Anatomy of Expert QuickBooks Online Setup

It is not uncommon for small business owners to connect a personal checking or credit card accounts to QuickBooks Online. This is quite alright to do folks, just don’t co-mingle personal and business expenses in the same account. If you do, let your accountant know right away so that can correctly categorize the personal expenses charged to your business account in accordance with the IRS tax rules.

Recording Owner’s Personal Contributions and Personal Expenses

Two frequent questions that smart business owners frequently ask their accountants are:

1. How do I enter business expenses that I paid for with personal funds?
2. How do I enter personal expenses that I paid for with business funds?

The answer is simple. You create two equity accounts, a master account named Owner’s Investment and a sub-account to this master account named Owner’s Pay & Personal Expenses. By doing this, you keep a running Balance Sheet total between the two accounts, and you have a separate register for each account that you can reconcile and run reports on. You can create custom reports for each of these accounts that give you the best insights on how much money you have personally put-in and taken-out of your business profits over time.

Routine journal entries are made to record Owners Pay & Personal Expenses, as well as Owner Draw transactions in QuickBooks Online.

PART 2 – CREATE CUSTOM MANAGEMENT FINANCIAL REPORTS

Small business owners often use cash accounting methods and run a variety of financial reports in QuickBooks Online that are tailored to their individual business needs. In recent years, the amount of money a business can make before going to an accrual method of accounting was significantly increased. Many small businesses use the cash accounting method. This means that they record income when it is received, and they record expenses when they are paid. Using the cash accounting method can help business owners with cash flow management.

Running Your Financial Reports on a Cash and an Accrual Basis

You have the option to run your financial reports in QuickBooks Online on either an accrual basis or a cash basis. When you run income reports on an accrual basis you can review what you have earned but not yet received, and when you run balance sheet reports on an accrual basis you can review the outstanding liabilities that have been recorded but not yet paid. To understand your accounting story, you can create a custom Management Financial Report suite in QuickBooks Online that includes both cash and accrual financial reports. Each type of report has its value in terms of your Budgeted versus your Actual Business Revenues and Expenses. With the cash accounting method, you pay State B&O Sales and Use Taxes due for products and services sold during the reporting period only if payment has been received. With the accrual accounting method, you pay the State Taxes due for products and services sold during the reporting period regardless of whether payment has been received. This is strong reason for businesses to use the cash method over the accrual method of accounting.

Share Business Growth Trend Insights with Your Business Partners and Investors

With a cash accounting method only paid expenses for the period show up on your Profit and Loss Report. With an accrual accounting method all expenses for the period show up on your Profit and Loss Report, regardless of whether they have been paid. One exception to note is how business credit cards transactions are recorded. Your credit card charges flow into the connected bank feed and get recorded as cash expenses, even though the balance of the connected credit card account may still be outstanding. You will need to examine multiple aspects of your company financials to make good business decisions. A custom financial report suite can tell the accounting story of your business. You can share the good news with banks, investors, partners, shareholders and potential lenders. We love that QuickBooks Online enables you to run both cash and accrual reports with the click of a button!

PART 3 – ADD YOUR COMPANY LOGO AND CUSTOMIZE YOUR FORMS

Always brand your Business Financial Reports and Purchase and Sales Forms in QuickBooks Online. Carefully review the Company Settings of your new QuickBooks Online account. Once you add your Company Logo and Company Name for your business in your QuickBooks Online account, it is easy to include this branding on your Company Financial Reports. Within the Company Settings under Account and Settings you establish your business contact information that flows through to your Purchase and Sales Forms such as your customer estimates, vendor purchase orders, customer sales receipts, invoices and customer statements.

Customize the Branding of Your Business & Add a Logo to Purchase & Sales Forms

It is important to Brand your Customer Facing Forms with Your Company Logo. The same is true for vendor forms such as purchase orders, if you choose to use them. Customize your Business Purchase and Sales Forms before sending them to your customers and vendors to make a good first impression. You can customize your estimates, invoices, statements and sales receipts in QuickBooks Online under Sales in Account and Settings by selecting the green button Customize Look and Feel. If you create custom fields or transaction numbers, or you want to include service dates, shipping charges, discounts, deposits or tips within your sales forms these options need to be turned-on within Sales Form Content in your Sales Settings. In order to choose what products or services to add to your sales forms from a list of products and services that you have created for your business, you turn-on the option in Products and Services within your Sales Settings by selecting Show Product/Service Column on Sales Forms. This is where you choose to Show SKU Numbers, Setup Price Rules for Discounts and Promotions that you will offer for specific products or services on specific dates. You can also choose to Show a Quantity and Price on Sales Forms, and Track Available Inventory Quantities and Prices for each product you sell to customers from your On-Hand Inventory. It is important to carefully consider all of the available options and fully utilize the customization features in QuickBooks Online.

