Accuracy Type

Accuracy Tips

Do not pay your payroll liabilities from the “Write Checks” window. If you use this window, QuickBooks will warn you to use the “Pay Liabilities” window, but will let you write the check. However when you print the 941, it will not reflect any payments that you made using the “Write Checks” window.

Use the “Pay Liabilities” window to create checks for all tax liabilities. Using this window will ensure that the payments are reflected accurately on the 941 report and that your liability accounts are properly reduced.

If you have customers who are also vendors you may decide to trade some or all of your services / products in exchange for payment.

To record such a barter transaction, invoice the customer for the goods provided or services performed as you normally would. To record the “payment” use the “Receive Payment” function to apply the barter amount against the invoice the same as you would when receiving cash or a check as follows:

Go to Customers: Receive Payment. Payment Amount will be the barter amount (the amount of the invoice you received from your vendor). Pmt. Method will be Barter. Check the radio button for “Group with other undeposited funds”. Save this transaction.

Go to Banking: Make Deposits. The payment you just received will come up in the Payments to Deposit screen. If there are also other payments to deposit, make sure you select only the payment(s) being recorded for the barter exchange. When you hit OK the Make Deposits screen will come up with the barter deposit(s) showing. Before recording the deposit make a negative deposit entry on the next blank line below the barter deposit for the amount of the barter as follows:

Deposit To is your normal operating checking account. Date is the date you would have normally paid your vendors invoice. Memo should be changed from Deposit to Barter.

If you have entered the vendors invoice as a bill for payment, Received From is the vendor name and From Account is Accounts Payable.

If you have not entered the vendors invoice as a bill for payment, leave Received From blank. In the From Account column select the expense account you would charge the vendors invoice to, the same as if you were entering it for payment. In the Memo column note the vendors invoice number.

In the Amount column enter the vendors invoice amount with a negative sign first. This negative amount should exactly offset the deposit amount above, resulting in a “Zero” deposit transaction. Save the “deposit” and the transaction is complete.

Day-to-day transactions like receiving payments from customers or paying vendors occur so frequently that most QuickBooks users do them automatically. However, from time to time you may encounter an infrequent transaction that will stop you in your tracks. In this article we’ll discuss several common tricky transactions and offer advice on how to handle them.

Security Deposits

Security deposits, such as for a rental space or to a utility company, require special tracking so that you can be sure to get the money back later. It’s best to maintain a separate account for each security deposit so that you can track each individually. If you have numerous security deposits, consider creating individual subaccounts for each deposit:

  1. Choose Lists, and then Chart of Accounts (or press Ctrl-A).
  2. Click the Account button, and then choose New (or press Ctrl-N).
  3. Choose Other Account Type, Other Current Asset, and then click Continue.
  4. Assign an Account Name such as Contributions from Owner, (and account number if applicable). If necessary, click Subaccount Of, and specify the Deposits account. Click Save and Close to save the new account.

An easy way to manage security deposits is to post them to a new Other Current Asset account.

Refunds from utility companies, insurance companies, or other sources

Choose Banking, and then Make Deposits. Specify the vendor, and then choose the account. In the case of deposit refunds, you should have an asset account that you’ll apply the money against. For other types of refunds, use the expense account from which you originally paid the money.

Apply utility deposit refunds back to the deposit account on your balance sheet.

Owner Contributions

This is a situation where an owner of the company invests money into the firm. The owner does so in hopes of making a return on their investment, but does not have a specific timetable in mind for repayment of the loan. If you don’t already have a Contributions from Owner account, follow these steps described previously for creating a new account, but choose Equity and name the account Contributions from Owner.

Distributions to Owner

Distributions allow an owner to take profits out of the company on a non-salary basis. Distributions can be paid through payroll or on a separate check. Your chart of accounts should already include a Distributions to Owner account, but if it doesn’t, you can establish this new Equity account, which you can then use in either of these types of transactions.

  1. Payroll: Distributions require special treatment in payroll because they’re not subject to income or payroll taxes in QuickBooks. The owner settles the income tax due when filing their annual return. Before you can pay distributions through payroll you must establish a payroll item. To do so, follow these steps:
  2. Choose Employees, Manage Payroll Items, and then New Payroll Item.
  3. Choose Custom Setup, and then click Next.
  4. Choose Addition, and then click Next.
  5. Enter the word Distribution and then click Next.
  6. Choose the Distributions to Owner account from your chart of accounts, and then click Next.
  7. Choose None for the Tax Tracking type, and then click Next.
  8. Leave all of the taxes unselected, and then click Next.
  9. Choose Calculate This Item Based on Quantity and then click Next when the Calculate Based on Quantity screen appears.
  10. Accept the default choice of Gross Pay and then click Next.
  11. Leave the Default Rate and Limit fields at zero and then click Finish.

Next, select the employee in the Employee Center, and then choose Edit Employee. Choose Payroll and Compensation Info from the Change Tabs list, and then add Distributions to the Additions, Deductions, and Company Contributions list. You can fill in the distribution amount now if you know the ongoing amount, or you can fill it in on the fly during the payroll process. Simply display the Paycheck Detail during the payroll process to access this field and enter the distribution amount.

Add Distributions to the Additions, Deductions, and Company Contributions section.

Separate check: A much simpler approach is to write a separate check to the owner. To do so, choose Banking, and then Write Checks. Choose the Distributions to Owner account and fill in the amount.

Loans to the Company

From time to time the owner may need to make a loan to the company. If the owner expects this money to be repaid, establish a Loan account on the chart of accounts and record the deposit of the loan to this new account.

