Good Practice Guide. QuickBooks Online

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1 Good Practice Guide QuickBooks Online WYCAS provides a range of specialist services designed to meet the needs of the third sector One to one support and training Preparation of year-end accounts Independent examination Financial training courses and workshops Computerising accounts Bookkeeping and management accounts Advice and information Bespoke consultancy projects 1

2 Introduction QuickBooks is an accounting package which has been useful to many charities in community groups due especially to its Class function, which enables groups to monitor and report on different restricted funds. An Online version (QBO) is available, where the data and set up is stored in the cloud, making it accessible from anywhere where there is internet access. The look and features are in constant development so it may change since the last time you logged in! Instead of paying for the software which is installed on one computer, there is a monthly subscription fee. As for any system, the data is only as secure as the password which protects it. Access and support Different access rights can be granted to different users, so some may be able to input and others only able to view reports, for example. Different users can be set up through the Set Up Cog menu which appears in the top right hand side of the screen. There is online support through the help menu (the question mark on the screen shot above). The online Chat is particularly responsive and helpful. WYCAS offers free support to clients who subscribe through us. If there are any features which do not work well or you would like to suggest system improvements, you can also do this on the system. The QuickBooks team look at these and prioritise them for action. There are many publically available tutorials and YouTube videos showing how to do most things on QBO. Setting up Decide which version of QBO is appropriate for your organisation. If you want to use budgets and classes to track restricted funds you will need the QBO Plus version. If you need a less detailed system QBO Essentials may be sufficient. The monthly fee varies depending on the package you select. If you are already using QuickBooks desktop the set up and data can be transferred to your Online account through the desktop company menu. You just need to select the Company menu on a more recent version (2013 and later) then Export Company File to QuickBooks Online, then enter your QBO sign in details to activate the transfer. If you are using Sage, Xero, Kashflow or even spreadsheets, the QBO team will help manage the transfer of your data onto QBO. 2

3 If you need to start from scratch, you will be asked questions to set you up when you first log in. This includes an option to upload your company logo, choose a type of industry, etc. This determines what will be set up as a default Chart of Accounts, products, services etc. These lists are only an educated guess as to what you will need at this point. If you choose charity QBO calls the names paying in to the charity Donors rather than Customers. It also calls the income and expenditure report the Financial Activities report, rather than the Profit & Loss. Customising the Chart of Accounts The Chart of Accounts is the primary list in the system. It is a list of all the different assets and liabilities which are used in your bookkeeping system (such as property, bank accounts, loans, etc), plus equity accounts (the starting balances and any retained earnings), plus income and expenditure accounts. The income and expenditure accounts are important to get right; these might also be called your budget headings. This is your organisation s chart of accounts and you should understand everything listed in it. If you have chosen not for profit or charity as an industry (check this) the default will probably not suit your organisation. To amend the chart of accounts, chose the Cog icon (as shown above) then chose Chart of Accounts from the list. On the RHS of every row there is a drop down menu showing options to Edit or Delete (or Run Report) for each account. If an account in your list is not one which you will use you can delete it. It will then not appear on your Chart of Accounts but the system has made it inactive (not deleted it entirely). If you wish to amend the name or spelling of an account, choose Edit. To add a new account to your Chart of Accounts go to the top of the list and select New. You will then need to choose the Category type and Detail type for the account, before overtyping the Name field. It is important to choose the correct category, especially for income and expenditure accounts, but the Detail type is not so important. You can tier your chart of accounts to make sub-accounts eg. Rent may be a sub-account of Premises costs. If you wish to add another account later on, you can do it in the course of entering a transaction rather than revisiting this list. A Spring clean of your Chart of Accounts is recommended, as historic accounts and duplicates can clutter up your list. VAT registered? If your organisation is VAT registered you can switch on this function through the VAT menu (highlighted in the image to the right). VAT 3

