Early in the year is when most business owners promise themselves that this will be the year their finances are finally organized. The chaos of last year is behind them, new revenue goals are on the calendar, and there’s a fresh start waiting inside QuickBooks.

But in reality, this is also when many businesses realize something uncomfortable: their books aren’t as clean as they thought.

QuickBooks doesn’t reset itself when the calendar turns. If transactions were miscategorized, bank feeds duplicated, payroll recorded incorrectly, or invoices left unreconciled in December, those problems roll right into the new year, and they only get harder to fix once tax season is underway.

That’s why right now is the best month to clean up QuickBooks. It gives you the cleanest possible starting line for the year ahead.

Your Opening Balances Set the Tone for the Entire Year

When January 1 hits, QuickBooks creates a snapshot of your business: cash balances, credit cards, loans, accounts receivable, inventory, and owner equity all carry forward from December 31.

If anything was wrong last year, those mistakes now become your “opening balances.”

That means:

• If income was overstated last year, this year starts with inflated equity
• If expenses were miscategorized, your tax return may be wrong
• If loans were entered incorrectly, QuickBooks may think you’re richer or poorer than you really are

Fixing these errors in March or April requires going back into a closed tax year, which is messy and often expensive. Fixing them in January is much simpler.

February Is When Bank Feeds Are the Cleanest

Most businesses rely on QuickBooks bank feeds to pull in transactions automatically. By February, all of last year’s activity has undoubtedly cleared the bank, making reconciliation easier.

Waiting too long means:

• Bank rules may apply to old transactions incorrectly
• Duplicate transactions may sneak in
• Unmatched deposits and payments pile up

A late January or early February reconciliation lets you start the year knowing your cash balances are real.

Your Accountant Needs Clean Books — Not a Guessing Game

Every tax season, accountants and tax professionals like this office spend valuable time cleaning up QuickBooks files that should have been ready for review. That cleanup time is billed, and it delays your tax return.

When your books are accurate before you file:

• Your tax return is prepared faster
• You reduce the risk of amended returns
• You avoid IRS notices caused by mismatches
• You get better tax planning advice

QuickBooks isn’t just a bookkeeping tool. It’s the foundation of your tax return.

Payroll Errors Don’t Disappear at Year-End

This time of year is when W-2s and 1099s are issued, and that’s when payroll problems finally surface.

Common QuickBooks payroll issues include:

• Employees classified incorrectly
• Benefits taxed improperly
• State withholding errors
• Missed payroll tax deposits

If these issues aren’t corrected early, they can trigger penalties and audits later in the year.

A Clean QuickBooks File Helps You Make Better Decisions

When your books are accurate, QuickBooks becomes a powerful business tool.

You can see:

• True profitability
• Cash flow trends
• Whether you can afford new hires
• How much you should set aside for taxes
• Where money is being wasted

Without clean data, QuickBooks is just a digital shoebox.

What Business Owners Should Do Right Now

Here’s the smartest way to start the year:

1. Have your QuickBooks file reviewed by our firm – we’re here to help!
2. Reconcile all bank and credit card accounts
3. Verify your chart of accounts matches your tax return
4. Fix misclassified income and expenses
5. Confirm payroll and tax settings
6. Lock last year once everything is correct

Doing this now saves time, money, and stress all year long. A clean file means fewer surprises, lower accounting bills, and better financial decisions. It also makes your business more valuable because buyers, lenders, and investors all look at your books.

If QuickBooks has felt confusing, overwhelming, or unreliable, this is your chance to change that.

The post Now Is the Time to Fix Your QuickBooks File — Here’s Why first appeared on Wellman Tax & Business Advisors, Inc..

QuickBooks, of course, can’t do your taxes for you. But it helps you lay some of the groundwork. Following up on last month’s column on customizing reports, we’ll look at the program’s tax-related reports and its powerful report-filtering options.

But first, you’ll need to make sure that this output will be accurate.

Describe your company accurately
Your tax entity setting should have been established when you first set up QuickBooks, but verify that you’ve specified the correct one. Go to Company | Company Information. Your Report Information is in the lower left corner. Click the arrow next to Income Tax Form Used to see what’s active.

Make sure that QuickBooks is set up for the correct tax entity.

QuickBooks automatically assigns some of your accounts to their matching lines on the 1040 and assorted forms and schedules; this is called tax line mapping. So when you create tax reports, related transactions will be grouped by these designations.

This can be a real time-saver – as long as you’ve specified the correct entity. If:

• was selected
• This setting is incorrect
• You’re starting a business and don’t know which to choose… … please contact us. If you switch entities, your existing tax line mapping will disappear and will have to be reassigned.

Dedicated tax reports
Many of QuickBooks’ general financial reports provide tax-related information. But there are some that specifically relate to the numbers that will go on your return. Go to Reports | Accounting & Taxes | Income Tax Preparation. Here’s an excerpt of what you’ll see:

QuickBooks automatically assigns many accounts to the appropriate tax form lines, based on your specified tax entity.