Company Loans Money to Others

Sometimes your company may make a salary advance to an employee, or the firm may loan money to an affiliate. In such cases it’s important to always establish a separate Current Asset account for such transactions so that you can easily track the outstanding balance. Such accounts can be a subaccount of a general Loans Receivable account, as shown in Figure 4. As shown in Figure 5, you’ll code the check to that subaccount.

Make sure to create individual subaccounts for loans to employees or other parties.

Be sure to use the proper subaccount when issuing an employee loan.

Loan Payments

Many users struggle with loan payments because there are usually three different scenarios:

  • Interest only payment: In this case there’s only one account to charge, which will be Interest Expense.
  • Interest and principal payment: If you’re amortizing the loan over time – your payments include principal and interest – then you’ll have to charge two accounts on the transaction, both the Interest Expense and the Loan account itself. These amounts will be different each month. Your lender can provide an amortization table, or you can search for one for free on the Internet. Simply use the search term “amortization table” to uncover a variety of free resources, or use this search term to locate an Excel-based solution: “amortization table”
  • Extra principal payment: Extra principal payments being submitted on a separate check should be applied directly to the Loan account.

Interest-only loan payments post directly to the Interest Expense account.

Make sure to break out principal and interest when a loan payment reduces the outstanding balance.

Expert tip: You can use the QuickBooks Account Reconciliation feature to reconcile your loan balance with the periodic statement that you receive from your lender. This ensures that your financial statements are correct, and helps you confirm that the lender is applying your principal payments correctly.

Petty Cash

Many offices keep a small amount of cash on hand to simply accounting for activities like running to the post office to buy stamps or make small purchases for the office. To establish a petty cash fund, you first write a check to Cash, which you then exchange for money at your bank. Let’s say that you establish a $100 petty cash account, and need to replenish it to cover three purchases:

  • Lunch for the office: $24.72
  • Postage stamps: $44.00
  • Office supplies: $23.18

In QuickBooks, you would choose Banking, Write Checks, and then write another check to Cash, and code it to the corresponding expense accounts for the three purchases.

Expert tip: Petty cash is easily subjected to abuse, so be sure to require receipts for all petty cash transactions.

In the past QuickBooks had an optional Audit Trail feature that you could choose whether or not to enable. However, recent versions of the program automatically enable Audit Trail, so every change made to a transaction in QuickBooks is logged automatically.

Although this may seem Orwellian, you may find that you sometimes need to carry out forensic research on a particular QuickBooks transaction. In layman’s terms, this means looking into who changed or deleted a transaction, determining what date the transaction changed, and how the transaction looked before it changed.

In this article we’ll discuss five different audit reports that QuickBooks provides, as well as show you some easier ways to mine the data within these reports.

Expert tip: It’s best to assign a separate user ID to each QuickBooks user. To do so, choose Company, Set up Users and Passwords, and then follow the onscreen prompts. Once you set it up, you’ll be able to have accountability for every transaction entered or modified in QuickBooks.

Audit Trail Report

As previously discussed, the Audit Trail is automatically enabled in QuickBooks, and it cannot be disabled. To view the audit trail, choose Reports, Accountant & Taxes, and then Audit Trail. As shown in Figure 1, the audit trail report will appear onscreen.

By default, the Audit Trail shows all activity for today.

Although the Audit Trail report defaults to today’s date, you can easily change the date range at the top of the screen. As you might expect, this report may contain a lot of data, so you may need to trim down the data shown:

  • Click the Modify Report button.
  • Click on the Filters tab.
  • Choose Transaction Type from the Filter List, and then choose Multiple Transaction Types from the Transaction Type list. As shown in Figure 2, you can then select one or more transaction types to display.
  • Click OK twice to display the report.

You can limit the Audit Report to certain transaction types.

Even with changing the filters and date range, you may still have a tough time navigating the report. Unfortunately QuickBooks does not allow you to search the report onscreen, however, you can easily export the report to Excel or another program so that you can carry out your research:

  • To export to Excel: Click the Export button at the top of the Audit Trail report screen, choose A New Excel Workbook, and then click Export.
  • To export to another program: The Export button also allows you to export the report to a CSV file, which means a comma-separated value format. This type of report is best viewed in a spreadsheet such as Excel.
  • If you don’t have Excel available, choose File, Save As PDF, and then save the report to a PDF file. You should then be able to copy and paste the resulting report into the program of your choice or use the search feature within your PDF viewer – the free Adobe Acrobat Reader is a common choice.

If you choose to export the report to Excel, you’ll have some advanced filtering capabilities at your disposal:

  • Excel 2007: Click on cell A1, and then press Shift-End-Home. This will select the entire workbook. You can then choose Sort & Filter from the Filtering section of the Home ribbon, and then choose Filter. You can then click the arrow in cell J1 and choose to which transactions to display:
    • Latest means the most recent version of the transaction.
    • Prior means the transaction has been edited. The Audit Trail shows both the latest and previous versions of the transaction.
    • Deleted means that the transaction has been deleted and must be manually reentered in QuickBooks if necessary.
    • Earlier versions of Excel: Click on cell A1, press Shift-End-Home, and then choose Data, Filter, and then AutoFilter. You can then click any of the arrows in row 1 to filter the list to meet specific criteria.

Sending the report to Excel enables you to filter for deleted or modified transactions.

Alternatively you can press Ctrl-F and search for the words Prior or Deleted. Click the Find Next button to move to the next transaction as you carry out your review.

Excel’s Find feature is another way to sift through a lengthy Audit Trail report.

