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 for Small Business     Volume 7

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In this Issue:


Don't second guess what information is included in QuickBooks reports!

You can't tell a book by its cover and you cannot determine what information is being displayed from the name of the QuickBooks report.  Make sure you understand what information is included in a report before coming to the conclusion that there are mistakes and problems with your data. 

QuickBooks is a collection of data: part numbers, account codes, customer information, etc. It is data stored in a computer file that can be searched and retrieved by using predefined reports or customizing report content to fit your needs.  In QuickBooks, the information retrieval process is known as 'filtering'.  And you can identify what information is being displayed running the report and clicking on the modify button (upper left corner on the report bar) and clicking on the filter tab. 

While you are reading this article, open the following report
Reports > Vendor & Payables > Vendor Balance Detail Report.  Many QuickBooks users expect to see all their vendor activity on this report.  Click on the modify button and then click on the filter tab.  Take note that this report has been filtered for the accounts payable account. Therefore it will only display transactions that have been included in accounts payable account. So what transaction types are part of accounts payable?

Half the battle of mastering QuickBooks and the reports is learning which accounts are affected by each  transaction type. 'Enter bill', 'Write check', and 'Credit card charges'  are similar in that they  permit you to record an expense, loan payment or purchase an asset.  BUT,  only one will increase your accounts payable account (bill), one will reduce your cash (check) in your bank account and another will increase what you owe on your credit card (credit card).  

Is it wrong to use  'write checks' to pay a vendor?  Or to record a payment to vendor using a credit card? No! But neither of these transactions will appear in the Vendor Balance Detail Report because this report will only display transactions which passed through the accounts payable account. No problem! Other reports exist to provide the information you seek.  For example, the Expenses by Vendor Detail Report, found under the Company & Financial reports menu, will display all the expense purchases from each vendor regardless of the transaction type entered into QuickBooks. Run the Expenses by Vendor Detail Report and click on the modify button, and then click the filter tab. This report will display all transactions coded to an expense account AND only if a vendor name was used. Therefore it will exclude transactions to employees, customers and other name types and money disbursed for loan payments and asset purchases.  No Problem!

In our last newsletter - Before you can depend on your reports, office procedures must be in place and followed to help weed out inconsistencies.  Gain business insight by building, filtering, saving and reviewing the same reports month to month and year to year. 
Read more about the reports to review at month end.

Most reports are flexible and will allow you to add or change the filter criteria used to include the data you would like to see. Take the Expenses by Vendor Detail Report one step further to include all names regardless of name type (vendor, customer, other, employee). Clicking in the Filter tab, then on the Name Filter, then in the dialog box, click on the blue down arrow and scroll to the top of the list.  Click on All Names to display transactions  for customers, vendors, employees, and other name types, or click on selected Names to pick more than one name from a comprehensive list of names. 

Add loan payments that you want to see displayed on this report?  Click on the account filter, scroll to the top of the dialog box list and click on selected accounts and check off all the loan accounts you want included and place a checkmark next to all the expense accounts you would like included in the report. 

Our QuickBooks Training CDs (see advertisement below) is an ideal training solution for new users to gain the understanding you need to master QuickBooks and all the different transaction types.  For individuals who have spent some time with QuickBooks but need a comprehensive overview to see what they have missed, consider attending one of our live seminars mentioned in this newsletter.  We specialize in helping small business owners correct and understand their reports. And we can customize your QuickBooks to reduce future errors. If you need assistance, give us a call 800-216-0763 and allow us to demonstrate how our support works.


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Bookkeeping Links
Cash versus Accrual accounting
Chart of Accounts
Record Retention Periods
Accounting Basics


Office procedures manual that includes a QuickBooks how to guide.

An office procedure manual is a written 'how to' guide describing the preferred  policies of management.  Having such a guide is guaranteed to reduce errors and reduce training time over the life of your business.

A policy & procedure manual is a tool your employee can use to quickly become a productive member of your team. It empowers them by providing guidance and training and sets boundaries on authority.   We all have seen the chaos a new or temporary employee can inflict because of poor training. Not to mention the downswing in your productivity because of the constant interruptions with questions. Much of which can be easily addressed in an office procedures guide.

Be prepared for some employee resistance to documenting their job. It is natural for an employee to want to remain indispensable, but remind them about how handy it will be should they become sick or hurt and require time away from work.

Since each company has a different culture and employs people with varying degrees of education there is no cookie cutter training manual that is easily customized. The procedures need to be detailed enough to provide a newly hired individual with the guidelines needed to complete the job and make decisions.  Write the manual with enough detail that someone without as much education or training can manage the basics of the job. 

Documenting procedures and policies can  appear to be an overwhelming task and therefore may finds its way to the bottom of the 'to do' pile.  Instead, allow yourself several months to complete this task. Breakdown the writing into phases. Create an outline of what you would like included and  address one part each week. For example, by next Friday, have everyone outline their job, the following Friday may include writing a procedure for one or two aspects of their job. Don't get hung up over grammar or style, more importantly is having the documentation on how each job function is performed. You can always standardize the format at a later date keeping in mind that the manual will be a continual work in progress as technology and procedures change and systems are streamlined.