Here, QuickBooks shows you which tax lines have been pre-assigned to your accounts. You can specify a tax form line for unassigned accounts, but this is something you should not attempt on your own. This report, though, will give you an idea of how useful your report output will be and where you’ll need our assistance.

Other reports provide tax-related data. You can access them by going again to Reports | Accountant & Taxes and clicking:

• Income Tax Summary. This displays totals for each tax line that’s relevant to your particular tax entity. Double-click on any number, and the Tax Line By Account report appears, detailing every transaction related to every tax-related account (you could add a column for Tax Line in Display options and make this quite a useful report).
• Income Tax Detail. This lists all individual transactions by tax form/schedule line assignment.

Paring it down
Some tax reports can be very lengthy; you may want to filter them to look at various “slices.” Click Customize Report | Filters:

This window displays a powerful set of filtering options.

The options listed under Choose Filter are available on other reports; they help you set up incredibly complex searches using multiple filters.

Let’s say you want a report that displays your installation labor costs on new residential construction from the last year (you could also throw other variables in). You’d simply choose the filters from the left pane and then select related options in the next pane (usually a list). You’d want to also click on the Display tab to make sure that the appropriate columns appear.

You can apply multiple filters to your reports.

QuickBooks reports can shave time off of tax preparation, and filtered views help you scrutinize your data in quite creative – and very useful – ways. The program’s boilerplate reports have their place in simple examinations of your financial status, but filters are potent tools. They can facilitate the kind of deep analysis that helps you make critical business decisions.

If you have questions on this or any other QuickBooks feature, call or email us. We’re your partner and we’re here to make your business better.

The post QuickBooks Income Tax Reports And Filtering Options: Target The Right Output first appeared on Wellman Tax & Business Advisors, Inc..

Use the Open Window
list Spend some time in Preferences, and you’ll be surprised to learn that you have more flexibility than you knew. QuickBooks is designed to work for a tremendously wide variety of businesses, so it comes with some features activated but many dormant.

The Open Window list is a good example. Do you tire of closing windows to find a screen that you used several tasks ago? Make sure that you’re in one-window view (View | One Window), and then click View | Open Window List. Click on any entry to move to that page.

Make account assignment mandatory
QuickBooks lets you enter transactions without assigning them to accounts. So your Chart of Accounts has two accounts labeled Uncategorized Income and Uncategorized Expenses that serve as repositories for these transactions. This means that when you run reports or prepare for taxes, you may have a hard time remembering the circumstances of those transactions and will find it difficult to assign them to accounts.

Do yourself a favor. Set up QuickBooks so that you must assign an account to every transaction. This will take extra time upfront, but not as much as if you try to recall the transaction three months from now. Go to Edit | Preferences | Accounting | Company Preferences and make sure that Require Accounts is checked. If you have questions on this, please call or email us.

Use the Account Prefill fields
Speaking of accounts, here’s a little time-saving tip. If you have vendors that are always assigned to the same account(s), you can establish this constant in the vendor record. Simply open the Edit Vendor window for a client and click the Account Prefill tab. Select the appropriate selection(s) from the drop-down lists. If a payment is sometimes split between multiple accounts, you’ll handle this division when you add transactions.

Use “Pending Sales”
Invoices, sales receipts and credit memos can be earmarked as “pending.” These sales do not show up in registers or reports (except for the Pending Sales report) and can’t be used for transactions where payment has already been applied. Create the transaction and click Edit | Mark [form name] As Pending. To finalize it, open the form and click Edit | Mark [form name] As Final.

This action can be useful in multiple situations, including:

• Backordered items
• Draft approvals
• Estimates
• Time-tracking for jobs
• Profit and loss reports that show the impact of pending sales (choose Either as the posting status [Non-posting or Posting] under Filters)

Be kind to your accountant: Set a closing date
Once we’ve worked with your QuickBooks file up to a certain date, entering, editing or deleting transactions prior to that date wreaks havoc with the balance of your books. To be safe, your administrator should password-protect the ability to do this, so that no one does this intentionally or unintentionally. Go to Edit | Preferences | Accounting | Company Preferences and enter a closing date and password. We will change the date each time we complete our work.

These are just a few examples of ways you can customize QuickBooks to make your workdays more productive and your record-keeping safer and more reflective of your business. We can help you further tailor the software to make it a better fit.

If you have questions on this or any other QuickBooks feature, call or email us. We’re your partner and we’re here to make your business better.

The post QuickBooks Tips And Tricks first appeared on Wellman Tax & Business Advisors, Inc..

The new Express Start is designed for businesses that want to blast through setup and start entering customers and invoices. You have two other options, though: Advanced Setup is the old EasyStep interview that solicits more details. You can also open an existing file or convert data from Quicken or other accounting software.

Express Start requires minimal input: company name, industry, company type, tax ID, and contact information. After you save your company file, it lets you start adding or importing customers/vendors/employees, products/services, and bank accounts.