Fraud alert: Perpetrators often generate checks or invoices under one vendor or customer ID, and then modify the accounting records to obfuscate their deed. Always review transactions with a Prior label carefully.

Voided/Deleted Transactions Summary and Detail Reports

Deleted transactions often appear as a discrepancy when you attempt to reconcile a bank or credit card account. Typically the starting balance that QuickBooks displays will differ from the ending balance on your bank statement. In such instances, it’s a good practice to first check the Voided/Deleted Transaction Reports:

  • Choose Reports, and then Accountant & Taxes.
  • Select either the Voided/Deleted Transactions Summary or Detail reports. Both provide basically the same information, but the Detail report includes the entire transaction, rather than just the top level information.

Double-click a transaction on the summary report to view its details.

Closing Date Exception Report

You can use this report to determine if anyone has made changes to transactions subsequent to you specifying a closing date in the QuickBooks preferences. To do so, choose Edit, and then Preferences. Next, choose Accounting, and then Company Preferences.

Finally, click the Set Date/Password button, and then follow the onscreen prompts. Going forward you can choose Reports, Accountant & Taxes, and then Closing Date Exception Report to monitor any chances to closed periods in QuickBooks.

Customer Credit Card Audit Log

QuickBooks offers additional protection if you store customer credit card data in QuickBooks. The Customer Credit Card Audit Log report, shown in Figure 6, records all activity related to customer credit cards:

  • When credit card numbers are entered
  • Whenever credit card numbers are displayed onscreen
  • When credit card numbers are edited or deleted

The Customer Credit Card Audit Log tracks all activity related to customer credit cards.

To enable logging of customer credit card activity in QuickBooks, choose Company and then Customer Credit Card Protection. Follow the onscreen prompts once you click the Enable button.

Do you know how to detect and protect yourself from fraud? Most of us want to naively believe it will never happen to us. In reality, fraud impacts small and mid-size businesses far more often than large corporations. Why? Smaller businesses tend to take fewer precautionary measures to prevent fraudulent behavior.

Also, fraud is often perpetrated by a family member, long time employee, or friend that’s been given too much freedom with too few controls. However, you must not be naïve when it comes to your business. Fraud is very much a reality that can happen in your business.

In this article we’ll discuss how fraud happens, how to identify if fraud is happening, and what to do if you discover fraud has happened. We’ll also discuss some measures that you can take within QuickBooks to limit your exposure.

Why does fraud happen?

A combination of three aspects usually set the stage for fraud:

Opportunity: Companies often unknowingly present opportunities for fraud. In particular, small businesses are more prone to these because it’s harder to separate duties when you have a small staff.

Pressure: Personal pressures can put people over the edge and cause irrational thinking. Someone you know may be under duress due to medical and/or financial issues, or any of a number of other personal situations that influence their judgment.

Rationalization: The perpetrator believes they can rationalize their behavior, i.e. they need the money more then the company, the company won’t ever notice, or other insidious thoughts. Indeed, fraud often starts as a “loan”, with the perpetrator fully intending to “pay it back”.

Fraudsters will go to extreme measures to cover their tracks. Many small business owners believe it could never happen to them, as their employees are like family.

However, it is critical that you separate your thoughts with regard to what happens at work versus what happens outside the four walls of your business. No business is 100% safe.

What are five popular types of fraud?

  1. Claiming additional payroll hours or falsifying an employee.
  2. Stealing merchandise or cash.
  3. Giving unauthorized discounts to friends and family.
  4. Selling private business information to outsiders.
  5. Exaggerating on expense reports.

Although it’s often enticing to delegate tasks to subordinates, you should keep a hand in as many of your business practices as you can, even if it’s on a random basis. Fortunately there are some simple ways you can do so:

Payroll: Hand-deliver the paychecks, and use this as an opportunity to thank your employees for their work. This will help identify any “false” employees, as well as foster good will among your team.

Further, a process for tracking hours will help to minimize extra hours appearing on anyone’s time card. You might have a manager sign off on subordinate’s time sheets, or install a modern time clock that uses swipe cards or biometric identification.

Theft of cash or merchandise: Separate duties to the extent possible. Ideally those who receive money should be different than those who that generate invoices.

You should also try to separate inventory duties, and implement checks and balances for purchase orders, receiving and invoicing. Don’t rule out video surveillance of warehouse areas, even if it feels like “Big Brother.”

Unauthorized discounts: Track discounts given to customers. In QuickBooks:

  1. Choose Reports, Sales, and then Sales By Item Detail.
  2. Click the Modify Report button, and then click the Filters tab.
  3. As shown in Figure 1, choose Items from the Choose Filter List.
  4. Select Multiple Items from the Item list, and then choose all discount and bad debt items.
  5. Click OK twice to view your report. If you find this report helpful, click the Memorize button and assign a benign name, such as Accounting Review.

Another filtering technique for the Sales by Item report is to clear the Item filter, and specify Amount, and then >=0. This will display any negative or zero amounts listed on a customer invoice, as well as credit memo items.

It may seem counterintuitive to look for amounts that are greater than or equal to zero, but in accounting jargon, invoice amounts should always be credits to an account, which means they’ll be less than zero.

Negative items or discounts on an invoice post to your books post as debits, or positive amounts, which will be greater than zero.

You can filter the Sales by Item report to track discounts and other write-offs.

It’s also helpful to search for amounts that are equal to or greater than zero.

Selling private information: This is particularly difficult to guard against. One level of defense to require employees to sign confidentiality agreements at the time of hire that discuss what the company considers confidential and the consequences of violating said agreement.

