Posts in Bookkeeping Tips

How to Safely Switch From QBD to QBO

How to Safely Switch From QuickBooks Desktop to QuickBooks Online

August 13th, 2020 Posted by Bookkeeping Tips 0 thoughts on “How to Safely Switch From QuickBooks Desktop to QuickBooks Online”

How to Safely Switch From QuickBooks Desktop to QuickBooks Online

Good businesses know that the world is always changing. Great businesses adapt their practices to accommodate that change.
There are two main structures that require change many times during the life of a business.
The first is external practices. This includes things like marketing, location development, packaging choices, order fulfillment, and client relations.
The second is your internal processes: recruitment, management, and bookkeeping. For today, we’re going to focus on changing your bookkeeping practices.
Perhaps the most common change in bookkeeping is switching from Quickbooks Desktop to Quickbooks Online. Quickbooks Online is becoming the more popular choice for bookkeeping, thanks to its cost effectiveness, remote work-ability, and improved features.
Let’s explore that change and elaborate on how to do it properly.

Set Up Your Company File For Transfer

A common mistake we see when companies attempt to transfer their data from QBD to QBO is that they jump the gun on transferring before their data is properly managed and formatted for the change.
First, be advised that you can only change your company over to a QBO account within the first 60 days of creating said account. If you wait too long, you may need to spend an appreciable number of labor hours transferring it manually.
Second, you need to hold off on starting payroll in your QuickBooks Online account. If you do, you won’t be able to convert your company smoothly to that account.
You should also, in your QBD terminal, hit Ctrl + 1 to see the number of targets on your file. If it’s over 350,000, you’ll need to consolidate the file before converting it.
Finally, we heavily recommend backing up your QBD company file. In the unlikely event that the transfer has a critical failure, you want to make sure your important financial data is protected.
With the preparations out of the way, let’s get started on transferring your file!

Transferring Your Company File From QuickBooks Desktop Pro and Premier to QuickBooks Online

To begin, create your QuickBooks Online account. There are a number of packages to choose from, so make sure the package you opt for has enough featurability and storage for your needs. Remember, you must perform the transfer within 60 days of creating this account.
After you create your account, go to your QBD terminal and log in as an admin. Make sure your Desktop version is up to date (you can begin a trial with a new version and restore your company file to do this for free.) By the way, the transfer process is the same for both Pro and Premier. If you use QBD Enterprise, you can skip ahead.
Then, go to Company, and select Export Company File to Quickbooks Online. You may be prompted to sign in (do so as an admin). You’ll be asked whether or not to want to transfer inventory. Bear in mind that only QBO Plus and Advanced have the ability to track inventory.
From there, simply select the QBO company you want to transfer to, enter some information and hit Agree. That’s all! It’ll begin the transfer, which may take up to 24 hours.

Steps to Take After Transferring from QBD to QBO

After the transfer is complete, we suggest keeping your QBD records up to date in tandem with your new QBO records. This allows you to prevent loss of data should, for any reason, your QBO account go kaput. It also gives you a chance to try out QBO for all bookkeeping practices without feeling pressured to stick with it if it doesn’t work out. You should also run a P&L report on your new QBO account to ensure all data converted appropriately.
Make sure to go to your settings and enable automatic payments and credits in QBO, since they will not be applied during the transfer. Finally, connect your bank accounts to QBO via autofeed, since this is not done by default.

Transferring From QuickBooks Enterprise

If your firm uses QBD Enterprise, it’s recommended that you start fresh with QBO and do not attempt a transfer, as transferring a QBD Enterprise file almost always results in data loss. If you’d like to give it a shot anyway, follow these steps:
First, sign into your QBD Enterprise account as an administrator. Then, hit Ctrl + 1 to open up your company’s information.
Then, press Ctrl + Q + B, and then select OK. Hit Start Your Export. Sign in as an admin to your QBO account, and then follow the steps like normal!

How Your Various Accounts Will Transfer

When you convert a company from QBD to QBO, some things will be converted to different names, will be grouped differently, or will not be converted at all. Let’s rattle off a few of the major discrepancies to keep in mind.

1.) If you have an audit trail in QBD, it will not be transferred to QBO. QBO will automatically keep a record of who has opened the books.
2.) If you have a bill discount in QBD, it converts to a vendor credit in QBO.
3.) Budgets only convert to Plus and Advanced QBO accounts.
4.) Profit and Loss is the only budget type that can be transferred.
5.) Credit card charges in QBD convert to expenses in QBO.
6.) Jobs are converted to sub-customers in QBO.
7.) Quickbooks Desktop has more payroll features than QBO. Paychecks will be converted into regular checks and employee addresses may indeed be fixed. Remember to set up payroll AFTER the transfer.
8.) Reconciliations will not be transferred, so you will need to manually enter an ending balance and reconcile.

Booktied Can Help With Your Transfer

If you find yourself having trouble converting over to QBO, just give us a shout! Booktied offers a number of services relating to Quickbooks and to bookkeeping itself.
With Booktied, you can give your team the training it needs to be self-sufficient in all bookkeeping practices. You can also outsource your bookkeeping to us as the ultimate time-saver! We’re just a call or click away!

How To Avoid Recording Duplicate Income in Quickbooks

How To Avoid Recording Duplicate Income in Quickbooks

July 28th, 2020 Posted by Bookkeeping Tips 0 thoughts on “How To Avoid Recording Duplicate Income in Quickbooks”

How to Avoid Recording Duplicate Income in QuickBooks

The entire idea behind bookkeeping is that you can maintain an accurate record of your income and expenses for the purposes of paying taxes and planning projects.  Of course, maintaining accuracy isn’t always as easy as it sounds.  Overstating income or expenses is a great way to throw things out of wack and create headaches.  Today, let’s focus on income overstatement.

One of the most common reasons for overstated income is  recording duplicate income transactions.

An overstated income is dangerous because it means your business is now assumed to be more profitable than it actually is.  This can lead to some nasty surprises when you check the business bank account and realize you have less to spend than you thought you did.

Let’s explore the causes of duplicate transactions in QuickBooks and how we can avoid them!

 

What causes duplicate income?

Duplicate income is often the result of an honest mistake.  QuickBooks has a lot of great automation software and technology that makes our lives easier.  Often, however, mixing humans with software is a recipe for confusion.

Most of the time, a duplicate income transaction happens because someone entered a transaction manually, even though that transaction was already reported automatically via QB’s bank feed software.  So how do we avoid this?

 

How to Avoid QuickBooks Duplicate Income

The best way to avoid duplicate transactions is to maintain a routine of reconciling your manual transaction entries with your company’s bank statement.  In doing so, you’re ensuring that your books are lining up with reality: the true activity in the business account.

Reconciling should be in every bookkeeper’s toolbox.  Here’s how to reconcile your business bank account in Quickbooks:

First, head to the Accounting tab.  In there, you should see a sub-tab labeled Reconcile.  Then, you’ll need to enter a Beginning Date and an Ending Date.  The beginning date we’ll be the last date you reconciled.  The ending date would be today, or any date after the beginning date according to your needs.

Quickbooks will pull up your manual entries and your bank statement side by side.  Then, you just need to go line-by-line and ensure that each entry made matches an actual transaction in the bank.  By the end, the difference listed on the page should be zero.  If it’s not, you may have a duplicate transaction.

Here’s how to get rid of duplicate transactions in both Quickbooks Desktop and Quickbooks Online!

 

How To Fix Duplicate Income In QuickBooks Desktop

To begin, launch your Quickbooks Desktop application and open up your company file.  You’ll need to go to the Banking menu and select Make Deposits.  Find the duplicate transaction, select it, click the Edit menu, and the click Delete Line.  Don’t forget to save!

You’re halfway there!  You still need to delete the transaction from your Undeposited Funds list.

To do this, go to the Lists menu and select Chart of Accounts.  Then, double-click Undeposited Funds.  Select, Edit, and Delete the duplicate payment.  That’s all!

How To Fix Duplicate Income in QuickBooks Online

After logging in, go to the Banking page.   Go to Bank Feeds, and then Bank Feeds Center.  Then, in the Items Reviewed section, select the account containing the duplicate transactions.  From there, you can simply delete any duplicates by selecting them and then hitting Delete Selected.  Hit Yes to save it, and you’re all set!

 

Other Causes of Duplicate Transactions

Simple human error isn’t the only cause of duplicate income in Quickbooks.  There are actually several different causes that can all affect your bottom line and make it less accurate.  Here’s a quick rundown:

Importing External Data – When you use a CSV (Excel) file to import transaction data to your Quickbooks account, it often creates duplicate data either by some glitch or because certain data was already present in your Quickbooks platform.

Point of Sale – If you have recurring clients or customers, sometimes they get put into the system multiple times.  Perhaps in one entry they use their middle name, and in another, they do not.  This can lead to annoying duplicate transactions.  To merge duplicate customers, select the two records, click I Want To, click Merge, and then hit Merge Customers.

 

Duplicate income is dangerous.  With Booktied’s help, however, you can maintain accuracy and keep your business safe. Booktied is a bookkeeping training and outsourcing company that enables you to either dispatch your bookkeeping to our professionals, or become a QuickBooks pro yourself!  Check out our services and get in touch today to get started!

How To Clean Out Undeposited Funds

How to Clean Out Undeposited Funds in QuickBooks | Booktied

June 29th, 2020 Posted by Bookkeeping Tips 0 thoughts on “How to Clean Out Undeposited Funds in QuickBooks | Booktied”

How To Clean Out Undeposited Funds in QuickBooks

In bookkeeping, your number one goal should be to maintain the highest level of accuracy possible.  By matching every dollar in with every dollar out, you can keep a watchful eye on your business and take charge in case of any financial inconsistencies.

This accuracy, however, can be rather difficult to maintain.  Bookkeeping is not a new concept.  However, in its modern iteration, it has become more complicated.  As a result, there are many areas in which mistakes can be made.