Express Start simplifies company setup

Activity-Driven Calendar
QuickBooks’ Reminders keep you apprised of each day’s tasks, but they don’t provide any information about the past or future. QuickBooks 2012 solves this problem with its new Calendar. When you enter an appointment, to-do, or key business task (invoices, bills, purchase orders, etc.), it appears in the calendar. You can display a graphical view of the month that tallies activities for each day and lists them below. Daily and weekly views are in list form. And links open the original documents.

The new Calendar displays daily, weekly, and monthly views of your financial transactions.

Save Excel Formatting
Once you’ve formatted a QuickBooks report in Excel, it’s frustrating to have to reformat it each time you run it for different time periods and/or with your ever-changing content. Excel Integration Refresh simplifies this process. You can now export a report to Excel, make formatting changes and save them, and then reapply them later to the same type of report using different date ranges and your updated QuickBooks data. Acceptable alterations include:

• Row and column header font formatting
• New formulas
• Renamed column and row headers, and report titles
• Resized columns
• Inserted columns and rows
• Inserted formula text

You can do this by opening your report in QuickBooks and clicking Update an existing worksheet, or by launching your report in Excel and clicking the QuickBooks tab on the toolbar, then the Update Report button.

This window opens when you click Update Report in Excel.

A New Report Community
There’s always room for more report formats. QuickBooks 2012 offers a library of Contributed Reports, variations created either by Intuit or your fellow users. You can select one of these, like Customer Sales By Quantity By Item Detail and instantly populate it with your own data.

You can sort these templates by industry and rating, and view them as a list, in a grid, or in the Report Center’s Carousel view.

Centralized Operations
QuickBooks 2012 also saves you time with its new Centers. The Inventory Center works similarly to those available for customers, vendors, and employees. It’s a clearinghouse of item records and transactions that can be viewed and sorted. You can also do inventory housekeeping tasks here, like adding items and launching transactions.

The Lead Center helps you carefully track new leads that you either paste in from Excel or enter manually. You can add to-dos and notes to contact records, and convert them into customers.

Upgrading Can Be Tricky
Intuit has included other, smaller time-saving organizational and reporting tools in QuickBooks 2012, like One-Click Transactions, which lets you create related transactions from existing ones (i.e., invoice to credit memo) with one click.

There’s nothing especially difficult about using most of QuickBooks 2012’s new features. But upgrading and setup are sometimes quirky, and the Excel Integration Refresh tool has a learning curve. We’re happy to help you start your company file on the right foot or get acclimated to this latest version.

Track your leads and convert them into customers in the new Lead Center

The post QuickBooks 2012: New Paths to Better, Faster Financial Management first appeared on Wellman Tax & Business Advisors, Inc..

If you’re still operating this way, though, you’re missing out on the numerous tools that QuickBooks offers to track your accounts payable, including the ability to:

• Enter bills as they come in
• Set reminders for bills due
• Pay bills easily/ Locate a bill or payment quickly
• Enter bills as (or after) you receive items
• Link bills to purchase orders
• Have instant access to a bill’s status

Receiving the goods
When an expense bill comes in (from a utility company, for example), click the Enter Bills icon on the home page, or Vendors | Enter Bills. A window like the one displayed above opens. Select the vendor and fill in the blanks. Make sure that the Expenses tab below is selected and the appropriate account number and amount fields are completed. If it’s a bill for an item that already has a related Item Receipt (the shipment preceded the bill), QuickBooks instructs you to use Vendor | Enter Bill for Received Items. Follow the prompts.

Note: Dealing with incoming inventory is complex. Consult with us if you plan to use this feature.

If the bill came simultaneously with items, click Vendors | Receive Items and Enter Bill. When you select the vendor from the list, this box opens (if you have sent a purchase order):

Click Yes. The Open Purchase Orders box opens, containing a list of open POs. Select the one(s) you want and click OK. The bill form opens, containing the details of that purchase order. Change quantities if they don’t match the shipment, and edit other fields as necessary. Save the bill.

Settling your debts
It’s good to set reminders for bills. Go to Edit | Preferences and click Reminders. Make sure that that Show Reminders List… box is checked, then click Company Preferences. Find the Bills to Pay row and enter the advance notice you’d like. Indicate whether you want to see a list or a summary, then click OK.

When bills are due, click the Pay Bills icon or select Vendors | Pay Bills. A window opens displaying all outstanding bills. You can pare this down by selecting a date in the Due on or beforefield and filtering by vendors. The screen will look something like this:

Enter a check mark next to the bills you’re paying, and change the amount in the Amt. To Pay field at the end of the row if necessary. At the bottom of the screen, you can set the payment date and type, use any discounts or credits, and make sure the correct payment account is selected. When you’re done, click Pay Selected Bills.

Tip: You can have credits and discounts automatically applied by going to Edit | Preferences | Bills.

After You’ve Paid Up
There are a number of places where your bills appear in QuickBooks, including:

• The Unpaid Bills Detail report
• The A/P Aging Detail report
• The Vendor Center
• QuickReports
• In the Recent Transactions pane of some forms
• On the bills themselves

QuickBooks also lets you void and delete bills, and copy and memorize them. Check with us before voiding and deleting, as this can make some complicated changes in your accounts.