4 Classes If your organisation uses QB Classes to track restricted funds (or for any other reason) you need to ensure that Class tracking is switched on. Do this by entering the Cog menu, choosing Company settings, then scroll down to Categories. Make sure that Track classes is ON. Then you can create a list of your classes in the Class list. This is entered through the Cog icon, All Lists, Classes. You can Add new classes, Edit or Delete as appropriate. It is worth noting that Deleting a class does not remove it from the system, rather it makes it inactive from the drop down menus which appear when you are recording a transaction. So if a fund has finished it is good housekeeping to delete/ inactivate the class from QBO. Setting up Bank and Cash account opening balances To set up the opening bank and cash balances go through the Cog to the Chart of Accounts and set up a new account, Type: Cash at bank and in hand; Detail type: Current. Then type the account name in the Name filed eg. Yorkshire Bank current account. Beneath this field you will see an option to enter the opening balance with a date. Complete as relevant. Remember that it may not be the bank balance per the statement which is entered; the balance should be adjusted for uncleared payments and receipts on the start date. Basic Recording Many organisations use their bookkeeping system in a simple way: to record income only when the money is received (into cash or bank) and to record payments only when the payments are made (either in cash, or through the bank by cheque or automated payment). If you use the system in this way, read this section for recording transactions. If you record invoices which you raise to your customers on your system and / or record bills when you receive them, read the next section (Invoices and Bills). From the + menu, you will see the following options Bank Deposit 4

5 1) Basic recording income Select the Bank Deposit option to record income. The following screen will appear which enables you to record your deposits. (Please note the Select existing payments part will only appear if you have used your QBO to raise an invoice). Fill in the details in the Add new deposits part, remembering to choose an Account (the drop down list from your Chart of Accounts will appear) to categorise your transaction. It is good practice to record a name in the Received from field, as this will enable you to run reports on that name in the future. If you are using Classes remember to record the class for the transaction too (or create a new one if appropriate). When you have finished Save your transaction (the drop down menu next to the green Save and new button enables you to select Save and close instead). 5

6 2) Basic recording - Expenditure Expense Bank Deposit Cheque Record spend either using the Expense or the Cheque option. They open very similar screens the Cheque one has a field for the Cheque number and the Expenses one has a Ref No field. Both require you to complete (or check) which bank account it is being paid from, who it is being paid to, date etc. All the fields are important to complete, but the most important fields are Account (this shows which expenditure account to link the transaction to eg. Room hire, travel expenses etc) and Class, (this shows which funding pot it is funded from. You can opt to attach a scan of the receipt / invoice you are paying. Invoices and Bills For larger organisations, you may wish to use QBO to raise invoices to your customers. This has the advantage of recording the income when it is due and enables you to report on who still owes you money at any time. In preparation for using the invoicing part of the system you need to: 1) Customise your invoice layout 2) Create a list of Products and Services 1) To customise the invoice open an invoice from the + menu. You will see the following screen and can select to customise from the item circled at the foot of the screen. 6

7 This gives you a range of styling and content options so you can create your invoice template to be exactly as you wish. You only need to do this once and it will be saved on QBO. Remember to state any extra specifications eg. Electronic payments can be made to Bank account , Sort code Please advise us of payment by or remittance advice 2) Invoices work by you specifying which product / service you are charging for. These items are linked to the income accounts in your Chart of Accounts. So if you were to invoice for an item Half day room hire that service could be linked to the income account Fees charged. To set up your Products and Services select this item from the Cog menu Products and Services 7