As a bookkeeper, your job is to monitor not only the mistakes and oversights of the business itself, but also your own mistakes or oversights.  By controlling both of those, you can be the best bookkeeper possible.

One of the most common mistakes we see in our work with bookkeepers is a build up in undeposited funds.  It’s an extremely easy mistake to make and, thankfully, a rather easy one to fix as well.  Let’s dig into what causes a build-up of undeposited funds, and how to clean out undeposited funds in QuickBooks.

 

What Causes a Buildup in Undeposited Funds?

A build up in undeposited funds are the result of improperly following the industry standard process for money-in transactions.  The process is meant to proceed as follows:  First, you send an invoice to the client.  The client pays the invoice, resulting in a cash balance in their account.  Normally, at this point, you would deposit that payment and record it.  Finally, you match the payment with the deposit.

A buildup in undeposited fund occurs when, instead of depositing the money and recording the payment as the correct income, you simply add it to an income account from the Banking Section of your QB account.  This results in an “Uncategorized Income” amount on your income statement, and the payment itself remains an undeposited fund.  How can we fix this?

 

The Remove and Record Method in QuickBooks

There are two main methods for removing undeposited funds from your account.  The first is called “Remove and Record”.

The Remove and Record method essentially consists of retracing your steps, correcting the error, and then performing the workflow order correctly.

Start at the Banking section of your QBO account.  Go to your bank account, and click undo on the uncategorized money-in transactions.

At this point, you have corrected the record on your income statement under “Uncategorized Income”.  But there is still the payment itself, which remains in the bank deposits window.  Now, it’s time to go back and do the workflow correctly.

Go to the Bank Deposits window, select the bank account in question, and enter the date of the payment.  Then, simply select the payment you just removed from the bank account window, and hit Save and Close.  You’re all set!  The payment has now been removed from the Undeposited Funds account and recorded as an actual deposit.

 

The Dummy Bank Account Method in QuickBooks

Start by creating a bank account in your Chart of Accounts window.  Name it something like “Dummy Bank Account”, so it can’t be confused with real accounts.

Go to your Bank Deposits Window, and select the dummy bank account.  Then, select the payments you want to clear from the Undeposited Funds Account, and hit Save and Close.  This “deposits” those funds into the dummy bank account.

At this point, the Undeposited Funds Account has been cleared of the payments.  However, there is now a record of money sitting in a bank account that doesn’t actually exist.  To alleviate this, go to the expense window, select your dummy bank account, and then select an income account to transfer the money to.  Then, simply make a payment from your dummy bank account to your income account in the same dollar amount as the previously undeposited fund.  Hit Save and Close, and then verify that the balance of the dummy bank account is zero.  That’s it!

 

Which Method Should I Use?

There are pros and cons for each of these methods.  Which one you use will depend on your needs as a business and as a bookkeeper.

If you need accuracy above all else, and you don’t care how long it takes, use the Remove and Record method.  This method is the most accurate, as it eliminates redundant transactions and ensures that your sales income will be correct.  The drawback to Remove and Record is that you must work on each transaction one at a time.  That means it could take hours, or even days, to work through a particularly cluttered Undeposited Funds Account.

This is not the case with the Dummy Bank Account method.  This method can be done in bulk.  No matter how many years of mistakenly Undeposited Funds you have, you can knock them all out within a few minutes.  Of course, there are always trade-offs.  With the Dummy Bank Account method, your final income will be less accurate, since this method tends to understate money-in transactions.

 

If you’re still confused about what to do with your Undeposited Funds Account, have no fear!  You’re certainly not alone – this is one of the most common issues that bookkeepers have with QBO or QBD.  That’s why Booktied is committed to providing you the best QuickBooks help and bookkeeping advice possible.  We help you maintain accuracy and efficiency without pulling your hair out or biting your nails.

For more information, feel free to contact us with any questions you have.  To see a list of what we can do for you, just visit our services page.  Happy bookkeeping!

How to Protect Your Business from the Coronavirus Disease

How to Protect Your Business from the Coronavirus Disease

March 15th, 2020 Posted by Bookkeeping Tips 0 thoughts on “How to Protect Your Business from the Coronavirus Disease”

How to Protect Your Business from the Coronavirus Disease

 

What is the Coronavirus, and how does it affect my day to day activites?

Coronavirus is a new disease that was discovered towards the end of 2019 and has affected almost every person as well as every business in one way or another. As per the World Health Organization, Coronaviruses are transmitted between animals and people. Some of the common signs of infection are respiratory symptoms, fever, cough and shortness of breath. This disease can cause serious illness and at times even death. WHO recommends everyone to regularly wash their hand, cover their mouth and nose when sneezing and thoroughly cook your meat and eggs. Try to avoid large groups of people and gatherings, and avoid those that are showing signs of illness such as excessive coughing, sneezing and respiratory issues.

Many business owners are concerned that Coronavirus will have a negative impact on their business. This is a very valid concern and can definitely cause some major stress and anxiety for the small business owner. The outbreak has caused global supply chain disruptions and this disrupts many businesses including retails stores, e-commerce such as Amazon and eBay sellers and manufacturing companies. Small business in the service industry have also been affected such as restaurants, hotels, tourism businesses and local car services and shuttles services.

How can the disease disrupt your small business?

Coronavirus can affect your business in many ways and none of them are good news. Let’s use a construction business focusing on residential rehabs as an example. For starts most people are not thinking about upgrading and renovating their home at this point in time. People are busy stocking up on necessities and anxiously awaiting updates on what actions to take to prevent the disease from spreading. With no new business coming their way, the employer is forced to lay off his part time employees and cut down on expenses such as buying new machines and investing in new trucks etc. At some point if things don’t improve the construction business will have to close its doors entirely since it won’t be able to cover payroll and cashflow will strain the business to its last breath.

Some businesses that can move their business online remotely are also at risk due to Coronavirus. People are not doing business and demand for services are going down in the entire US. People are postponing investing and growing their business including: designers, brokers, business coaching, new sales man, new offices and many more. This lowers the demand for services and in return effects the cashflow of many small businesses. With no cashflow businesses are forced to reduce staff since they can’t afford to pay them during this difficult time.

What actions can you take to help keep your business afloat?

With Coronavirus being a threat to most businesses in the United States it’s important to take the necessary steps to stay in the game and survive this crisis. The disease will eventually pass and only those that were prepared and acted will live to tell the tale. Here are a few important steps that every business should work so they stay in business.

Remote access for employees

You must test and implement home working technology that will allow your employees to continue working even if you are required to shut down your local office. In today’s day and age it’s not that complicated to implement an efficient system for your employees to work from home. You can utilize software such as TSheets to track time spent on different projects. Every employee gets their own login information and you the employer can track it all through your own admin account. You can use Zoom to create online conferences and video calls. You don’t have to push off meetings with clients or partners it can all be done remote on this platform. Most important you can use software like TeamViewer, LogMeIn or Go To My PC to gain remote access to your computers in the office. Bottom line is you need to improvise so you can continue doing business and serving your clients throughout this virus.

Cut down on Expenses

Many businesses are going to fail during the next period of time simply because of cashflow trouble. It’s crucial that you analyze your financials such as your income statement or profit and loss to find where your business can cut down on expenses. For example you might want to cut down on meal and entertainment, employee bonuses, office renovations, hiring new employees, certain advertising and marketing etc. Once the disease passes you will be able to resume business as usual and continue to invest in growing your business.

The bottom line of it all is to be careful and practice better hygiene including washing your hands with soap and warm water, stay away from people that show symptoms of the Coronavirus, and soon enough the virus will pass and those that were properly prepared will easily recover and be able to continue their lives and business as usual.

Keyboard Shortcuts in QuickBooks Online & QuickBooks Desktop

Keyboard Shortcuts in QuickBooks Online & QuickBooks Desktop

March 12th, 2020 Posted by Bookkeeping Tips 0 thoughts on “Keyboard Shortcuts in QuickBooks Online & QuickBooks Desktop”

Keyboard Shortcuts in QuickBooks Online & QuickBooks Desktop

Time, as we know, cannot be created.  As such, small businesses must complete daily tasks as efficiently as possible so that profit and productivity can be maximized.  This concept should also be applied to your bookkeeping practices.  Let’s check out some convenient shortcuts that Intuit has built into their QuickBooks Online and Desktop softwares.

Shortcuts for QuickBooks Online

Finding text on a page:

This shortcut works on any website and on just about any browser.  It’s a very powerful tool to have.  Simply press ctrl + F and type in the word or phrase you’re looking for.  Most browsers will automatically flick you to the first instance of that text on the page.  Then, to move from instance to instance, press enter.  This is especially useful when looking for a specific transaction or customer on a long list.

Calculate rates or totals:

Say goodbye to constantly switching between your calculator and your laptop.  QBO can automatically calculate amounts and rates from within a text field.  In any field marked Amount or Rate, simply type in the calculation you need, and hit tab.  QuickBooks will automatically calculate the equation and input it into the field.

Add a desktop shortcut for QBO:

You can add a shortcut on your desktop that enables your browser to open directly to QuickBooks.  To do this, reduce the window of your browser so that you can see your desktop in the background, go to https://quickbooks.intuit.com/login/, and click and drag the lock icon to the left of the URL and drop it into your desktop.  Note: sometimes the lock will appear as the QuickBooks logo in certain browsers.

Navigate a form without a mouse:

Navigating a form without a mouse is fairly straightforward.  To move forward one field, hit tab.  To move backward one field, hit shift + tab.  To select a checkbox, press the spacebar.  To open a dropdown list, use alt + down arrow once the list button is highlighted.  This saves a lot of time, since trying to move a mouse around a tightly-packed form is annoying and time consuming.  You may also find that your carpal tunnel gets a little better with this method as well.

Shortcuts for QuickBooks Desktop

QuickBooks Desktop comes out of the box with dozens of keyboard shortcuts.  Below is a quick reference list of the most important ones.

