Professional Tips and Workarounds for QuickBooks Online: Improve your QuickBooks Online and bookkeeping skills using advanced techniques and best practices

BIRMINGHAM—MUMBAI

Professional Tips and Workarounds for QuickBooks Online

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For my wife, Sarah, who fully supports me in everything that I do, and our children, Hannah and Owen. Not forgetting mum and dad – thank you.

– Ash Beetson

Contributors

About the author

Ashley Beetson has worked in various bookkeeping and accounting roles over a career spanning 30 years. This has included working in law firms, manufacturing, and an accounting practice, as well as operating his own bookkeeping business for 10 years. In 2014, Ash was invited to join the UK Trainer Writer Network, assisting Intuit in creating training materials for QuickBooks ProAdvisors. In 2021, Ash was included in the Top 100 list of ProAdvisors as compiled by The Insightful Accountant.

In 2019, Ash co-created nettTracker, a third-party software application that integrates with QuickBooks Online. It is designed specifically with accountants in mind to simplify fixed-asset processes, and there are plans to add further features that will help accountants and bookkeepers.

When he's not working, you'll probably find a bass guitar in Ash's hands as he's a regularly gigging musician, playing at different venues 3-4 times a month.

Thank you to my wife, Sarah, as my first proofreader, and to all the team at Packt for the help and guidance while writing my first book. Also, to everybody I have worked with over the last 30 years, I thank you. It's through all the knowledge gained working with different people and businesses that this book is possible. I hope my past learnings will be useful to others, saving people time and some head-scratching.

About the reviewer

Aaron Patrick is a Chartered Accountant and Head of Accounts at a state-of-the-art accounting practice called Boffix, which uses cloud technology to make sure that clients have the information they need at their fingertips.

He is also a UK Intuit QuickBooks Certified Trainer, delivering Core and Advanced QuickBooks training to accountants and users alike. Finally, he has a dedicated YouTube channel called Aaron Patrick the QuickBooks Chap, which delivers training and support one video at a time!

Table of Contents

Preface

Section 1 – General Tips and Shortcuts

Chapter 1: Creating and Reviewing Opening Balances in QuickBooks Online

Should opening balances be in place before using QuickBooks?

What dates are used for opening balances?

Opening balances – Customers

Which Product/Service Item to use

Opening customer balances – Summary

Opening balances – Suppliers

Opening balances – Bank

What if no opening balance is created?

What about uncleared checks and deposits?

Opening balances – VAT/GST/sales tax

Inventory (stock)

Opening Balances – Other

Other business taxes

Fixed assets (Plant and Machinery)

Loans and Hire Purchase Agreements

Shareholdings

Director's loans

Provisions for prepayments and accruals

Summary

Chapter 2: Useful Tips and Tricks Every QuickBooks User Should Know

Purging a QuickBooks company

Using the Purge Company option

Using the KISS principle

How can you make QuickBooks easier to use?

General tips for daily use

Merging accounts

Date shortcuts

The calculator function

The advanced search function

Duplicating a tab in the browser

Other shortcuts

Summary

Section 2 – Adapting QuickBooks Online to Suit Different Business Types

Chapter 3: QuickBooks Online for Manufacturing Businesses

Chart of Accounts for manufacturing

Products and services – Raw materials

Bill of Materials (BOM)

Workflow of a manufacturing company

Purchase order for raw materials (Step 1 of 7)

Goods delivered and supplier bill created (step 2 of 7)

Sales order from a customer (Step 3 of 7)

Picking materials to build the product (step 4 of 7)

Accounting for work-in-progress (step 5 of 7)

Updating stock with finished goods (Step 6 of 7)

Goods delivered and an invoice raised for the customer (Step 7 of 7)

Simplified Option

Other Considerations

Stocktakes and adjusting stock quantities

Summary

Chapter 4: Recording Income for Retail Businesses

Using Inventory

The Sales Environment and the different methods of Payment accepted

Sales receipts versus Bank deposits

Undeposited funds

Using journal entries to record sales

Recurring entries

Using Customers

Considerations for Inventory

Updating Sales Prices

Revaluating inventory (Stock)

