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How QBO Can Help You Manage and Retain Customers

Posted by Lance Wilkins Posted on Jan 26 2018

This is our QuickBooks Online side of exploring the features we would use for a service-based business using QuickBooks. Last post was the desktop version.

Practically speaking, there’s little difference in the information entered, or the process of getting it into place. When people new to QBO are surprised, it’s usually because the screens appear so different.

Above is a screenshot of the new customer screen in QBO. You can see our customer, 7th Branch Outdoor Sports entered on the Company line. This screen is mostly contact information and is easily understood.

The red circle drawn around the word Address shows that we are on the Address tab. In desktop we had tabs. They ran vertically up the left side of the screen. In QBO we also have tabs. They run horizontally starting with Address as shown.

There is a tab for Notes we would like to keep for this customer. There is also a tab for Tax info. Let’s see that in more detail.

Above you can see the New Customer window with the Tax info tab selected. Like desktop, this is where we would enter the sales tax information for this customer. In desktop we specify a sales tax item and a sales tax code. The sales tax code in desktop determines whether a customer is taxable or not and the item tells QuickBooks desktop the rate to use.

In QBO, a checkbox determines if the customer is taxable or not. The rate assigned is called the Tax Code.

Above is the Payment and billing tab. We specify the payment terms we are granting this customer. These will populate invoices by default. Preferred delivery method is helpful. It also will populate any new invoices for this customer by default. It specifies whether this invoice should be sent (emailed) or printed.

By the time this is published, the new QBO feature called Projects should be available. Projects will be a menu selection in the left-hand panel. See the graphic above.

Projects will replicate some of the features available for jobs or projects in QuickBooks desktop. These features help the business owner to track the profitability of large projects.

To create a new project, click the green button in the upper right part of the window as shown.

The setup process is simple. Give the project a name and assign it to a customer.

When creating invoices and expense transactions, use the project name where you would normally put the customer name. This will allow QBO to pull those transactions into a single report to show the profit and/or loss on that particular project.

How QuickBooks Can Help You Manage and Retain Customers

Posted by Lance Wilkins Posted on Jan 05 2018

This is the start of a series of posts in which we look at the features in QuickBooks that would be used in a business that sells services to its customers. It may sell materials as well, but the significant portion of its business is to provide a service to the public.

These are industries that QuickBooks serves well. The software, both the desktop version and the online, is rich with features to aid business-owners that fall into this category.

We will alternate the posts. As QuickBooks Online (QBO) continues to grow in popularity in some circles, it’s important we cover the features of both.

This post examines specifically the desktop version. We’ll start at the beginning and look at customer setup and the specifics that can help you keep tabs on your service-based company.

Start with the Customer Center, Customers->Customer Center. When looking for a particular transaction, people often ask where they should go to find it. If it is a customer transaction, this is usually the best place to start.

Customer Center

The Customer Center shows our list of customers on the left, along with each customer’s balance due (1). The upper right portion of the screen gives contact information. The lower right part of the screen may be the most helpful.

Arrow 2 points to the tabs identifying different information that can be kept in QuickBooks for each customer. The Transactions tab is the most common and is the one shown here. You can also keep information for multiple contacts for individual customers (Contacts). If you use the To Do list in QuickBooks, you can create custom ‘To Do’s’ for an individual customer.

Multiple notes can be saved, again individual to each customer, on the Notes tab. Lastly, The Emails tab will maintain a record of the invoices and other forms you send to the customer by email. This is a great resource as you will have a record of these contacts listed within QuickBooks.

Notation 3 is there to point out that, in the transaction part of the window, you can filter and sort in various ways to help you find past dealings with this customer.

A Complete Customer Setup

There’s more to setting up a customer in QuickBooks. While most of the following is optional, some of these settings will be very helpful.

There are several tabs along the left edge of the customer setup window. Let’s take a brief look at them.

The first is the Address Info tab. Most of this window is self-explanatory. One capability often overlooked here is that the fields with the down-arrow symbol in the label can serve multiple uses. Click on the down arrow and the label can be changed from say CC Email, to another web site, or phone number, etc. And the label will match the data you put in the field. It’s very customizable in this regard.

Also, you can store multiple ship addresses for customers. This may not be used much in a service-based company, but it’s good to know it’s there.

The three most useful items on the Payment Settings tab, in my opinion, are the three marked in the screenshot above. Setting the payments terms here means they will populate every invoice without being specifically selected, no matter who is entering the data. The preferred send method will also fill in a new invoice with the appropriate data without anyone remembering and making the selection manually.

The credit limit is a nice feature. Once the customer reaches the limit, you can still create an additional charge for them, but QuickBooks will give a warning the you have to answer, making the specific decision that, yes, you want to allow the customer to go over the limit.

Be careful keeping customer credit card information. Use independent logins and good security. You don’t want to be responsible for losing critical information like this and having to admit it to your customers.

Even service companies often sell items along with the services they perform. Often these items are subject to sales tax. Since it is common for service companies to be performing work at customer locations, different sales tax rates based on location are the rule. Here is where that setting is established so no one has to decide which sales tax item should be used when an invoice is created.