When navigating dates, QuickBooks has a very clever system for jumping about.  To find the first or last day of a given time period, such as a week, month, or year, simply press the first or last letter of that respective word.  Here’s a guide:

Jump to the first day of the week by pressing W.

Jump to the last day of the week by pressing K.

Jump to the first day of the month by pressing M.

Jump to the last day of the month by pressing H.

Jump to the first day of the year by pressing Y.

Jump to the last day of the year by pressing R.

Editing various lists and forms is also made easier with QuickBooks Desktop shortcuts:

Press ctrl + E to edit the selected transaction in the register.

Pressing ctrl + del will delete a line.

Ctrl + alt + Y will copy the selected line in an invoice, and ctrl + alt + V will paste said line.

Use + andto move up or down by one.

Other general shortcuts:

Ctrl + A opens your Chart of Accounts.

Ctrl + W opens the Write Checks window.

In any list or form, use tab to move forward one field, and tab + shift to move back.

 

There are also a number of general bookkeeping shortcuts to be aware of, which you can use in both QBO and QBD.  Be sure you’re utilizing batch options: if you need to delete a large number of transactions, you can do so in one fell swoop by checking the box to the left of each transaction and then selecting “delete” from the batch options menu.

Another good practice for QuickBooks is to set reminders for various housekeeping items.  For example, setting a reconciliation reminder for the end of each month can help prevent you from getting behind with double checking your transactions.  This can save a lot of time later by reducing bottlenecks, and can save money by reducing overtime pay for your accountants or bookkeepers.

Finally, there are many tasks within the field of bookkeeping in general that can be automated.  If you use QuickBooks Online Advanced, you can use the Workflows feature to automate just about any calculation or notification that you normally utilize on QuickBooks.

QuickBooks has many shortcuts beyond what was discussed in this article.  Don’t be afraid to experiment and explore other shortcuts, and to mix and match them to find your optimized workflow.

Using QuickBooks is the industry standard in bookkeeping for a good reason.  The sheer amount of featurability and usability present in even the most basic versions of QuickBooks allows business owners to record and analyze their finances in the easiest, most accurate way possible.  And now, with shortcuts and other workflow tools, it’s faster than ever.

Booktied offers training on everything QuickBooks so you can improve your bookkeeping practices even further.  We also offer bookkeeping catch-up and full-scope outsourced accounting services for any business.  Contact us for a free consultation.

Why Small Businesses Fail Often & What To Do About It

Why Small Businesses Fail Often & What To Do About It

March 2nd, 2020 Posted by Bookkeeping Tips 0 thoughts on “Why Small Businesses Fail Often & What To Do About It”

Why Small Businesses Fail Often & What To Do About It

One of the most beautiful properties of capitalism is the intrinsic equality it provides for everyone who wants to participate.  Anyone, regardless of race, gender, or social status is allowed to begin transacting business for their own benefit whenever they want (barring a few government permits, licenses, etc.)  Of course, capitalism isn’t a perfect system.

Since everyone can start a business, quite a few people do! There are over 30 million small businesses in the United States alone, with that number increasing every year.

As a result of this flourishing business environment, competition between small businesses is quite high.  And while this competition keeps innovation, technological progress, and overall wealth and quality of life on the rise across the board, it does mean that many business ventures must fail.

Only about 20% of businesses make it to a stable, growing status in the business arena.  In order to survive, you have to be the best.  Let’s walk through some of the main reasons small businesses fail, and what you can do about it.

The Product Doesn’t Sell

          Profit is the lifeblood of a business.  Profit is the difference between revenue and expenses and maximizing it should be your main goal when taking on any value-creating endeavor.  The two parts of profit, revenue and expenses, can be broken down and analyzed individually.

Revenue is the raw dollar value earned purely on sales of your product or service.  If you sell 100 pizzas at $10 each, your revenue is $1,000.  Expenses are, at the most basic level, the costs of creating your goods to sell.  For pizza, it’s the ovens, dough, sauce, cheese, and the wages of the people who make the pizza.

When you boil it down, the ONLY reason businesses fail is a level of profit that is not sufficient.  There are, however, infinite reasons as to why this can happen.

One of the most common is that your new products or services simply don’t sell well enough.

Sometimes, when a product or service is developed, it’s true utility becomes clouded in pride, ego, or logistics.  A product may be designed as a solution for a problem that doesn’t exist.  In this case, when the product comes to market, the consumers simply don’t react.  Other times, the product does offer a solution for a real problem, but it’s a solution that no one wants.  Finally, a product may flop due to a marketing issue:  You might have the best product or service in the world, but no one will buy it if they don’t know about it.

While it’s impossible to perfectly predict how the market will react to a new product, you can reduce the chances of a product flop by spending a little extra time or money on focus groups, market research, and brainstorming.

Capital Flow Issues

About half of all entrepreneurs with failed ventures state that a lack of proper capital flow is one of the main reasons for failure.  Cash flow is crucial for the day-to-day operations of any given business.

Cash is needed on a daily, weekly, monthly, and yearly basis in order to cover ongoing expenses, interest payments, or due loans.  Failure to cover these expenses in a timely manner will lead to payroll issues, defaulted loans, and ultimately closure of the business.

As a business owner, the best way to prevent cash flow issues is by understanding exactly what you need each day, week, month, and year in order to keep the business afloat.  We’ll touch more on this later.

Bad Management

          Most issues in business can be attributed to the level of competence within management.  Management is the brain behind a business:  The blood can’t flow properly unless the brain tells it to.

Within management, there are a number of concepts that can poorly affect the performance of your business.  First, there is the overall competence of the members of management.  Education, training, experience, and wisdom all factor into this, so it’s important that you pick the right people for your team.  While it can be fun to work with friends, you need to ensure that they are also qualified to handle the responsibilities you give them.

Conflict within management is also considered one of the most common issues for new businesses.  If managers and executives can’t get along, the business will suffer.  It’s important to ensure that your team is properly trained in conflict resolution so that your operations remain unaffected.

Another area of management that sometimes gets neglected is communication.  Transparent information, and the rate at which it travels, is directly related to how effectively a business can operate and adapt to market changes.

The Most Effective Way to Prevent Failure

Monitoring your business is the best way to prevent surprises in your finances.  You need to be able to quickly check sales and expenses with perfect accuracy. To do this, invest proper time and care into your bookkeeping.

Accurate bookkeeping allows for more effective communication. With accounting software like QuickBooks, businesses can easily share financial information between managers, executives, and employees with ease.

Booktied specializes in everything bookkeeping-related. From QuickBooks training and instruction to full-service outsourced bookkeeping, Booktied gives you all of the resources you need to properly monitor and communicate the financial status of your business.

For any questions you might have about our services or about bookkeeping in general, drop us a line, and we’ll be happy to help!

How to Set Up a Chart of Accounts in QuickBooks

How to Set Up Your Chart of Accounts in QuickBooks

February 20th, 2020 Posted by Bookkeeping Tips 0 thoughts on “How to Set Up Your Chart of Accounts in QuickBooks”

How to Set Up Your Chart of Accounts in QuickBooks

Running a business requires proper flow of information.  Operational information must pass from managers to employees, performance information must pass from managers to executives, and administrative information must pass from executives to everyone else.  The information that is most important, however, is financial.

Financial information ties directly into everything else about your business, including where your stores are located, how your factories are run, how your executives are compensated, and even which brand of pen you stock the supply closet with.

Money makes the world go ‘round.  It’s the main driving force behind most global business, and can make or break a company faster than you can say “we’ll do better next quarter”.

As such, it makes sense to convey your company’s financial information in the most detailed, comprehensive way possible.  By exposing where each dollar flows, you can sleuth out any issues and communicate more effectively about what needs to be changed.

One of the most common ways to convey financial information beyond simple bottom lines is called the chart of accounts.  A chart of accounts is essentially an index of all the accounts your business has in its books.  Your financial statements and reports are constructed from this chart, so it’s important to make sure it’s done right.  Let’s walk through how to do that.

 

How to Set Up Your Chart of Accounts

When you first booted up your QuickBooks software, it probably created a chart of accounts for you.  While QuickBooks is an astoundingly effective program, it couldn’t possibly know the ins and outs of your operations well enough to automatically create the perfect chart of accounts for you.  So, let’s edit yours.

Editing the chart of accounts is fairly straightforward on all versions of QuickBooks.  On QuickBooks Desktop, you’ll be using the “Accounting” function on the left menu.  From there, you can add, edit, or adjust the history of any account.

On QuickBooks Online, simply choose “Chart of Accounts” from the “Your Company” drop-down menu, and you’ll be able to add, delete, or edit accounts from there.  Determining how you should arrange the accounts is a bit more involved.

 

Understanding The Chart of Accounts

First, let’s break down the basic components.  A CoA consists of five main types of accounts: assets, liabilities, equity, income, and expenses.  Within each of these accounts are smaller, more defined accounts that give detailed information on where money is coming from and going to.

Your assets account should contain everything your company owns.  Separate these assets into accounts like “operational equipment”, “administrative equipment”, and “cash”, to name a few.  This is where you can get as detailed as you need to be for your business.  If you have a lot of different equipment for different lines of production, you may want to separate those into their own accounts to see where you’re under- or over-equipped.

Your liabilities accounts should contain everything your company owes.  Having separate accounts for bank loans, lines of credit, and accounts and wages payable can be instrumental in seeing exactly where your debt lies.  This can help you be more aware of your exposure to things like rate changes or upcoming due dates.  Avoid surprises by being as detailed as possible.

The equity account will be more or less crucial depending on the size of your company.  If you’re a sole proprietor, you only have one owner: you.  If you have angel investors, you’ll have common or preferred stock.  Regardless of size, it doesn’t hurt to separate this account into common stock, preferred stock, and retained earnings as a start.