8 You can Add a New product or service and will then set it up using the screen shown below The Service name is what you are selling to them that you would like to see on the invoice eg. For WYCAS it might state Accounts preparation as the Name. The Item/Service code is optional, if you find it helpful to use. A category is a means of classifying products and services you sell to customers. Categorising what you sell can help you better understand sales volume and who s buying what. It can also help when completing transaction forms, since you can search for items by category. You can also run sales reports by item. The Description on Sales form will be as it appears on your invoice. By setting a Sales price/rate it saves time when raising invoices and makes it easier to use standard charges. The Income account box is crucial. This determines which income account your invoiced services will be reported under, in your Financial activity reports. It is a drop down menu which links back to your Chart of Accounts. When you receive payment of the invoice, record it as Receive Payment from the + menu. If you do not record the payment in this way it will mess up the system, as the invoices will show as unpaid and the income may be double counted. Bills Some organisations like to record bills on QBO to track what they owe and manage the timing of when they are paid. If there are a large number of bills or cash is being very closely managed this can be important. Many third sector organisations simply record payment of bills as expenditure as all bills are paid immediately. To enter a bill, select Bill from the + menu. Work through the screen inserting the details, including which expenditure account the bill is to be recorded against eg. A Staples bill would be recorded to Stationery account. Remember to record the Class too and you can attach an image of the bill to the electronic recording on QBO. When Bills are paid, go to the + menu and Pay Bills. You can select the supplier, view the outstanding bills and record the payment being made to clear the bill. 8

9 Bank reconciliation To reconcile the bank account on QBO to your bank statements, choose Reconcile from the Cog menu. This should lead you through the process of reconciling, asking for the date of the statement, closing balance and any interest or bank charges. When you click OK a page will open with all the transactions which you have recorded into QuickBooks, which have not yet been marked as having cleared the bank. You need to tick those that appear on the statement (correcting any amounts as necessary) until the Difference at the foot of the screen is zero. When you are satisfied that you have selected the correct cleared items click the Finish Now button to process this reconciliation. When reconciled, it is a good idea to view the reconciliation report for uncleared items; are they valid entries and not mistakes/duplications? You will have an option to print the report which is a good idea, as it shows which items had been marked as cleared at that moment. If the recording later changes on the system, the paper copy can be useful evidence as to what has altered. The Finish Later button enables you to leave a partially finished reconciliation. Linking your bank account to QuickBooks From the Home screen on QuickBooks it is possible to link your bank account(s) to your QBO account in order that transactions are downloaded into your QBO. Setting this up may require completion and submission of a paper form to authorise the linking. Once the link is established the bank transactions are pulled into QBO and you can see them through the LHS menu: Transactions Banking. The screen will look like this: 9

10 Notice that this is the Review screen (see beneath the Balances underlined in green on the left hand side). This means that the QBO user has yet to affirm within QBO what the transactions were. QBO does check invoices and bills already entered to see if amounts or names match, and in that case will suggest a match. It is then a matter of clicking on the transaction to confirm what it was, or code it to the correct account and class. When this is done the transaction disappears from the Review Screen and shows on the In QuickBooks tab. QBO does learn where things are usually coded and you can also set banking rules for set amounts or names on transactions to be coded in specific ways. This can be very effective in speeding up your bookkeeping, but does not remove the need to perform regular bank reconciliations! If a transaction downloaded from the bank is already in your QBO or needs to be excluded from your system, you can tick the box on the LHS of the listing and chose Batch Action Exclude. Reports Click on the Reports option on the LHS of the screen There are many, many reports on the system! 10

11 It is worth saving your favourites to My Custom Reports, to save you having to search down the appropriate report each time. Generally well-used reports are: 1) Profit and Loss by Class (called the Financial Activity by Class if set up on QBO as a charity). This shows the ins and outs by Class, including the Balance on each class at the foot of the report. (This may be subject to bringing funds forward by class using a journal at the start of each financial year.) 2) The Balance Sheet is worth checking to make sure there are no rogue items there! It should contain Bank and Cash balances, Fixed assets (if recorded on the system), Debtors and Creditors (if using invoicing and bills on the system). 3) AR Ageing Detail to keep an eye on the people who owe you money. 4) Budget vs Actuals if you have input a budget to the system. WYCAS Advice Line: Website: 11