You can just pay bills by using Banking | Write Checks or Enter Credit Card Charges. But the payoff for tracking bills is instant access to your accounts payable status, better relations with vendors, and a more insightful accounting of your company’s cash flow.

The post Tracking Bills in QuickBooks, Worth the Effort first appeared on Wellman Tax & Business Advisors, Inc..

QuickBooks can memorize a variety of transaction types, including invoices, purchase orders, and bills. After you’ve memorized them, you can edit, reschedule, and delete them, as well as group them if more than one will be dispatched on the same day. Here’s how.

A familiar start

Let’s say you’re starting a new job providing regular training for a client; it’s always four hours, every Monday, for 12 weeks. First, find or create the invoice.

After you’ve found (or created) the invoice, then click Edit | Memorize Invoice. This window opens:

Figure 1: You’ll define the terms of your memorized transaction in this window.

The client’s name will already be filled in. You’ll first have to decide whether you want to just be reminded every week (the tickler will appear in your Reminders list) or whether you want QuickBooks to automatically enter the transaction. Click the appropriate button, or Don’t Remind Me if you have another way to remember.

Drop down the list next to How often, and select Weekly. Enter the first date of training. Put 11 in the box next to Number Remaining to represent the balance of the 12 weeks, and 0 next to Days In Advance To Enter. Click OK.

Retrieving your work

It’s easy to find your memorized transactions when you need to alter or delete them. Click Lists | Memorized Transaction List (or Ctrl+T). Highlight the entry you want to change in the list that appears. At the bottom of the window, click Memorized Transaction. This window will pop up:

Figure 2: This window displays your options for managing Memorized Transactions.

Click Edit Memorized Transaction. The window you used to specify the original options (as displayed above, in the very first figure) will open. Make the desired changes and click OK.

Tip: To save time, when the list of memorized transactions first appears, put your cursor on the targeted entry and right-click. The Memorized Transaction menu will appear.

Of course, if you want to remove an ongoing transaction, just highlight it, right-click, and select Delete Memorized Transaction.

Customizing your view

You can change the way your list displays by right-clicking on an empty space in the Memorized Transaction List and clicking Customize Columns. A window like this will appear:

Figure 3: It’s easy to customize the screen that displays your list of memorized transactions.

To add a column to the Memorized Transaction list, highlight it in the box of available columns on the left and click Add. It will move over into the box on the right and be inserted into your table. Similarly, to get rid of a column, highlight it in the box on the right and click Remove.

You can also change the order in which columns appear by highlighting one and clicking Move Up or Move Down.

More tools

If you’ve gotten a reminder that it’s time to pay a bill, you can go straight to the Memorized Transactionscreen by right-clicking the item in the Reminders screen and selecting Recall Transaction. The correct transaction should be highlighted. At the bottom of the screen, click Enter Transaction (or right-click it) to display, edit and/or save it.

Sometimes your memorized transactions will occur on the same day. To save time, you can group them. Open the Memorized Transaction list and right-click in an empty part of the screen. Select New Group. Enter a name for it in the Name box, and set your reminder and frequency options like you did with the transactions themselves (you’ll be seeing the same dialog box as you did then). Click OK.

Right-click on the first entry that you want to add to the group, then select Edit Memorized Transaction. Click next to With Transactions in Group, then drop down the list next to Group Name and grab the correct one. Click OK. Now you can use your group just as you’d use an individual memorized transaction.

Figure 4: Once you’ve named and defined a group, you can add individual memorized transactions to it.

Memorizing transactions in QuickBooks isn’t exactly rocket science, but you can find yourself with late bill payments, items not invoiced, and/or inventory not ordered if you don’t do it exactly right. Triple-check your work and consult with Us until you’re confident. Once you are, you may find your financial ship sailing more smoothly than ever. If you have any questions about memorized transactions, give us a call.

The post Repetitive Transactions. Memorize Them. first appeared on Wellman Tax & Business Advisors, Inc..

Conscientious daily work habits—including a constant eye on tax issues—can help prevent this painful scenario. QuickBooks offers many built-in tools to help you minimize the tax-time terrors.

Stay on Top of Your Receivables in QuickBooks 2011

Even if your sales are up, slow customer payments may be damaging your cash flow. If you often come up short when it’s time to pay your tax obligations, it may be that you’re not chasing down your receivables adequately.

QuickBooks Pro and Premier 2011 added a number of features to help with this. The new Customer Snapshot gives you instant access to key customer information; things like open balance, number of days to pay, and recent invoices and payments.

A new vertical pane next to transaction forms displays an overview of your interaction with the customer or vendor. Beyond saving the time you used to spend looking up historical information, this feature can alert you to collection opportunities. A new Collections Center also automates e-mailed collection notices.

Figure 1: QuickBooks Pro and Premier 2011 display vertical panes next to transactions to help you catch unbilled items and open balances.