The income account is, obviously, extremely important.  You should have an account here for every method of income your business has, such as sales of each product, installation fees, consultation fees, etc.  This can help you show off your strongest income streams, as well as analyze how to improve your not-so-strong ones.

Finally, the expenses account.  The expenses account is most likely the one administration will be most picky about.  They will want to see what’s eating up the budget, where they can save money, and where they can boost investment.  Having this section be extremely comprehensive can be a huge time saver during your next board meeting.  When the CEO asks why his bonus is smaller this year, you can show him its because he decided to pump money into name-brand sparkling water for the breakroom.

 

Numbering Your Chart of Accounts

A final note on numbering:  We highly recommend that you number each account on your chart.  This makes referencing them infinitely easier.  It will also drastically reduce the number of mistakes made when fussing with your CoA, since matching numbers is easier than matching names, especially when you have dozens of accounts.

Here’s a numbering scheme that we find works for most businesses: number asset accounts 1000-1999; number liabilities accounts 2000 – 2999; number equity accounts 3000 – 3999; number income accounts 4000 – 4999; and number expense accounts 5000 – 5999.

Numbering in this way makes analyzing your accounts much easier.  When someone says to reference Account No. 4450, you know to look at your income accounts, and vice versa.  Another tip: leave about 20 spaces between accounts.  This allows room for growth, so you don’t have to do a bunch of editing later.  Instead, if you need a new account, you can simply slip it in where it belongs.

By arranging your chart of accounts, you’re giving yourself an extra advantage in the brutal world of business.  Having your financials laid out before you like a roadmap gives you the acute situational awareness needed to effectively navigate your next financial decision.

Remember, if you have any QuickBooks-related questions, or inquiries about bookkeeping in general, contact us.  Booktied is dedicated to providing training and resources for all things QuickBooks.

QuickBooks Online VS QuickBooks Desktop

QuickBooks Online VS QuickBooks Desktop: Which one should I use?

February 13th, 2020 Posted by Bookkeeping Tips 0 thoughts on “QuickBooks Online VS QuickBooks Desktop: Which one should I use?”

QuickBooks Online VS QuickBooks Desktop: Which one should I use?

QuickBooks has been a staple in the bookkeeping business for almost four decades.  Its predecessor, also made by Intuit, is called Quicken.

Quicken was launched in 1983.  That means businesses had been using Intuit’s accounting technology for a full 8 years before the Berlin Wall fell.  It’s no surprise, then, that Intuit is the biggest name in bookkeeping software, and has been for decades.

Quicken initially became popular by far exceeding its competitors in one main area: simplicity.  While every other accounting software that was on the market was extremely complicated, Quicken employed a simple checkbook-like interface that made it especially appealing for both personal finances and simple business accounting.  By enabling just about anyone to boot it up and start bookkeeping, Quicken changed the game.  As a result of that initial genius, Intuit is still the king of the bookkeeping software space 5 decades later!

Quicken is still around today, although it’s best for personal finance, rather than for corporations.  By the early ‘90s, Intuit realized that Quicken was missing the functionality necessary for accounting and bookkeeping for larger, more complicated businesses.  In order to fill this hole in the market, Intuit launched QuickBooks.  Initially, QuickBooks was only available as a desktop application that the user paid for one time and then used on one computer, as most software was back then.  QuickBooks Desktop is still available as one of the main forms of QuickBooks to this day.

By 2002, however, the internet was a huge industry and growing fast.  Intuit had another stroke of genius when it decided to pioneer the field of cloud-based accounting with QuickBooks Online.  QBO allows multiple users to access the same QuickBooks account from different computers, anywhere with an internet connection.  It’s paid on a monthly subscription, which can be scaled up or down according to the needs of the business.

Today, QuickBooks Online represents a significant portion of the use of QuickBooks.  But, perhaps surprisingly, it has not completely dominated the field.  QuickBooks Desktop still has its own loyal user base.  But which version of QuickBooks is right for your business?  What are the advantages and pitfalls of each?

Let’s walk through those questions and find out everything you need to know about QuickBooks for your business.

 

Comparing QuickBooks Online to QuickBooks Desktop

QuickBooks Online is the most popular version of QuickBooks.  In the modern era where everything is cloud-based, it makes a lot of sense to make your accounting software match.

QuickBooks Online is typically most popular with small to medium-sized businesses.  The versatility of being able to log in from anywhere makes it very attractive to small business owners who must be mobile or who multitask with both administrative and operational responsibilities of their business.

Another big advantage to using QuickBooks Online is the sheer amount of add-on applications that are available for it.  Since it’s internet-based, many apps, both third-party and Intuit-built, can link with QuickBooks Online and give it even more featurability.  QuickBooks Desktop does have add-on applications, but they’re limited in usefulness by comparison.  QuickBooks Desktop does allow the download of transaction information from your bank, however, which is one of the most important features for accounting software in general.

QuickBooks Online differs from QuickBooks Desktop in price, as well.  A basic QBO Essentials plan costs $40 per month.  Depending on your needs, however, you may opt for the cheaper QuickBooks Simple Start ($25/month) or the more expensive QuickBooks Advanced ($150/month).  There are, obviously, differing features on each level.  Intuit has outlayed a comparison of QBO plans on their website.  As of writing, your first 30 days with QBO is totally free.  After that, your first three paid months are 50% off.  Talk about value!

QuickBooks Desktop, by contrast, starts at a one-time fee of $300 for the Pro version.  The Premier version, which comes with additional features such as forecasting and industry-specific transactions, will run you $500.  The flagship version of QuickBooks is called Enterprise, and it’s the perfect choice for large businesses with more complex finances.

Within Enterprise, there are varying levels of power and customizability, each with a different price.  All of them are paid on a subscription basis, with discounts available for your first year.  The Silver edition is the base level, which is $850 for your first year (30% off).  The Gold level will run you $950 for the first year (40% off), and Platinum is $970 for the first year (50% off).  You can find a full comparison of QBD versions on the QuickBooks website as well.

This pricing structure allows business owners to get the exact functionality they need, without having to spend extra on features they don’t.  Depending on your exact needs, you will find that either QBO or QBD presents a strong financial advantage over its sister program.

 

Which version of QuickBooks is right for me?

Determining which version of QuickBooks you should use is fairly simple:  It boils down to pricing and which features you can’t do without.  If you need web-based CRM apps or time trackers, or if you need to access your books from anywhere, choose QuickBooks Online.  If you want to create back-ups and copies of your financial data for external audits, or if a one-time purchase is better suited for your financial situation, choose QuickBooks Desktop.  If you’re an inventory business or large company that needs powerful tax and payroll software, choose QuickBooks Desktop Enterprise.

QuickBooks is one of the most important inventions of the last 50 years.  By allowing any business, from sole proprietorship to multinational corporations, to electronically manage their finances for an accessible price, Intuit has single-handedly innovated the efficiency and accuracy with which the business world’s financial performance is analyzed.

How To Customize an Invoice in QuickBooks

How To Customize an Invoice in QuickBooks

February 11th, 2020 Posted by Bookkeeping Tips 0 thoughts on “How To Customize an Invoice in QuickBooks”

How To Customize an Invoice in QuickBooks

Your clients aren’t just dry businesses or households that operate perfectly within predefined logistical principles.  They’re composed of real people who make decisions and pass judgement on your business from an external perspective.

Consumers are getting more and more involved in the buying process.  They’re doing more research, more digging into your business, more reading into reviews, and more analysis on how you treat people.  It’s important to make sure that everything your company puts out is your very best – with global competition at an all-time high, you can’t afford anything else.

One of the biggest things that modern companies need to consistently optimize is communication.  Gone are the days of minimal contact with a “just get it done” attitude.  Customers want high-quality service at every level.

For example, according to Forbes, 92% of consumers would stop buying from a company after three or fewer bad customer service experiences.

The delivery of any and all communication from your business should be optimized: advertisements, the checkout process, internal memos, the lot.  Making these things more effective or interesting is a great way to really push your brand the extra mile.

One document that needs particular attention is your company’s invoice.  An invoice is essentially a message to your client that it’s time to pay up – something that people and businesses typically dread.  Receiving this message needs to be as pleasant and as impactful as possible, so that your client remembers the good things about your product or service, rather than things that need improvement.

Customizing your company’s invoice is made very easy by QuickBooks – you can do it right from your account.  The process varies a bit from QuickBooks Online to QuickBooks Desktop, so we’ll cover both.  Let’s walk through the steps of customizing an invoice to make sure it gives the best impression possible to your clients.

How to Customize an Invoice in QuickBooks Online

Customizing an invoice in QuickBooks Online is as easy as it gets.  From your main page, simply click the gear icon (Settings) and select “Form Styles”.  Click “New Style” and select which form template you want to customize.

You’ll see a number of tabs that allow you to customize your invoice.  The first is labeled “Design” and allows you to change the aesthetics of your invoice.  The second tab is labeled “Content”, which walks you through changing the content on your form.  The third tab is labeled “Emails”, and the final tab is labeled “Payments”.

Those last two tabs won’t customize the invoice itself.  The “Emails” section allows you to enter a custom email message that will accompany your invoice.  This can be a great way to lead your client more gracefully into the payment stage.

The “Payment” tab lets you adjust the settings for online payment of said invoice.

Within the “Design” tab, you will find a number of fairly self-explanatory buttons in the sidebar, which each allow you to change a different aspect of the invoice.  We recommend you start with a template and go from there, changing the color scheme, fonts, and logos to match your brand.  Feel free to play around with the different templates, but remember that in order to add SKUs or create progress invoices, you’ll need to use the Airy Classic template.

Once you get your invoice looking on-brand, it’s important to make sure that all of the content on the invoice is appropriate.  In the “Content” tab, you can adjust almost anything about what’s displayed on the invoice.  Add or remove data fields, sections, headers, boxes, descriptions, etc. until your invoice displays all of the necessary information but isn’t cluttered with superfluous boxes and numbers.  It may be a good idea to add a disclaimer or user agreement information here as well, to clear up any possible confusion.