What about multiple projects for one customer?

There is one last attribute in the process of managing customers we need to cover. While many service-based companies will have no need to track the income and expense of a particular job or project independent of other jobs/projects, some will.

If your projects are large enough to track independent of other jobs, this feature will help you do that. In QuickBooks we can setup multiple jobs or projects for one customer. This allows reports to be created specific to a job or project, allowing the profitability of that one job to be analyzed.

To set up a job or project for a customer, choose Add Job from the New Customer & Job menu in the Customer Center.

In the window that opens, the only required field is a name for the job or project. Often QuickBooks users will use the address of the job. Other information like start and completion dates and various labels such as Pending or In Progress can be attached to the job as well.

When complete, the job will be indented underneath the customer name.

 

How Non-Profits Can Create Year-End Donor Letters in QuickBooks

Posted by Lance Wilkins Posted on Dec 15 2017

A question frequently asked by small non-profits using QuickBooks is; how do we create the letter donors will use to deduct their contributions on their tax returns?

There really has never been a way to do this in QuickBooks. As a result, the letter requirement has become a real chore.

The purpose of this blog post is to introduce you to a way to accomplish the creation of these letters using QuickBooks and QuickBooks’ ability to integrate with Excel and Word. It’s a multi-step process, complicated to describe in a blog post, so we’re showing it in a video.

If it seems complicated to you, run through it again. It’s not really complicated, but utilizes a couple of QuickBooks tools that may be new to some. The link to the video is here:

 https://youtu.be/kwfWdtZcA20

 

 

Easy Customer Refunds in QuickBooks

Posted by Lance Wilkins Posted on Dec 01 2017

For many businesses, customer refunds are a fact of life. Defective products, services that didn’t work, or just to pacify an unhappy customer, occasionally a refund will need to be processed.

As common as this situation is, it is surprising how few QuickBooks users are familiar with the process.

Refunds are created using credit memos. Customer -> Create Credit Memos/Refunds. 

In this example, Rock Castle Construction refunds their customer, Kristy Abercrombie, for two hours of labor that resulted from the breakdown of their air compressor.

When saving the credit memo, QuickBooks uses a popup screen to ask the following question.

Selecting “Retain as available credit”, keeps the credit memo as a credit in the customer’s balance. “Apply to invoice”, allows the QuickBooks user to apply the credit against an unpaid invoice for this customer.

In this instance, let’s say the customer had already paid the invoice and we wanted to give them an actual refund check. We would select the middle option, “Give a refund”.

Once the refund option is chosen, QuickBooks displays the above screenshot with all the information filled in. You can change it if necessary.

Usually, you can select OK with the data QuickBooks has used. The refund check is created, ready to be printed.

Have you ever used this feature?

 

How to Reward Customers Who Pay on Time

Posted by Lance Wilkins Posted on Nov 17 2017

We’ve been looking at ways to discount for customers the last couple of blog posts. Today we want to examine how QuickBooks will help you reward customers who pay early.

“Terms” refers to the terms for invoice payments you offer to customers. The most common terms used in business are already setup in QuickBooks, only a few QuickBooks users ever need to setup their own terms.

These terms set the due date of invoices we create. Some include a discount offered to the customer in exchange for quick payment. An example would be 2% 10 Net 30. The customer may take a discount of 2% if the invoice is paid within ten days. Otherwise, the amount is due within thirty days.

The list of available terms can be a little hard to find the first time. Look in Lists->Customer & Vendor Profile Lists->Terms list.

Granting the discount, when the customer pays, is part of the Receive Payment process.

The circled message at the bottom of the Receive Payment window informs the QuickBooks user that the customer merits a discount. In this case, the customer paid the discounted amount.

To grant the discount, first select the invoice being paid in the list of open invoices shown in the Receive Payments window. Click the Discounts And Credits icon on the ribbon.

The ribbon, as shown in this screenshot, is the view that users of QuickBooks 2013 and 2014 will see. Earlier versions of QuickBooks will have a Discounts and Credits button, but it will be in the lower part of the window. This button will provide the same functions as the icon on the ribbon of 2013 and 2014 products.

QuickBooks does the math and computes the discount should be 2.48. As you can see in the screenshot, that amount can be edited. Usually the reason for editing would be a rounding error where the customer has calculated an amount a penny or two off.

Select the account to which the discount should post. Here, we have created an account for just that purpose, Discounts Given. Then click done and the discount is applied to the invoice/payment.

 

Create Special Prices for Special Customers - Automatically

Posted by Lance Wilkins Posted on Nov 10 2017

If you discount certain items or certain customers on a regular basis, there’s an easier way than using a discount type item. Price Levels in QuickBooks will offer a better solution.

Price Levels are found on the Lists drop down menu. There is a difference between Pro and Premier as to what kind of price levels can be used.

In QuickBooks Pro, Fixed % price levels are available.

Navigate to Lists->Price Levels and select New from the menu that pops up with a right mouse click, and you will see the above window. Name the price level so it can easily be identified. Set whether the price level is an increase or a decrease over the price set in the Item List.