Here are a few ideas to get your manual started.  Include:
Passwords (who is responsible for the list of all passwords used on all computers and updated every time there is a change). Where, is this information stored and secured?
Backup procedures for the server and also individual workstations including frequency and what should be backed up.  Plus - how often a 'test restore' is performed to make sure the backups are working as intended and the backup media is not damaged.
IT - Computer security including access, data storage, who has access, remote access policies,
what can be downloaded from the internet, adherence to software license and management polices.
Disaster recovery plan in the event of a fire or weather related catastrophe.
Who has authority to commit the company to contracts with customers & vendors.
Who can procure supplies, goods & services and are there any applicable limits. Who has use of company credit cards.
What are the vendor payment policies.  What documentation is required before payment can be approved such as purchase orders, pricing,  and goods receipts.   What is the pecking order of who gets paid in the event of cash flow crunches.
What are the accounts receivable policies such as authorization to establish new accounts, credit limits, pricing policies, authorization to issue credit memos and write off bad debts. Invoicing policies - how often, which forms, what pricing and approvals are required.  Remember the customer list is an asset of the company and access should be based on need only. Any printed copies should be numbered and accounted for. If you maintain records on customer credit cards  what policies are in place to protect customers from credit card theft, what policies are in place to protect personal information of customers.
You can find confidentiality and discrimination policies on the web and then have your attorney review.
Provide employee payroll procedures & benefits. Who is entitled to company paid benefits and what cost is born by the employees?  What forms should be included in an employee file, how often are performance reviews completed? Who is the benefit plan administrator and who is responsible for providing the plan administrator with the information needed?  Are there plan documents and where are they filed? Who has access to employee payroll information (a key factor in preventing identity theft)? Sick leave and personal time off policies should be described.
Budgeting- Development and adherence to amounts and types of employee and management training.
List acceptable limits and describe what supporting documentation must be submitted for reimbursement for travel, entertainment, and auto. 
Describe nonacceptable uses of the office telephone and internet
including posting on social media sites. An Internet acceptable-use policy can save hundreds of nonproductive hours per year from an employee tempted to shop online and maintain social ties. Acceptable use might allow employees to check their e-mail or update their social networks before work or on their breaks. Be sure to educate employees on an ongoing basis, identifying the latest security threats and how their e-mail could be targeted. Newsletters or department meetings  might be a good forum for disseminating this information.  Purchasing online monitoring software that tracks what employees do online will discourage the employee who might spend hours shopping online, downloading videos or frequenting U-tube plus provide evidence should you need to let this employee go.
How does the filing system work? What records should be retained, location and filing frequency (daily, weekly, monthly),  how long they should be kept and where long term storage is maintained.  
Define the accounting use of each Chart of Accounts. Describe the types of payments that get coded to each account with a list of vendors that normally end up in the account. This will be a real handy guideline for a novice to bookkeeping.
When and how are taxes payable?  Provide a list of what taxes and licenses are paid with due dates and identify who is responsible for insuring payment and filing.
What are the month end policies?  Who will perform bank reconcilations, enter adjusting entries, what reports should be reviewed and what final reports should be printed and distributed.  Have your CPA review these policies to make sure you have the tightest possible grip on internal controls.

Provide a step by step how to guide on common data entry QuickBooks transactions (Invoicing, Bill paying, Payroll, etc).  Use screenshots of QuickBooks in your manual.  Also mention any procedures, hints and tips on correcting common mistakes.  With each QuickBooks data entry task mention, also list the reports you work with to review your work

Tip: You can grab a screen shot of a QuickBooks window by pressing the 'Ctrl' + 'Print Screen'  keys at the same time on your keyboard.  Doing so, places the image into memory for pasting into your manual. You will not see any change in your computer monitor until place the cursor in the spot in your document where you want the image to appear and press the 'Ctrl' + 'V' keys at the same time.  

An office procedure manual provides the guidance needed to help your employees work together in achieving the goals and mission statement of your company. 

Once the you have completed the manual,  make sure that it is never falls into the hands of your competition.  As a precaution, print and assign a unique number to each printed manual.  Do not allow the manual to be photocopied or removed from the office and before handing over a final paycheck to an exiting employee, be sure the office manual is returned.

Improved reports with the 'credit card charge' 


If you have set up an American Express or other credit card account in QuickBooks, you have seen how payments with credit cards vendors show up in detail expense reports under the vendors name and not the name of your credit card providing important expense management information.  Excellent detailed transaction reports include the 'general ledger'  and the 'transaction detail by account' both found under the  Accountant & Taxes section of the Reports menu.