If you’ve got any questions about these newer versions of QuickBooks, give our office a call.

Older Versions’ Cash Flow Tools

Previous versions of QuickBooks also help you maximize customer payments. Enter an invoice for a customer who has outstanding time charges and/or costs, and a dialog box reminds you of that.

Figure 2: If you’re invoicing a customer who already owes you money, QuickBooks will remind you – and include the past due balance in your current form.

Also, QuickBooks’ integration with Microsoft Word makes short work of collection letters. Open theCustomer Center, then click Word | Prepare Collection Letters and follow the wizard. The Payment Snapshot (Company Snapshot | Payments) is a page you should visit daily; its tables and graphs spell out who needs nudging.

Intuit also offers solutions that let you accept payments online, so you don’t have to wait for checks to arrive in the mail. Talk to us about which one might be best for you and how to get started with it.

Keep Documents Close

However you store receipts and other tax-related paper, it can be frustrating to match paper to QuickBooks data. QuickBooks 2010 introduced the ability to attach scanned documents to any screen that has theAttach icon. Using this tool faithfully will reduce the time and frustration associated with your tax preparation. Prices start at $9.95/month for one attachment per list item or transaction; 30-day free trial.

Figure 3: Click on this icon to attach a scanned paper document to a QuickBooks item.

Use “Classes”

QuickBooks uses the accounts assigned to your transactions to categorize your tax-related data. You can also slice your data in additional ways by using classes to break out account balances by filters, like by departments, consultants, or locations.  You must use it faithfully for it to be effective.  You should also check with us before embarking on this new classification system.

First, make sure that QuickBooks is equipped to handle classes. Click on Edit | Preferences, then click the Accounting tab and Company Preferences. Click on the box next to Use class tracking if it isn’t already checked, and on Prompt to assign classes if you want QuickBooks to remind you before you save an unclassified transaction.

Figure 4: Make sure your Company Preferences are set to accommodate class tracking.

Go to Lists | Class List,  and then click the Class tab in the lower left corner. Select New.  Type your new class name in the field that appears and check the Subclass of box if you want to make this a subclass. Assign these classes in transactions where appropriate, and you’ll have neatly categorized data for theProfit & Loss by Class, Profit & Loss Unclassified, and (new in 2011) Balance Sheet by Class reports. Classes can also be displayed in other reports.

Built For Tax Reporting

QuickBooks can’t prepare your taxes for you, but these tools and more help shape your data to make tax deadlines less stressful and your returns more accurate than the days of pencil and paper.

It does so in the background by, for example, assigning your transactions to the appropriate accounts, so your reports tell the right story. Other assistance is more obvious; QuickBooks helps you print 1099s, W-2s and W-3s.

QuickBooks’ design encourages you to look at tax-related issues every day, which can be a very good thing come filing time. Take advantage of this—along with the expert advice of our offices—and you can be more confident and less frantic during your periodic interaction with the IRS.

The post Taxes 24/7/365 first appeared on Wellman Tax & Business Advisors, Inc..

#1: Set Reminders

As shown in Figure 1, QuickBooks can display a reminder window when you open your QuickBooks company:

Choose Company, Reminders, and then click the Set Preferences button.

Choose the My Preferences tab, and then click the Show Reminders List When Opening a Company File on the My Preferences tab.

Click the Company Preferences tab, and choose Show List for Overdue Invoices. As shown in Figure 2, you can enter a negative number to be notified of overdue invoices before they reach their due date. Click OK to save your changes.

Figure 1: QuickBooks can show you a list of overdue invoices whenever you open your company.

Figure 2: Enter -3 in the Days after Due Date field to be notified when invoices are within 3 days of their due date or later.

#2: Monitor Customer Balances

In addition to tracking overdue invoices, you should also stay abreast of how much credit you’ve extended to each of your customers. One way to do this is to use the Customer Center whenever you create new invoices:

Choose Customers, and then Customer Center (you can also click the Customer Center toolbar icon or press Ctrl-J).

As shown in Figure 3, the customer center lists the Balance total for each customer. You can use this information to determine whether you want to sell additional products or services. You can quickly create an invoice from the Customer Center: select a customer name, and then press Ctrl-I (as in I for invoice).

As also shown in Figure 3, you can add an Open Balance column to the transaction list. To do so, right-click on the transaction list, and then choose Customize Columns. Choose Open Balance from the Available Columns list, and then click the Add button.

Figure 3: The Customer Center makes it easy to monitor open invoices.

Expert trick: To sort customer open balances in descending order, click twice on the Balance Total column.

#3: Create an Overdue Watermark

An attention getting messages, such as “OVERDUE!” or “PLEASE PAY!” can add impact to follow-up copies of invoices that you send out. It’s easy to add a watermark to your invoices:

Choose Customers, and then Create Invoices to display the Create Invoices window.

Click the Customize button on the toobar, and then click the Manage Templates button.

Select an existing invoice, such as Intuit Product Invoice, and then click the Copy button.