Then round in a way you wish prices to appear on your customer invoices.

The completed Price Level is shown in the above graphic. We’ve named our new price level “15% Discount.” The price level will decrease item prices by 15%.

The rounding has been set so that discounted prices will show as whole dollars. There are many options for rounding. Prices can be specified to end in .25, .50 and others. Many choices will allow specifying prices to end in .49, .89, .99 and so on.

A time-saving feature when using price levels is that QuickBooks can be told to always use a certain price level for certain customers without any ‘reminding.’

By editing the customer and accessing the Payment Settings tab, we can specify a certain price level to be used automatically with that customer.

Now, without the need for a discount item, the price comes up automatically for this customer with a 15% discount. How did QuickBooks compute this price of $2736?

A case of 500 ML Cattle Supplement is 24 bottles priced at $133 each. So, QuickBooks starts with $133, discounts by 15% (19.95) to arrive at a price of 113.05. Per our rounding instructions, it then sets the price at $114, rounding up to the nearest whole dollar. The last part of the calculation is to multiply the each price times 24 to reach a case price of $2736.

You could alter the pricing or units of measure to tweak the way the final price will come out on an invoice. Using different methods can yield different results.

 

The Premier level of QuickBooks offers an additional option to price levels. Per Item price levels.

Many of the same calculation and rounding parameters that are found in Fixed % type price levels are here as well. But, they can be applied to a single item rather than all items.

In addition, the calculation can be based on the price, as with Fixed % price levels, or cost.

Just like Fixed % price levels, the Per Item price levels can be applied to one or more specific customers.

Unfortunately, only one price level can be applied to a customer.

 

How to Show Discounts Given on Customer Invoices

Posted by Lance Wilkins Posted on Oct 27 2017

Discounts are common in many businesses. Discounts for special events, special customers, or special payment terms. Just as there are a variety of reasons for granting discounts, there are various ways to create them in QuickBooks.

Let’s start with a simple method to give a customer a discount directly on an invoice. We can create a Discount type item.    

You want to use discount items for one-time or occasional events. In cases where a discount is always granted a certain customer, or a discount given due to payment within a certain time frame are more efficiently handled in other ways. 

The above screenshot shows the setup screen for a Discount type item. The following screenshot, shows the item setup screen after all the pertinent information is entered.

You must decide if the item, by default, is taxable or not. This is important. If you use the discount item to reduce the price of taxable items and the discount item is set to a non-taxable code, sales tax will not be reduced as a result of the discount.

No worries though, the sales tax code can be changed either way with each invoice where the discount item is used. So, just use the setting that would be appropriate most often.

Another setting is the account from the chart of accounts to which the discount item will post. This can be the same income account to which the items you normally sell post. Or, you can create a special income type account to track the amount of discounts. In the graphic of the Discount item, this latter approach was used. The discount amount will post to an income type account called, Discounts Given.

The invoice above shows an invoice using the new Discount item. A nice way to expand on its use is to add a subtotal after the discount showing the net price.

You can see that adding the subtotal line makes this appear a little better to your customer. They now can see the price of the merchandise before sales tax, but after the discount you’re giving.

The subtotal becomes critical for more complex invoices. For example, perhaps several lines need to be discounted, several lines do not.

The discount item in QuickBooks discounts the line immediately above it. If there are three lines of merchandise and/or services, then the discount item is used on line four, the discount is computed on line three only.

In order to discount the entire amount, use a subtotal item on line four, then the discount item on line five. Now the discount will apply to the entire amount.

That’s a good overview of adding a simple discount to an invoice. Next time, we’ll look at some of the other ways to create a discount for a particular purpose in QuickBooks, and do it with less manual input.

 

Voiding QuickBooks Checks – What About Bill Payments and Paychecks?

Posted by Lance Wilkins Posted on Oct 20 2017

Voiding a bill payment check does not reduce any expense in QuickBooks. Payments to vendors are being reduced.

If a bill payment check is voided, the bill originally paid by a voided bill payment check, will now appear on the list of open payables. It is no longer a paid item.

If the bill payment was from a prior period, use the procedure outlined a couple of weeks ago for regular checks with two modifications.

The Name column in the Make Deposit window must have the vendor name the original check used. The Account column must be filled in with the account Accounts Payable.

The above transaction causes an increase in the vendor’s balance by the deposit amount.

Use the Enter Bills window, but change the radial button setting in the upper left of the window to Credit rather than Bill. Create the transaction just as you would a bill, using the same expenses or items as were on the original bill. 

The next step is to access the Pay Bills feature, find the bill for that vendor, and use Set Credits to apply the credit to the bill.

 

Voiding and Replacing Paychecks

Fortunately, the usual scenario in which a paycheck needs to be voided is when an employee loses a paycheck and it needs to be replaced. Here is an easy way to solve this sticky problem without affecting any other payroll transactions.

If the paycheck to be replaced were check number 287, create a regular check using the same payee (the employee), the date of the lost paycheck, and the same check number.

Use the Payroll Expenses account on the stub portion of the check but leave the amount of the check as zero. Create a memo explaining this is a voided paycheck, then save the check.