Summary

Chapter 5: Handling Client Money

Setting up QuickBooks for Client Funds

Settings for expenses

Setting up the Chart of Accounts

Setting up Products and Services

Settings for Customers

Recording Client Account Transactions

Managing fees deducted from client funds

Paying Suppliers on behalf of clients

Reporting Against Client Funds

Reporting Client Balances within the Office Company File

Summary

Chapter 6: The Secret to Success with Projects in QuickBooks Online

Settings for Projects

Enabling Projects

Settings to track expenses by customer

Progress Invoicing

Creating a Project

Recording Income and Expenditure against a Project

Creating an Estimate

Allocating Bills and Expenses to a Project

Creating invoices against a Project

Recording Time against a Project

Who can record time?

TimeSheet Entries

Creating a Budget against a Project

Managing Unbilled Expenses

Using the manage billable expense tool

Useful reports for Projects

Default Project Reports

Allocating other costs to a Project

Using journals to adjust a project

Using a zero-total Bill to adjust a project

Sub-Customers versus Projects

Summary

Chapter 7: Handling Foreign Currencies in QuickBooks Online

Enabling Multicurrency settings

Settings for Customers, Suppliers (Vendors), and Banks

Setting up Bank Accounts

Editing Foreign currency Exchange Rates

Recording Transactions in Foreign Currencies

Matching Foreign Currency Transactions in the feed of the Home Currency Bank Account

Matching foreign currency transactions with a foreign currency bank account

Matching a single payment for multiple foreign invoices

Receiving a foreign payment in a different foreign currency bank account

Making further adjustments when working with Foreign Currencies

Revaluation of Foreign Currency Balances in QuickBooks

Editing reports to display Foreign Currency values

Summary

Section 3 – Reviewing and Reporting Data in QuickBooks Online

Chapter 8: Best Practices When Reviewing Financial Records

How frequently should we review our financial records in QuickBooks Online?

Checking Financial Reports

The Matching Concept

The Accruals Concept

Income Recognition

The Going Concern Concept

Materiality

Prudence

Consistency

Reviewing the Profit and Loss Report

Report dates

Changing the way that Columns are Displayed

Changing the order in which a Profit and Loss Report is sorted

Comparing Values to Previous Financial Periods

Looking Out for Errors and Inconsistencies

Reviewing Income values in the Profit and Loss Report

Reviewing the Balance Sheet (Undeposited Funds)

Reviewing Accounts Receivable

Business Owner Paid by Customer

Crediting Customer Invoices no Longer Payable

Reviewing Accounts Payable

Supplier bills already paid by the business owner

Supplier Bills settled by Hire Purchase Agreements

Summary

Chapter 9: Enhancing the Consistency of Your Financial Statements

Common Errors Associated with Chart of Accounts

Unnecessary use of Chart of Account Categories

Common Errors associated with Products and Services

Prepayments, Accruals, and Deferred Income

Adjusting prepayments

Using Classes, Locations, and Tags

Classes and locations

Tags

Summary

Chapter 10: Reconciling the Balance Sheet

Different Balance Sheet Categories

Agreeing Values on the Balance Sheet (Basics)

Reconciling Debtors/Accounts Receivable (Current Assets – Trade Debtors)

Creditors/Accounts Payable (Current Liabilities – Trade Creditors)

Reconciling Bank Accounts and Credit Cards

Loans and Mortgages

Reconciling Stock (Inventory)

Director's loans or drawings

Advanced Balance Sheet Reconciliations

Reconciling Fixed Assets

Reconciling Accruals, Prepayments, and Deferred Income

Reconciling undeposited funds

Reconciling VAT

Summary

Chapter 11: Closing the Year-End, the Audit Log, and More

Bookkeeping Checklists

Closing The Financial Year/period

Retained Earnings

What if the business is a sole proprietor or partnership?