Customize the Way Your Sales Forms will Look and Feel to Your Customers

Start creating your sales forms in QuickBooks Online with a template and add your logo, color scheme, font choice, content, customer email and payment preferences. These selections can be applied to estimates, sales receipts and invoices. Each of the 3 content sections are easily customized.

Create a Default Message to Your Customers, Reminders and Online Delivery Method

Your preferred customer invoice payment terms and delivery method should be established from the start of your business within your Sales settings noted above. Within your Sales Settings you can select a default message to your customers, a default reminder and a default online delivery method for your custom sales forms, and you can automatically send yourself a copy. Within your Online Delivery email options, you can choose to show a short invoice summary, or the full invoice details. You can also choose to attach a PDF copy of the invoice to the customer email. QuickBooks Online also allows you to list each transaction as a single line, or to include all detail lines on a customer account statement. Additionally, you can choose to show an aging table at the bottom of your customer account statement. This is great when you have customers that make multiple payments on a large invoice balance.

PART 4 – OPTIONAL ADDITION OF CLASS AND LOCATION TRACKING

Tracking locations and classes can make your business reports more meaningful. When establishing your Company Settings in QuickBooks Online, consider whether you want to track categories such as locations or classes. You will need to turn-on class and location tracking in the Advanced Settings of Account and Settings during setup. Later you will create your list of classes and/or locations in QuickBooks Online to assign to various transactions. You can create sub-classes and sub-locations as well. And you will be able to run custom reports in QuickBooks Online by class or location.

You Can Create Multiple Levels of Sub-Classes and Sub-Locations

The Quickbooks Online Location Tracking feature allows you to add fields onto Purchase and Sales Forms that will assign transactions to various locations, regions, countries, divisions, departments, stores, territories properties and business units. You can include specific location information for each Purchase and Sale Transaction. The QuickBooks Online Class Tracking feature is used to add fields onto Purchase and Sales Forms that will assign transactions to departments, business units, locations, product or service types, product or service brands, product or service lines and more. Using classes in QuickBooks Online offer a deeper reporting function, as they can be assigned to each transaction line in a document, or to an entire transaction. When you utilize class and location tracking there are specific Profit and Loss and Custom Sales Reports that you can run for meaningful business insights.

PART 5 – OPTIONAL SETUP OF CUSTOM WORK NOTIFICATIONS

Customize your QuickBooks Online Work Notification Settings to stay up to date on projects and tasks. When establishing your Work Notifications in QuickBooks Online it is important to consider what you need to know as a business owner. You can keep track of what you are working on in QuickBooks Online by setting up email notifications of assignments, due dates, additions and deletions.

Each Individual QuickBooks Online User Can Setup Their Notification Settings

If you have an accountant or bookkeeper working in your QuickBooks Online account, this may be a useful tool for them to stay on task. Your accountant can be notified when your bookkeeper makes additions or deletions in your QuickBooks Online account, which is an excellent proactive audit tool. You can always view the Audit Log Report for a detailed account of every transaction done in your QuickBooks Online account. You will receive email notifications to the email address you specify in your setup. This is an underutilized feature of QuickBooks Online that can be very useful to business owners.

PART 6 – PROGRESS INVOICING & BILLABLE EXPENSE TRACKING

Multiple progress invoices can be created from a single customer estimate. Within your Sales Settings you can turn-on Progress Invoicing. This will enable you to create Multiple Progress Invoices From a Single Estimate. Keep in mind that you can only invoice an estimate that has a status of Accepted or Pending. It is important to note that the calculation for the remaining estimate line amounts for partially invoiced estimates do not include taxes, discounts or shipping charges. Once the status has been updated you can choose to:

1. Invoice the total of all estimate lines
2. Invoice a chosen percentage of the estimate lines
3. Invoice a custom percentage or amount for each estimate line under the Due column

Billable Expenses Can Be Marked as Billable & Taxable to Customers With a Markup %

When customizing the settings for your Company Expenses in your QuickBooks Online account, you have the option to turn-on the feature Track Expenses and Items by Customer. You also have options to Make Expenses and Items Billable to Clients, to Charge Sales Tax on Billable Expenses and Items, and to add a Default Markup Percentage Rate. You can choose to track billable expenses as income in a single account or in multiple accounts. You can also establish default bill payment terms. After you have turned-on the billable expense feature it will be easy for you to add billable expenses to your customer invoices with their related sales tax and markup percentage where applicable.

