I am constantly working with small business owners whose businesses are in financial trouble — and it’s not because they can’t enter transactions in QuickBooks. Without the following simple manual processes, even someone adept at QuickBooks can lose control of the business’s cash, payables, receivables, and profitability.
I was working with a frustrated client last week who just wanted help writing some expense reimbursement and profit distribution checks to himself and his partners. Our task started off simple enough, until the reimbursements he was tracking in Excel didn’t agree with those recorded in QuickBooks; and we began to open the “can of worms.”
Let’s talk about symptoms of the underlying problems.
- Partner reimbursements for prior projects, that the client assured me had been paid, were showing unpaid in QuickBooks. I ask him if he could produce a check stub and he couldn’t.
- QuickBooks showed a substantial invoice from another partner that the client assured me had been paid. We looked at a vendor balance detail report and, in fact, the invoice had been paid. The problem was that it had been entered into QuickBooks twice, as had several other invoices.
- The client needed to pay project reimbursements to partners only after their invoice for these expenses was paid but hadn’t considered how they would track the reimbursement bills by project in QuickBooks.
In summary, we had bills entered twice; bill payment checks recorded in QuickBooks believed to have never been cut; and unpaid bills in QuickBooks believed to have been paid. With the double entry of billable expenses, there was a high potential to overbill their client and there was some uncertainty as to what the bank balance really was. These were really smart people who were sitting on a disaster ready to happen.
For those of us who can’t afford to hire a professional accountant or bookkeeper, there are some simple things we can do to prevent all of these problems from happening in our business.
Keeping track of Vendor Bills
- When you receive bills put them in a separate inbox or folder for later entry into QuickBooks
- When you have entered bills put them in a separate “Unpaid Bills” folder
- When you are ready to pay a bill, first get the hard copy from the “Unpaid Bills” folder
- When you pay a bill stamp it with a “Paid” stamp and write in the payment date and check number
- File paid bills in a separate “Paid Bills” folder
If you follow these procedures, you won’t enter bills twice, especially since QuickBooks warns you about duplicate invoice numbers. If you can’t find a hard copy of a bill when you are ready to pay, you now have a warning that something is wrong and can investigate before cutting what may be a duplicate check.
Keeping Control of Checks
Keep unused checks in a single file, drawer, or box, in sequential order by check number so you will know if a check goes missing. Consider storing checks under lock and key.
Use three part checks, which contain the check, a check detail for the vendor, and an office copy of the check detail to be filed in check number sequence.
For any given check number, you will always have either a check stub with the payee and check detail on file or a blank check. In this manner, the entry of a check in QuickBooks is questionable, you can verify that it has or has not been cut.
Keeping Control of Deposits
While I recommend that you use pre-printed QuickBooks deposit slips to save time and let QuickBooks do the math, at least print a deposit summary.
When you return from the bank, staple the deposit receipt to the deposit summary and file it in a separate folder of deposits for that bank account.
You now have on file, a hard copy of the detail of your deposit, who paid you, the check number, and the amount. You also have, attached to it, proof from the bank that you made the deposit and to what account the deposit was made. This is especially important when you have multiple bank accounts. We are all human and, occasionally we might use the wrong pre-printed deposit slip. When we don’t find the deposit on our bank reconciliation, we may have a heart attack but we can prove we made a deposit and double check the account on the deposit receipt.
Considering How You Need to Track Information
As I mentioned, the client needed to pay project reimbursements to partners only after their invoice for these expenses was paid but hadn’t considered how they would track the reimbursement bills by project in QuickBooks. Consequently, there was a lot of frustration and wasted time figuring out why a manual record of partner bills for expense reimbursement didn’t match the unpaid bills in QuickBooks.
It’s important to think about, in advance, what QuickBooks reports you can use to track the information you need so it is at your fingertips, whenever you need it, in the best format to suit your needs. If it’s not there, get advice from an QuidkBooks expert. It will save you time, frustation, and prevent mistakes you might really regret. In this case, with an export of QuickBooks data to Excel and a little VBA programming we found a way to create exactly the report they needed.
Robert Guild is certified QuickBooks ProAdvisor in Austin, TX who conducts CPE courses for CPAs and individual training and group classes to QuickBooks users. His company at www.QBCoach.biz, maintains a sixteen-station QuickBooks lab, providing hands-on training. You can contact him directly at rguild@QBCoach.biz or follow him on twitter at QBPro