Use the Template name field shown in Figure 4 to assign a name like Overdue Intuit Product Invoice, instead of Copy of: Intuit Product Invoice.

Click OK to close the Manage Templates window, and then click the Layout Designer button in the Basic Customization window.

Click the Add button on the toolbar, and then choose Text Box.

Enter the message you want to add in the Text field, such as OVERDUE!

Click the Font button, and then make these changes:

• Set the Font Name to Arial Black
• Set the Font Style to Bold
• Set the Font Size to 60
• Change the Font Color to Silver

Once you’ve set the font settings, click OK to close the Font dialog box, and then click the Border tab. Unclick Top, Left, Right, and Bottom, and then click OK.

Resize and reposition the text box on your invoice, such as in the center of the body section, as shown in Figure 5.

Right-click on the text box and choose Order, and then Send Backward.

Figure 4: Assign a meaningful name to your new template.

Figure 5: You can add an OVERDUE! Watermark to a customized QuickBooks invoice template.

Going forward, you can choose this template from the list anytime you wish to follow-up on an overdue invoice.

#4: Send e-mail follow-ups

A friendly note can sometimes shake a payment loose on an overdue invoice. For instance, you can choose Reports, Customers & Receivables, and then A/R Aging Detail. Double-click on the invoice in question to display it onscreen, and then click the Send button on the toolbar, which looks like an envelope with a green arrow. As shown in Figure 6, you can change customize the body of the e-mail to your liking. If you typically mail print copies of your original invoices, then consider changing the default text of the e-mail to make your collections easier. To do so, click the Edit Default Text button and then make any changes that you like. Do note that these changes won’t appear in the Send Invoice window until you close it and click the Send button again. Click the Send Now button to e-mail the invoice copy to your customer.

Figure 6: Customize the default e-mail text to simplify invoice follow-ups.

#5: Use Statements

QuickBooks makes it easy to send statements to one or more customers. Choose Customers, and then Create Statements. Set the desired options, including which customer or customers to contact, and then choose Print or Email to generate the statements.

#6: Tweak the Collections Report

When calling on an overdue invoice, it’s helpful to make sure that your customer is aware of all pending invoices. You can easily tweak this report so that it lists all open invoices:

Choose Reports, Customers & Receivables, and then Collections Report.

Click the Modify Report button, and then click on the Filters tab.

As shown in Figure 7, click on the Date filter, and then choose Remove Selected Filter. Do the same for the Aging and Due Date filters, and then click OK.

As shown in Figure 8, the Collections Report now displays all open invoices. You can click the Memorize button to save this report for future use.

Figure 7: Modify the Collections Report filters to add helpful information to this report.

Figure 8: The resulting report shows all open invoices, as well as contact names and telephone numbers.

#7: Accept credit cards

Many business owners avoid accepting credit cards due to the fees involved, which can top 3%. However, 97% of an overdue invoice is far better than 0%, or having to wait even longer to collect. You can learn about QuickBooks Merchant Services by choosing Add Credit Card Processing on the Customers menu in QuickBooks. Or, consider a payment service like PayPal (www.paypal.com), which offers a free Request Money with QuickBooks wizard. Look under the Merchant Services section of your PayPal business account.

The post Manage Collections with QuickBooks first appeared on Wellman Tax & Business Advisors, Inc..

Does the mere mention of accounting ratios put your teeth on edge, and bring back bad memories of Accounting 101?  It shouldn’t as ratios can help your quickly determine how your business compares against others. Banks often use ratios to analyze your financial statements as part of the loan approval process, so it’s helpful to know in advance how you’ll be measured. Even better, ratios allow you to compare your business against your peers since many trade groups publish lists of average ratios within an industry. Although ratios may have made you drowsy during accounting class, they can be a fascinating way to measure your company’s financial performance.

Gross Profit Margin

Simply put, gross profit margin—sometimes referred to as gross margin—is your revenues less your cost of sales. For some industries, this is a very meaningful metric, while it won’t mean as much to others. For instance, manufacturers, restaurants, and retailers often treat gross profit as a key performance indicator.  In such environments, one typically purchases inventory at one price, and ideally sells it to someone else at a higher price. The spread between these two numbers is the gross profit margin. Let’s say that you buy $40 of pine straw (we’re trying to avoid the accounting class term widget) and sell it for $60. In this case, $20 of gross margin divided by $60 of sales yields a gross margin percentage of 33%. Thus one-third of your sales are available to put toward overhead items, such as office supplies, payroll, rent, taxes, and so on. Ideally your gross margin is high enough to cover your overhead and leave you with a profit. With that example in mind, let’s see how you can calculate your own gross profit margin.

Caveat: Gross profit margin isn’t meaningful to everyone. For instance, if you’re a self-employed service provider, you may not have any cost of sales. Your salary is arguably all or most of your profit. You can certainly count your salary as cost of sales and compute a gross profit margin, but you might not find much value in the result.

