It can be a drag, but every small business entrepreneur needs to make sure their books are done. Having your books done lets you know how much money you’re making, that you aren’t being stolen from, and that you aren’t going to jail.
Lots of small business entrepreneurs choose to do their books on their own using QuickBooks Online. QuickBooks Online is a quality tool, which our solution seamlessly integrates with. For those doing their books themselves, we put together some tips on how to maximize your use of QuickBooks.
Tip #1: Set Up Your Books Right the First Time
Quick accounting-lingo lesson: “chart of accounts” is the term us nerdy accountants use to describe the “buckets” used to categorize the money in and out of your business. Things like marketing, office supplies, and sales are all common accounts within the chart of accounts.
While you don’t need to technically understand the ins and outs, your life will be a lot easier if you take the time to set up your chart of accounts right the first time. Here’s how you do that.
When you log into QuickBooks, it will ask you to choose your industry. Then, select cash or accrual basis. If you aren’t sure, we suggest selecting cash basis, as it’s easier and most small businesses use it as long as they do less than $5 million in revenue per year. You can also read this article for more details on cash-based accounting versus accrual based accounting if you’re not sure.
Once you do that, you can customize your chart of accounts. Our first tip is: don’t make it too complex. Lump things into broad categories to keep things simple. Then, for each chart of accounts, you’ll want to make sure that you have the correct “detail type,” because your tax return is linked to your chart of accounts through “detail type.” So, if you’re not sure about a certain detail type, it’s good to ask someone to double check so that you don’t have to worry about it later. Then you’ll have one less thing to worry about.
Tip #2: Set Up QuickBooks Rules
QuickBooks rules is a handy tool that allows QuickBooks users to automate transaction entries. This means you don’t have to input and code every single transaction into a journal entry. Just set up the rule, and the software will do it for you. Awesome!
For example, you could set up a rule that says: if a transaction includes “Walmart,” then code to “supplies” in the chart of accounts. Now, it will always code Walmart purchases as supplies.
Setting up QuickBooks rules is very easy to do, and it will save you a ton of time.
Tip #3: Set Up Recurring Transactions
Setting up recurring transactions automates an element of bookkeeping as well, but is more useful for journal entries. For instance, you can set up a recurring transaction for payroll entry.
To set up recurring transactions go to the appropriate page under “transactions.” Then, press the plus sign at the top of the page, and choose “check.” Then enter the payee and account information, as well as a description of the transaction and the amount. Then click “make recurring” at the bottom of the page, and enter a template name, and the date you want the transaction to occur, as well as a start and end date. Save the template, and QuickBooks will automatically create that check for you every month – no work required!
Tip #4: Create and Use Memorized Reports
If there’s a report you use often (for instance, a quarterly profit and loss report that compares to the same quarter from the previous year), you can set up QuickBooks to memorize that report so that it automatically generates whenever it’s ready. You can find a step by step instruction guide for how to set this up here.
Once you’ve decided what reports are most useful to you and you’ve set up QuickBooks to automatically generate them, make sure you go through and clean out your list of memorized reports every so often to keep your list of reports relevant.
For those reports that are the most important to you, you can have QuickBooks automatically email them to you when they’re ready.
Common Accounting Mistakes: Don’t Do These Things
Now that you know some QuickBooks tips, here are some common mistakes we see a lot.
Don’t Expense Personal Items To Your Business Account
Seriously, don’t do this. It makes accounting a nightmare, is illegal, and could make your life complicated — especially if you have a business partner. All personal expenses taken from the business’s funds should go to owner draw in QuickBooks to ensure that all equity is staying consistent with ownership, and that personal expenses go towards the owner’s salary.
Don’t Lump Payroll Together
On your chart of accounts, generally you want to keep things simple and broad. But, for your payroll, you’ll want to break down that category into specific roles and salaries. Your payroll taxes, along with your employee’s income taxes, are deducted based on salary. In order to remain compliant (and free of unwanted audits) the best thing to do is to break down payroll into each specific role and salary.
Don’t Neglect Vendor 1099’s
You can use vendors’ W-9 forms to keep track of their information for 1099’s at the end of the year. This is an extremely important detail to keep track of, as the IRS will penalize you if you do not file all of the appropriate 1099’s.
Use these tips to make your life a whole lot easier and keep your books a whole lot cleaner. Isn’t bookkeeping fun?