After you’ve adjusted everything to your liking, you’re ready to start sending that sparkly new invoice to clients!

How to Customize an Invoice in QuickBooks Desktop

To start, go to the “Lists” menu in your QuickBooks Desktop terminal.  Then, select “Templates”.  Double click the template you want to customize, and you’ll be taken to the customization window.

From there, customization is fairly easy.  You can adjust the fonts and text colors for many different fields, including labels, company name, and data.

You can also adjust the contact information for your company, to ensure your client is able to reach out if they have any problems.

The “Additional Customization” button allows you to add and remove fields for display on either the digital copy or the printed copy, depending on your needs.

The “Layout Designer” button at the bottom of the window will bring you to, well, the layout designer.  This is a great tool that allows you to reposition the fields, headers, and footers on your invoice to match your exact specifications.

Be sure to save your progress regularly.  Before long, you’ll have a clean, effective invoice to send to clients.

And that’s it!  Customizing invoices is sometimes ignored by businesses because it seems unnecessary.  However, good business owners know that your clients notice the effort you put into the details, and they’re sure to prefer the new, interesting invoice over the old one.  Having a clean, branded invoice is simply part of good bookkeeping.

Booktied is committed to giving your business all of the bookkeeping catch-up, training, and resources it needs. If you have any questions about customizing invoices or about what Booktied can do for you, contact us!  Be sure to check out our related articles on our blog for more QuickBooks help, as well!

Is My Company Too Small for Accurate Bookkeeping?

Is My Company Too Small for Accurate Bookkeeping?

January 28th, 2020 Posted by Bookkeeping Tips 0 thoughts on “Is My Company Too Small for Accurate Bookkeeping?”

A common question new business owners ask is “Is my company too small for Accurate  bookkeeping?”

The short answer is NO, every business needs to keep their books current. Even solopreneurs or small, two or three man operations should stick to a monthly bookkeeping process. Getting into a monthly habit, rather than periodically updating the books, is best practice. The consequences of not doing so can be drastic: the number one reason most small businesses fail is financial mismanagement. Skipping out on bookkeeping can also lead to tax issues, salary problems, and a lack of financing opportunities, among other things.

The #1 reason most small businesses fail is financial mismanagement

There are a lot of potential issues under the blanket term ‘financial mismanagement’, but one surefire way to eventually run into financial issues of some kind is ignoring the monthly bookkeeping process. Without bookkeeping, your business will have no idea what monthly profits look like, where your expenses are going, who your biggest clients are, and so on. Accounting comes from the word accountability: proper bookkeeping is being accountable for your business.

Future Financing

Piggybacking off the point made above, if you have any aspirations for growing your business in the future, you will likely need to secure some sort of funding. During that process, you will need to have accurate records of your financial history throughout the years. Proper bookkeeping makes sure your business is ready whenever the next big breakthrough falls your way.

You have to pay your taxes

Every individual and company has to file and pay their taxes. Come time to file, you will need to have a clear depiction of your cash flow throughout the year. If you keep track of your books monthly, this will likely be an effortless process for you. But, if you are not, you are going to run into trouble. Additionally, doing your bookkeeping monthly helps avoid forgetting any expenses, for instance, that might lower your tax payments. 

Proper bookkeeping can also mean that you can pay your taxes quarterly throughout the year, rather than one lump-sum at the end. Going this route, if your company is in a financial position to do so, can have benefits to your cash flow as well.

Banking Issues

Part of the monthly bookkeeping process is reconciling your accounts with your financial records. Throughout the month, certain transactions might get lost or buried away. This can have negative consequences on your banking records as well as your books. If you are not comparing your statements on a regular basis, you are likely to miss such mistakes. Occasionally your bank may spot them, but do you really want to rely entirely on them to do so? Monthly bookkeeping is the best practice to avoid falling into banking issues. 

You want to get paid, right? 

It is important to take out a salary as a business owner. Presumably you want to get paid so you can pay rent, buy groceries, and take care of your other essentials. 

First off, as a business owner, it is bad practice to just draw money at whim. And, if you are not taking a salary and you are not tracking your books, you may run into some serious issues. You may not have enough funds to cover your own drawings, or you may draw money and then default on other payments. If several of these problems occur at once or if an emergency arises, the consequences can be especially serious.

Others want to get paid

Whether you have employees, contractors, or other expenses, at some point they are going to want to be paid. Without current books, you will not always know what your payables are. Alternatively, you may lose track of your company’s receivables. When things are small, especially for those solopreneurs, you may feel that you will not forget to pay or collect your money. However, sooner or later you will run into issues, so it is simply best practice to properly record your books from the beginning.

Learn how Booktied can help your bookkeeping and financial analysis headaches go away. Schedule a free consultation today: www.booktied.com.

Mistakes when reconciling in QuickBooks

Common Mistakes When Reconciling in QuickBooks — And How to Fix Them

January 13th, 2020 Posted by Bookkeeping Tips 0 thoughts on “Common Mistakes When Reconciling in QuickBooks — And How to Fix Them”

Common Mistakes When Reconciling in QuickBooks — And How to Fix Them

Reconciling your bank statements with company records is one of the most important internal control measures a business can implement.  A bank reconciliation consists of checking each transaction on the statement given to you by the bank and matching them with every transaction on that account that you have kept as a company record in your books.  There are many reasons why reconciling is important.  Let’s go through a few of them.

First, and most obviously, reconciling maintains the accuracy of your records.  This is crucial for any business that wants to prevent financial surprises when trying to merge, acquire, or grow.

Another reason why bank reconciliations are important is that they are an inherent safeguard against embezzlement or other financial crimes.  When you perform a bank reconciliation, you must put every transaction under a microscope.  If something is off, there’s a good chance it will be discovered in the reconciliation process.

Finally, bank reconciliations are a good way to remind yourself of transactions that require additional attention.  Maybe you have a client who forgot to pay for the last month of service.  Maybe you failed to give a deposit back to a client who, as it turns out, deserves it.  Whatever the case, reconciling is a surefire way to audit ongoing transactions and take any action necessary.

Unfortunately, bank reconciliations are time-consuming and can lead to a lot of frustration. QuickBooks is by far the most popular accounting and bookkeeping software out there, and for good reason.  It’s simply the best when it comes to sorting out your financial information and reconciling your transaction data with your bank statements.

Sometimes, however, using QuickBooks to perform your bank reconciliations can be a little tricky.  There are a number of things that can lead to complications and frustrations in the process, which can add needless stress and time to your business’s accounting.  Let’s walk through a few of the issues that can occur when reconciling in QuickBooks.  We’ll also give you actionable tips on how to fix and prevent these issues, so you can make your next reconciliation as fast and as efficient as possible.

Issues with Reconciling in QuickBooks

You have the wrong beginning balance in your QuickBooks records.

Before you go through the pain of combing through your transactions and matching each one to your bank statement, it’s important to check the beginning balance of your QuickBooks record and make sure it matches the beginning balance on the bank statement.  Remember, the bank statement shows what actual transactions happened on the account, so if the numbers do not match, it is a problem on your end.  If your beginning balance on QuickBooks doesn’t match the balance on the bank statement, you will need to fix this problem before continuing.

This problem often arises because of changes in a past QuickBooks record.  To fix this issue in QBD, simply run a Reconciliation Discrepancy Report.  This will show you records from past time periods that were modified, voided, or deleted since the last reconciliation.  In QuickBook Online, you’ll see a link that says “We can help you fix this” near the mismatched balances notice.  Clicking this link will bring you, again, to a list of transactions that have been changed, deleted, or voided since the last reconciliation.

To fix a mismatched beginning balance, just comb through those transactions and ensure that each of them get corrected.

Some transactions from the end of one month did not clear until the next month.

If you have issues matching up all of the transactions from QuickBooks to a transaction on the bank statement, it could be because of a timing issue.  Sometimes, when you make a purchase or take a payment on a bank account, the transaction may take a few days to “clear” or to be completed on the bank’s end.  As the end of the month approaches, the likelihood that each transaction actual clears next month increases, even though you’re recording them in QuickBooks as having been performed this month.  This can lead to discrepancies between what your QuickBooks account says and your bank statement says.

If the transaction in question still hasn’t cleared by the time you are reconciling (i.e. you’re reconciling a brand-new statement), leave the transaction as is and make a note that the transaction is not cleared yet.  When it does clear with your bank (likely in a few days), go back and mark the transaction as cleared.

If the transaction already cleared the following month (for example, if you are reconciling old statements), you can ensure that the transaction cleared by looking at the following month’s statement, and then mark it as cleared on your reconciliation for the previous month.

This problem is especially common with checks.  If you used a check to pay a bill, remember that, in your records, the date you record the bill as paid is the day you physically gave the check to the service provider.

Your beginning balances matched, but your new ending balance does not.

Let’s say your reconciliation began with matching beginning balances.  Then, after performing the reconciliation, your ending balances do not match.  This means that something went wrong during the reconciliation itself: Maybe you missed a transaction when reconciling; maybe your company recorded a transaction that didn’t actually happen on that account; maybe the failed to record a transaction that did happen.  Skim through all of the transactions you just reconciled and ensure that the amounts match.  While you’re at it, you may as well make sure the dates, transaction types, and payers/payees match as well.

If that doesn’t fix the issue, check with your team about mis recorded transactions.  This is a common source of mistakes when reconciling with QuickBooks, so don’t worry.  Just find the problem, sort it out, and carry on.

These are just a few of the possible problems that companies can have when reconciling bank statements in QuickBooks.  If you are having issues with your QuickBooks software, or with reconciling in general, have no fear!  Booktied specializes in helping businesses train their employees in QuickBooks.  We also offer catch-up bookkeeping for businesses that need to get their financials accurate, fast.  For all of your general bookkeeping needs and QuickBooks questions, contact Booktied!