QuickBooks will display a warning message that the number already exists, but will allow the check to be saved. Now void the check using the QuickBooks Void command.

This completed step is merely to have a record in QuickBooks that the old paycheck number is a voided transaction.

Now display the original paycheck. Click on the Print icon at the top of the transaction ribbon.

Select Print. QuickBooks will suggest a new number for the check. Either accept the suggestion or type in the number of the check form that will be used, if different.

Once the check has printed, Save the paycheck with the new number.

The check register will now show the old check number as a voided check and the replacement check will, of course, have the new number as printed.

 

Accruing Sick and Vacation Time

Posted by Lance Wilkins Posted on Oct 13 2017

Setting up paid time off, like sick and vacation, is one of the common questions QuickBooks users have. QuickBooks will track this information for you, keeping the running tally of what is available for each employee and printing amounts available and taken on paycheck stubs.

As a demo, we will setup a time off accrual in Employee Defaults, that way it will be the default setting every time we hire a new employee.

Open the Employee Center. From the Manage Employee Information dropdown menu, choose Change New Employee Default Settings. Click on the button, Sick/Vacation.

The top portion of the Sick and Vacation window is what we’ll use in this example. It measures sick time. The procedures for vacation times would be essentially the same.                

In the screenshot, the accrual period is set for “Every hour on paycheck”, let’s use that.

The next field tells QuickBooks how much time to accrue for every hour worked. In the sample file for Rock Castle Construction, time is set to show in hours and minutes. This is a setting in preferences. The time could show as a decimal.

We’ll set the amount of time to accrue per paid hour as two minutes. 0:02:00. This setting will accrue sixty minutes of sick time by the time the employee has worked thirty hours.

If time showed as a decimal, this amount would show as .03333. It would be the same amount of time.

The employee will be allowed to accrue a maximum of forty-eight hours. At that point, time ceases to accrue until some hours are used, bringing the amount available below forty-eight again.

The hours will not reset each year, which is a requirement in some states.

Note the checkboxes in the bottom portion of the window. We don’t want paid sick time to accrue on sick and vacation time used, so we will make that selection here.

Above is a paycheck created for a Rock Castle employee. Note the circled areas on the right. The lower of the two shows that Gregg has accrued 2:40 in sick time for the hours on his check. That’s eighty hours times two minutes each, resulting in 160 minutes, or two hours and forty minutes, for this paycheck.

The double headed arrow points out that we have added one hour of sick time to be paid. This lowers the amount of sick time available to 1:40. That is the amount shown by the top circled area, Sick Available.

Everything seems to be calculating correctly.

 

How to Correctly Void a Check in QuickBooks

Posted by Lance Wilkins Posted on Oct 05 2017

Hint: It’s not on the Edit menu

This is an area of QuickBooks that seems to generate more mistakes than almost any other.

QuickBooks provides a command, located on the Edit menu, to void a transaction. When this command is used, the transaction amount is changed to zero. A memo is added indicating the transaction has been voided.

But it is an edit. That is, the transaction retains its original date. The amount just changes to zero.

The problem with this solution is the impact on older transactions being voided.

Assume a company’s bookkeeping is complete, financial statements have been printed, perhaps given to a bank, and a tax return filed.

Then, it is decided something needs to be done about the old checks that won’t clear the bank. They are listed as outstanding on the bank reconciliations, perhaps the check dates are year or more old.

So, the checks in QuickBooks are voided. The result? Besides voiding the checks, the previously issued financial statements are incorrect and the filed tax return is now incorrect.

Voiding a check in a current period causes few issues. It can be located in the check register or on any report. Double click on the line with the check in order to view it. Then, from the edit menu or the Delete icon of the transaction ribbon, choose Void Check.

It might be a good idea to add a note of explanation in the memo field of the check. Then Save and Close to record the transaction. Since the check was originally written in the current period, prior account balances are not affected.

 

Voiding Checks From Prior Periods

This is the more common situation and a task that must be handled with more care. The first step is the same. Find the check to be voided either in the account register or on a QuickBooks report.

Double click on the entry to view the check. In the memo field of the check make a note that the check is being voided with a deposit entry as of a current date.

Do not void the check with the QuickBooks Void command. Only note in the memo field that the check will be voided, and on what date. 

Using a current date, create a Deposit in QuickBooks. The Name column can be left blank.

In the Account column, use the same expense account as was used on the original check. In the Memo column explain that check #XXX from (original date of the check), is being voided by this deposit. In the Amount column, use the amount of the check being voided.

The next and final step will be when the bank account is next reconciled.

The old check will still be there, but so will the new deposit. Check off both even though they are not on the bank statement. They are the same amount so will net to zero and not affect your bank reconciliation.

 

How to Setup a Wage Garnishment Order

Posted by Lance Wilkins Posted on Sept 13 2017

Those who do payroll in QuickBooks will find it necessary from time to time to create a payroll item. One of the most common is when a wage garnishment order for an employee is received.

When that happens, here is how to accomplish the task.

