Growing Your Bottom Line with QuickBooks

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2 Growing Your Bottom Line with QuickBooks If you re running a small or mid-sized business, chances are pretty good you know a thing or two about QuickBooks (or at least have heard of it). With literally millions of subscribers for the online version alone, QuickBooks is by far the dominant player in accounting software for small and mid-sized businesses. So the choice to use QuickBooks for your bookkeeping and accounting may have been one of your few no-brainer decisions in running your business. But unless you ve had training in QuickBooks or were already an experienced user, that first easy decision was likely followed by a lot of uncertainty, hesitation, and maybe even indecision as you tried to figure out how to use it. QuickBooks is a powerful and flexible platform, and even if you re not aspiring to do anything beyond basic bookkeeping, getting QuickBooks to work well for you and your business is a lot more complicated than just signing up, entering your business info, and starting to process invoices and expenses. If you re a QuickBooks user but aren t convinced it s all that helpful and certainly isn t critical to running your business, you re not alone! 2

3 But we re here to fix that, because while we admit that we re bookkeepers and accountants and so are maybe more keen on accounting software than the general population, we do think QuickBooks is pretty great and can really help you run your business efficiently and effectively. It just takes some work to get it set up and integrated into your workflow. We use QuickBooks a lot not quite all day and every day but pretty close and we ve learned a lot from our own usage and from working with our clients. We re happy to share some of those lessons and our favorite shortcuts, best practices, tips, and tricks. Whether you just want to do basic bookkeeping and accounting or are scaling your company with aspirations to be the next Facebook, Apple, or Amazon *, read on, and we ll help you get more out of QuickBooks. * Of course, QuickBooks isn t designed to support the accounting needs of companies at this massive scale, but it can sure help you get going down that road! 3

4 7 QuickBooks Tips for Small & Mid-Sized Businesses 4

5 1 Set a Strong Foundation with Your Chart of Accounts If you ask a room of bookkeepers and accountants what single piece of advice they d give to anyone just getting started with QuickBooks, you ll get near-universal agreement: take the time to set up your chart of accounts correctly. Getting that right at the outset will save you countless hours of hassle down the road and will also give you something that s even more important than efficiency: confidence that your numbers are right, because you ve been allocating income and expenses to the right places from day one. The question, though, is what does it mean to have a correct chart of accounts. The real answer (unfortunately) is that it depends, because each business is unique. So the best guideline is to think about what you want your reporting to look like. When you think about your company s financials, what kinds of things are you tracking in your mind? Those are the things that need to show up in your chart of accounts. In our experience, most business owners tend to go way too granular on their chart of accounts, breaking out things that really don t need to be broken out. For instance, if you really need to track your utilities costs, don t break out heat, electricity, and water as separate accounts. If, at some point, you end up really wanting to know what you re paying for, say, electricity (maybe you re thinking about switching to renewables and need Setting up your chart of accounts with the right level of granularity is critically important. A good guideline is to go less granular than you might think. Stephanie Hartnett SmartBooks Controller 5

6 to assess the potential financial impact of the switch), you can still find that out in many different ways. Too much granularity introduces unnecessary complexity, making it harder for you to tell, at a glance, how your business is doing. 2 Always Connect Your Bank Accounts & Credit Cards One of the real benefits of modern software-based bookkeeping and accounting is that data entry can be super streamlined. That will save you tons of time and eliminate a lot of normal human error during data entry: no matter how good you are on a numeric keypad, a typo, numeric reversal, or missed line will happen at some point, and those errors are a pain to track down. Connecting your bank accounts and business credit cards to your QuickBooks account is easy to do and incredibly helpful. Once the accounts are connected, all your transactions will flow into QuickBooks automatically. While you may still need to add a vendor, adjust the GL account coding, or split transactions, connecting your accounts eliminates a lot of manual effort. What that means is that, when you re doing your account reconciliation, you can focus on actually reconciling accounts and properly coding transactions in QuickBooks so that everything flows correctly to your general ledger. That beats spending lots of time on data entry and then tracking down errors (or worse, just accepting unreconcilable discrepancies). 6

