time you used QuickBooks open up again, or you’re using the “save current desktop” preference, and the same windows open up every time from the last time you selected this preference.  If you select the “don’t save the desktop” feature, QuickBooks will open faster because it won’t generate any reports or windows when it starts up.  (note to accountants – if you get a QuickBooks file with lots of windows open, go to Window on the top menu, and then click on Close All…yeah, I spent a couple of years clicking on dozens of X’s before I figured out that one)

Why I Cringe When I See “Reconciliation Discrepancies” in QuickBooks

You’re near the end of a long and busy day, reconciling your bank account in QuickBooks.  You’ve checked off every deposit and check from the bank statement and thought you were done, but the bottom right corner of the reconciliation screen says “Difference: $20.00.” You need to hurry to make it to a dinner appointment, so you click on the “reconcile now” button anyway, and the following box appears:
QuickBooks Reconciliation Discrepancy

QuickBooks Reconciliation Discrepancy

You’ve cleared dozens of transactions totaling several thousand dollars, so a discrepancy of $20 is too small to be worth correcting, right?  So you click on the “enter adjustment” button, QuickBooks automatically creates a $20 transaction to Reconciliation Discrepancies expense, and congratulations, you’re done reconciling! Maybe you just missed recording a $20 bank charge in the books.  In this case, the adjustment for the discrepancy is inconsequential.  However, just because a discrepancy is small, it doesn’t mean it is not worth investigating.  Below are a few examples of what could have caused the discrepancy that might make you glad you looked into it further:
  1. You deposited $20 from a customer in your bank account, but forgot to record it in your books and missed it while reconciling.  The customer gets upset when he/she is invoiced again and claims that the bill was paid, but you have no record of receiving the payment.
  2. A bank error takes $80 out of your account, but the original check was for $60.  In your haste of reconciling, you didn’t catch the difference in the amounts.  If you discover the error, you’ll probably get $20 added back to your account (plus, you’ll score some points with the boss).
  3. You missed an unrecorded $1,000 deposit from a customer and an unrecorded $980 fixed asset purchase.  You might think that missing two large transactions that somehow happen to net out to a small amount would be very unlikely, but I have seen it happen many times!
You never know why reconciliation discrepancies exists.  That’s why I cringe when I see them. When you have a reconciliation discrepancy, you can’t blame the bank or QuickBooks.  You can only blame yourself for making a mistake in the reconciliation process.  You can blame your perfectionist accountant for telling you to start over and do it again, but you might thank your accountant for it later.

One Idea for Learning QuickBooks Better

Sometimes, business owners, accountants, and bookkeepers have asked me the simple question, “How can I learn QuickBooks better?”  A satisfactory answer to their simple question can be complicated, however.  My response is that it depends on how the person best learns.  I suggest that attending training seminars might work best for some.  For others, reading the manual could be helpful.  The follow-up question I am asked is usually, “well, how did you learn it?” My interaction with QuickBooks early in my accounting career (which consists almost entirely of working in accounting firms) was primarily in printing simple reports from client files to use as workpapers for preparing tax returns.  When clients started asking “how do you do this and that” in QuickBooks, I realized that I could use more practical experience myself, so a few years ago I purchased QuickBooks Premier Accountant’s Edition to use at home as my own personal finance software. Some might consider this a crazy idea.  There are certainly less expensive software packages out there that are better designed for personal finance rather than running a business (Quicken, for example).  However, I accomplished my personal objective of learning QuickBooks better.  With my frequent use of QuickBooks at home, entering transactions and reconciling accounts became second nature for me.  Although I don’t regularly use some business functions like inventory and sales tax with my personal file, I had the opportunity to experiment with them at home. So, that is how I learned to use QuickBooks, and I’m passing the advice along to any newly hired bookkeeper or accountant who also wants to become more comfortable with QuickBooks.