Computer systems and paper work should also be protected with passwords, lock and key and whatever other measures may be warranted to minimize unnecessary access.

In QuickBooks, choose Company, Users, and then Set Up Users and Roles to assign unique log in names and passwords. As shown in Figure 3, QuickBooks offers predefined roles that automatically limit access to specified areas, but you can easily tweak a user’s role to meet their exact needs.

You should also require users to change their passwords periodically, and whenever possible, have your IT specialist restrict access to the folder where your QuickBooks data resides. However, do be aware that anyone can purchase a password recovery tool for $45 from

Use passwords in QuickBooks to limit employee access on a need-to-know basis.

Expense Reports: Always require receipts on all reports for reimbursement with no exceptions. You should also establish guidelines so that employees know when to seek approval so that they avoid the risk of unreimbursed expenses.

Unfortunately there’s no magic cloak that you can place over your business to protect it from fraud. Your best defense is to limit opportunities and remain vigilant. Fraud perpetrators have seemingly limitless imagination, so be sure that you’re always keeping a hand on the tiller of your business.

You’ll likely be closing the books on 2010 soon and your records will become the basis for your tax return. It’s critical that your QuickBooks records for a given year match the corresponding tax return, so consider setting a closing date in QuickBooks so that no one inadvertently changes the supporting documents for your tax return:

  • Choose Edit, and then Preferences.
  • Choose Accounting, and then click on the Company Preferences tab. As shown in Figure 1, you can use this window to determine if a closing date has been set.
  • Click Set Date/Password, and then enter a closing date. Although optional, you should then set a password. If you set a date without a password, then the prompt shown in Figure 2 will appear when someone attempts to enter or modify a transaction dated on or before the closing date.
  • Conversely, the prompt shown in Figure 3 asks for the closing date password.

The Company Preferences Accounting tab displays the current closing date for your company.

Users can bypass this warning prompt if you don’t set a closing date password.

Set a closing date password to ensure that users can’t modify prior year transactions without permission.

It’s generally best to set the closing date once you’ve completed all of your year-end reconciliations, printed W-2s and 1099s, and other year-end tasks. In fact, an ideal time is when you send the books out to have your tax return prepared.

Eliminating Uncategorized Income and Expenses

Unless you set a specific preference, users can enter transactions without specifying a revenue or expense account. Such transactions appear on the Profit & Loss Statement as Uncategorized Income or Uncategorized Expenses, as shown in Figure 4.

If these items appear on your Profit & Loss Statement its an easy fix. Simply double-click on the amount, and then double-click on each of the transactions in the resulting transaction report. Assign accounts to each of the underlying transactions, and then click the Refresh button to see the effect on your report.

Fortunately you can set a preference in QuickBooks to ensure that no uncategorized transactions will ever slip through:

  • Choose Edit, and then Preferences.
  • Choose Accounting, and then click on the Company Preferences tab.
  • Ensure that Require Accounts is checked, and then click OK to save the preference.

QuickBooks places transactions that don’t have account numbers into Uncategorized Income and Expenses.

The Require Accounts preference prevents uncategorized income and expense transactions.

Note: Setting this preference won’t clear up existing uncategorized transactions, but will prevent them from occurring in the future.

How to Print W-2s and 1099s from QuickBooks

If you process payroll in QuickBooks, you’ll soon need to print W-2 for your employees. The recipient copies of these forms must be postmarked by January 31, 2010, while you’ll need to submit the government copies by February 28, 2010.

QuickBooks can print on blank perforated W-2 forms or preprinted W-2 forms. But before you embark on printing W-2 forms, make sure that you have the latest payroll update:

  • Choose Employees, and then Get Payroll Updates.
  • Click the Update button, and then follow the on-screen prompts to download the latest payroll updates and forms for your version of QuickBooks.

Once you’ve installed the payroll updates, you’re now ready to print your W-2 forms:

  • Choose Employees, Payroll Tax Forms & W-2s, and then Process Payroll Forms.
  • Choose Federal Form, and then click OK.
  • Choose Annual Form W-2/W-3 – Wage and Tax Statement/Transmittal, and then specify the year for which you’re printing W-2s.

You can print W-2 forms directly from QuickBooks on preprinted or blank forms.

  • When the Select Employees for Form W-2/W-3 window appears, click Review/Edit to display a preview of each form to be printed. You’ll walk through an interview, copies of the W-2 forms, the summary W-3 form, and then printing instructions.
  • Click Submit Form to display the dialog box. You then use this window to print the various copies of forms W-2 and W-3.

QuickBooks makes it simple to generate W-2 forms at the end of the year.

It’s just as easy to print Form 1099 from QuickBooks. You may not realize that there are over a dozen different versions of the ignoble 1099 form.

However, most users only need Form 1099-MISC, which QuickBooks allows you to generate, as well as the transmittal Form 1096. 1099 must be postmarked by the same dates discussed previously for W-2s. Here’s how to print 1099s in QuickBooks:

  • Choose Vendors, and then Print 1099s/1096. If this option does not appear, choose Edit, Preferences, and then Tax: 1099. Choose Yes on the Company Preferences tab, and then click OK.
  • When the 1099 and 1096 Wizard appears, click the Run Report button for step 1. When the Vendor 1099 Review report appears, carry out these steps:
  • Scroll down and ensure that all vendors that require a 1099 have a Yes in the Eligible for 1099 field. Check with your tax advisor if you’re unclear as to whether any of your vendors should receive a 1099 form.
  • If you find any misclassified vendors, double-click on the vendor name, and then choose the Additional Info tab, and then set or clear the Vendor Eligible for 1099 checkbox. Filter the report to show only 1099 vendors, so that you can confirm that every 1099 vendor has a proper address and tax ID number entered in QuickBooks.
  • To do so, click the Modify Report button, and then click the Filters tab. Scroll down to the Eligible for 1099, and then choose Yes, as shown in Figure 8. Click OK, and then confirm that all vendors have tax IDs and addresses.