7 Unfortunately, not all banks will connect directly with QuickBooks. It s a pain, but it doesn t mean you re back to manual data entry. Instead, you can likely export your transactions from your bank and then import them into QuickBooks. You won t get the automatic flow of transactions, but you will still avoid all that manual data entry. Also, if you re using a personal credit card for business expenses, you probably shouldn t connect the credit card to QuickBooks, unless you use that card for only business expenses. If at all possible, you should avoid using a personal card, because if you re like most people, intermingling your personal transactions with your business expenses will require constant untangling. It may be nice to think about getting all those credit card points from your business travel and other expenses, but your bookkeeping will be way easier if you keep business and personal expenditures separate. If you do decide to use a personal card or have no choice, the next best thing is to use a good expenses software package to help manage that. You ll probably need to do that anyway. (More on that later.) You can save a lot of manual data entry by taking the time to link your bank accounts and credit cards to QuickBooks. In the end, it s a huge time-saver! Kelly O Rourke SmartBooks Accountant & Training Specialist 7

8 3 Manage Your Payables Electronically The SmartBooks team comes from all over the country and all different walks of life, so we don t agree on everything. But one thing we do all agree on is the awesomeness of Bill.com for handling vendor payments. Of course, the Bill.com platform fully integrates with QuickBooks, so tracking bills all the way through to your general ledger is a snap. But what makes Bill.com a consensus favorite here at SmartBooks are the ways it makes tracking and managing bills and payments so much easier. The basic workflow for processing bills with Bill.com is simultaneously really easy and really powerful. Vendors and suppliers can send invoices to a dedicated address or fax number, which funnels the invoice right into the Bill.com platform. You can set up approval requirements and notification preferences that suit your needs, so every bill gets routed appropriately to make sure all the right people are signing off (this also gives an ironclad audit trail of internal approvals). Once a bill is approved for payment, it sits in a queue waiting to be processed for payment when you choose. We have some clients who like to pay as close to the due date as possible, some who like to pay bills every Friday or every 15th of the month, and some who just pay as they go. Bill.com will accommodate whatever cadence you prefer. Regardless, payment goes out, and it all syncs back over to QuickBooks. Easy! Bill.com also makes reconciling your bank accounts and managing AP and cash much easier. If you pay your bills individually by check, you have lots of transactions hitting your bank account and 8

9 you have to monitor your account to know whether a particular payment has cleared. If you re processing even a modest number of payments, it can quickly become impossible to accurately calculate how much cash is actually available, and reconciliation is a potentially burdensome process. If you want to reduce the number of transactions you re tracking, consolidate bill payments to particular days of the month: Bill.com will aggregate payments of multiple bills and hit your account with one transaction. And with Bill.com, the full payment hits your account immediately, so you don t have to worry about open payments distorting your cash picture. Also, Bill.com is, among other things, one of the world s greatest filing cabinets. If you ever get audited or need to go back through a series of expenses (like in the above example where you wanted to know how much you d been spending on electricity), finding historical records in Bill.com is super easy. Finally, Bill.com provides an important added layer of security. When you pay vendors through Bill.com, payments come from Bill s account not yours. That means you never Bill.com is really a central component of our QuickBooks workflow for a lot our clients. Lisa Self SmartBooks Accountant 9

10 need to share your bank account information with your vendors (other, of course, than Bill. com). We ve had clients who suffered from check fraud, had to dispute transactions, and were even forced to close and open new bank accounts because their bank information fell into the wrong hands. By hiding your banking information from the world at large, Bill.com helps protect you from those risks. One caveat: Bill.com isn t free. It s not very expensive, but if you have a really low number of transactions in a given month, it may not be worth the investment yet. We re big fans, but we know it s not the right fit for everyone. It s also worth noting that Bill.com can be used for invoicing, processing incoming payments, and managing receivables as well. It s a fantastic tool for managing transactions all around. (No, Bill.com didn t ask us to say any of this. We really do love it this much!) 4 Use an Expense Reporting Application to Manage Reimbursable Expenses If you have employees incurring business expenses that you need to reimburse (or you insist on using your personal credit card for business expenses so you can get to the Caribbean next winter with points), an expenses app like Tallie or Expensify will make your life (and your employees lives) a lot easier. As with Bill.com, Tallie and Expensify streamline the whole process: employees enter expenses into the app and submit them for approval. Once 10

11 approved, the expenses can be synced over to QuickBooks or Bill.com as a bill that can then get paid. Approvals are easier to track and enforce, individual expenses will hit the right accounts in QuickBooks, and employee reimbursement will be quicker and more accurate. Tallie and Expensify are pretty similar in their core functionality. Tallie is a bit less expensive, and its approval processes are a bit easier to administer, but if you re traveling and spending internationally, Expensify will likely be a better fit for you. 5 Gain Insight With Reports & Budgets Small business owners tend to be very bottom-line-driven people and for very good reason! One of the best ways to grow your bottom line is to dig in on the rest of your finances. This is where QuickBooks can really start to be a workhorse for you, as it can do a lot with your data to help you gain insights into where you re making money, where you re spending inefficiently or excessively, and how well you re tracking to your plan. QuickBooks reporting allows you to run financials, look at transaction listings, build customer summaries, and more. You can use class tracking to allocate income and expenses by select categories to gain insight into your performance without introducing unnecessary complexity into your chart of accounts. So if, for example, you have multiple projects that all roll up to the same lines in the general ledger (cost of goods and revenue, for instance), you can create a class for each project. Then individual expenses and invoices can be assigned to these classes so you can run reports by these classes in order to get 11

