Finding the Right Solution

I wanted to pass on some thoughts regarding a recent engagement where the client seriously considered moving from QuickBooks desktop to QuickBooks Online.  I have reasons why I like both, so an example that landed on one side or the other seemed like it would help others.

The client is a not-for-profit and as a result often has to produce reports over time about their financial activities.  They also have staff limitations.  In a way that makes them really well suited to the Online, since it has a straight forward user interface and it produces report graphics that are really sharp.

However, the way you transfer data between the two platforms has limitations.  For an entity that needs to historically mine data, this can be an issue.  In addition, there were some capabilities for printing reports and checks that didn’t transfer.  There were ways to manage around that, but then again there’s still QuickBooks desktop, which is what the client ultimately chose.

My lesson learned is that it’s important to drill down on what a client really needs.  At a high level this organization was a perfect candidate for Online, but really it wasn’t the best for them.  Luckily I had the opportunity to work with them in a way that clarified the issues.  I would urge anyone else considering a switch to do a serious due diligence on their needs.  Both systems work, but you want to make sure they do so in a way that truly matches your expectations.

When You Need to Know...

In line with the "having to make tough choices" theme of recent events, I asked myself what key reports in QuickBooks tell you the main things one needs to know about the business.  While financial statements have their uses, sometimes what you need to know goes one level deeper.  Here are my nominees for reports that can spur direct action or will serve as a reminder that you can afford to treat yourself to some time off.

1.  Receivables Aging.  (File : Reports : A/R Aging Summary)

-           Don’t kid yourself if it turns out you’re working for free.   If this report is going in the wrong direction, take the time now to set up a collections action plan.  Build it into your billing rate for slow payers.

o   Bonus tip:  Bill at the time of sale or service, rather than a set interval.  It sets a tone and starts the payment cycle ASAP.

2.  Sales by Customer (File : Reports : Sales by Customer Summary)

-           If anything strikes you as unexpected, check it out.   Your intuition about your business is a valuable resource.  This is a quick way to make sure your vision of where you stand with your customers matches theirs.  The sooner you find out the differences the sooner they get fixed.

1.  Company Snapshot.  Set it for this month and again see if anything catches your eye as not what you expected. 

-           If this one takes too much time, consider how to break it into pieces that limit you to 15 minutes a day.  You should be conversant with the numbers around how your business is operating. 

Make sure you do other monthly tasks, especially bank reconciliation and inventory.  Even if you don’t have a problem with fraud or error, tax season will be even worse than necessary if your books are not an accurate reflection of your business.

Payroll Choices

Having a chat this week with someone who wanted to move their payroll to QuickBooks reminded me of the challenge business owners face when selecting how to process their payroll. Regardless of what processing option you select, it’s important to remember that someone who works for you (either as an employee or in a consultative capacity) must understand the payroll in depth.  That means being clear on the tax demands of federal, state and local governments.  It also means understanding how to deal with issues like garnishment for child support payments and other delinquencies.  In sum, you need someone who can get at the right information when it's needed.

The word “organized” can’t be used enough in a sentence that also includes the word “payroll”.  You have to know the correct information about every employee and you have to get it right every time.  QuickBooks has tools to help you get started and walk you through the process.  The idea is to make sure you’ve got the information you need before you sit down at the computer.

Just a look at that preliminary list is enough to send many people straight to a payroll service provider. For many companies that is the best option, but it’s worth noting that outsourcing payroll is not like selecting a vendor for garbage pick-up.  Some weeks payroll will run as easily as getting the trash to the dumpster.  Other days there will be issues, and they have to be dealt with real time.  Payroll is the most important thing you do for your employees, and it has to be done right every time.  On top of that, the penalties for not complying with payroll taxes are swift, severe and actively enforced.   Like every other challenge in business, it can be managed, but it’s important not to underestimate what it will take to “make payroll”.  It’s not just having the money in the bank.

Keeping Tabs on Cash

Since cash flow is such an important topic, and QuickBooks can be a tool to help I thought I’d post on it twice.  A key place to start is keeping yourself up to date on both your Receivables and your Bank Statements.  Make sure reconciliations are done every month and make sure you know where you stand.  Again, this type of activity carries a double bonus.  First, it’s part of your cash flow management program.  Secondly it sends the message to people you work with that you care about where the money goes and you are paying attention.  Both errors and the potential for fraud decline as a result.

Other Quickbooks tips I picked up from a blogger in Canada courtesy of my Small Business Trends RSS feed.

1.     Use the customer letters in QuickBooks to correspond about collections.  You do this in the customer center and start with the menu with the Microsoft Word icon. (QuickBooks does these letters by linking with Word).  There’s a wizard that walks you through the process, including the options to select the tone of your letter.

QuickBooks also has letters for credit applications and dealing with NSF checks.

2.  Use the customize invoices menu to set up reminders for invoices to print, and also to have overdue invoices printed to be sent again.

3. Set up invoices to summarize anything that is still outstanding

4. Set up finance charges or service charges for items that require multiple invoices over time.

 Creating these special forms may take a little time, but the odds that this time will translate directly into cash are better than many other tasks.  One other item to consider is once again, it sends a message that your business may be small, but it is serious about getting things done.  (As someone who has to stand up straight to hit 5 feet, this is a message I’m familiar with having to deliver!  LOL)

Inventory Adjustment Tips

While it is possible that your completed inventory count will match the amounts in Quickbooks, it is highly unlikely.  Most of the time you’ll find actual physical inventory is lower than what you’ve recorded.  The technical term for this is “shrinkage”.  It can have many legitimate causes, but it can also indicate theft.  Almost as important as doing the count is determining the reasons for the differences between recorded amounts and actual inventories. 

Of course, once the count is done, you need to reconcile the difference.   You do that using the Adjust Quantity / Value on Hand window.  You get to this window by choosing Vendors | Inventory Activities | Adjust Quantity/Value on Hand.



Once you’ve entered the date, you head for the Adjustment Account field.  Make sure you or your accountant has set up an Inventory adjustment account in your chart of accounts.  If this hasn’t been done, you can always call a Quickbooks Proadvisor for assistance.

Use either the New Qty column or the Qty Difference column to enter the count (depending on how you filled out the worksheet and calculated it). Whichever column you use, QuickBooks fills in the other column automatically.

These changes will post to a number of different accounts, which require more explanation than I’m sure you’d want to read here.  Again, this is where a ProAdvisor comes in handy for a quick explanation tailored to your specific situation. While you are making the adjustments is a perfect time to think about why there are differences in the count and what you can do to reduce them in the future. 

One non-Quickbooks tip I would offer here, is taking time to develop a litle check list of what you're doing to correct inventory, causes of the differences and next step "to-do's". The "slow down" of following your list helps you catch errors, ensures you stick to a systematic approach and is likely to trigger ideas on improving your inventory management. Needless to say your inventory value being correct and well documented also puts you in a much better position if you get audited.

Last but not least, make sure to pat yourself on the back for taking good care of your business as the final step in this process. It's not fun, but it's really worth the trouble.