Seattle Small Business Blog

I just paid a bunch of vendor bills using credit memos that we have on file with that Vendor. There was a little left over on the final invoice, which was paid by check. However, the check stub only lists one invoice and one credit memo, but I know that’s not right.  How do I get a list of all the other invoices that were paid using the credit memos?

There’s no built-in/easy way to do it. It will require that you create and customize your own report to give you exactly the data you’re looking for and nothing else.  Here’s how:

• Do a “Find”  (Ctrl-F)  and go to the Advanced tab
• then click on “Date” in the Filter list and select “This week,” “This month,” etc., or choose the specific date you recorded the transactions
• then click on “Name” in the Filter list and select the name of the Vendor you’re working with
• then click on “Transaction Type” in the Filter list and select “Multiple”
• then in the “Multiple” screen select Bill, Bill Payment, and Bill Credit
• then go back to the main Find window and select “Paid Status” in the Filter list
• then check the button next to “Paid”

That should show you all the bills that were paid to that Vendor, and their corresponding payment method, whether by Credit Memo or Check.

Click the “Report” button to the right of the screen, and it will give you a printable report. You can also “Memorize” it (button at the top), in case you might need to perform a similar search in the future, for this or any other Vendor. You can further customize the report by clicking on the “Modify Report” button, also at the top of the screen.

-Veronica

Q: I noticed that Owner’s Draw is not showing up in the expense column of the P&L statement, is there a reason why?

Treatment of an owner’s compensation is determined by what type of entity/taxation structure your business is operating under.

When you are operating as a single-member LLC (taxed as a Sole Proprietor), Owner’s Draws are not considered Expense transactions. They are Equity transactions, which show up on the Balance Sheet, not the Profit & Loss.

In a single-member LLC (as well as a partnership LLC), all the profits/losses of the business flow through to your personal tax return and are considered to be the “Owner’s Equity” in the company. If you decide to take money out of the company, it is not considered an Expense — just as if you decide to put money into the company, it is not considered Income.

If your business entity were a Corporation or an LLC taxed as Corporation, then you would be taking a Salary instead of Draws. In that case your Salary, as well as all your company-paid Payroll Taxes, would show up as Expenses on the Profit & Loss.

If you really want to include your compensation on the P&L, we can create an Expense account for “Management Fees,” which will reflect all the Draws you take throughout the year. At the end of the year, we would need to make an adjustment to move that “Expense” back over to the Equity section of the Balance Sheet, since it is not allowed to be included as an Expense on your Federal Income Tax return.

I know this can be a difficult concept to grasp right offhand — but then again, so is most Tax Law. Let me know if you need any further explanation…

-Veronica

Q: I’m still learning QB, so can you walk me through merging the vendors?

Merging vendors is pretty easy:

• Go into Single User mode
• Then go to the Vendor Center and decide which vendor name you want to keep. I usually go with the one that’s either 1) oldest, or 2) has the most transactions posted to it.
• Double-click on that Vendor’s name in the list, copy the name as it appears in the top-most field of the Edit Vendor window, then close that window.
• Now double-click on the name of the Vendor you don’t want to keep, and paste the copied name into the top-most field. Click OK or Save (whatever the button is called) and QB will ask you to confirm that you want to merge the two Vendors.
• Say yes and you’re done.

The other option is to just make one of them inactive (right click the Vendor’s name in the list and choose “Make Inactive”), but that makes the Vendor’s name disappear from the list in the Vendor Center. If we ever want to see our complete history with that Vendor, we have to remember that there’s a second one that’s inactive, and search for it separately. Most of the time, if you’re looking for historical transactions and you find a Vendor that’s active, you’ll stop there and won’t bother continuing to look for duplicate/inactive Vendors that may provide additional history.

If you merge the two, then you will have all the transactions available to view under just one name, which will stay active and easily viewable without having to take any additional steps. 

-Veronica

Question:  I added three payments I received this week through “Receive Payments” and showed that I received all 3 through my PayPal account.  These payments are now associated to the A/R account, but I can’t seem to edit the account they are associated to (it should be Products/Services income, right?)