To begin, choose Reports, Company and Financial, and then Profit & Loss Standard. As shown in Figure 1, look for the Gross Profit amount, and then divide this by Total Income.

Figure 1: The Profit and Loss Standard report provides the figures you need to calculate gross profit.

In this case, $30,953.20/$51,241.16 shows a gross profit margin of 60.4%. Is that good? Is it bad? Very often the answer is “it depends”, which is why you should try to compare yourself to similar companies in your industry. However, let’s consider the restaurant industry. Many owners strive to keep their gross margin at around 63%, which means a cost of goods sold percentage of 37%.  The gross profit ratio enables you to track this key measurement, but you must ensure that your transactions are being recorded in the proper accounts. The percentages can skew if, let’s say a telephone bill, is miscoded to Food Costs, instead of Telephone. Similarly, your cost of goods sold might look great only because someone miscoded food costs into an overhead account, such as Supplies.

Profit Margin

Profit margin is another commonly used ratio that you can derive from the Profit & Loss Standard report by dividing Net Income by Total Income. In essence, this is the percentage of sales that the owner of a business gets to keep—before Uncle Sam gets his share. Profit margins vary widely by industry. For example, a grocery store chain may have profits of $2 billion, but a profit margin of just 2.6%. An oil company may have staggering profits in dollars, but their profit margin is often just 10%. Conversely, some software companies have a profit margin of 28% or more. As with gross profit, the best way to determine whether a profit margin is reasonable is by comparing the result to one’s peers. The construction company shown in Figure 1 has Net Income for the period of $13,123.48, which when divided by Total Income of $51,241.16 returns a profit margin of 25.6%.

Inventory Turnover Ratio

This ratio illustrates how many times a year that you’re selling your entire inventory. This can help you gauge whether you may be holding too much inventory, or not enough. This ratio is based on cost of goods sold divided by average inventory. As you’ve seen, cost of goods sold appears on the Profit and Loss Standard report—look for Total COGS—but you’ll have to perform a quick calculation to determine average inventory. To do so, divide the sum of your beginning inventory plus ending inventory by 2. Although you can use several different reports in QuickBooks to determine the beginning and ending balance of your inventory, try this first: choose Reports, Company and Financial, and then Balance Sheet Prev Year Comparison. Change the report date to This Fiscal Year, and then look for the inventory account balance, as shown in Figure 2. The ending balance for last year is also the beginning balance for this year.

If you need beginning and ending balances for a shorter period, such as a quarter, choose Reports, Accountant and Taxes, and then General Ledger. Set the report dates to the period of your choice, and then use the beginning and ending balances for your inventory account.

Figure 2: The Balance Sheet Prev Year Comparison can provide beginning and ending inventory balances.

Average Collection Period

This ratio helps you determine how long it takes your customers to pay their invoices. The formula is a little more complex than some of the other ratios: number of days multiplied by average accounts receivable balance, divided by credit sales. For instance, let’s say that your average accounts receivable balance is $30,000, and you had total sales of$400,000 for the year.  365 multiplied by 30,000 is 10,950,000. This amount divided by our total sales of $400,000 is 27.38, meaning that on average your customers pay their invoice in just under 30 days. Be sure to monitor your average collection period, as your cash flow can tighten quickly if that ratio increases. If you typically invoice your customers, then you can use the Total Income figure from your Profit & Loss Standard report.

Keep in mind: Average collection period won’t be of interest if your customers pay on the spot, such as in a retail store or restaurant.

Although QuickBooks doesn’t directly provide a figure for average accounts receivable, you can quickly customize a report to aid in this calculation:

1. Choose Reports, Company and Financial, and then Balance Sheet Standard.

2. Click the Modify report button, and then set the From and To dates to match the period shown on your Profit & Loss report. As shown in Figure 3, change the Display Columns By to Months, and then click OK.

Figure 3: Change Display Columns By to Months when you want a month-by-month report.

When QuickBooks displays the 12-month report, as shown in Figure 4, click the Export button, and then click OK to send the report to Microsoft Excel.

Figure 4: You can convert the Balance Sheet Standard report into a twelve-month format.

As shown in Figure 5, row 9 contains the Accounts Receivable figures. In cell R9, enter this formula to calculate your average accounts receivable balance:  =AVERAGE(F9:R9).

Figure 5: Use the Accounts Receivable figures to calculate your average accounts receivable balance.

As you can see, the average collection period ratio enables you to determine how long it takes your customers to honor your invoices, which in turn has a direct impact on your cash flow.

Other Common Ratios

Current Ratio: Divide current assets by current liabilities to determine a firm’s liquidity.

Quick Ratio: Subtract inventory from current assets, and then divide by current liabilities to apply a more severe liquidity measurement.

Debt Ratio: Divide total debt by total assets to determine how much of the company is financed by debt.

Return On Assets: Banks often add net income plus interest expense together, and then divide this by total assets to determine the firm’s return on assets. This figure typically needs to exceed the interest rate of a loan that you may be contemplating.