Navigate to Lists->Payroll Item list in order to display the list of payroll items. Either select the Payroll Item button in the lower left, or right-click your mouse anywhere within the actual list itself.

From the resulting menu, pick New.

In this post, we will use the Custom Setup method. It allows us more flexibility setting up the item.

You can see the many types of payroll items that can be selected in the graphic above. While the examples for the type selected suggest union dues, retirement plans, etc., a wage garnishment is definitely a deduction. So, we will choose Deduction as the payroll item type.

The next window in the wizard wants a name for the item. If you create a wage garnishment item for each wage garnishment order received, you will be able to create the checks to disburse the withheld amounts more easily. That’s what has been done in this example. Gregg Schneider is the employee whose wages will be garnished.

This screen allows you to specify the agency for payment of the withheld funds. It also contains a field for the number that identifies your employee to the agency. This is why we created the payroll item for only one specific garnishment order. Otherwise, this information could not be filled in here.

There is also a field for the liability account QuickBooks will use when creating paychecks and withholding the specified amounts. By default, QuickBooks will suggest Payroll Liabilities. Using an account like Wage Garnishments Payable allows much better tracking of the amounts coming in and going out of the account.

The Tax Tracking Type window is critical. The selection made from the dropdown menu shown, will determine the taxability of wages, how those wages are reported on government forms, and how they affect W2’s.

There’s quite a list of available options and if setting up something other than a simple wage garnishment, you’re likely to find on the list exactly what you are looking for. For our purposes, a wage garnishment does not affect taxes. None is the correct choice.

The next window (not shown) will allow very specific setup of the effects the new payroll item will have on tax withholdings. Generally, if you feel something in that window needs to be changed, you should seek professional payroll advice from your accountant or bookkeeper. Rarely would anything in that window need to be altered.

If the payroll item were to be based on quantity, like mileage, we could specify that in this window.

A wage garnishment will be deducted from net pay.

The last window in the setup process allows us to set a default rate. This can be either a dollar amount of a percentage. In the example, we have specified 25% of the employee’s net check.

If there were an annual limit, that could be set in this window as well.

In next week’s post, we’ll detail how to set this up with an employee to automate payroll processing.

 

A Simple Way to Write Off Uncollectible Invoices

Posted by Lance Wilkins Posted on Sept 08 2017

From time to time, it becomes necessary to write off a customer balance that has become uncollectable.  Let’s look at how to record this transaction in QuickBooks.

Step 1 - Add a new Item for Bad Debts

     ► Open the item list, click the Item button in the lower left corner, and select New.

     ► Select 'Other Charge' as the item type.

     ► Name the item "Bad Debt".

     ► Do not enter a default amount

     ► Make the item taxable and in the Account field, select the expense account for Bad Debt Expense. If you don’t already have an expense account for this purpose, you can create one without leaving item setup.

 

Step 2 - Issue a Credit Memo

     ► Choose the Refunds and Credits icon from the Home Page or select Create Credit Memos/Refunds from the Customer drop-down menu

     ► Enter the customer, a current date, etc. in the header of the credit memo.

     ► Use the bad debt item just created as the line item in the credit memo.  Enter the amount to be written off exclusive of any sales tax amounts.

     ► Enter the appropriate Sales Tax Code. Use a non-taxable code if there is no sales tax to be written off.

     ► If applicable, select the appropriate Sales Tax Item from the drop down list at the bottom of the Credit Memo form

     ► Click Save and Close.

Step 3 - Apply the Credit Memo

Choose the selection to Apply to an invoice when this popup appears.

Be sure the correct invoice, if there is more than one, is selected in this window, and click Done.

That’s it. This method allows the recovery of any sales tax that may have been paid on the customer’s original invoice. As long as you use a current date for the credit memo, it preserves the account balances from previous periods. Your accountant will thank you for that.

Anyone using this method already?

Getting Paid Faster

Posted by Lance Wilkins Posted on Aug 18 2017

QuickBooks’ Finance Charge Feature

 

Statements and finance charges can help small businesses receive more timely payments from their customers.

There is a little setup in order to use finance charges in QuickBooks. Let’s look at that first.

Navigate to Preferences->Finance Charges->Company Preferences.

The first field asks for an annual percentage rate the finance charge computation should use. Keep in mind this is an annual rate. In the sample company, QuickBooks will compute what the annual amount should be, then divide to only charge for the appropriate period, usually one month.

What is the minimum amount QuickBooks should charge. This field should really be filled in. Otherwise, the amount could be very small, making it less than the cost of charging the fee.

A grace period is often a good idea. Where this is most useful is preventing a customer payment and a statement with a finance charge from crossing in the mail.    

As an example, say the customer has terms allowing thirty days before payment is due. They pay on the thirtieth day. At the same time, finance charges are computed and statements sent by the business. The customer will receive notification they are late and have been charged a finance charge even though they paid on time. 

Finance Charge Account allows the selection from the chart of accounts. Finance Charge income will post to this account. A best practice is to use an Other Income type of account.

Most QuickBooks users will charge from the due date as shown.