Simplify your 1099 review by displaying only vendors that require 1099s. Ensure that each vendor has a proper tax ID and address lists.

  • Return to the 1099 and 1096 wizard, and then click the Map Accounts button. Most 1099 vendors are classified as subcontractors, so ensure that Box 7 matches the account where you posted subcontractor income.
  • Click the Run Report button on the 1099 wizard. As shown in Figure 9, the report shows amounts that will appear on a 1099, as well as amounts you paid that won’t be included.
  • Be sure to double-click each amount in the Uncategorized column. QuickBooks only allows you to map a single account to a given box on Form 1099, so you may need to change the account on one or more uncategorized transactions to ensure that the 1099 reports the proper amount. Keep in mind that reimbursed expenses are not typically included on Form 1099.

Double-click on uncategorized amounts to determine whether they should be included on Form 1099.

  • Once you’ve reviewed the summary report, click Print 1099s. Confirm the date range to use, and then use the Select 1099s to Print window shown in Figure 10 to preview and then print your forms.

This window allows you to print copies of Forms 1099 and 1096.

Although it may seem like drudgery, reconciling your bank account is a critical accounting task that you should carry out each month. Doing so helps ensure the integrity of your financial reports, since most of your accounting transactions ultimately affect cash in some fashion.

Further, QuickBooks is a much more powerful tool for your business if you use it to its fullest extent. Most likely you’ve been reconciling your bank account all along, so in this article we’ll discuss the tricks and techniques you need to know to streamline the process.

If you’re new to QuickBooks, you start the bank reconciliation process by having your bank statement in hand, and then choose Banking, and then Reconcile. The Reconciliation screen shown in Figure 1 appears. In most cases, you enter the ending balance from your bank statement, add any interest or fees, and then click Continue.

You mark transactions as cleared, and then click Reconcile Now. However, it’s not always that simple, so read on to learn how to sail over any hurdles that may appear.

The QuickBooks Begin Reconciliation window.

The QuickBooks Reconcile window.

1. Locate discrepancies
Click the Locate Discrepancies button to display the Locate Discrepancies window.

From there, click the Discrepancy Report button to display the report. This identifies any edited or deleted transactions that may affect your reconciliation.

QuickBooks can help you identify edited transactions that may disrupt your reconciliation. Ideally your discrepancy report should never have any transactions listed.

2. Confirm your beginning balance
Your beginning balance should always tie to your bank statement, but if it doesn’t, click the Undo Last Reconciliation button until you reach a point where the beginning balance matches your bank statement. You must then redo the reconciliations to bring your books current and resolve the discrepancy.

3. Don’t forget interest and fees
Be sure to record any interest and fees in the window. Alternatively you can record deposit and check transactions to record interest and fees, or the very savvy can use journal entries.

If you go this route, be sure to debit cash and credit interest income for interest earnings or credit cash and debit bank charges for any fees incurred.

4. Double-check your ending balance
Always double-check your ending balance input when you start the reconciliation. A simple transposition or other error here can make it appear that you’ve missed a transaction.

5. Look for transpositions
Sometimes you’ll mark all transactions as cleared, but still have a difference. In such cases, divide the difference by 9. If it divides out evenly, then there’s a good chance that you transposed a number on a transaction.

For instance, a $63 dollar difference divided by 9 returns 7 could mean that a transaction was entered incorrectly. As shown in Figure 5, you can right-click on an amount, and then choose Edit Transaction to fix the error.

Right-click on an amount and choose Edit Transaction to correct a mistake.

6. Pick a side, any side
Don’t mix and match deposits and withdrawals. Reconcile your Deposits and Other Credits first, and then confirm that the total items you marked cleared ties to the amount shown on the Reconcile window.

Then reconcile Checks and Payments – doing one side a time limits your search area for missing or misposted transactions.

7. Clear the decks
If you get tangled up in a reconciliation, click the Unmark All button to start over.

8. Enter missing transactions
You can add missing transactions without closing the reconciliation window. Simply choose a command from the menu across the top or from the Home screen. Saved transactions will instantly appear in the reconciliation window.

9. Check undeposited funds
Choose Banking, and then Make Deposits. If the window appears, you must complete the deposit process for these transactions.

Undeposited funds can pose problems with your reconciliation.

10. Hide unnecessary transactions
Click the Hide Transactions after the Statement’s End Date check box to have fewer transactions to sift through.

11. Void old transactions
Old, uncleared transactions can linger on forever – locate such transactions within your register, choose Edit, and then Void. The banking system generally considers checks to be stale after six months.

Such lingering transactions are often duplicates of a transaction that cleared.

12. Clear voided transactions
Always clear transactions with a zero balance as these won’t affect your reconciliation, but do clutter up the Reconcile window.

13. Bank online
Some institutions allow you to synchronize your records with your online statement. This involves a matching process that automatically clears transactions that match, and makes it easy to quickly post new transactions.

14. Use your keyboard
Rather than using your mouse to click on each transaction that you wish to clear, use the arrow keys on your keyboard to move up and down. Press the spacebar to toggle a transaction as cleared or uncleared.

15. Walk away and come back later
If you just can’t seem to get the unreconciled difference down to zero, the best thing to do is click the Leave button, and then resume the reconciliation tomorrow. A fresh eye can do wonders.

