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In this Issue:
What to do
when a customer overpays?
Determine if a refund check
will be issued or will the funds be retained
on account to be used against other
outstanding invoices or future sales to the
Here is an example to
illustrate your options:
Customer, Red Blooms, sends you a check (number 5689)
for $48.00 to pay for two invoices #35 $18.00 and #42
1. The receive payments window only shows invoice #42
2. By conducting a search on $18.00 (Edit menu > Advanced
find > select the filter "amount" and click on the
radial button "=" and enter $18.00 > click Find) it is apparent
that Red Blooms has previously paid the $18.00 under
their check number 5650.
Option One: Refund the overpayment:
3. Enter in the receive payment window the check number
5689 but enter an amount of $20.00 and apply to
invoice #42. In the lower left of this window click on
"group with undeposited funds". Save
4.From the banking menu,
click on Make deposits, select all the
checks that apply to the deposit, click OK.
On the 2nd window, click on the next available line
under "received from" and
enter the customer name Red Blooms. Tab to
the next column and type "Customer refunds"
as the account name. You will be required to
set up this account, select type = "income".
In the memo field, put a note to describe
the transaction and enter the amount in the
far right corner. Save and Close
5. From the "write checks" window, create a
check payable to "Red Blooms" (customer) and
code to the account "Customer refunds".
Enter description into memo field. Save
print the check. The customer refunds
account now has a zero balance. The
account's only purpose is to clear the
overpayment deposit and return payment to
Apply the overpayment "on
3. Enter in the receive payment window the check
number 5689 in the amount of the payment received
$48.00. Place a check next to the invoice #42 $20.00 and
do not place a checkmark next to any other invoice.
Clicking save and close will leave the $18.00 as a
credit on the account. A pop up window will remind
you that this amount will be left open (as a credit) to
be used against future invoices entered into the system.
4. Consider mailing the customer a new statement
(Customer menu > Create Statements)
which will notify the customer of the new credit on his
account. Doing so will alert the customer to send
instructions with his next check as to which invoices to
apply the overpayment.
5. When the customer has incurred additional invoice
charges to his account and has instructed you to use the
$18.00 credit, you can apply the credit as follows:
Open the receive payment window > select the customer >
highlight the invoice to which the payment will be
applied > click on set credits > click done . This
procedure will link the credit (overpayment) to the
invoice specified by the customer.
Its many months later and
overpayment placed on the
account was never used:
6. It is now 12 months later and it does not look as
if the customer who overpaid will be buying any
additional services or products from your company.
You can choose to refund the overpayment or
write off the credit.
Write off the credit
Create a statement charge of $18.00 to write off the
Customer menu > Statement Charge > Select the customer >
Enter today's date, for a number type "adjust", for
item, type "Adjustment or write offs", set up as an
other charge item type and select an income account from
your chart of accounts. For
amount charged, enter 18.00, under description, type a
note as to the reason for the adjustment, click on
To remove both the credit balance and the new statement charge
from current reports, you must link the charge write off to the credit
Customers menu > Receive payments > Enter customer name
Red Blooms > highlight the new invoice for $18.00 and
click on Set Credits > place a checkmark next to the
Credit > Done
Refund the overpayment
If after several months the customer has not
utilized the credit you can refund his money by entering
a journal entry and writing a check:
Create a journal entry to adjust the customer
credit balance" : type Red Blooms in customer name
Credit "Customer refunds" (new account type="income")
Write a check payable to customer name for
$18.00 and code to Customer refunds
your year end QuickBooks reports pass muster
with your tax preparer?
You may not be
graded by your tax preparer, but when you
get their invoice to pay for services you
may wonder if you could have prepared a
little better before dropping off your QuickBooks
company file. For Tax reports to
be correct you must first begin January
1 with the same asset and liability
balances reported on your prior year tax returns. You can find out what was reported by
turning to page 4 of your Last year S Corporation
or Partnership tax return. Compare these
amounts to your QuickBooks balance sheet as
of 12/31/tax year.
the reports menu >
Company & Financial >
Balance Sheet Standard >
Set date to 12/31/tax year
Failure to make
these adjustments each year will require
your accountant to spend additional time
fixing the same problems year
after year. Having your QuickBooks file
updated with accurate balances and swept clean
of problem transactions will
reduce the time your accountant must spend
with your data plus provides you with an
added bonus of identifying mistakes throughout the
beginning balances in QuickBooks to agree to
the tax return can be tricky. Use of
journal entries will speed the process but
some adjustments such as inventory may
require an adjustment to the item's
quantities and values. Changing a reconciled
cash balance or the balance of the accounts
receivable or accounts payable account, may
correct your 12/31/prior year balances but
create havoc with the balances
currently in QuickBooks.