Perhaps you can explain how to do this?

A/R is the correct account to which payments should be posted. The Income account is affected when you create the initial Invoice and specify which Products/Services you sold to that person.

When the invoice is created, it posts “Income” to the Products/Services accounts, and an offsetting amount is posted to “Accounts Receivable,” since you have not yet received the actual payment. When you receive the payment, the appropriate amount is then moved out of Accounts Receivable and into your PayPal or your bank checking account (whichever account the payment originally posted to). This decreases your A/R account and increases your bank account.

The only time this workflow would be different is if you did not invoice the customer, but you did receive payment — i.e. the customer paid at the time of purchase, so you never issued an Invoice. In this case, there are two ways you can handle this:
1) Create a Sales Receipt (best/most “correct” way), by going to Customers > Create Sales Receipts
2) Enter the deposit directly into the PayPal or bank checking account, by going to Banking > Make Deposits

A Sales Receipt is just like an Invoice, but instead of issuing an Invoice and collecting payment later, a Sales Receipt combines the two and shows that the payment was received at the time of the sale. It’s filled out the same way as an invoice — you select the products/services the customer purchased, QuickBooks calculates sales tax, etc. You just don’t have to go back in afterward and do the Customer > Receive Payments step, as you would with an Invoice.

If you enter the deposit directly into the bank account, you are not able to select which items the customer purchased. You are only able to designate the name of the customer and which “type” of income you received — Sales of Products or Sales of Services. You also cannot auto-calculate Sales Tax using this method.

The proper way to do it would be to always enter an Invoice if they customer will be paying later; or to always enter a Sales Receipt if you collect payment in advance or if the customer pays in full at the time that the order is placed.

Until you’re routinely invoicing all customers through QuickBooks, there may be some discrepancies, but part of my weekly review process includes checking Accounts Receivable and Accounts Payable to make sure they are reflecting the appropriate amounts. If I do see a customer who has a balance due or a credit balance (meaning that you received payment against the A/R account but there was no invoice to match it to), then I will either fix it myself, or ask you for more details if it’s unclear.

Let me know if you need any more info on this process. It can be a little abstract to try to wrap your head around it, until you see it in action.

Accounting is all about numbers. These numbers are collected , summarized and analyzed before creating reports and statements. This is then distributed to management and even stockholders. It takes time to put all these numbers in order which is why an accounting software is often used for this purpose.

The advantage of using an accounting software for starters is that you can reduce the time needed to collate data so you know almost immediately if the business is making money or not.

Another advantage of using an accounting program is that aside from being fast, it is as accurate as the information you put into it. The best part about accounting software is the fact that you only pay once in order to get the whole package. This saves you money as accountants will charge a professional fee each time you require them to do a particular task.

Most accounting programs in the market are easy to use, set up and navigate. This means you don’t have to be a certified accountant to use it. Generally, you are given a step by step guide that will help you throughout the entire process.

There are a few things to look out for when you decide to invest in an accounting software. First, this should be reliable. Some software programs look good in the beginning but then fail to deliver later on.

You can talk with other companies that are in the same industry you are in to find out what software they are using. Since these software programs are sold more openly in the web, you should get in touch with current users to see how well it has performed or read reviews written by various organizations that spend time browsing through the program.

Although accounting uses the basics of mathematics, there is more to it than that especially when various sheets are compiled together. You can ask for a 30 day trial period to see if this is what you need. Should the features and all the numbers come back with the same results, then you know it is worth buying.

If it has a lot of features that you don’t need, you should just look elsewhere and get the kind that suits your needs. There are various ones in the market like those used for payroll or to compute for taxes so you should focus only on what you need.

The last thing to consider is the price. Given that you know what features you are after, you don’t even have to buy the most expensive one in the market. Compare prices. There are cheaper packages that can perform just as well.

Reliability, features and price are the three most important things to look for when you decide to purchase an accounting software for your company or organization.