The Billable Expense Feature Speeds Up the Process of Creating Customer Invoices

This Billable Expense Feature is a great time saver for businesses that create time and material invoices for their customers. It is the key to accurately and efficiently creating Construction Progress Invoices for customers with projects that are billed over time on a percentage of completion. Be sure to double check that your Profit and Loss Report includes both Billable Expense Income and the Cost of Goods Sold Expenses. If you have not setup your income and expense accounts correctly, your reports may include the income and not the expense, or the expenses and not the income. Note that if your company issues purchase orders to vendors, you will need to turn-on this feature in the company settings as well.

PART 7 – OPTIONAL QUICKBOOKS PAYMENTS MERCHANT ACCOUNT

QuickBooks Payments Merchant Services allows your customers to pay their invoices online. Once you’ve setup QuickBooks Payments account you can customize your customer invoices to include a Pay Now Button that will provide your customers with the option to immediately pay their invoice upon receipt. QuickBooks Payments offers free bank transfers and charges a fee to process each credit card payment received. They subscription add-on will automatically create an invoice payment and match the invoice payment to the deposit when it comes into your bank feed. The only known caveat is the fact that you cannot turn-off the option to pay with PayPal. There are two payment options, one to pay-as-you-go, and another to pay monthly and save. Keep in mind that it typically takes 2-3 business days for deposits of credit card payments, and an average of 5 business days for bank transfers to be deposited into your account. Once deposited, it can take an additional 2-3 business days to show up in your Quickbooks Online bank feed to categorize.

PART 8 – REVIEW AND CUSTOMIZE YOUR COMPANY SETTINGS

Not every small business uses the month of “January” as their “First month of the fiscal year”. It is important to think through this decision carefully, as it may also be the first month of your “Income tax year”. There are several important selections for you to make within the Advanced Company Settings. You can choose a date to Close the books that will prevent any changes to your accounting transactions before that close date. You can enable account numbers within your chart of accounts. You can choose your default sales discount, tips and billable expense income accounts. And you can turn-on automation such as the pre-filling of forms with previously entered content. There is also an option to automatically apply credits, automatically invoice unbilled activity, and automatically apply bill payments. Additionally, you can turn-on Projects in the Plus and Advanced versions of QuickBooks Online. You can also turn-on Time Tracking and make single-time activity billable to your customers. Your currency, date and number formats are also established within your Advanced Company Settings.

PART 9 – ADD OR EDIT USER ACCESS TO QUICKBOOKS ONLINE

Make certain to give the correct access to planned users of your QuickBooks Online account. There are six main types of User Access Rights that can be established in QuickBooks Online, and there can only be one Master Admin, which is typically the business owner. Note that you can also only have one Accountant User. This user does not count towards your current user limits. An Accountant User is automatically given Company Admin Rights. Before your Accountant can begin managing your QuickBooks Online books, you will need to send them an Accountant Invitation.

1. Within your QuickBook Online account go to the My Accountant tab
2. Enter the email address for your Accountant

Understand the 6 User Types You can Setup in QuickBooks Online

1) Master admin user access where they can see and do everything. This includes adding users, sending money, and changing billing info. Billing reminders are also sent to this user.

2) Company admin user access where they can see and do everything. This includes sending money, changing passwords, and adding users.

3) Standard user where you can set how much access you want this user to have, without giving them admin rights. You can let them see and do everything with Customers and Sales, or Vendors and Expenses (or both). You an also let them enter timesheets, add users, update company info, or manage subscriptions.

4) Custom user access where you can assign specific access to areas of your QuickBooks Online account, letting you be in control of what they see and do.

5) Reports only user access where they can see all reports, except the Audit log and those that show payroll or contact info. They can also create custom reports and add report groups. But they can’t view the actual transactions.

6) Time tracking only user access where you send an employee or vendor an invitation to enter their timesheets. They can only see their timesheets and time reports.

Be Careful About Giving Master Admin Rights to Certain Users of QuickBooks Online

Make sure that Master Admin rights are given to a trusted individual that understands how to transfer them back to you if needed. If you have granted Master Admin rights to an outside Accountant to manage your QuickBooks Online accounting needs, they should immediately transfer these rights back to you if their services are terminated for any reason. I’ve known business owners who regretted giving such rights to in-house staff that left their employment and did not transfer the rights back. Never let an employee setup your QuickBooks Online account under their own personal email address. For more information on how to change your master admin user see this article: https://quickbooks.intuit.com/learn-support/en-us/invite-users/change-your-quickbooks-online-master-admin-user/00/185969

You Can Delete Users and Change What They Can See and Do in QuickBooks Online

The roles and responsibilities of your staff can change, and employee turnover is an everyday event that small business owners need to address. For this reason, it is important to understand how to delete users and change their access in your QuickBooks Online account. You have control over what users can see and do in QuickBooks Online. And the new QuickBooks Online Advanced subscription offers even more customization options for the setup of users.