What happens if the financial year-end is changed?

The Audit Log feature

Customizing reports to investigate changes to previous periods

Using Management Reports at Year-End

Including reports in a management report

Finishing touches to the Management Report

Summary

Why subscribe?

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Preface

QuickBooks Online is a fully cloud-based accounting software solution for small-to medium-sized businesses. It has also become popular with bookkeeping and accountancy firms that provide bureau bookkeeping services.

At the time of writing, QuickBooks Online has close to 5 million users worldwide with different levels of subscription available. This book will concentrate on using the Plus subscription, which is the most popular.

Accountants and bookkeepers with a QuickBooks Online Accountant subscription will benefit from being able to access different QuickBooks client files from one area. In addition, there are some Accountant-only tools that are not available to standard users. No Accountant tools are used in the book, so the features used should be available to all with a Plus subscription.

The purpose of this book is to provide you with additional tips and workarounds that reflect real-world scenarios. Although there is some flow between the chapters, they can be read in any order.

Who this book is for

This book is aimed at anybody that would like to get the most out of their QuickBooks Online subscription.

For a business owner using QuickBooks reading this book, not every chapter will be relevant. If you are a bookkeeper or accountant, the book should become a great reference tool. As and when you need to help different business types that are getting started with QuickBooks Online, simply jump to the appropriate chapter.

When businesses grow, they may need to implement different apps. This book looks at how QuickBooks Online can be adapted to suit most business models by only using the tools that are available in QuickBooks Online. This is perfect when getting started and working to a budget.

The book does not cover the very basics and general use of the software. The book is designed for readers already familiar with QuickBooks Online. If you need assistance with the basics, please check out other titles from Packt, and the free webinar tutorials provided by Intuit that help when getting started.

What this book covers

Chapter 1, Creating and Reviewing Opening Balances in QuickBooks Online, looks at how, when it's not possible to automatically convert data to QuickBooks Online, manual adjustments may be required to ensure the balance sheet is reporting the correct figures. This chapter explains the entries required.

Chapter 2, Useful Tips and Tricks Every QuickBooks User Should Know, with QuickBooks ready to use, provides some guidance to help keep things simple, together with some quick tips that can generally save time.

Chapter 3, QuickBooks Online for Manufacturing Business, is the first specialist chapter, which details specific settings and workflows for businesses that manufacture products. This includes the handling of the bill of materials and adjustments for stock.

Chapter 4, Recording Income for Retail Businesses, looks at different methods of recording income when invoices are not raised. This includes options to update price lists and revalue stock.

Chapter 5, Handling Client Money, provides a detailed suggestion on how QuickBooks can be used for lawyers, investment brokers, and property agents, who often handle money on behalf of others – client money.

Chapter 6, The Secret to Success with Projects in QuickBooks Online, provides one of the most detailed guides you will find to using the Projects feature in QuickBooks.

Chapter 7, Handling Foreign Currencies in QuickBooks Online, explains, as multicurrency can sometimes be a little confusing, exactly how the feature works, and what to look out for when things are not always straightforward.

Chapter 8, Best Practices When Reviewing Financial Records, is not simply about using tools in QuickBooks. It also includes guidance on generally accepted accounting principles and concepts and how they can be applied when reviewing data in QuickBooks Online.

Chapter 9, Enhancing the Consistency of Your Financial Statements, following on from Chapter 8, Best Practices When Reviewing Financial Records, looks at how adjustments can be made to ensure the profit and loss is reporting the correct values.

Chapter 10, Reconciling the Balance Sheet, includes tips that will make the process of getting ready to prepare annual financial statements for a business from year to year, including checking the balance sheet thoroughly, easier.

Chapter 11, Closing the Year-End, the Audit Log, and More, looks at how, with the accounts of the business complete, the year should be closed. This chapter includes some basic steps to take, and how to investigate any balances changed, that should not have.