1. To set up a credit card account (a separate account is needed for each credit card you use), from the List menu > Chart of Accounts > Right click and select New > Select 'Credit Card' as the type of account > Enter the name of your credit card (AmEx, Visa, or  Mastercard) and to differentiate when you have 2 or more of any one you can add the last 4 digits of the card number. 

2. To enter monthly purchases on your credit card,  from the banking menu > record credit card charges > and then select 'enter credit card charges'.   Entering each transaction on your credit card statement will provide you with important management information and help your accountant prepare your tax returns.

3. To make a payment to the credit card company,  use a write check transaction and code the check to the credit card account you created in step 1.
Other uses of  the 'credit card' type of account:
Officer Loans
Occasionally business owners use their personal funds (cash, personal checking, personal credit cards) to pay business expenses. Setting up an officer loan account as a credit card account will permit the use of the 'enter credit card charge' form for data entry.  And as mention earlier, this form allows us to enter the vendor/payee name providing important information about the item or service purchased and still track the amount as reimbursable to the business owner. 
InterCompany Loans
When you are managing several corporation/business entities with QuickBooks,  and  one company regularly pays expenses on behalf of a sister company, then the credit card account type will create more meaningful reports making reconciliations of the intercompany loans a breeze.   Lets assume Company A pays expenses for Company B.  In Company B set up a 'Due to Co A' . in the QuickBooks file of the affiliate as a credit card type of account.  Enter in the 'enter credit card charges' all payments made by Company A using the same vendor names.   In Company A  set up an asset account, 'due from Co B''.  Code all checks, bills, and credit cards made on behalf of the Co B to the 'due from Co B' account.  At the end of each month, make sure these intercompany accounts have the same ending balance.  

The inside scoop on IRS audits:
What business deductions can I take on my tax return?

A very reasonable question. A few rules of thumb:  "any reasonable and necessary " expense is deductible unless there is a specific provision that limits the deduction in the IRS code.    An example of a limitation is 50% of meals & entertainment expenses are not allowable. Examples of  a nondeductible expenses are political contributions and fines and penalties.   A deduction arises when you spend money. So if you are retaining income to fund future growth you are not spending so plan on paying income tax.

A lot of the IRS code is pure common sense. Restrain  urges to be 'piggy' about taking excessive deductions.  For example, if your competition does not spend oodles on Meals & Entertainment, and you do, then your tax return will tend to stand out.  So find out what is reasonable for your industry. And pay your taxes timely (ie: don't use tax money to fund your business growth).  For more valuable tips on tipping the odds in your favor of never be called in to justify your books and records see the audit guides below!

To be truly informed about what the IRS looks for in a tax audit, read the manual the IRS wrote for their rookie staffers right out of school.  Written in plain English, learn about what the IRS believes is not so reasonable and how they fish out those questionable expenses and uncover undisclosed income. 

To download the IRS audit guide for your industry, click on the industry link below that most closely resembles the way you do business (please take note of the date published and check with your CPA for any additional tax regulations or changes since date published):
Architects, Artists and Art GalleriesAttorneys, Auto Body and Repair Industry, Auto Dealerships, Beauty and Barber Shops, Bed and Breakfasts, Business Consultants, ConsultantsCar Wash Industry, Carpentry/Framing, Cash Intensive Businesses, Child Care Providers, Commercial Banking, Commercial Printing, Computers, Electronics and High Technology, Construction Industry, Drywallers, Entertainment, Entertainment - Music Industry, Hobby-Loss Rules, Farm Hobby Losses, Farming - Specific Income Issues and Farm Cooperative, Furniture Manufacturing, Garden Supplies, Garment Contractors, Garment Manufacturers, Gas Retailers, General Livestock, Grain Farmers, Hardwood Timber Industry, Independent Used Car Dealer, The Laundromat IndustryManufacturing Industry, Masonry and Concrete Industry, Ministers, Mobile Food Vendors, Mortuaries, Oil and Gas Industry, PartnershipsPizza Restaurants, Coastal Waterways Industries, Poultry Industry, Reforestation Industry, Restaurants and Bars, Retail Gift Shop, Retail Liquor Industry,  
Scrap Metal IndustryShareholder Loan, Sports FranchisesTaxicabsTobacco Industry, Tour Bus Industry, Trucking Industry, Veterinary Medicine, Wine Industry
Updated guides found on IRS website, IRS Auditor handbook on which penalties they can negotiate (chapter 20)


We make QuickBooks work for you!  We clean up your files, provide one on one training, and make sure that you know when an error has occurred. Don't need help right now? Please tell your customers, vendors & business contacts that we are here. 800-216-0763.  An affordable and top notch service is available immediately by our  CPAs and Certified QuickBooks advisors. 
Tax and accounting regulations mentioned herewith or at the QBalance website are intended for businesses or individuals residing in the United States.  Tax and accounting regulations can be complex. Exceptions and circumstances will impact how a regulation applies to your unique situation.  Therefore information presented should not be relied upon without seeking professional advise from your accountant or attorney.

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