 

How to Reconcile in QuickBooks

How to Reconcile in QuickBooks Online and QuickBooks Desktop

January 1st, 2020 Posted by Bookkeeping Tips 0 thoughts on “How to Reconcile in QuickBooks Online and QuickBooks Desktop”

How to Reconcile Your Bank and Credit Card Statements in QuickBooks Online and QuickBooks Desktop

When it comes to running a small to medium-sized business effectively, accuracy of records is tantamount to pretty much anything else that is vital to your business operation.  It may seem like a hassle to keep and maintain all of your transaction records with zero mistakes, but it is absolutely imperative to do so.

If your records are sloppy, mistakes are bound to be made.  Funds can be lost in a sea of mismatched bank records and corporate accounts.  Taxes can be over- or under-paid, which can lead to an audit.  An audit, if you aren’t organized and accurate in your records, is a long, annoying, and often expensive process.

Another reason to maintain accurate records is in the case of any potential future sale, merger or acquisition of your business.  Loosely kept records not only slow the due diligence process to a halt:  It can also lower your sale price or prevent the sale entirely, as your buyer loses confidence in your ability to run a tight ship.

One of the best ways to ensure accurate records is through the use of a bank reconciliation.  A bank reconciliation is a form of internal audit that ensures that the records you have gathered in your company ledger about transactions and balances match the records kept by your bank, in the form of your bank statements, that you get at the end of each month.

Reconciliations can be somewhat tedious.  Checking hundreds or even thousands of records for accuracy of time, payer/payee, and amount can take a long time and can be exhausting.

Luckily, if you use QuickBooks, the process is made a bit quicker and easier.  Let’s walk through how to reconcile your bank and credit card statements in both QuickBooks Online and QuickBooks Desktop.

How to Reconcile Bank and Credit Card Statements in QuickBooks Online

Reconciling your bank statements with your company records in QuickBooks Online is fairly straightforward, and marks a substantial improvement over more traditional reconciliation methods.  In the past, business owners or accountants had to find the physical files containing the company’s transaction records and match them up with physical bank statements.  Nowadays, everything is electronic, which makes the process not only faster, but cheaper as well.

To get started reconciling your records in QBO, select the gear on the homepage, select “Tools”, and then select “Reconcile”.  Alternatively, you can go into the “Accounting” section on the left side panel and select “Reconcile” from there.  Either method takes you to the second part of the process.

Once you’ve selected “Reconcile”, you’ll need to choose which account to reconcile.  Make sure the account you select on QuickBooks matches the account that your bank statement belongs to.

You’re now ready to start reconciling the bank statement with the company records.  You’ll need to enter some specific information.  Namely, QuickBooks will ask you for the Ending Balance and the Ending Date of the bank Statement you’re attempting to reconcile.  You should also see a Beginning Balance, which is automatically generated using prior information.

After you enter this information and proceed with the process, you’ll be able to perform the actual reconciliation.

When you first start, you’ll see a number titled “Difference”.  This number indicates the difference between the total balance in your company records for that account and the balance that you just entered for that account according to your bank statement.  Next, you’ll just move down the company records and make sure that everything in the bank statement is recorded there.

As you continue down the company records and check off transactions that match up with your bank statement, you’ll see that number decrease.  Ideally, by the end of your reconciliation, that number should be zero.  If it isn’t, double check for minor mistakes or missed transactions on your part, and then call your accountant or banking representative if the problem persists.

Overall, QBO gives you a fairly quick and easy way to reconcile your bank records with your company ledger.  QuickBooks Desktop allows the same thing, but with some minor differences.  Let’s take a look at that now.

How to Reconcile Bank and Credit Card Statements in QuickBooks Desktop

To reconcile an account in QuickBooks Desktop, start by backing up your company file.  It’s always a good idea to do this before making any changes in case you need to revert back to an old version.

Then, go to the “Banking” menu and choose “Reconcile”.  The process from here is somewhat similar to the reconciliation process in QuickBooks Online:  Just select the account you want to reconcile, enter the starting balance, ensure that the date listed is correct for the statement you are comparing, and then begin combing through and matching up transactions until every transaction on the bank statement is accounted for in your company records.  Again, the difference between your bank statement’s ending balance and your company record’s ending balance should be zero.  Reconciling with QuickBooks is just that easy!

Here are a few general tips for your reconciliation journey:

  • The beginning balance on your bank statement for a given month should match the ending balance for the previous month. If you see a discrepancy there, it means that one of your past records wasn’t reconciled properly.
  • It can help to first reconcile deposits all at the same time, and then focus on payments, or vice versa. This keeps your head from spinning when trying to switch columns constantly.
  • If you get frustrated or tired while reconciling, take a break. Nothing makes more mistakes than a frazzled brain.  You may also consider reconciling on a more frequent basis, like weekly or bi-weekly, to minimize the amount of time needed per reconciliation session.

Reconciling your records has never been easier, and ensuring that it’s done right is one of the best ways to make sure that your company records are accurate and up to date.  Remember, the longer you put off reconciliation, the bigger the problem becomes down the line.

For questions about reconciliation or any inquiries relating to your accounting needs, feel free to contact us or check out our services page.  We’re here to help!

Match deposits in quickbooks

How to Record and Match Bank Deposits in QuickBooks Online & QuickBooks Desktop

December 23rd, 2019 Posted by Bookkeeping Tips 0 thoughts on “How to Record and Match Bank Deposits in QuickBooks Online & QuickBooks Desktop”

How to Record and Match Bank Deposits in QuickBooks Online & QuickBooks Desktop

Every business owner who manages their own cash and check transactions knows that it can be frustrating to try and keep all your records accurate and matching with one another with no issues.  It’s extremely important for tax and bookkeeping purposes to ensure that these records are all in agreement in terms of dollar amount and timing, and keeping it all organized gets more and more complex the bigger your business gets.

The issue really stems from a difference in the way businesses and banks process and record their transactional information.  Let’s say, for example, you run a small business that specializes in grooming dogs.  You have several customers a day that each pay for their appointment with varying methods.  Some use their credits cards.  That’s no problem, because their money essentially goes straight into your bank account with no intermediate step.  However, some customers elect to pay with cash or a check.  You collect each hard payment in the same place – the cash register, for example – and then at the end of the week, you go to your bank and deposit the money.

That’s where issues can arise.  For tax, audit, and finance reasons, you need to ensure that the dollar figure for each individual customer transaction remains separate and accurate.  However, for your own records, you also need to account for every cash transaction as a portion of a bank deposit.  Luckily, both QuickBooks Online and QuickBooks Desktop allow you to do this easily, although the methods for accomplishing it within each software is a little bit different.  We’ll start with QuickBooks Online.

 

How to Record and Match Bank Deposits in QuickBooks Online

QuickBooks is well-known for its ability to make everyday accounting processes as simple as possible.  The same is true for their deposit-matching system.  With very little effort, you can get all your information matching and ready for your next internal audit, monthly financial checkup, or for Tax Day itself.

In order to get started sorting your payments by deposit in QuickBooks Online, you first need to organize all of your cash and check transactions into the Undeposited Funds Account.  This account exists for this very purpose.  It allows you to keep all of those “loose” transactions in check before you deposit them.

After you make the deposit at the bank, you’ll need to go into QuickBooks Online and make a matching record.  Here’s a simple walkthrough.

You need to create what’s called a new bank deposit record.  To do this, click “+ New”, and then click “Bank Deposit”.  You’ll need to select the correct bank account from the “Account” drop-down menu.  This, of course, will be the bank account you just deposited the payments into.  Then, just select the box for every transaction you just deposited.  This will make a record of that deposit, and will list each of those payments in the details so that it’s all accounted for.

It’s imperative to ensure that you didn’t miss any transactions entirely, that you didn’t add any transactions on the QuickBooks deposit record that weren’t actually deposited, or that you didn’t forget any physical cash or checks when making the actual deposit at the bank.  Make certain that the total for the online deposit record you just created matches perfectly with the amount stated on your bank’s deposit slip.  If those numbers do not match, something went wrong.  Retrace your steps and make sure you got everything.

If you can’t find the source of the discrepancy, you may need to check your deposit slip and see if there were any fees associated with the bank deposit.

These fees are easy enough to add in QuickBooks Online.  Just go to the deposit record in question and select “Add funds to this deposit”.  Add the fee as a line item, fill out the information, and select “Bank Charges” from the “Account” drop-down menu.  Remember, this is a fee, not a payment to you.  As such, you need to record it as a negative number (for example, -$1.50).

It’s important to note here that after you create a bank deposit in QuickBooks Online, you can review it, adjust it, or delete it according to your needs.

Next, we’ll take a look into how to accomplish these same goals in QuickBooks Online’s older, but just as valuable brother: QuickBooks Desktop.

 

How to Record and Match Bank Deposits on QuickBooks Desktop

Starting the deposit recording process on QuickBooks Desktop is quite similar to starting it on QuickBooks Online.  First, you’ll need to organize all of those cash and check transactions into the Undeposited Funds Account.  From there, however, the process becomes a bit different.

In fact, the rest of the process on QBD is essentially the reverse of the process on QBO.  The next step on your QuickBooks Desktop application is to go from your homepage to the “Record Deposits / Make Deposits” page.  From there, in the “Payments to Deposit” window, select each payment you just deposited at the bank.  Finally, in the “Deposit to” drop-down menu, select the bank account you want to deposit the funds into.

From there, you can check the amounts, add bank charges, write a memo, and complete the process.  Again, it’s imperative that you ensure the amounts are correct and that you’re depositing the funds into the right account.

Just like in QuickBooks Online, you can review, adjust, and delete past deposits.  QuickBooks makes it super easy to manage your cash and check payments so that nothing slips through the cracks.  You can relax knowing that your finances are recorded quickly and accurately, and focus on running the business itself.