Rarely does anyone want to print an invoice for each finance charge created. Most companies will leave the final checkbox unchecked.

To calculate the finance charges, either the menu option on the Customer menu or the icon on the Home Page can be selected. The following window shows the Assess Finance Charges window from the sample company Rock Castle Construction.

Only one customer has overdue invoices as of 12/31/2018 (the date in the sample file).

The overdue balance is $3500.  If we looked up the details of this balance, we would find an invoice that was due on 11/14/18. The amount is overdue by several weeks.

Ten percent (the amount of our annual rate) of $3500 is $350. At December 31 the invoice is forty-seven days late. The result of that calculation is a finance charge of $45.07.

Different states may have regulations controlling the amount that can be charged customers for late payments and when those can be assessed. Be sure when you set your preferences you are in compliance with these regulations in your state.

Do you charge your customers finance charges? Does it help you get paid faster?

 

The Customer’s Check Bounced, Now What?

Posted by Lance Wilkins Posted on Aug 07 2017

There is a feature, introduced in QuickBooks 2014, that will make the entries for a customer’s bounced check in QuickBooks. It uses the method we have suggested to QuickBooks users in the past, but those entries had to be created manually. Now, the software does it automatically.

Above is a screenshot showing a typical payment transaction in QuickBooks and highlighting the icon on the transaction ribbon that will activate the Bounced Check feature. Note the manner in which the payment is currently allocated.  

Above is the window that opens once the Bounced Check icon is selected. Note that all the fields in this popup window are editable. You are able to choose the amount the bank has charged you for the bounced check. You are also able to set the transaction date, the expense account charged for the bank fee, class (if you use the class feature), and the fee you wish to charge your customer.

Once the information is filled in correctly, you may select the Next button at the bottom of the window.

This is an informational window, explaining what entries QuickBooks will make.

Note that in section 1, QuickBooks is explaining that the two original invoices paid by this payment, are now marked as open, or unpaid. Section 2 explains that the amount of the bad check, $7,633.28 and the service amount charged by the bank, $25.00, have both been deducted from the QuickBooks bank balance.

Section 3 informs you that a new invoice will be created for the customer, charging them and adding to their balance, the amount you, the QuickBooks user, chose to charge your customer for the returned check. We chose $35.00. 

The customer name in the graphic is “Remodel Bathroom” which can seem a little confusing. This sample file is for a contractor who tracks income and expense by job. The payment was for a particular job, Remodel Bathroom. In your QuickBooks file, if you used an actual customer name on the invoice, rather than a job, that name would show here.

This last graphic is the portion of the Customer Center showing the customer’s transactions. It has been filtered to show only open transactions. Note that there are only three invoices open.

The bottom two are the invoices originally marked paid when the payment from the customer was first received. QuickBooks has marked these as open. This procedure allows these invoices to age properly, as of the original invoice date since, in reality, they were never really paid.

The third invoice, the one shown on line one in the graphic, is the invoice charging the customer the $35.00 fee for the dishonored check.

Recording a customer’s bounced check is as easy as a couple of mouse clicks.

Since this feature has been available since the 2014 version, have you ever used it?

When a Customer is Also a Vendor

Posted by Lance Wilkins Posted on July 20 2017

What to Do When  a Customer is Also a Vendor

This is a common scenario for small businesses. Another business buys product from you. They are a customer. But, they also sell to you. They are a vendor. 

This is an issue in QuickBooks because a name cannot be both a customer and a vendor. And there is no way to trade services or products between customers and vendors.

At least, not in a straightforward, documented way. There is a solution.

Creating a name as both a customer and a vendor is not difficult. Change the name a little.

Let’s say we have a customer named Greg Aackerman. We want to put Greg on the vendor list as well.

In vendor setup, use the vendor name ‘Greg Aackerman (vendor)’, and fill in the “Print on Check as” field with the name only.

Create a new bank type of account. You’ll see why in a few paragraphs. Name the new bank type of account “Clearing Account.”

Recording transactions is simple. Use the customer, in our case Greg Aackerman, to record sales on invoices. Use the vendor, in our case Greg Aackerman (vendor), to record purchases on bills.  

Saving the above transactions results in the following customer/vendor balances.

The puzzling part for most QuickBooks users comes now. How do we offset the balances?

First, note the amounts. Greg owes us $1125. We owe him $560. So whatever we do, we want to end up with a zero balance due to Greg the vendor and a balance due us of $565 ($1125 - $560) from Greg the customer.

Receive a customer payment from Greg in the amount of $560.

Navigate to Pay Bills and pay the bill we owe to Greg the vendor. Use the Clearing Account as the bank account to pay from.

Record a bank deposit. Deposit only the $560 payment we received from Greg and deposit it to the Clearing Account.

The result is that we no longer have a balance due to Greg in accounts payable. We show a balance due from Greg in accounts receivable of $565.

It’s important to double check and be sure we have created the transactions correctly. If we have, there should be a zero balance in the bank type account, Clearing Account.   

 

 

QBO – Easier Time Entry for Workers

Posted by Lance Wilkins Posted on July 07 2017

This option isn’t for everyone, but it is a unique capability of QBO. If you sell services to your customers, most likely you are purchasing those services either from contractors or employees.