16. Reconcile More Frequently
If you can access your bank account online, you can reconcile your bank statement as often as you wish. Consider reconciling accounts with heavy volume weekly or twice a month.

Just about every QuickBooks user relies on the Report Center and Reports menu, but if you’re like most, you have a small handful of reports that you tend to rely on. In this article we’ll go off the beaten path and explore ten reports that many users overlook. Even if you are using some of these reports, we’re sure you’ll find a few more to add to your repertoire.

1. Profit & Loss Summary Prev Year Comparison: To access this report, choose Reports, Company and Financial, and then Profit & Loss Summary Prev Year Comparison. Most business owners rely on the Profit & Loss Summary report, but comparing your results to last year can provide quick insight into whether your revenue is growing or contracting-as well as how fast expenses are rising.

2. Balance Sheet Prev Year Comparison: You’ll find this report also within the Company and Financial section of the Reports menu. As with your income statement, it’s important to compare where certain balances stand now versus last year:

  1. Cash
  2. Accounts Receivable
  3. Inventory
  4. Accounts Payable
  5. Other Liabilities, such as lines of credit or short term loans

3. Statement of Cash Flows:
As with the two preceding reports, you’ll find the Statement of Cash Flows in the Company & Financial section of the Reports menu. Profit & Loss reports enable you to see what you earned, while Balance Sheet reports help you determine what you have-as well as what you owe. However, neither report necessarily provides a clear picture of where cash is coming from, or going to. You’ll be able to see:

  1. How much cash you’ve taken in from sales and spent on expenses
  2. Cash inflows or outflows from borrowing, repayment, or investing activities

In short, this report shows you exactly what caused your bank balance to increase or decrease during a given report period.

The Statement of Cash Flows report explains changes in your bank account balance.

4. Collections Report: Tricky economic times mean it is more important than ever to keep track of your collections. Fortunately QuickBooks makes it easy to contact customers with overdue invoices: choose Reports, Customers & Receivables, and then Collections Report. As shown in Figure 2, the report provides a phone list and shows all overdue invoices. However, you can also use this report to quickly e-mail copies of overdue invoices to your customers. To do so, double-click on a transaction within the Collections report to view the invoice, and then click the Send button at the top of the invoice form to display the Send Invoice form shown in Figure 3. You can modify the wording shown to be more direct, such as a subject line of “Overdue Invoice” or perhaps e-mail text along the lines of “I’ve attached a copy of your overdue invoice. If there’s a problem with our products or services, please let me know immediately, otherwise I trust that you’ll remit payment promptly.” To change the default e-mail text, c

Choose Edit, Preferences, and then choose Send Forms. Select Invoice from the Change Default For list, make your changes, and then click OK.

The Collections Report gives you a jump start on dunning overdue customers.

You can adjust the wording of an overdue invoice e-mail for one customer at a time or change the default text.

5. A/P Aging Summary: Although it’s key to make sure that your customers are paying in a timely fashion, it’s just as important to pay your vendors, too. Unpaid bills can result in phone calls, e-mails, and other unnecessary interruptions. Choose Reports, Vendors & Payables, and then A/P Aging Summary to display the report shown in Figure 4. As with most reports in QuickBooks, you double-click on amounts to ultimately drill down to the original transaction.

The A/P Aging Summary helps you determine when bills are slipping into overdue status.

6. Trial Balance: Many business owners overlook the Trial Balance report, since it’s one of the few reports in QuickBooks that uses the terms Debit and Credit. However, it’s a helpful report, as it shows you all account balances in a concise format. If anything looks out of order, simply double-click on the amount to view the underlying detail. Choose Reports, Accountant & Taxes, and then Trial Balance to view this report.

7. Voided/Deleted Transactions Summary: It’s no surprise that small businesses are much more prone to fraud than large businesses. Small business employees usually wear multiple hats, so it’s often impossible to separate financial duties (bigger businesses can do this with ease). Fortunately QuickBooks makes it hard for perpetrators to cover their tracks: choose Reports, Accountant & Taxes, and then Voided/Deleted Transactions Summary. As shown in Figure 5, you’ll be able quickly identify any transactions that have been deleted from QuickBooks. Granted, this isn’t an end-all solution by any means, but it is a helpful management tool. Plus, if a transaction ends up “vanishing” from QuickBooks, you can use this report to see who deleted it!

The Voided/Deleted Transactions Summary enables you to find transactions that appear to have vanished.

8. Audit Trail: The audit trail was an optional feature in earlier versions of QuickBooks, but is permanently enabled in recent versions of QuickBooks. This provides a complete record of every entry made in QuickBooks, as shown in Figure 6. The downside to that is that you can end up with a massive report. Don’t worry, as it’s easy to filter this report and narrow your search. To do so, choose Reports, Accountant & Taxes, and then Audit Trail. Once the report appears, click the Modify button, and then click on the Filters tab. You can filter by date range, amount, or dozens more fields.

The audit trail shows every transaction-including modifications-in QuickBooks.

9. Previous Reconciliation: It’s a good practice to always print at least the summary report once you’ve reconciled a bank or credit card account. Someone else could edit a reconciled transaction, which could cause the reconciliation to be out of balance. A printed copy of the report shows that the account reconciled as of the report date, although you will still have to untangle the edited transaction. However, if you close out the reconciliation screen, you have a second chance to print your report: choose Reports, Banking, and then Previous Reconciliation. As shown in Figure 7, you can choose from multiple reports.

The Previous Reconciliation report option allows you to reprint missing account reconciliation reports.