To avoid problems, adjust the 12/31/prior
(if necessary) to agree to the tax return, then
create a reversing journal entry as of
1/1/tax year to return order back to these
accounts. Set up an income type of account called
"balance adjustment" to use on the
reversing entry rather than your regular one
of your regular income accounts. Doing so
will make it easy for you to find these
transaction adjustments again.
Have you "forced"
any of the cash accounts to balance during
reconciliation? Look at your chart of
accounts for an equity account named
"opening balance equity".
QuickBooks applies all
improperly recorded transactions to the
opening balance equity account.
If there is a balance in this
account, edit each
transaction that is dated in during the Tax
Year you are reviewing and change the account to an
expense account or income account.
For example, consider using the account,
bank service charge in lieu of "opening
balance equity" for an automatic journal
entry created during a bank reconciliation
and consider using a "purchases" account in
lieu of "opening balance equity" for an
automatic journal entry created during an
Be sure to investigate why the person who is
reconciling is not resolving problems prior
to hitting the reconcile window.
For assistance making these changes, call
800-216-0763 to speak with our
QuickBooks Advisors and CPAs. We can
walk through the adjustments that are
needed as part of an annual QuickBooks
support plan or per call service plan.
Don't stop, you
are not quite done with your review. Run
a Profit & Loss report and double click
net income. In this report, look for inappropriate transactions
found in the wrong accounts. For example, the income accounts
should hold invoices, sales receipts, deposit
transaction types but not bills, checks or
credit cards. There should not be
invoices or sales receipt transactions in
your cost of goods sold accounts and expense
accounts. If you do spot an
inappropriate coding, double click to
open the original transaction select the
correct account or if items were used, make a note
of the item causing the problem. From the list menu, select
item list and highlight the questionable
item. Right click and edit this item to see
what account has been recorded as the
default for this item. Some items can be
used in both a sale and a purchase. If this
is one of those types, you need to expand
the item to a two-account item by clicking
on the square option box "this service is
performed......" or "this item is purchased
and sold...." Once expanded, enter the
expense account on the left side and the
income account on the right side.
Call us at 800-216-0763 for assistance cleaning
up your list items and for more detailed explanations on the
best way to handle transactions.
running too slow?
If you have recently
upgraded QuickBooks, it may be running slow
because your PC is more than 3 years old. As
Intuit has added more features to its products and
increased the sophistication of existing features,
older PCs will lack the processing speed and
memory to run the products at an acceptable speed.
And run QuickBooks with at least 1 gig of Memory.
If your computer is
fairly new, a slow running QuickBooks may be due
to the size of your QuickBooks file. It is
seldom necessary to keep more than a year or two
of detailed historical accounting records in your
file. Consider using the QuickBooks utility called
"Condense" (or clean up) to eliminate the old data and speed up
the transaction and reports response time. In a
Condense, QuickBooks will delete all the
transactions you no longer need to keep your
records current, replacing them with new
transactions that summarize, by month, the deleted
transactions. This procedure will enable you to
clean up your lists by deleting old customer and
vendor names that will no longer be used.
Still want the
detail? In fact, we recommend keeping the detail,
but in a different company file. By creating
a "clone" of your company file, you may
access old data in the slower file at any time
Here is how:
1. From the File
menu > click Open a company file
2. Right click on your company file > click on
3. Right click again > click on Paste - A
new company file appears called "copy of
4. Left click (only once) on the newly created
"copy of your company" to highlight>
right click and select "rename" and change
the name to "OLD Do Not Use data Prior to
(enter todays date).qbw"
5. Double click on this newly created copy to open
up. From the company menu > select Company
information > Change the name of the company to
"Old Company name Do Not Use" > click on
OK. This will change the name on your reports and
windows within QuickBooks to avoid erroneously
entering new data into this "reference only"
The above 5 steps take
less than 5 minutes and create a comfort level for
condensing old data on your regular QuickBooks
To condense the data:
File > Utilities > Clean UP
or older editions:
File menu> Archive and condense data > select
Condense transactions as of a specified date.
