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July 7, 2016

I heard QuickBooks Online was horrible…” and other common misunderstandings

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It wasn’t too long ago when the idea of moving your business online was scary. Is it secure? Is it safe? Will anyone buy from me? As we all now know, going to the cloud has become a no-brainer: you almost HAVE to have an online presence if you’d like to be successful! Websites have replaced business cards and Google has replaced the Yellow Pages. Most people utilize secure online banking and never set foot into a bank. So, why should your accounting software be any different?

Also not long ago, Intuit made its foray into the world of cloud accounting with what would become QuickBooks Online. To say it was clunky, unreliable and not very user-friendly was an understatement. Most early adopters took one look at QBO and decided their trusty QuickBooks desktop file was just fine. Well, folks, Intuit was paying attention. After many thousands of dollars and development hours, a newer, more aesthetically pleasing and reliable QuickBooks Online was introduced.

“This new QBO looks pretty, but will it work for my industry?” The answer was a solid MAYBE for most businesses initially. It worked well for service- and professional-based industries. It incorporated a newly-branded QuickBooks Payments (aka Intuit Payment Network) so customers could pay via invoices emailed directly to them (gasp! No more snail mail!?!?) and made it easy to “share” the books with other users and your bookkeepers/accountants without the need for thumb drives, remote applications, and backup files. However, if you had inventory, if you were in construction, manufacturing, or any other type of industry that needed features like job costing, progress invoicing, inventory management or point-of-sale support….well, you were out of luck. Or were you?

You WERE NOT!  Intuit opened up their API (ie: programming back door) to allow 3rd party developers to create applications that  connect with QBOand provide specialized features for all sorts of industries!  Time trackers, payroll apps, inventory management, job costing, project management, sales tax management.  You name it, there’s probably an app that will get the job done.

Once every four to six weeks, Intuit sends updates through to QuickBooks Online.  Sometimes they’re small bug fixes, but usually these updates are making QBO more and more usable as a standalone product for most industries.  A year ago I would never have dreamed of sending a general contracting client to QBO – now, an affordable app called Knowify integrates flawlessly to provide job costing, progress billing, time tracking and work in process tracking!  AND Intuit has job costing on their radar to be added very soon.  Non-profit organizations now have specialized reporting and a standard chart of accounts specific to their industries and in non-profit-eeze!  Best of all, a quick click on the Feedback button in QBO allows users to submit their ideas for improvements or features they’d like to see soon.

QuickBooks Online will never be the end-all be-all for businesses, especially in the new era of Cloud Computing, but QuickBooks desktop won’t be, either.  Now is a great time to migrate over to the cloud and see how much more efficient you can be while watching your business grow.  Let us walk you through QBO and help you migrate!

November 24, 2015

Money In, Money Out: Common Misconceptions (Part 2)

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In my last post, we covered money in: various ways money may come in to your business that could be something OTHER than income.  In this post, we’ll cover money out.

The vast majority of money that will be flowing OUT of your business will be in the form of expenses: paying bills, paying your employees or purchasing your raw materials to make your product.

There are a couple of other ways money comes out of your business that may NOT be an expense. Our first example would be in the event of a customer refund.

Let’s say your business sells widgets for $25.00 each. Mr. Smith buys a widget, gets it home and discovers he doesn’t actually need it, so he brings it back in for a refund. Instead of classifying the refund as an expense, it will ACTUALLy be categorized against the SAME INCOME account that the sale originally went to. This in effect takes the original income out of your sales. If you incorrectly classify a refund as an expense, you’re going to end up paying taxes on the non-existent income. Why? Because that revenue is still going to show up in your sales account! The only way to NOT pay taxes on that revenue is to completely remove it from the sales account.

We know if you have employees to pay, this will come out of the expense funnel. But what about if you need to pay yourself?

If you cut yourself a paycheck right along side your employees, then YOUR paycheck will also be an expense. However, if you are a sole proprietor, partner, or take any draws from your company in general, your paycheck will actually be a DRAW from Owner’s Equity (commonly called an owner draw or shareholder distribution). A draw is not subject to standard payroll taxes (social security, medical and federal withholding) and will only show up on your balance sheet, not your profit and loss statement. ***A word of caution – there will still be federal taxes owed. Contact your tax preparer or CPA to discuss the implications of taking distributions from your company and to obtain a recommendation about how much to set aside to pay for your self-employment taxes.***

Properly classifying transactions is SO important and can have very far-reaching effects if not done correctly.  If you are ever unsure where a transaction goes, do not hesitate to contact your accounting professional for assistance.  Investing in a good accountant’s services NOW is much less expensive than paying additional taxes and penalties to your federal and state governments later.  We are always ready and willing to help answer these questions.  Feel free to reach out!

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