Clutter Clean-Up Suggestions for QuickBooks by Marie Gibson

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Apr 8th, 2013
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calculateAs an Advanced Certified QuickBooks Pro Advisor and business consultant, I work with a number of new clients monthly that have been using the financial software for a while. Overall, they may believe that the program has improved their productivity and accuracy; and yet there are always ways to improve on any system. In this article, I share with you some of the most frequently-seen opportunities that allow for improved productivity. Some of these suggestions may seem unnecessary or minor to you, however, remember that we perform visually and anything that removes the clutter from our visual path will assist our productivity.

  1. Merge duplicate accounts in your Chart of Accounts – Most Chart of Accounts pass through the hands of a number of bookkeepers, accountants, and/or friends. Each person inadvertently creates new accounts because they couldn’t find the account they were looking for. For instance, I might always post my telephone bill to “Telephone Expense.” However, my new bookkeeper wants to post to the phone account and can’t find it in my Chart of Accounts. Without clarification, she sets up a new account with the name “Phone.” If this discrepancy is discovered within a short period of time, the transactions could easily be edited and posted to the original account. However, months/years sometimes go by until someone realizes that there is duplication. These two accounts can be easily merged with two mouse-clicks and you can retain whichever name that is agreed upon. This merging process cleans your chart of accounts and makes finding the resulting accounts easier.

  2. Merge the duplication of customers, vendors and items – Again, because the program is very visual in nature, and we are visual users, removing excess clutter will simplify and speed your work. If your records show a duplication of customers, vendors, and items, merge them. One word of warning; the merging affects all historical records–not just new transactions. Once merged, the only way to separate them is to individually edit and repost transactions.

  3. Make accounts, customers, vendors, employees and items inactive if you no longer use them–they can easily become active again. This action is a little different than merging. You may have customers, vendors, employees and items that you no longer use or they may have moved away. You cannot delete them because they have been used in previous transactions. You may hide them by making them inactive. In the future, you can use them by making them active. Again, clean-up your lists and make it easier to maneuver through the program.

  4. Learn to use class tracking instead of having an extremely long chart of accounts – This is the most underutilized area of QuickBooks. Once I show clients how it’s intended to be used, they don’t know how they lived without it. Class tracking is a feature that can be turned on/off based on your company preferences. With class tracking, you can divide your business into departments, programs or profit centers, and then track your income and expenses separately by these areas. Each department or class produces its own Profit and Loss Statement which will help you determine which areas of your business earn the most PROFIT. Just because an area provides your highest gross revenues doesn’t mean that you should automatically keep it. What are the expenses that are associated with these revenues and what is the Net profit? Class tracking will help you determine the focus of your business based on Profitability.

  5. Learn to remove old bills from your Accounts Payable (A/P) report properly – When reviewing records, I often find old bills on the A/P report. My clients will say that they already paid these bills and they don’t know how to remove them from the report. Remember this report affects your Balance Sheet, and the bills indicate that you have a liability with these vendors. This occurs when people enter bills using the Enter Bills function. The Enter Bills function adds the bill to the A/P report and adds an expense to your P&L. When they pay the bill, they forget to use the Pay Bills function which would remove the amount from the A/P report. Instead they create a check using the Write Checks function in QuickBooks which duplicates the expense on your P&L. These two areas don’t link therefore your A/P report doesn’t have a clue that you actually cut a check and paid the bill.

  6. Likewise, learn to remove old invoices from your Accounts Receivable (A/R) report properly–The QuickBooks system has a very specific sequential process, and you’ll create problems for yourself if don’t follow it exactly. When you invoice a client, the amount is added to your A/R report as an asset AND creates revenues in your P&L. Using the Receive Payments function removes the amount from the A/R report. Some users, however, create an invoice and when they receive the payment for the invoice, they use the Record Deposit function. This enters the amount into the bank, but it also duplicates your revenues, and it doesn’t remove the amount from your A/R. If you create an Invoice; then you MUST use Receive Payments.

  7. Understand what the “Undeposited Funds” account is and how to use it–otherwise you may be duplicating your income in your Profit and Loss report. Again, because of the step-one, step-two method of QuickBooks, the program must be used in a very specific manner to function comprehensively. When you use the Receive Payments icon from your clients, you might expect to see the amount recorded directly into your bank account. QuickBooks, however, uses an interim storage area–called Undeposited Funds.This extra step emulates our actions in real life and this storage account could also be called A Blue Bank Bag, Bottom Desk Drawer, Special Corner in Wallet or so on. At some time, we actually create a deposit slip and deposit the money to the bag with several checks at a time. Our bank statement will show a lump sum deposit and QuickBooks will also show a matching lump sum deposit–making our reconciliations easier. This feature can be turned off for a limited number of businesses–but it will make your reconciliations difficult. Leave it on–unless you have a very good justification for turning it off.

  8. Check your Balance Sheet for liability amounts that have already been paid including Payroll liabilities and Sales Tax liabilities–Correct these properly. QuickBooks accrues your Payroll and Sales Tax liabilities in a very specific manner and posts the amounts due to your Balance Sheet as liabilities. There are specific functions to pay these liabilities. Again, users will forget to use the proper functions and will create a check from the Write Check function–usually bypassing any and all warning messages to the contrary. The program is unable to link these areas and the corrections must be made through the sequential system.

  9. Adjust inventory for end-of-year quantities and values. If you have inventory, your Balance Sheet should always show you the Cost value of that inventory. Your business owns it–it’s an asset and changes in your inventory will change your financial position of your company. You will compare a physical inventory count to the amount shown in QuickBooks. The Adjust Inventory feature allows you to change the quantities due to damaged, lost or stolen inventory and also the value of inventory for those items which may lose some of their worth. The asset value of your inventory is shown on your Balance Sheet whereas these adjustments will be included as expenses in your Profit and Loss (P&L, Income Statement).

  10. Reconcile your loan balances and credit cards in QuickBooks with your statements. Often, a company will reconcile their checking account regularly, but they might overlook the need to reconcile their credit cards and loan accounts. These accounts and amounts that have been borrowed and/or paid affect your liabilities on your Balance Sheet. You really do want an accurate representation of your company’s financial position which is reflected by that report. A reconciliation of these liability accounts is very similar to reconciling your bank statement.

Most of these tips can be accomplished easily, but if you have problems, I offer inexpensive packages – including QB cleanup – and I can do it in person or remotely. For additional free downloads, weekly articles and information on business advisory services, please visit www.marie-gibson.com.

Marie Gibson is the author of SMART BOOKS = SMART BUSINESS

 © Marie Gibson is devoted to helping business owners make wise business decisions by taking charge of their accounting and running their business profitably!

The information presented in this article is for informational purposes only and should not take the place of professional financial and/or legal consultation.

And if you liked these tips you may be interested in the Get a Plan! Guide® to Ridding Your Workspace of Clutter part of the Get a Plan! Guides® series designed to give you the ideas and inspiration to do your work easier, faster, and in a more focused fashion.

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