To get the most out of this book

Only refer to the chapters that you really need – those that are relevant to you. Chapter 1, Creating and Reviewing Opening Balances in QuickBooks Online, and Chapter 2, Useful Tips and Tricks Every QuickBooks User Should Know, provide tips on setting up and using QuickBooks regularly and are relevant to everybody. Chapter 8, Best Practices When Reviewing Financial Records, through to Chapter 11, Closing the Year-End, the Audit Log, and More, are also relevant to all as they are concerned with reviewing information in QuickBooks.

Chapter 3, QuickBooks Online for Manufacturing Business, to Chapter 7, Handling Foreign Currencies in QuickBooks Online, are aimed at niche business types or those that require specific features, such as using Projects or Multicurrency. For example, a marketing agency may find Projects useful, but Chapter 3, QuickBooks Online for Manufacturing Business, to Chapter 5, Handling Client Money, may not be of much interest.

Download the color images

We also provide a PDF file that has color images of the screenshots and diagrams used in this book. You can download it here: https://static.packt-cdn.com/downloads/9781801810371_ColorImages.pdf.

Conventions used

There are a number of text conventions used throughout this book.

Code in text: Indicates code words in text, database table names, folder names, filenames, file extensions, pathnames, dummy URLs, user input, and Twitter handles. Here is an example: The supplier's name used in this example was Contra adjustments.

Bold: Indicates a new term, an important word, or words that you see onscreen. For instance, words in menus or dialog boxes appear in bold. Here is an example: The Sales tab of Account and settings contains the option to use Progress Invoicing.

Tips or important notes

Appear like this.

Get in touch

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Section 1 – General Tips and Shortcuts

It's important that a QuickBooks Online company file is set up correctly, reflecting the financial position of an organization at the point that QuickBooks Online was put into use.

Once the initial Opening Balances are in place, review the general setup of the QuickBooks company, ensuring that it contains just the right amount of account categories. Too few, and it can be a struggle to code transactions; too many, and reporting can become a little messy.

As QuickBooks is used each day, there are a few little tips that can generally save time no matter what type of business you have. So, just for starters, we'll advise you of some of those.

This section comprises the following chapters:

Chapter 1, Creating and Reviewing Opening Balances in QuickBooks Online

Chapter 2, Useful Tips and Tricks Every QuickBooks User Should Know

Chapter 1: Creating and Reviewing Opening Balances in QuickBooks Online

As described in the preface of this book, QuickBooks Online is a cloud-hosted accounting software solution for small to medium-sized businesses. Accountants and bookkeepers can assist their clients by being able to access all the information they need at any time.

Opening balances reflect the financial position of a business at the point when QuickBooks Online is brought into use. Where a business has only just been set up and they choose to use QuickBooks from the very beginning, there will not be any opening balances to speak of except for cash or equipment introduced by the business owners.

Where a business has been operating for some time and has perhaps used spreadsheets or other accounting software in the past, there will be a financial history that results in values that will affect the balance sheet in different ways.

It is very important, especially when moving from one method of accounting to another, to ensure there is continuity. Without a correcting starting position, future profits could be over or understated, and the values filed in various tax returns could be incorrect.

In this chapter, we will cover the following topics:

Should opening balances be in place before using QuickBooks?

Opening balances – Customers

Opening balances – Suppliers

Opening balances – Bank

Opening balances – VAT/GST/Sales Tax

Other opening balances

Should opening balances be in place before using QuickBooks?

Before we explore opening balances, we need to know whether it is necessary for our opening balances to be in order when we make the switch from our old method of keeping books to QuickBooks.

The simple answer to this question is no. As soon as you have a subscription in place and set QuickBooks Online up with the required settings, you are likely to want to start creating customer invoices before you do much else.

However, it is best to get some opening balances in place as soon as possible. As customers start to pay for products and services supplied before QuickBooks is in use, it is important to have a record of any of those unpaid amounts in place. This will also be the case when it is time to pay suppliers for amounts owed against historic bills.

We can build our opening balances in stages – it is not necessary to do it all at once. In some instances, it is not possible to deal with all the opening balances because all the