> Enter a date to condense the file to that will leave one year of
comparative data open on your working company
file)> click on Next
> Place a checkmark next to "remove transactions
marked "to be printed"; remove invoices marked "to
be sent"; and, remove transaction containing
"unbilled (unreimbursed) costs.> click on
> Select those list items that you would like
removed: Removing unused accounts,
vendor & other names, unused invoice items
and done "to do" notes is generally a good idea.
Removing customer names (and their addresses) that are inactive before the condense date
may not be wise.
First determine if there may be untapped marketing
potential with these customers.
If you choose not to remove
customer names, when the condense is complete,
you may pick and choose unused names to delete
from the list menu by highlighting the name/item
and typing the "Ctrl key + D" at the same time.
QuickBooks will not let you delete any
account/name/item that has a transaction linked to
it or is used elsewhere in the software. Read more
about condense in the QuickBooks Help Index under
"condensing data". If you would like an
experienced QuickBooks Pro Advisor overseeing this
procedure call 800-216-0763 to speak with
our QuickBooks Advisors. Get help with the adjustments that are needed
as part of an annual QuickBooks support plan or
per call service plan.
Condensing is one of many tips available for
reducing wait time.
If you are using a multi-user QuickBooks and the
performance appears to be slow, cut your workload and speed up
performance by turning off "auto refresh"
feature on your reports. From the Edit menu
> Preferences > select Reports and graphs on the
left icon bar > select the don't refresh option
>click OK. Each report has a refresh button
on the top of the reports window. You will need to
get into the habit of clicking the refresh each
time you look at a report that is open on your
We offer a new file start service where we take
your company file and return a new one to you with
one year of data ! Call 800-216-0763 for
Do-it-yourself Cafeteria plans
Cafeteria plans (Code
section 125) makes it possible for employers to offer
their employees a choice between cash salary and a
variety of nontaxable benefits (qualified benefits). A
cafeteria plan, including a flexible spending
arrangement, is a written
plan that allows your employees to choose
between receiving cash or taxable benefits instead of
certain qualified benefits for which the law provides an
exclusion from wages. Contributions are not
considered wages for federal income tax purposes, and
those sums generally are not subject to FICA and FUTA
taxes that save the employer up to 8% in payroll taxes
on the value of the elected benefits.
Premiums deducted from the
employee's paycheck for accident and health benefits
including health care, vision and dental care (but
not medical savings accounts or long-term care
insurance). Exempt from
Health flexible spending
accounts for expenses not reimbursed under any other
health plan. Exempt from
. Subject to
FICA/Med/FUTA- but exempt from Fed withholding
Dependent care assistance.
Exempt from Fica/Medicare/Fed
withholding up to certain limits, $5,000 ($2,500 for
married employee filing separate return). The
exclusion cannot be more than the earned income of
either the employee or the employee's spouse
Group-term life insurance
coverage Premiums for $50,000 are
exempt from Fica/Medicar/FUTA/Federal withholding.
Over $50,000 exempt from Fed withholding & Futa
only). Special rules apply to qualify for this
benefit. Find out more in IRS publication 15B
available in PDF format at
S Corp owners with more
than 2% ownership do not qualify to participate in this
plan. Plans that favor highly compensated or key
employees require special attention -see your tax
advisor. Dependent care benefits include amounts
placed into a flexible spending account under a salary
reduction arrangement if the benefit provided was day
implementing such a pre-tax benefit plan was costly. You
had to hire out the administration to an outside service
company. But we found a company that has put together a
"do-it-yourself cafeteria plan kit".
Click here to read more about these services.
What is the break even of
implementing a Section 125 plan? Employers pay
social security taxes on wages, but convert those wages
to benefits and save 7.65%. To set up such a plan is $97
(for the templates for the plan document) and $197 per
year for the software to track what needs tracking and
produce a year end information return 5500 for the
annual break even is calculated by taking the annual
cost of $197 and dividing by 7.65% or
$2,600. Bottom line, if your employees
contribute as little as $2600 in after tax deductions of
health insurance premiums, setting up this plan costs
you nothing and saves the employee social security taxes
and federal income taxes of an average of $575.00.
Now introduce a dependent care plan to the mix with flex
medical spending and the employer begins to save
thousands in payroll taxes and the employee's saves even
more! A win/win scenario for