It has been argued that if you can balance your checkbook, you can use QuickBooks. In theory, this sounds easy enough. However, QuickBooks if not set up and maintained properly, can waste more time and money than it saves for the small business owner. When set-up and maintained properly, some of the areas QuickBooks can save the small business owner time and money include but are not limited to:
- Accounts Payable Management – Pay vendors accurately and within specified terms. This allows the small business owner to better manage their cash flow.
- Accounts Receivable Management – Invoice customers accurately and monitor customer collections.
- Financial Reporting – A variety of special reports can be created to monitor the health of a business. Reports can be exported into Excel for additional analysis. Additionally, QuickBooks can be set up to ensure compliance with outside regulators. Most commonly this involves sales tax compliance with various state and local tax authorities. Compliance can also include Federally mandated reporting such as segmentation of program revenues and expenses for A-133 grant reporting. Additionally, tax reporting can be made easier as QuickBooks accounts can be coded to match the line items on a Federal tax return. Finally QuickBooks can be easily structured support contractors’ need for accurate cost accounting records.
- Cost – QuickBooks is fairly powerful considering the cost of the program when compared to other midsized accounting software. Additionally, for those that want integrated solutions QuickBooks Merchant Services allowing business owners to accept credit card payments and QuickBooks Payroll Solutions can be easily integrated into the client’s QuickBooks file. Despite the advantages of QuickBooks and its general ease of use, there are a few common issues that pose problems for business owners.
- Reconciliation of Bank & Other General Ledger Accounts – One of the key tasks that should be handled every month concerns the reconciliation of the bank accounts for the entity. Reconciling the bank accounts allows for the business owner to ensure that all transactions have been recorded each month. Reconciling the general ledger accounts will ensure that the transactions have been properly recorded.
- Loan Accounts – As part of the reconciliation process, one of the major areas that is often overlooked is the reconciliation of the loan and credit card accounts. Many business owners record the full loan payment to principle and fail to break out the payment between principal and interest. Additionally, credit card accounts are often not properly recorded. Usually the payment made to the credit card is posted to the accounting system. The problem is that the business owner fails to record the transactions on the credit card statement. Only the payment to the credit card gets recorded and not the actual items on the credit card. A business owner may only be making the minimum payments to the credit card of a few hundred dollars per month. The actual credit card could have a balance in tens of thousands of dollars.
- Sales Tax Payments – Many business owners do not properly set up their sales and use tax accounts. This can create problems in that the entity ends up over or under paying sales and use tax. The underpayment or late payment of sales and use tax causes the entity to have to waste valuable time and resources paying penalties.
- QuickBooks Solution Verses Other Solutions – Sometimes a business owner with a fairly simple business may choose QuickBooks when another more simple solutions is available. For example if an individual is running a small part-time side consulting business they may not have a very large volume of transactions. Perhaps the individual may only have 20 or 30 payments per year and maybe 5 to 10 invoices per year. Additionally, the individual is filing a Schedule C which does not require the individual to produce a balance sheet. Does it make sense to invest large sums of time entering data into QuickBooks when a spreadsheet format or a simple listing on ledger paper categorizing the revenues and expenses? These are questions we can help you navigate. If you choose to setup QuickBooks we can ensure that it is properly setup and maintained.