QuickBooks is one of the most-popular pieces of accounting software in the world and for good reason. You can access QuickBooks Online from anywhere with Wi-Fi, and its affordable price point and ability to integrate with so many other technologies puts it at the top. The number of apps and add-on software products that exist today is mind boggling. It makes sense. Why re-invent the wheel? I’ve learned a lot about QuickBooks as my company builds onto the pre-existing platform.
Even without a formal accounting education, most people can use the basic functions of QuickBooks within a short period of time. Also, thanks to the popularity of this software, it is easy to find people who are familiar with it if you need help.
One of the basic things you can do within QuickBooks is record revenue. Being in business is all about revenue. If you want to keep your small business running, you need to see your revenues consistently outpacing your expenses. If there is no revenue to record, you can still use QuickBooks for recording expenses.
Create Income Accounts
To enter revenue into QuickBooks, you first have to have an account where that revenue can land. Depending on the size and design of your business, you may just need a single income account to track your revenues. Or you may need several. When you create these accounts, be sure to provide each with as much detail as possible. Clarify exactly where the money in the account is coming from. The purpose of your bookkeeping system is to make it easy to track all the financial transactions in your business. Including detail with all your entries and accounts is a critical step.
It’s good to be specific here, but creating too many income accounts just makes things messier and more complicated than they need to be. For example, one of our clients has always differentiated revenue between “Express” and “Interactive” sales. Each service has its own costs associated. It’s important to differentiate them in order to accurately compute the profitability of each product/service line. Gross profit margin should be one of the most important metrics each business owner reviews.
This is a step many small business owners who use QuickBooks overlook. If you are selling to other businesses, you should add an account in the software for each of your customers. This step is important so that you can record the revenue under the proper customer on each entry. Obviously, you aren’t going to record retail sales under the names of each customer. Use this feature if you sell business-to-business.
Add basic information, specify different payment terms for different customers (net 30, due upon receipt, etc.) and relevant other notes. Another one of our clients sends over details of any new business and we add it to their QuickBooks account. Show your clients you appreciate them — especially your more profitable ones.
Make the Entry
With income accounts created and your customer list in place, you will be ready to record income events as they occur. To do so, select the appropriate income account, the right customer, and then enter all the basic details of the transaction. Include the amount of the payment, the invoice number, date, and any other relevant information. Whether you receive only a few large payments each month, or you bring in a large volume of small payments, it is important to stay on top of the income recording process. You always want to have a clear picture of your financial status.
Timing of revenue and expenses is important in accrual accounting. Make sure to properly apply payments to the correct open invoices. Otherwise, you may overstate revenue and customers will become rightly upset if you follow up to collect on invoices already paid.
Keeping up with your accounts is a big, but critical, job. Use these tips to make sure you get it right the first time.
A version of this post originally appeared on botkeeper’s blog here.