Year-End Processes for QuickBooks Online - Part 2

Hi there, Linda Ardissani, Ardissani Bookkeeping. So I wanted to do part 2 of my video on how to really go through your books at year end and check and look at your records and some of the things that I'm doing right now with my clients, especially if you have a bookkeeping business, or if you're just a single owner operator that, you know, you're getting to year end, you're thinking maybe I should really look through my stuff and see where my books are at and maybe do a little cleanup proactively before the year ends. And it's actually a good time of year to start to look at this I mean, you should really be looking at it all year, but if you haven't, it's a really good time to look at your records. So let me share my screen. We'll come right here, sample file. And one of the things I didn't go into last week that I really wanted to go over here is I did come through the balance sheet and we went all through the balance sheet report last, last week. But something I didn't go into too much detail is accounts payable and accounts receivable. So let's just pull up an accounts payable aging report. And this is a place that you really want to look into. A lot of people kind of skip this and it just stuffs space on there and goes ongoing and ongoing year after year. And it's a place that you really want to look at and keep really up to date and clean, especially at year end. You just want to really take a look and see if this is exactly who owes you and exactly what you owe, and then it's correct. I'm laughing because this is actually something I saw this week when I worked on a company file. And we'll open up this 14 Stories and see the bill. And the bill here is for outside services and it's dated 12/11/2005. Actually saw this and I think back to 2005 with QuickBooks, it was Desktop and it was when they just changed their whole look of their screen. Everybody was yelling about it. So I can remember that on the forum. It was a big deal because it was a big, big change. I think that's when they brought out the brought up the homepage and people didn't like it. But anyway, so how would you get rid of this? So a vendor credit would be a great way to get rid of this. You can search and see if this is either just something old that never was paid, or perhaps, and more likely, if you search by $1,000 in the search bar, you're going to find that you had a duplicate entry and you want to remove it. So the easiest way to remove this is to just create a vendor credit. So you're just going to come up here and and do a vendor credit. I actually started one here. And you want to put it towards the same exact account. So it was outside services. It was $1,000. And date it. This is an adjusting entry, so I'm going to date it 1/1/2018. And just to write off an old bill still on the books that was a duplicate transaction, you could write down the reference number, you know, reference number, you know, 1234, whatever it was on the actual bill. OK. And then save and close this. So we're going to save and close it. And then now I want to show the payment on this bill, right? So this bill has now been paid by this vendor credit. So I'm just going to come over here and make a payment. Again, I want to make that probably the same date as the, as the vendor credit, just to keep it nice and clean. And then just check off bill and payment. It's going to be a zero transaction. You know, you can just make whatever number up here you want to make it. And then save and close it. So now my accounts payable aging is going to be zero. Now it's cleaned up, I paid all my bills. So this is a good time of the year, you got a few days left in the year to— if you're cash basis, you probably really want to maybe look and see if you've got some cash flow, look at your profit and loss and say, hey, I've got these bills I need to pay. Cash basis, if I pay the payment dated the year that you're in, like 2018 that we're in now, you can use that as an expense, it'll actually show up and lower your amount of profit at the end of the year. So that way, maybe pay a little bit less taxes. So it's It's a good time of year to really take a look and maybe pay some things to get your— if you got the money to pay the bills, lower the amount of money that's going to be due at tax time. The other thing is accounts receivable. You know, I've got the aging report up here and here's Ashley Prio, $100, but the due date, she— this is an older bill. It was from June of 2017 that was never paid. I've already dealt with her. She bought a bunch of widgets. She never gave them back. She's not going to pay the bill. Clearly, it's all done. So when it comes to aging and writing off customers' stuff, if you're accrual-based and you've already paid taxes on this income because it's all by the date of the invoice that they figure out your income, then you're going to want to write this off to bad debt. You'll make an item to bad debt and use it in a customer credit memo to apply that to get this off the books. If you're cash basis, the easiest thing to do is open the invoice up and take a look at the item that's being used in the invoice and see that it's widgets that person paid $100 for. And then create a customer credit memo and go in here and create the credit memo. I've actually already done that. Let me go to the credit memo here. So I've got the credit memo already in place to save time and You can write in here that, you