Top 10 QuickBooks Best Practices

Top 10 QuickBooks Best Practices
Top 10 QuickBooks Best Practices

QuickBooks is popular accounting software often used by small and medium sized businesses (SME). QuickBooks follows the FASB (Financial Accounting Standards Board) guidelines for keeping records. It supports both cash and accrual methods of accounting.

You can either purchase a software package or purchase it online. The main advantage is that QuickBooks Online provides live and instant access to files, while also allowing you to work both offline and online, helping you save data locally or remotely, whichever you prefer. It also enables fast transaction processing. The best part is that it helps reduce IT and compliance burden as upgrades and updates to latest tax tables are automatic and you need just IE 6 or FireFox or Chrome and a broadband connection to access QuickBooks.

Listed below are some of the best practices that you could follow to get the most out of QuickBooks. This would be relevant for all businesses, irrespective of whether it is a manufacturing firm or a services firm. When time is short or the accounting needs are complex, the services of a Finance and Accounting expert would be better advised as they have the necessary expertise to deal with your accounting needs using Quickbook.

Best QuickBooks Practices

  1. Ask My Accountant (AMA):

    This account has been set up by QuickBooks for any accounting items that you might not be sure of.

  • For example, if you need to make a payment and do not know what expense account it should go into, you could put it under AMA until you talk to an expert or an accountant. However, it can be used for other purposes too.
  • For instance, sometimes you might want to put large transactions such as asset purchases under AMA so that you could review the details of each transaction with your accountant or expert.  This is because different assets need to get depreciated in different ways depending on the item purchased and purpose for which it is purchased. Putting such transactions under AMA gives you time to review the transactions and take appropriate actions along with your accountant.
  • AMA is also useful when you do not want why a particular transaction happened in the first place and you need to clarify it with your staff or other internal stakeholders. In such cases, you could use subaccounts under AMA. Make this subaccount in the name of the staff or stakeholder who needs to answer questions regarding the transaction so that you do not need to remember who to ask.
  • For instance, suppose you have a business credit card with multiple card holders, you might not be able to explain all the transactions made using the card. You could make an expense account naming a cardholder, say Mr.X and then make that account a subaccount of AMA account.Now if Mr.X makes a credit card charge that you know nothing about, you can code it to Mr.X’s AMA account.  This way, you can review the charges with Mr.X or export all of the unknown/questionable charges to excel and then email it to him to get explanations on each of them.
  1. Reconciliation:

    By reconciling the books you would have all of the transactions in for a particular month and can confidently move on to the next month. Consider reconciling all accounts such as checking & savings accounts, loans, lines of credit, payroll liability accounts and credit cards.  Always start with smaller accounts first. You could consider starting with all credit cards and loan accounts before moving on to savings, payroll and the general checking account. It would benefit you if you start with accounts that have an impact on the general checking account. The main mistake that many QuickBooks users make is sorting inappropriately. If you have a large volume of transactions, sorting by amount can be save significant time.  This especially true in the case of deposits.  For example, when reconciling credit card merchant deposits, sorting by amount can make your QuickBooks reconciliation much more efficient. You could sort your checks and payments side of the reconciliation by check number. Reconciliation should be given due importance as it would help ensure the integrity of your financial reports and would ultimately affect your cash flows.

  2. Chart of Accounts:

    The Chart of Accounts (COA) is a list of asset, liability, equity, income, and expense accounts. It is to these accounts that you would attribute your daily transactions to. The COA is one of the most important lists you will use in QuickBooks as it helps you keep your financial information organized. When the COA is created with summary accounts along with other list types for detail, information would be captured in a timely manner, helping you make good financial and management decisions for the business. Hence, if you create a logical and organized COA, you would be able to generate extremely useful company-level account-based management reports.

  3. Name Types:

    QuickBooks has several name types such as employee, vendor and customer. Using the correct name types in QuickBooks would help you stay organized when the data is required for large accounting projects at the end of the year.  Mistakes in name types can be time consuming to correct. This is because name types can be changed only by deleting the name and recreating it under a new name type or making the name inactive and creating a new, slightly differentiated name. Organized name types can aid in quickly locating vendor payments and keeping your payroll function separate from that of your vendors.

  4. Sub Accounts:

    Sub accounts help keep your books organized and make sure that reports are easy to compile and read. You could set up sub-accounts under various account headings in order to track expenses, by their type, such as travel, and by the types of items, you may need to purchase while incurring this expense. This would include hotels, meals, car rental and petty cash.  Creating such accounts would ensure that all of these sub-accounts show up under the heading ‘travel’. This would make reports easier to read. You can add sub-accounts to any parent account in your COA.

  5. Backup QuickBooks:

    It is a good idea to always backup QuickBooks to an external source such as a drive, CD or USB port. In case of a system crash or other system issues, you can be assured that the data is safe with you in another place. Being proactive in backing up is crucial, in the sense that you need to save files whenever major changes are made in your accounts.   Remember even though QuickBooks gives you the option to either backup locally or online, it might be best to go for a drive or CD.

  6. Create Password:

    You would never want your company files to be compromised, as it would have valuable information.  You might be undertaking tasks such as printing checks from QuickBooks or paying bills from QuickBooks. If such transactions are accessed by ill-minded staff, you could become a victim of fraudulent practices. Therefore, it is imperative that you password protect your QuickBooks.  Ensure that you create a strong password that is at least eight characters long. Ideally, it should have a capital letter, a lower case letter and a number or symbol.  Additionally, you should change your password every 60-90 days to ensure security.

  7. Verify or Rebuild:

    In your QuickBooks, within the Utilities menu, you will find both Verify and Rebuild functions. The Verify function is used for detecting transaction damage and list damage in your company data file.  Verify can also detect damaged memorized reports. Rebuild Data function repairs transaction and list damage in your company file. Verify should be run at least once a quarter, if not more frequently.  If any errors are found, run the Rebuild tool to clean up the errors. If you leave any errors unchecked and unfixed, the only solution is send the data back to Intuit who created QuickBooks.

  8. 1099:

    1099 information is needed when you file your year-end taxes, for sending to contractors by the end of January and to mail to IRS by the end of February. Since all your accounting data such as who you have paid, when and how much, is already in QuickBooks, it takes only a few keystrokes to prepare 1099s. If a vendor in your QuickBooks is a possible 1099 contractor, you need to click the box “Vendor Eligible for 1099” in the additional info tab. This way, at year-end when you run your 1099 reports, your list of 1099s would be ready.

  9. Minimizing Journal Entries:

    Journal entries might be useful for making changes to a previous closed year or for entering daily sales reports and even huge entries can be organized only in the journal entries screen. However, with QuickBooks you can keep journal entries to the minimum as QuickBooks provides a number of options for avoiding most journal entries.

By using the above best practices you can stay organized, keep your accounts efficient, and generate accurate reports in a timely manner. An even better idea would be to collaborate with an efficient bookkeeping service provider to minimize all your accounting worries. Best of all, at year-end, you would have easy to read and error free reports which can help you take the right decisions for the next year.

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