Compare Yourself to Others

Now that you understand how to calculate ratios based on your financial results, the next step is to compare yourself to your peers. You may belong to a trade group that makes benchmarks available to its members. If not, a good first step is the BizStats web site, at www.bizstats.com. Your line of business may be included in their free offerings, but even more information is available on a subscription basis. You can find even more resources by searching the Internet search for the term “industry benchmarks”.

Did You Know?

You can send your thoughts about QuickBooks to Intuit directly from within QuickBooks. To do so, choose Help, Send Feedback Online, and then one of these choices:

• Product Suggestion, as shown in Figure 6

• Bug Report

• Help System Suggestion

Any of these links will display an online from in your web browser so that you can submit your thoughts directly to the QuickBooks development team. QuickBooks frequently updates its’ products, so before you send a bug report, choose Help, and then Update QuickBooks. Click the Update Now button to ensure that you have the latest patches and fixes for your version of QuickBooks.

Figure 6: Submit your wish-list items directly to the development team from within QuickBooks.

The post Use Accounting Ratios to Stave Off Financial Problems first appeared on Wellman Tax & Business Advisors, Inc..

Figure 1: The QuickBooks Begin Reconciliation window.

Figure 2: The QuickBooks Reconcile window.

1. Locate discrepancies
As shown in Figure 1, click the Locate Discrepancies button to display the Locate Discrepancies window shown in Figure 3. From there, click the Discrepancy Report button to display the report, as shown in Figure 4. This identifies any edited or deleted transactions that may affect your reconciliation.

Figure 3: QuickBooks can help you identify edited transactions that may disrupt your reconciliation.

Figure 4: Ideally your discrepancy report should never have any transactions listed.

2. Confirm your beginning balance
Your beginning balance should always tie to your bank statement, but if it doesn’t, click the Undo Last Reconciliation button until you reach a point where the beginning balance matches your bank statement. You must then redo the reconciliations to bring your books current and resolve the discrepancy.

3. Don’t forget interest and fees
Be sure to record any interest and fees in the window shown in Figure 1. Alternatively you can record deposit and check transactions to record interest and fees, or the very savvy can use journal entries. If you go this route, be sure to debit cash and credit interest income for interest earnings or credit cash and debit bank charges for any fees incurred.

4. Double-check your ending balance
Always double-check your ending balance input when you start the reconciliation. A simple transposition or other error here can make it appear that you’ve missed a transaction.

5. Look for transpositions
Sometimes you’ll mark all transactions as cleared, but still have a difference. In such cases, divide the difference by 9—if it divides out evenly, then there’s a good chance that you transposed a number on a transaction. For instance, a $63 dollar difference divided by 9 returns 7 could mean that a transaction was entered incorrectly. As shown in Figure 5, you can right-click on an amount, and then choose Edit Transaction to fix the error.
Figure 5: Right-click on an amount and choose Edit Transaction to correct a mistake.

6. Pick a side, any side
Don’t mix and match deposits and withdrawals. Reconcile your Deposits and Other Credits first, and then confirm that the total items you marked cleared ties to the amount shown on the Reconcile window. Then reconcile Checks and Payments — doing one side a time limits your search area for missing or misposted transactions.

7. Clear the decks
If you get tangled up in a reconciliation, click the Unmark All button shown in Figure 2 to start over.

8. Enter missing transactions
You can add missing transactions without closing the reconciliation window. Simply choose a command from the menu across the top or from the Home screen. Saved transactions will instantly appear in the reconciliation window.

9. Check undeposited funds
Choose Banking, and then Make Deposits. If the window shown in Figure 6 appears, you must complete the deposit process for these transactions.

Figure 6: Undeposited funds can pose problems with your reconciliation.

10. Hide unnecessary transactions
Click the Hide Transactions after the Statement’s End Date check box shown in Figure 2 to have fewer transactions to sift through.

11. Void old transactions
Old, uncleared transactions can linger on forever—locate such transactions within your register, choose Edit, and then Void. The banking system generally considers checks to be stale after six months. Such lingering transactions are often duplicates of a transaction that cleared.

12. Clear voided transactions
Always clear transactions with a zero balance as these won’t affect your reconciliation, but do clutter up the Reconcile window.

13. Bank online
Some institutions allow you to synchronize your records with your online statement. This involves a matching process that automatically clears transactions that match, and makes it easy to quickly post new transactions.

14. Use your keyboard
Rather than using your mouse to click on each transaction that you wish to clear, use the arrow keys on your keyboard to move up and down. Press the spacebar to toggle a transaction as cleared or uncleared.

15. Walk away and come back later
If you just can’t seem to get the unreconciled difference down to zero, the best thing to do is click the Leave button shown in Figure 2, and then resume the reconciliation tomorrow. A fresh eye can do wonders.

16. Reconcile More Frequently
If you can access your bank account online, you can reconcile your bank statement as often as you wish. Consider reconciling accounts with heavy volume weekly or twice a month.

The post 16 Bank Reconciliation Tips first appeared on Wellman Tax & Business Advisors, Inc..