know, that you're returning— they didn't pay for the widgets. You want to write off the widgets here. And then notes, right? This person complained, yada yada, whatever else that she did. You want to tie it back to the invoice. You can have that in there. And then of course, you're going to have to do the same thing you did with the vendor. You're going to make a payment. And then in the payment, you're going to apply the credit memo to the invoice, zero transaction. In this case, you know, I'd probably still date it 1/1/18. It's kind of an adjusting entry. Make notes that, you know, this is to close out this invoice. $3,099, and then just write it off. So we're gonna get that off of our books. Moving on to the profit and loss report. Now I'm going to get into the profit and loss, and we're going to do like we did last week with the balance sheet. We're going to see the areas that are troublesome on most files and start to figure out where to fix these things. So, you know, you're going to want to go through your sales and look at all the accounts, all the items in there. They should be invoices. Make sure everything looks correct and accurate. Rental income, and this just happens to be the categories around the sample file and products. When you see uncategorized income, you will probably say, wait a minute, it's just like last week. There should be no uncategorized income, like there should be no uncategorized assets. These are things that you want to clean up. So you can come in here and see, oh my goodness, everything that had Frank DeAngelis on it got posted to uncategorized income. So all of these would need to be cleaned, and it's all invoices that are here. And the invoices— if this said invoice, the invoices, it might be a product or service that you didn't put a category in. And then like this one where it says rent, and it got tagged to uncategorized income. Now, for the most part, when you come on this screen by default, and this is your gear wheel products and service window, you don't see these 2 categories on here, income and expense. I actually had to add them. So I just did that by hitting this gear, and then I selected them so that they would show up on this report. So that's a little tip too, so you can see how to make this report be a little bit easier to find. And then I find this Uncategorized Income. I want to edit that account, and I might be able to really quickly, if it was invoice-based, instead of having to go through with my Reclass tool or go into each one, one at a time to fix it, I can come over here and just change this to my Rental Income account. I just type it in here and then change it, and then this little box pops up, says also update this account by historical. So you're going to want to hit that. To update all of those transactions so that now that they're all on that, all that will now be posted to the proper category. So let's go back to this profit and loss report. And as you can see, it's set to accrual basis. So that's the way it's set up by default. But for sure, you should come over to this company settings box and fill this stuff in on where you're, you know, whether you're accrual or cash basis. And, you know, whether you're a corporation, put your EIN in. All these things should be done on your, on your books so that it's here for your sake and for the sake of— even if you have a bookkeeper, they want to know you're a corporation, you know, you're a shareholder, or you're a partnership, an LLC, sole proprietor. You know, we needed to have that information in the, in the records. So here we've got our profit and loss, and it's by cash basis. So that's what it really should be. I'm doing— looking at the view that the accountant will look at when he does your tax return. And as you can see, as you come in here, there's some serious little red flags kind of jumping out at me here. Unapplied Cash Payment Income Account. And probably the— you probably looked at this, especially if you came from Desktop and you didn't have this, and you're like, what the heck is that? This account is created for people who have invoices And then the payment for the invoices actually predates the invoice. So you can't have an invoice be paid before it's actually presented, right? So that's usually the reason by this— behind this. So here you have Mary Summers. We invoiced her on 7/23, but she paid me on 27th of June. Now, this is either an error in the date of the payment, or perhaps this was a deposit, and then it needs to be put into a customer deposit account and then applied. I'm going to just say that somebody typed in the wrong date. So by changing this date to anything after 7/23, it's going to update my file, and I'll just put 7/24, and it's going to take it out of the unapplied cash payment income account. You can see it already disappeared. So to clean these up, you'd need to change your dates and things like that to get that out of there. And sometimes it's a matter of a payment being in here without an invoice. So you probably need to go and look and say, why was this payment here? Again, is it a deposit or is it supposed to be Somebody just didn't create the invoice, but they received the payment. You need to create the invoice. So that's how you clean that up. Uncategorized income. Oh my goodness, I see this a lot. And a lot of times it comes off of the banking, right? You go to the online banking and it recognizes it as uncategorized income and people just go, oh, they