10. Transaction History: Think of this as a “report within a report”, as you can only run it in certain circumstances. As shown in Figure 6, you must have a transaction open on the screen or single-click on a transaction within a report. You can then choose Reports, and then Transaction History. As shown in Figure 8, QuickBooks will display a report that shows the entire history for a given transaction.

The Transaction History report provides shows all activity related to a given transaction.

Did You Know?

The Microsoft web site offers hundreds of free spreadsheet and word processing templates. Options range from timesheets to analysis tools to contract documents. Visit, and then search for a template by use (home, office, school), collection (real estate, small business, wedding), or keyword. Indeed, if you’ve created a template that you rely on, you can submit it to the site and share your work with others!

Does the mere mention of accounting ratios may put your teeth on edge, and bring back bad memories of Accounting 101? It shouldn’t as ratios can help your quickly determine how your business compares against others.

Banks often use ratios to analyze your financial statements as part of the loan approval process, so it’s helpful to know in advance how you’ll be measured. Even better, ratios allow you to compare your business against your peers since many trade groups publish lists of average ratios within an industry.

Although ratios may have made you drowsy during accounting class, they can be a fascinating way to measure your company’s financial performance.

Gross Profit Margin

Simply put, gross profit margin-sometimes referred to as gross margin-is your revenues less your cost of sales. For some industries, this is a very meaningful metric, while it won’t mean as much to others. For instance, manufacturers, restaurants, and retailers often treat gross profit as a key performance indicator.

In such environments, one typically purchases inventory at one price, and ideally sells it to someone else at a higher price. The spread between these two numbers is the gross profit margin.

Let’s say that you buy $40 of pine straw (we’re trying to avoid the accounting class term widget) and sell it for $60. In this case, $20 of gross margin divided by $60 of sales yields a gross margin percentage of 33%. Thus one-third of your sales are available to put toward overhead items, such as office supplies, payroll, rent, taxes, and so on.

Ideally your gross margin is high enough to cover your overhead and leave you with a profit. With that example in mind, let’s see how you can calculate your own gross profit margin.

Caveat: Gross profit margin isn’t meaningful to everyone. For instance, if you’re a self-employed service provider, you may not have any cost of sales.

Your salary is arguably all or most of your profit. You can certainly count your salary as cost of sales and compute a gross profit margin, but you might not find much value in the result.

To begin, choose Reports, Company and Financial, and then Profit & Loss Standard. As shown in Figure 1, look for the Gross Profit amount, and then divide this by Total Income.

The Profit and Loss Standard report provides the figures you need to calculate gross profit.

In this case, $30,953.20/$51,241.16 shows a gross profit margin of 60.4%. Is that good? Is it bad? Very often the answer is “it depends”, which is why you should try to compare yourself to similar companies in your industry.

However, let’s consider the restaurant industry. Many owners strive to keep their gross margin at around 63%, which means a cost of goods sold percentage of 37%. The gross profit ratio enables you to track this key measurement, but you must ensure that your transactions are being recorded in the proper accounts.

The percentages can skew if, let’s say a telephone bill, is miscoded to Food Costs, instead of Telephone. Similarly, your cost of goods sold might look great only because someone miscoded food costs into an overhead account, such as Supplies.

Profit Margin

Profit margin is another commonly used ratio that you can derive from the Profit & Loss Standard report by dividing Net Income by Total Income. In essence, this is the percentage of sales that the owner of a business gets to keep-before Uncle Sam gets his share. Profit margins vary widely by industry.

For example, a grocery store chain may have profits of $2 billion, but a profit margin of just 2.6%. An oil company may have staggering profits in dollars, but their profit margin is often just 10%. Conversely, some software companies have a profit margin of 28% or more.

As with gross profit, the best way to determine whether a profit margin is reasonable is by comparing the result to one’s peers. The construction company shown in Figure 1 has Net Income for the period of $13,123.48, which when divided by Total Income of $51,241.16 returns a profit margin of 25.6%.

Inventory Turnover Ratio

This ratio illustrates how many times a year that you’re selling your entire inventory. This can help you gauge whether you may be holding too much inventory, or not enough. This ratio is based on cost of goods sold divided by average inventory.

As you’ve seen, cost of goods sold appears on the Profit and Loss Standard report-look for Total COGS-but you’ll have to perform a quick calculation to determine average inventory. To do so, divide the sum of your beginning inventory plus ending inventory by 2.

Although you can use several different reports in QuickBooks to determine the beginning and ending balance of your inventory, try this first: choose Reports, Company and Financial, and then Balance Sheet Prev Year Comparison.

Change the report date to This Fiscal Year, and then look for the inventory account balance.The ending balance for last year is also the beginning balance for this year.

If you need beginning and ending balances for a shorter period, such as a quarter, choose Reports, Accountant and Taxes, and then General Ledger. Set the report dates to the period of your choice, and then use the beginning and ending balances for your inventory account.

The Balance Sheet Prev Year Comparison can provide beginning and ending inventory balances.

Average Collection Period

This ratio helps you determine how long it takes your customers to pay their invoices. The formula is a little more complex than some of the other ratios: number of days multiplied by average accounts receivable balance, divided by credit sales.

For instance, let’s say that your average accounts receivable balance is $30,000, and you had total sales of$400,000 for the year. 365 multiplied by 30,000 is 10,950,000. This amount divided by our total sales of $400,000 is 27.38, meaning that on average your customers pay their invoice in just under 30 days.

Be sure to monitor your average collection period, as your cash flow can tighten quickly if that ratio increases. If you typically invoice your customers, then you can use the Total Income figure from your Profit & Loss Standard report.