12 the revenue, expense, and profitability of each project (or location or whatever makes sense for your business). Running reports gives you the detailed insight you need while keeping your income statement and balance sheet at an appropriately higher level. The downside, though, is that it can take some work on your part to get meaningful and useful results from reports. QuickBooks does have some standard reports, but it s not always obvious which report can include what you want on it. And it s reasonably unlikely that a standard report will show you exactly what you want in any event. QuickBooks standard reports are certainly a great place to start, especially since you can then start to customize off those reports. Once you do start to customize, though, do yourself a favor: always remember to save a customized report so you can come back to it next month, quarter, or year and not have to reinvent the wheel. You may think you ll remember exactly how you got to the report you re looking at right now, but it s a lot easier and more reliable to just go ahead and save it. And if you find yourself turning to the same report with any kind of regularity or frequency, don t just save it favorite it, so it s always right at the top of your reports list. One way to get more out of reports, especially since you took the time to set up a killer chart of accounts out of the gate, is to enter a budget in QuickBooks and run reports 12

13 Customizing reports to show exactly the information you want is a great way to get insight into your business. Favorite those reports so they re easy to get to. Ethan Viers SmartBooks Accountant comparing your actual results to your budget. That will help you make deliberate, strategic decisions about how you use your capital and how to invest your energies. Be sure, though, to build your budget using the same structure you set up in your chart of accounts. Otherwise, comparing budget to actual results will almost certainly be prohibitively complex. 6 Set Up Recurring Transactions for Efficiency For most businesses, there are many transactions that happen like clockwork, month after month, with absolutely no variation. You pay your rent on the first of every month. You ve amortized the cost of a big purchase of intellectual property over the next several years and need to recognize an expense on the 15th of every month. You need to depreciate your fixed assets every month. Recurring transactions are a great way to streamline this work, eliminate error, and take a few things off your to-do list each month. Transactions can be set up to end after a certain number of occurrences or on a certain date, or they can be set to recur in perpetuity. If a given transaction is going to occur more than a few times, it is absolutely worth your time to set up the recurring transaction. 13

14 And don t worry about losing sight of a transaction by making it recurring. You ll still have all the same oversights and reconciliations; you re just eliminating the manual effort of entering and processing the transaction. 7 Extend the Power of QuickBooks with QB Apps So as much as we count on QuickBooks, it doesn t do everything. But the online version of QuickBooks (often referred to as QBO) integrates with a lot of third-party apps (it s one of the benefits of being the dominant market leader: everyone wants to make products that work well with yours), and Intuit maintains a QBO application marketplace at apps.com. Apps are fundamental to unleashing the full power of QBO, and there are literally hundreds of QBO apps out there, doing everything from sales tax to ecommerce to time tracking to payroll to inventory management and more. If nothing else, it s worth taking a spin over to apps.com and doing a little browsing, as you might see something that gets your wheels turning about what else you could be doing in QuickBooks to help you manage your books and operations more efficiently. And with more apps getting added every week, definitely check back periodically, if you don t see what you re looking for. QuickBooks is a really powerful shell application. It s great on its own, but apps make it even better. Stephanie Hartnett SmartBooks Controller 14

15 QuickBooks is a great package that effectively serves the needs of most small and mid-sized businesses. There s no question it deserves its place at the head of the accounting software class, but you probably shouldn t expect it to work perfectly for you right out of the box. To get the most out of QuickBooks, set aside some time (or hire some expert help) to align it with your business needs and operations. With that setup done and some regular processes in place, QuickBooks can help you run your business smoothly and effectively, ultimately growing that bottom line we re all really focused on. ABOUT SMARTBOOKS SmartBooks provides outsourced bookkeeping, accounting, payroll, HR, and tax services for small and mid-sized businesses. We re committed to giving SMBs a level of service and expertise typically reserved for larger companies but at an SMB-friendly price. Need help getting more out of QuickBooks? CONTACT US TRUSTED BY LEADING SMALL & MID-SIZED BUSINESSES SmartBooks SmartBooksCorp.com info@smartbookscorp.com SmarBooks Corp. All Rights Reserved.