If you sell those services based on time, X number of hours at X dollars each, you need a record of that time in order to invoice the customer/client.

QuickBooks Online (QBO) has some features that can help you with this process. The Plus version of QBO includes time tracking features that simplify the entry and sale of the services you provide. 

The base subscription for the Plus subscription to QBO allows up to five users. In addition to those five, you can create two accountant users which do not count against the limit of five.  

The unique capability we want to highlight here, is that you can add even more users without paying additional fees. Users with report viewing only rights and users with time entry rights can be added. An unlimited number at no cost.

To see how this works, we’ll setup a fictional example. We have a sample company to use,  Rock Castle Construction. Rock Castle provides certain services to its customers. Some of those services are performed by employees, some by subcontractors.

All this time must be tracked so Rock Castle can pay for it and invoice its customer. To ease the burden of tracking the time, we’ll let those who provide the service track the time for us.

The first step is to set up a new user in QBO.

From Settings (gear icon), choose Manage Users. Then Add a new user.

Remember, selecting Time Tracking as the user type, means we can add as many as we want.

Both the list of vendors and the list of employees is available, we can choose a name from either one. In this case, we will choose a vendor, Mendoza Mechanical.

As we proceed through the setup, QBO will ask for the user’s name and email address. We enter the information and continue.

QBO will invite the user to setup an account.

Above, you can see a portion of the email QBO sent to Mendoza Mechanical, inviting them to setup their user account in Rock Castle’s QBO subscription. A link is there allowing the recipient to accept the invitation. There are also instructions for signing in when time needs to be entered.

Above is the very simple screen presented to Mendoza so they can setup their user account login credentials. 

After the one-step setup is completed, Mendoza can access the time activity portion of Rock Castle’s QBO subscription. Here, they can enter time.

Above is a screenshot of Mendoza Mechanical’s access to Rock Castle Construction’s QBO subscription. How much of the program is accessible is always a concern. But you can see from the screenshot that the other menu items do not exist in this window. There is nowhere else in the software this user can go.

Shown is the single activity time entry screen. A weekly timesheet could also be used. Mendoza selects the customer they worked for and what service was performed. They can enter time as a total amount, or opt to include start and end times. 

There is also a help popup window to answer questions they might have about this entry.

Once the time is entered, it is available in the QBO system to pay Mendoza and invoice the customer without further manual entry.   

Is a feature like this something that would be useful to you?      

Updating Costs and Prices Automatically

Posted by Lance Wilkins Posted on June 23 2017

A lot of the work Intuit has done in recent years to improve inventory management in QuickBooks has gone into their Enterprise software. Even without the Advanced Inventory features that are part of the highest subscription level, Enterprise has several inventory features the other versions of QuickBooks don’t have.

One of those is automatic cost and price changes.

It’s very important to note a couple of things about cost information in QuickBooks. First, the value of inventory is maintained on an average cost basis. That is, if we purchase a widget at $5 and one at $10, QuickBooks tracks inventory as 2 widgets valued at $7.50 each.

The sale of one of those widgets will generate a charge to cost of goods sold of $7.50.

An item record actually has two cost fields.

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The bottom circled area titled Calculated Average, is the QuickBooks generated average cost for this item. It is not an editable field. 

The upper circled area is editable. You can put any number you want in that field. It affects very little. QuickBooks uses the average cost in all accounting entries.

That can change with QuickBooks Enterprise. That user-entered cost field can matter very much when using the automatic cost and price updates. Let’s see how that feature works.

First, turn on the preference.

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Several settings are available in the Automatic Cost & Price Updates window. The top dropdown field labeled Markup, gives the QuickBooks user two choices. Percent over cost or Amount over cost.

The middle section determines how automatic cost updates will be handled by QuickBooks. The first field is labeled “If item cost changes on a purchase. The choices are Always update item cost, Never update item cost, or Ask about updating item cost. Selecting Always or Ask and then assuming the QuickBooks user responds positively when asked, will cause QuickBooks to update the Cost filed in the item setup window.

The second field is labeled “When item cost changes.” The selections for this field are Always update sales price, Never update sales price, or Ask about updating sales price.

In the sample file is a product named Virus Vac A. The cost field is filled in with the amount 37.50. The price is set at 75.00.

If we enter a bill purchasing Virus Vac A at 30.00, the following popup appears.

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The popup appears because the setting selected in preferences is “Ask about updating item cost.” Yes has been selected as the answer in the graphic in order to show the price options. If yes is not selected, the price update options are grayed out. If you do not automatically change the cost, there is no way to automatically change the price.

So, the new cost is $30. QuickBooks will change this value in the item window when this transaction is completed. The markup on the old cost is 100%. A cost of 37.50 times 100% yields a price of 75.00.

Now, if QuickBooks updates the new cost to 30.00, in order to maintain the price markup of 100%, the price will be updated to 60.00.

Let’s go back to our Automatic Cost & Price Updates window.