like to clean that screen off. They go click, click, click, click, click, put it all in and then it's in here. Sometimes this is caused by— these are deposits. So this is actually something that can be just updated and changed. You could come in here and change this to the, you know, the right account. A couple of other things you might see, anything in here, if you find the word deleted, you want to reactivate it. I don't have anything in this file, but you might see deleted. If it's deleted, maybe it's in the wrong category. You again need to fix the account that it goes into. Anywhere there's a negative, you really want to take a peek at that and find out why is your— why does your category have a negative. So if it's an expense account, it should have a debit balance, and if it doesn't, it's got a credit balance, and maybe there's a good reason for it. Once in a while, I had somebody the other day that had insurance, and it was actually— he had insurance for workers' comp, and something happened with an audit, and he got a bigger refund than he had at one point in the year. His refund was more than his actual bill expense for the month at the time, so he had a credit balance. It didn't end up that way at the end of the year, but, you know, depending on your cycle, it might end up happening where you've got a credit balance inside, like an insurance account. It could be for any number of reasons, but that's another reason that you might see that. Repairs and maintenance, you know, you want to look in there. Why is there a negative? Okay, so you had somebody paid for some tires and then somebody had damage to an apartment and got reimbursed. Okay, that makes sense. That's why it's negative. But for the most part, you don't want to see negatives here, just like you don't want to see negatives in the— up in the income. This is a discount, so that's okay. But anything up here, you don't want to see negatives. And then as you get down here, you'll see that same old thing, unapplied cash bill payment expense. It's the same thing. It's somebody entered a date of a bill payment that preceded the date of the bill. Just change the dates and you'll be fine on that one. Uncategorized expense. I mean, that's sometimes just a category that people put things in. It probably came from the bank feed. Again, you just need to come in here and just change it. Starbucks, maybe it's meals and entertainment, maybe it was You know, marketing promotion, maybe gave away some gift cards. I mean, it could be anything in here. So you just want to go in here, look at like Shell, it's probably auto, or actually for $3.18, you might have bought a candy bar. So you just need to find what those things are and like Shell, probably auto, and just come in and put them in the right category. That'll help clean that up. So I hope this was a helpful video. I know that was a lot to cover, but it's just some of the places that I do see these things that need to be addressed. Not so much on the profit and loss, just looking at your, your categories. If you're not in Simple Start and you're in, you know, in a file that's Plus or Essentials, you have this report where you can actually go through and look at every single thing that's in each account and just kind of go through almost like a general ledger style to see what all the categories are and what's in here and if these are the things that should be in here. This is a nice little view and kind of slide through it and look at every single transaction. If you have QuickBooks Online Accountant, you can come in and just look at the reclass. This is where I spend my life going through these files. And you can just come in here. I'd like to change it to say All. And what I really love about it is I can come in here and just look and see that, all right, sales income. And this is— you can see that these were invoice-based because it's got the little dot. You can't really change that unless you change that category like we did in the products level over here in the gear. But all of these things, and I like to just come in and just kind of do this to it so I can see you know, what these things are. And you can see if you want to clean any of these up. Like maybe this right here is— well, those are deposits from Intuit. But, you know, you can just go through and just correct any of these things that maybe don't belong in this particular category. So I hope this was helpful. I hope that just going through these categories and these different processes help you going through your books to clean your books. Of course, if you need professional help and you want to reach out to me or anybody, your accounting professional. It's just a wise idea if this is kind of like, like too much information. And maybe you're thinking that maybe this is way more than you really want to handle yourself, let a professional handle it. But I hope that this will help you step through and really get through the categories and then really look at what your— where your books are at and give you a better clean data. Good data is a great place to start when you start to look and analyze. So now we've gone through all these steps. Then part 3 will be us analyzing the data, taking a look at where we're at, comparing year to year, and really try to figure out what you can do to save money, make money, whatever would work in your file. So thank you for watching. I hope that was helpful, and I'll be back next week. Bye now. Bye.