Although QuickBooks doesn’t directly provide a figure for average accounts receivable, you can quickly customize a report to aid in this calculation:

  • Choose Reports, Company and Financial, and then Balance Sheet Standard.
  • Click the Modify report button, and then set the From and To dates to match the period shown on your Profit & Loss report. Change the Display Columns By to Months, and then click OK.

Change Display Columns By to Months when you want a month-by-month report.

When QuickBooks displays the 12-month report, click the Export button, and then click OK to send the report to Microsoft Excel.

You can convert the Balance Sheet Standard report into a twelve-month format.

Row 9 contains the Accounts Receivable figures. In cell R9, enter this formula to calculate your average accounts receivable balance: =AVERAGE(F9:R9).

Use the Accounts Receivable figures to calculate your average accounts receivable balance.

As you can see, the average collection period ratio enables you to determine how long it takes your customers to honor your invoices, which in turn has a direct impact on your cash flow.

Other Common Ratios

Current Ratio: Divide current assets by current liabilities to determine a firm’s liquidity.

Quick Ratio: Subtract inventory from current assets, and then divide by current liabilities to apply a more severe liquidity measurement.

Debt Ratio: Divide total debt by total assets to determine how much of the company is financed by debt.

Return On Assets: Banks often add net income plus interest expense together, and then divide this by total assets to determine the firm’s return on assets. This figure typically needs to exceed the interest rate of a loan that you may be contemplating.

Compare Yourself to Others

Now that you understand how to calculate ratios based on your financial results, the next step is to compare yourself to your peers. You may belong to a trade group that makes benchmarks available to its members. If not, a good first step is the BizStats web site, at

Your line of business may be included in their free offerings, but even more information is available on a subscription basis. You can find even more resources by searching the Internet search for the term “industry benchmarks”.

Did You Know?

You can send your thoughts about QuickBooks to Intuit directly from within QuickBooks. To do so, choose Help, Send Feedback Online, and then one of these choices:

  • Product Suggestion
  • Bug Report
  • Help System Suggestion

Any of these links will display an online from in your web browser so that you can submit your thoughts directly to the QuickBooks development team. QuickBooks frequently updates its products, so before you send a bug report, choose Help, and then Update QuickBooks. Click the Update Now button to ensure that you have the latest patches and fixes for your version of QuickBooks.

Submit your wish-list items directly to the development team from within QuickBooks.

It’s not just a catchy ad slogan: It’s true. Unless you have dozens of employees or numerous exceptions each payday, you can literally process a payroll run in just a few minutes using the employee compensation tools in QuickBooks.

No matter which version of desktop QuickBooks you’re using, payday chores are similar. Even if you’ve subscribed to Full Service Payroll and are having most of the work done by Intuit, you still have to enter the number and type of hours worked for each pay period.

If you’re doing payroll manually or through a payroll service, you might be surprised at how quickly and easily your payroll tasks can be completed once you’ve finished entering information about your company and its employees, taxes and deductions.

A Simple Process

When you get a reminder that it’s time to run payroll, go to Employees | Pay Employees and choose Scheduled Payroll to get to this window:

No matter how many payrolls you’ve run, it’s important to verify that these dates are correct.

When you click Start Scheduled Payroll, a new screen displays your employee list in a spreadsheet grid. By default, QuickBooks displays several columns, including Employee, Regular Pay and Sick Hourly; you can opt to include others, like Employee Number. If you hide columns that contain information, that data will still be used in paycheck calculation. Then:

  • Verify that the information at the top of the screen is correct (Payroll Schedule, Bank Account, etc.).
  • Make sure that all employees to be paid have check marks next to their names.
  • Enter the number of hours worked for each hourly employee, placing them in the correct pay type column.

Select one and click Open Paycheck Detail to see a complete breakdown of compensation and withholding — all calculated automatically by QuickBooks based on your setup data — within the Preview Paycheck screen. Close the window when finished.

The Preview Paycheck screen shows the numbers behind the check amount.

Checking Your Work

If you’re satisfied that everything is correct, click Continue. In the next screen, you’ll verify Payroll Information again and check a box to indicate whether checks will be printed or handwritten (you can assign a starting check number to the latter). QuickBooks displays a grid containing each employee’s total gross pay, total taxes and deductions, net pay, employer taxes, contributions and total hours. The Direct Deposit field will be checked if the individual is signed up.

If you’re not sure that your payroll information is correct, you can click Finish Later, otherwise, select Create Paychecks.

The Final Step

QuickBooks will then display your results:

Once you’ve previewed and approved a payroll, you can simply click to print any paper checks and pay stubs.

Check the box at the bottom of this window next to Do not advance the dates of this payroll schedule in the Payroll Center if you still have employees to process for this run. If the box isn’t checked, QuickBooks will change the dates in the Pay Employees window to reflect your next pay period.

When you select Print Paychecks or Print Pay Stubs, the selection window opens. You can toggle among views of Paychecks, Direct Deposit or Both. Select the ones you want to dispatch and click Print or E-Mail. You’ll have the option to reprint any checks if you need to; otherwise, click OK.

Click Preferences in the print selection window to customize paycheck vouchers and pay stubs.

No Room for Errors

Sounds simple, and it is — as long as your setup was error-free. As you well know, you can’t make mistakes running payroll or you’ll initiate a whole series of incorrect numbers, making employees, benefits providers and government agencies unhappy.

So do not proceed if something doesn’t look right; QuickBooks always gives you an out. And let us know how we can help with setup, taxes or payroll runs — or anything in between.