QuickBooks setup for new company

Setting Up a Company in QuickBooks Online & Desktop

December 16th, 2019 Posted by Bookkeeping Tips 0 thoughts on “Setting Up a Company in QuickBooks Online & Desktop”

How to Create and Set Up a New Company in QuickBooks Online and QuickBooks Desktop

Since the advent of QuickBooks Online in 2000, business owners have had questions about the differences between QuickBooks Online (QBO) and QuickBooks Desktop (QBD).  At the end of the day, they accomplish the same goal: ensuring the accuracy, timeliness, and efficiency of your business’s accounting processes.

But there are differences between QuickBooks Online and QuickBooks Desktop that all business owners and accounting professionals should be aware of.

Many of these differences are pretty self-explanatory.  For example, QuickBooks Desktop cannot sync data between one computer and another, so it should be used on permanent office-based computers.  A QuickBooks Online account can be accessed on any computer that has an internet connection, so it should be used for more mobile employee work or personal laptops.  Additionally, QBD requires purchase up-front, which is a one-time fee upon installation, whereas QBO allows for a free 30-day trial before switching to a monthly subscription fee.

But there are also differences in the way the user operates each software.  From transactions to downloading bank statements, the way one uses QuickBooks may differ between the online version and the desktop version.

One key difference in the operation of these two software’s is the method by which one creates and sets up a new company within each software.  Today, we’ll cover the basics on setting up new companies on both QuickBooks Online and QuickBooks Desktop.

How to Create and Set Up a Company in QuickBooks Online

Setting up a new company in QuickBooks Online is fairly straightforward.  Keep in mind, however, that every additional company you set will require another paid subscription.

First, go to the QuickBooks Pricing page, located here.  Select the plan you’d like for the new company.  Typically, this will bring you to a page asking you to confirm whether or not a given account is the one you’d like to sign into.  Sometimes, if you are using a different computer than normal or if its been a while since you have signed into Quickbooks, you’ll see the default page, which prompts you to create an entirely new QuickBooks account.  Fear not, as there is a way around this.  Towards the bottom of the prompt box, you’ll see text that says “Adding a company to an existing account?”.  Just follow the sign-in link next to that text and log in as normal.

After signing in, just fill out the information in the wizard and your new company will be added to your QuickBooks account!

QuickBooks Online makes it pretty easy to manage multiple companies under one account.  The key benefit to using QuickBooks Online is the sheer amount of mobility one has with their information.  You can log off from a session on your computer in the office and pick it back up from your laptop at home.  This is extremely powerful and makes QuickBooks usable from anywhere with an internet connection.  It’s no surprise that QuickBooks Online is the more popular version of QuickBooks.

Some users, however, still prefer QuickBooks Desktop.

How to Create and Set Up a Company in QuickBooks Desktop

Adding a company to your QuickBooks Desktop application has one distinct advantage compared to adding one to QuickBooks Online: price.  Whereas, with QBO, you must pay an additional subscription fee for each new company, QuickBooks Desktop is paid for only one time, on a per-installation basis.  As such, you can add a new company to your QuickBooks Desktop software for noo additional cost.

It is, however, a little less straightforward to create a new company with Desktop.  First, you’ll need to create a new company file.  To do this, first open up your QuickBooks Desktop software.  You’ll see a window titled “No Company Open”.  In that window, you’ll see a button labeled “Create a New Company”.  Select this, and you will be presented with two options: Express Start and Detailed Start.

Which one you use will depend on your specific needs.  As a general guide, Express Start only requires your company’s name, business type, and industry.  Detailed Start will require more information.

Use Express Start for fast company creation to get working quickly.  Use Detailed Start if you have some time to spare and want to get all the information entry out of the way from the very start.

After completing these steps, you can add information like services, products, and customers, and go on to work with the company as you would any other.

Things to Note with New Companies

QuickBooks makes managing multiple company’s finances very simple.  You can switch between companies quickly to make any interfacing as fast as possible.  But there are a few things to note when it comes to setting up new companies on either QuickBooks Online or QuickBooks Desktop.  Let’s dig into those now.

First, when you create a new company with QBO, you can copy lists from an old company over to the one you just created.  Things like vendors, inventory, and customers can easily be copied into the new company, which makes any migration of data a breeze.  Keep in mind, however, that any changes you make to a list in either the old or the new company will not automatically be reflected in the other company’s data.  In other words, you must manually update each company to keep them identical, if that is your goal.

Second, if you’re trying to migrate lists from an old company in QBD to a new company in QBO, you’ll need to do so within 60 days of the creation of the QBO company.  After that, you’ll need to wipe the new company to a clean slate before migrating.

Third, when you create a new company in QuickBooks Online, your users will not be able to access it until you add them to that particular company and pay any required fees.

By using the instructions above and keeping in mind a few quirks, you’re sure to have your new company set up in no time!  Whether you use QBO, QBD, or both, keeping the books straight for a new company is easier than ever.

takeing out a salary as a small business owner

Should You Take Out a Salary as a Small Business Owner

December 11th, 2019 Posted by Bookkeeping Tips 0 thoughts on “Should You Take Out a Salary as a Small Business Owner”

Should You Take Out a Salary as a Small Business Owner

As a small business owner, you most likely got involved with your work because you have a
genuine interest in providing your product or service. Paying yourself is, of course, important,
but it is not one of the major issues you concern yourself with as an entrepreneur. Too often,
small business owners neglect to figure their own pay out at all and decide that they will
prioritize themselves last. Too often, small business owners neglect to take out a salary, especially in the beginning. However, this is a mistake that could have both personal and business consequences.

The reasons for potentially paying yourself last seem obvious: put as much of the profits back
into the business to help it grow. But, in fact, this is not the best approach for long term business
viability. Paying yourself first, most importantly, provides security for you and your family. A
regular income frees you up, at the very least, to cover your basic needs and provide for your
wife and kids. Having a consistent salary also helps motivate you to show up everyday and work
hard. When times get tough on your business, it is essential to have some stability in your
personal life to keep your operations afloat. Additionally, it allows you to start building your
personal savings. This has important ramifications down the road for your business as well. If,
for instance, you want to relocate your business or upgrade your current facilities, having a
personal savings might help you do so. You may have enough savings built up to cover the
entire expense yourself, or at the very least, a solid savings account may help you secure a loan
to accomplish those goals.

Another overlooked yet important benefit to paying yourself a salary as a small business owner is the clarity through which
long-term and short-term goals are laid out. If you are taking out drawings periodically you might
become too obsessed with short-term progress to cover your drawings that you lose sight of the
big picture. The big picture might require some changes to be made that negatively affect the
short-term bottom line. At that point, your need for money comes into direct conflict with the
mission of the company. Once your salary is fixed, however, you and your business can be
more clear about the overall mission. You know exactly how much money you need on a
monthly basis to cover overhead, and as a result, your monthly goals can start to work in
tandem with quarterly, annual, and five or ten year plans. Your monthly goals provide the
stability through which working towards those larger goals is possible.

From an operational perspective, paying yourself a salary simplifies the bookkeeping process
and preparation of your financial statements. You always know exactly how much money is
going to be taken out each month to cover your salary. The alternative, the draw method, gives
your business some flexibility with your wages, but that might come at the expense of your
personal financial situation. It is important to keep in mind that, depending on how your business
entity is set up, you may not always have access to your business’ money for drawings. For
larger corporations, there may be specific guidelines you have to follow to draw money. Even as
a sole proprietor, it is not best practice to just draw money at will either.

Taking a salary is the best way to add consistency to both your business and your personal situation and avoid
running into any issues. Additionally, having a salary appear on your income statements also
looks good to banks and other potential investors by demonstrating a serious level of
commitment and trust in your business.

Another great benefit to taking a salary involves your business and personal taxes. When taking
a salary, your personal taxes are automatically taken out. This makes it less of a headache to
get through tax season. Alternatively, you would have to self-report all the drawings you take out
throughout the year. Then, in terms of taxes, you could pay them in one lump sum or quarterly
throughout the fiscal year. Generally, this involves more quarterly reporting and potential self-
employment taxes as well. Paying yourself a salary, thereby, simplifies your small business
accounting process.

Learn how Booktied can help your bookkeeping headaches go away. Schedule a free
consultation today!

What is an income statement

What is an Income Statement?

December 5th, 2019 Posted by Bookkeeping Tips 0 thoughts on “What is an Income Statement?”

What is an Income Statement?

An income statement is a formal way of collating and quantifying all business incomes and
expenses for a specific period of time (usually a year) to gauge whether that period was
profitable or not.

The reason most entrepreneurs choose to start up their own business is to make a profit
eventually. But what exactly does profit mean? To put it simply, profit is what you get after you
take out all your expenses from all of your revenues and still have money left over.
No matter what industry your business operates in, there are certain standard ways of making
money. These are known as “income” streams and can include accounts such as sales revenue
and service revenue. Whatever receipts you have from your primary business output is included
in this definition.

All businesses incur certain expenses as well that come with operating and financing that
business. These “expenses” can differ for each firm and industry, but some common ones are
salaries and wages expense, rent expense, office supplies expense, insurance expense, and
insurance expense. These are the payments that a business makes to keep producing and selling
its primary business output.

A business might see periods of time where their income is greater than their expenses, and those
periods are characterized as periods of “net profit.” However, it is equally possible to be in a
financial situation where your expenses are greater than your income, and in that situation, you
would be in a “net loss” scenario.

An income statement is a financial document that adds up all the income and expenses for a
particular period of time (usually a year) and then subtracts them to show whether the business
made money (profit) or lost money (loss).

Income statements are incredibly important for a business because they are one of the primary
financial documents used by external agents to assess the company’s current and future
performance. Investors use the income statement to gauge how they feel about the future
profitability of a firm as this directly relates to their share price. If the firm’s income statement
shows a profit, then investors will be attracted to invest their money in that firm in hopes of
higher future returns.