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The bottom section in the preference window deals with assembly type items. If we are having QuickBooks automatically update costs for inventory items, should these new costs then add up to create a new cost for an assembly item? The checkbox indicates yes, QuickBooks should make that calculation.

If the cost of the assembly total bill of materials changes, should QuickBooks automatically update the sales price? Again, a selection in this checkbox indicates that yes, it should.    

How do you maintain pricing as the costs of the products you sell changes over time?

The Chart of Accounts - What’s Different in QuickBooks Online vs. Desktop?

Posted by Lance Wilkins Posted on June 16 2017

There are two good reasons to review the chart of accounts today. One, there is a setting when creating a new account that is unique to QBO. Two, knowing how to create accounts will make your company’s financial reports more accurate.

The account, from the chart of accounts, tells the financial software how to handle the amounts we post there when we create transactions. If the account is an asset or liability, the balance in the account is increased or decreased depending on the type of transaction we use and that balance remains, even across multiple years. It’s the account type that makes that happen.

On the other hand, with an income or expense type of account, the dollars posted there only appear on reports for certain time periods. We determine that time period when we create the report. A Profit and Loss report for June 2017 will show the expense amount of in particular account for that time period only, regardless of what may have happened in the past.

A 6/30/2017 balance sheet will show the total of all transactions in an asset or liability account since the beginning of the QuickBooks file, up through 6/30/2017.

So, it is very important to use correct account types. QBO takes another step.

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You can view your chart of accounts by navigating to Transactions on the left panel and then choosing Chart of Accounts.

Above is a screenshot showing how the list appears. Note the column headers.

The first column from the left displays the name of the account. This is usually specified by the QBO user. 

The second column shows the account type as explained a few paragraphs ago. In the graphic, Bank, Accounts Receivable, and Other Current Asset types of accounts appear in the list.

The third column is circled. This is the Detail Type.     

Detail Type is not part of account setup in QuickBooks Desktop, so if you are new to QBO, you may not be familiar with it. It’s a way QBO gathers more information about how you intend to use this account. That information helps QBO decide where the account balance should appear on financial reports like Profit and Loss and Balance Sheet.

The fourth column shows the account balance, but only for balance sheet accounts. Those would fall into the general categories of assets, liabilities, and equity.

Scroll down this list to the income and expense accounts and you find that no balance shows. Income and expense accounts close, that is the balance is zero’d out for reporting purposes, at the end of each year. QuickBooks does not maintain an indefinite running balance for those types of accounts.

Also note that there are two account balances for the bank accounts shown. If the screenshot were long enough that you could see the credit card account type also, you would see both account balance columns filled there as well.

This tells us there is a difference between what our QuickBooks balance in this account is and the balance coming from the financial institution. There are transactions we need to match or enter from our bank feeds.

Once you are more familiar with and understand the QBO chart of accounts, it becomes easier to create new accounts correctly.

 

Get Creative in QuickBooks

Posted by Lance Wilkins Posted on June 09 2017

QuickBooks Premier and Enterprise provide an item type not found in Pro. It’s the inventory assembly type item.

Assembly items are used to create, assemble or manufacture products to sell from different component items already in stock.

Let’s stick with our sample company, Rock Castle Construction. They have one assembly type item. It’s an Interior Door Kit.

Rock Castle buys and maintains in inventory things like doors, door frames, hinges, doorknobs, etc. From these inventory parts, it assembles what it calls an interior door kit. That is, a door assembled with a frame, hinges, doorknob, etc. All the purchaser has to do is slide the mounted door and frame into a wall opening.

Since the component pieces are all in inventory, let’s look at how the assembly item would be created.

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An Inventory Assembly type item is similar to an inventory part type item. You can see from the three arrows shown in the graphic, it requires the same number of accounts for posting as the item is used in various transactions. Cost of goods sold, income, and asset.

The big difference is the circled area, the bill of materials. This tells QuickBooks what items go into building this assembly item. From the screenshot, you can see that it takes one doorknob, a door, and three hinges. It also takes a door frame but you would have to scroll down that list in order to see that particular item.

What this means is that when one Interior Door kit is made, inventory of the component pieces will be reduced by the amounts required for the manufacture of the finished product.

In this case, there will be one less door, doorknob, door frame, and three fewer hinges.

QuickBooks has a process in order to create the assembly item, it’s called a Build Assemblies transaction.

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 We choose what assembly item we want to create at the very top of the transaction window. Once we do that, QuickBooks fills in the middle area of the window with the bill of materials we reviewed in the setup of the assembly item.

The quantity we want to build is entered in the lower right part of the window. You can see in the screenshot that we have decided to build five of this item. Making that selection fills in the right-most column. How many component parts will be used in this transaction?

The quantity on hand of those components will be reduced by the numbers shown in the “QTY NEEDED” column. The on hand quantity of the assembly item, Interior Door Kit, will go up by five.

This is a good basic overview of how the assembly type item works in QuickBooks. It is also possible to add service item(s) to the ‘recipe’ or bill of materials, thus adding the cost of things like labor and overhead to the inventory assembled.

Do you have a use for this QuickBooks feature? How do you use it?