Many small businesses are dissatisfied with their current bookkeeping process. They may be keeping a paper ledger. They may be using accounting software such as PeachTree, Microsoft Navision, SAP or AS400. If your accounting software is too robust, clunky, complicated or confusing, as a small business owner, you may wonder how to use QuickBooks to ensure efficiency and streamline your accounting process.
If you spend too much of your valuable time on maintaining your books, keep reading to learn how to use QuickBooks to improve your efficiencies so you can get back to doing what you do best, taking care of your customers and growing your business. We will give you a breakdown of what QuickBooks is, help you learn which version is best for your needs and give you a heads-up of issues you may face.
What Is Quickbooks?
QuickBooks was the first product Intuit launched over 20 years ago, and to this day, it dominates the small business space holding over 80% of the market share. Large corporations and individuals also use it for either their household finances or independent contract work. Intuit offers a product called QuickBooks Self-Employed for entrepreneurs who have a sole proprietorship or work as an independent contractor.
If you seek a cloud-based accounting system, QuickBooks Online allows you to have up to five users in the system simultaneously. You can access this data easily no matter where you are and there is even an app you can use on your phone or tablet which is more mobile friendly than using the website.
There are also several QuickBooks products for desktop depending on your small business needs. QuickBooks for Mac and QuickBooks Pro allow for up to three concurrent users. This is ideal if the only people viewing your books will be the business owner and the accountant. QuickBooks Premier allows for up to five concurrent users. This is useful if you plan on breaking up the accounting process.
For example, you, your accountant, your financial analyst, your AP clerk and your AR clerk can all be viewing the same file simultaneously. QuickBooks Enterprise allows for up to 30 concurrent users. You should not need to upgrade to this version of QuickBooks desktop until you are a medium-sized business.
There are three versions of QuickBooks desktop - pro, premier and enterprise. These all sell at different price points and have their own pros and cons. To summarize the functionalities and specialties of these versions, QuickBooks Pro is recommended if you do not manufacture products. QuickBooks Premier is recommended for retail, nonprofit, contractor or manufacturing accounting.
QuickBooks Enterprise, as the name suggests, is recommended for larger enterprises. With each of these options, you can have a custom, industry-specific chart of accounts created, so you do not have to build one from scratch. You can, however, tweak it as time goes on and you find you need different accounts to help you track your revenue, expenses, assets, and liabilities better.
Challenges with Using Quickbooks
QuickBooks was the first product Intuit launched over 20 years ago, and to this day, it dominates the small business space holding over 80% of the market share. Large corporations and individuals also use it for either their household finances or independent contract work. Intuit offers a product called QuickBooks Self-Employed for entrepreneurs who have a sole proprietorship or work as an independent contractor. If you seek a cloud-based accounting system, QuickBooks Online allows you to have up to five users in the system simultaneously. You can access this data easily no matter where you are and there is even an app you can use on your phone or tablet which is more mobile friendly than using the website.
Lost Connection to Data File
Learning how to use QuickBooks is easy. Troubleshooting the lost connection to a data file is hard. Follow every instruction when installing QuickBooks onto your computer to minimize the chance of this error occurring. If you follow all installation instructions and ensure your firewall is permitting the connection, use the QuickBooks connection diagnostic tool to diagnose the issue.
If your small business is providing accounting services to local companies, it may disappoint you to learn QuickBooks will only show your 20 most recent opened companies. If you provide accounting services to 35 companies, it can be a pain to find each company's file on your drive rather than opening it through QuickBooks. To get around this, open certain companies on certain days.
Some small business owners allow QuickBooks to connect to the company bank account. This is helpful in the sense that you do not have to enter every transaction manually, particularly when it is your rent or car insurance payment. However, it may mis-code some of your expenses.
If you purchase food for the office at Staples rather than office supplies, you will have to go in and re-code the transaction. The benefits outweigh the occasional times the software slips up because it will automatically mark the transactions as cleared when it comes time to reconcile your bank account.
Access issues do not belong solely to QuickBooks, but it is a concern. If, for some reason, your accountant could not come into the office, business still has to go on. As a small business owner, you probably have nobody cross-trained in the accounting process to pick up the slack for your absent bookkeeper.
So what do you do? You could pay Intuit for remote access to QuickBooks desktop. You could pay another company such as TeamViewer or CitrixViewer to allow your employees remote access. You could give your accountant a work laptop with VPN access so she could work from home, but none of these solutions are ideal. QuickBooks online works to solve this problem, but you are at risk because Intuit could raise the monthly rates of their product at any time.
How to Use Quickbooks
Let's jump into how to use QuickBooks for small businesses.
Manage Sales and Income
Almost every small business owner needs to know how to use QuickBooks to manage their sales and income. Depending on the type of business you operate, it may make sense to track sales by customer. This does not apply to retail or restaurant environments where customers pay when they receive a product such as groceries or meals.
However, if you sell a service such as security monitoring or plumbing, it makes sense to create customers within QuickBooks. Keep track of what customers owe you by running an Accounts Receivable Aging Report. Chances are you are not in the financing business, so feel free to tack on interest and late fees when customers become past due or delinquent. The A/R aging summary shows you current invoices, invoices 1-30 days past due, 31-60 days past due, 61-90 days past due and greater than 90 days past due.
Track Bills and Expenses
Every small business owner needs to know how to use QuickBooks to track their bills and expenses. To do this, create vendors for everyone you owe money to on a recurring basis. Examples include insurance companies, your internet service provider, your water company and your electric and gas company.
The A/P aging summary allows you to see at a glance who you owe money to and when these bills are due. This helps you to manage your cash flow so you can avoid late fees, interest payments and having your utilities cut off.
Running payroll manually is not an ideal situation. Calculate all unemployment insurance amounts, withholdings for employees and track earnings for each employee to help you file taxes at the end of the year. If you learn how to use QuickBooks to process payroll automatically, almost all payroll headaches will become a distant memory.
QuickBooks offers you the flexibility to pay some employees by check and others by direct deposit. Local, state and federal payroll taxes are automatically calculated. QuickBooks automatically fills in your payroll tax forms on your behalf. You also have the option to pay directly through QuickBooks. QuickBooks can even automatically fill in the necessary journal entries to record your payroll.
Some small business may be interested in learning how to use QuickBooks to track inventory. QuickBooks tracks and updates inventory you have on-hand automatically based on the transactions you enter. It also calculates the average unit cost of your inventory. For example, you had 20 smoke detectors on-hand and purchased five more. You have spent $1,000 on smoke detectors in total.
QuickBooks will tell you the average cost of a smoke detector is $40 which will help you price the inventory when you sell it. The Inventory Valuation Summary is your friend if you want to know how much of a product you have on hand without having to count every single item in your possession.
Accept Online Payments
Perhaps the most beneficial of things to learn about how to use QuickBooks to improve your cash flow is QuickBooks allows you to accept online payments. Intuit works with Stripe to allow customers to pay their invoices online. Rather than paying a monthly fee for something customers do not use, you pay by transaction. ACH (bank) transfers are free. Keyed-in card information is charged at a rate of 3.4% plus $0.25. If a card is swiped or invoiced, fees are $0.25 plus 2.4% or 2.9% respectively.
Now you know how to use QuickBooks you can decide if it is right for your small business. There are pros and cons to QuickBooks versus shoebox accounting or other ERP software. There are pros and cons regarding the version of QuickBooks you use, be it desktop or online and which desktop or online version you purchase or subscribe to. However, without a doubt, QuickBooks can be used to improve your cash flow and easily monitor the health of your business. Just do your due diligence and understand what technical issues you may run into and how to prevent, troubleshoot and resolve them.