Creditors and lending agencies such as banks also use the income statement to predict whether
the company will be profitable enough in the future to pay off their dues or not.
A typical multi-step income statement is divided into two sections: gross profit and net profit.
Gross profit is the money left over after the costs of the primary business activity (producing or
purchasing goods) are subtracted from the revenues of the primary business activity. In this
stage, an average income statement would show “net sales” that is sales less any discounts and
sales returns. Net sales would then be used to finance the “cost of goods sold.” This is simply all
the direct costs associated with producing or buying the items sold, such as the cost of raw
materials or direct labor working on the product.

Net profit is what is left of gross profit after you take out all other operating expenses such as
advertising and insurance expense etc. This is also where you would add any additional revenues
such as interest revenue or any gains on the sale of business assets.

Getting an accurate net profit figure is the ultimate goal of any income statement as net profit is
the real profit used by internal and external agents of the business to assess the overall business
productivity.

How Proper Bookkeeping Can Help Your Business Grow

How Proper Bookkeeping Can Help Your Business Grow

November 15th, 2019 Posted by Bookkeeping Tips 0 thoughts on “How Proper Bookkeeping Can Help Your Business Grow”

How Proper Bookkeeping Can Help Your Business Grow

Among other things, small business owners underestimate the importance of bookkeeping. Proper bookkeeping is a crucial aspect of growing businesses generally and, for small businesses, it is even more crucial for growth. Where bookkeeping is lacking, a small business can easily fail. In the same vein, a small business can grow exponentially where there is proper bookkeeping

In some cases, owners of small businesses choose to handle the accounting of their business by themselves and in some cases, they choose the services of professionals. Similarly, it should be considered in terms of bookkeeping as well. Also, it is a common misconception that bookkeeping and accounting are inherently the same. While some would readily argue for this, others would argue against it. One way to consider bookkeeping and accounting is this;

Bookkeepers perform tasks like teaching their clients to use software that help them manage accounting by themselves; implementing document management and inventory control processes to establish an efficient system in the business; setting up point of sale systems that can capture the daily transactions which are carried out in the retail environment and development, implementation, maintenance and review of internal business processes and reconcile all accounts monthly.

Obviously, these are inherently different from some of the major tasks of accountants. Also, bookkeeping helps you achieve the most for your small business and grow the business as quickly as possible. Here are some ways in which proper bookkeeping can help your business grow;

Ensure better flow of cash

Bookkeeping keeps records of your transactions, business events and other such things to help you plan ahead and make things easier to manage. It is also easier to meet deadlines and pay for things at the right time when there is proper bookkeeping in place. In order for a small business to grow, the importance of cash flow shouldn’t be understated or undermined.

Evaluating the business

Proper bookkeeping makes it easier for you to perform business evaluations for your small business where there is a proper bookkeeping plan in place. This evaluation makes it easier for you to determine whether your business is growing or not and make changes to strategies that are not working.

Create performance charts

In order to increase performance and delivery, it is important for small business owners to know when to increase the strength of their workforce. Proper bookkeeping makes it easier for small business owners to keep their performance charts in check and grow their workforce at the right time.

Make taxpaying easier

One thing that small businesses struggle with is paying taxes and processing all the documents that are needed for paying taxes. When your documents are properly documented, it is easier to process and pay your taxes and keep your business from debt.

Make feedback to investors easier

One more thing that bookkeeping does to help small businesses grow is to make it easier for small business owners to report their operations and progress to their investors, keeping them in the loop with what is happening with the business.

In the long run, the decisions you make for your business with regards to bookkeeping would determine whether the business would grow or not. Also, it is important to understand that bookkeeping and accounting are inherently different.

The importance of separating business and personal expenses

The Importance of Separating Personal and Business Expenses 

August 8th, 2019 Posted by Bookkeeping Tips 0 thoughts on “The Importance of Separating Personal and Business Expenses ”

The Importance of Separating Personal and Business Expenses 

Precise bookkeeping is vital to any business of any size. Accurate accounting is the only way to get a good read on your business’ performance.  To do this, it is imperative to separate personal expenses from business accounts. Serious complications can result if you do otherwise.

 

Tax Implications

The first consequence of improper bookkeeping we tend to think of is the IRS. This is a very valid concern. Business and pleasure do not mix when it comes to taxes. An audit under any circumstance can feel like a nightmare. It will be even worse if you have used company funds to pay for personal expenses. If audited, the burden will be placed on you to validate that any expense in question, is in fact, business related. The proof needed would be receipts and invoices of these transactions. If you are unable to provide this evidence, you could be subject to penalties and back taxes. Neither of these will assist your business in being successful.  

 

Accuracy of Financial Data 

The other consequence to not separating personal and business expenses is the lack of accurate financial data. You will not have a clear picture of your business’s financial performance if your expenses do not reflect what is truly needed for operations. If you properly handle your financials, you should be able to run reports about the health of your business rather quickly and easily. But if these reports reflect incorrect data, you could be making inaccurate assumptions about the financial health of your company. Without these accurate reports, you will be unable to budget properly for your company or forecast future spending. Without a solid understanding of your spending, it will be challenging to understand if you can take on new expenditures, such as a large purchase or hiring a new employee. As your business grows, you may look to investors for a new product launch, or apply for a loan to purchase new equipment. To make these moves to expand your company, you must have accurate financial data to share. Sometimes you will need to hire a professional company like Booktied to manage the business’s finances.

 

Separating Expenses

The first step is to create clear and specific boundaries and policies. Your business should be as separate from your personal finances as possible. Most importantly, different bank accounts and credit card accounts will keep things transparent. Establish a procedure for monthly reconciliation to ensure all expenses are, in fact, business related and classified correctly. Avoid the “gray area” by keeping business lunches and other work activities separate from events with friends and family. If you haven’t been doing the best job of keeping personal and business expense separate, now is the time to start. While it may seem like a headache and time consuming, the problem will only grow the longer you leave it unresolved. Set aside the time and get your bookkeeping in order. There is no easy fix for it. Do the best you can with the information you can recall.

In the future, if you do accidentally pay for expenses out of the wrong account. Rectify the situation as soon as possible and be sure there is a paper trail to show the documentation. Expense tracking shouldn’t be a burden and will be more straightforward with clear separation of accounts. Understand what is a business expense, and only use company funds to pay for these. In the long run, keeping business matters separate is more efficient.  You will spend less time cleaning up your bookkeeping, allowing you to spend your time on revenue-generating activities.

Importance of reconciling your bank and credit card monthly.

Why reconciling your accounts every month is a must.

August 8th, 2019 Posted by Bookkeeping Tips 0 thoughts on “Why reconciling your accounts every month is a must.”

Why reconciling bank and credit card statements every month is
essential for your business.

One essential procedure to have in place for every small business is monthly reconciliation of
both bank and credit card statements. If your business currently does not have a system in
place to reconcile the bank then now is the time to start. Monthly settlement of these accounts will allow for early
intervention on many items, such as fraud, overspending, bounced checks, payments lost in the
mail, and incorrect transaction entry.

Procrastination is never good when it comes to business, especially procrastination of financial
matters. We forget over time. Receipts get lost or pushed further down in our inbox. What could
be a small amount and easily fixable in a month, can compound and turn into a much larger
issue by the end of the year. Setting aside time for reconciling each month will keep the task
manageable, allowing you to be more efficient and avoid unnecessary headaches down the
road.

Maintain Accuracy
Accurately tracking income and expenses is vital for a business of any size. Whether you have
50 transactions a month or 5,000– accuracy matters. Reconciling your bank and credit card
statement each month will allow you to confirm that all transactions have been entered into your
bookkeeping system correctly. This designates time to catch errors and solve them quickly.
If you see a transaction on your statement, yet have no record of it, you can start the process of
investigating it. Missing details will be much easier to rectify within a month of them happening
than if you wait until the end of the year.

Validate your data entry and verify that the dollar amounts are the same in your internal system
as they are on the statements. Check for items that may have accidentally been miskeyed or
transposed numbers. Also, confirm that each entry is classified correctly. Marketing expense or
office supplies? Make sure the details are accounted for each, and every transaction is recorded
accurately.

Fraud/Checks and Balances
One of the top reasons you should be reconciling each month is due to fraud. No one wants to
deal with it, but the early discovery of fraudulent activity will be much easier to manage than if it
has been happening for a while. It could be an external threat or internal issue that is the source
of the problem.

Fraud from an external source typically happens when a company credit card number has been
compromised. The sooner the errant charge is caught and reported, and the card canceled, the
better.

Internal misuse of company funds can be a more significant issue to bear. In a small business,
there tends to be a considerable amount of trust among employees. Overall, this is an excellent
thing for teamwork. However, a small business that doesn’t have proper checks and balances in
place is a prime target for an employee to take advantage of your trusting nature. Consider the
statement reconciliation as somewhat of a mini internal audit each month. Are expense reports
being filled out and submitted accurately? Is someone making potentially questionable charges
on the company credit card? Quick intervention of this behavior will help protect your company.
Other possible internal fraud to look for could be missing deposits, cash withdrawal, and
unauthorized checks.

Understanding The Big Picture
One of the best benefits to come from reconciling monthly is that the dreaded “tax time” will
be much simpler! However, tracking income and expenses is about more than preparing for
taxes.
Accurate monthly bookkeeping will allow for more manageable report generation when needed.
Taking this time each month will give you a better idea of the big picture for your business–
covering everything from cash management to growing sales numbers. Being informed about
your accounts will also assist you in avoiding overdraft fees or the embarrassment from
bounced checks.
Prioritizing the time to reconcile monthly might seem excessive if your business doesn’t have
numerous transactions. Still, trust that putting proper procedures in place now, before the
process becomes overwhelming, will help your business tremendously in the long run. Give
your financials the time and attention they deserve. Proper bookkeeping will help avoid
frustrations, assist you in making more informed decisions about your company, and allow
peace of mind that you are in control of your business’s financial situation.