QuickBooks 2005: The Missing Manual

Steps to Take Before You Create Your Company File

If you've just started a business and want to inaugurate your books with QuickBooks, your prep work will be a snap. On the other hand, if you have existing books for your business, you have a few small tasks to complete before you jump into QuickBooks' setup. Whether your books are paper ledgers or electronic files in another program, gather your company information before you open QuickBooks. Then, you can hunker down in front of your computer and crank out a company file in no time. Here's a guide to what you need to create your company file in QuickBooks.

A start date

To keep your financial history at your fingertips, you need every transaction and speck of financial information in your QuickBooks company file. But you know that you have better things to do than enter years' worth of checks, invoices, and deposits, so the comprehensive approach is practical only if you started your company quite recently.

The more realistic approach is to enter account balances and transactions that are open (unpaid invoices or bills you haven't yet paid) as of a specific date and from then on, add all new transactions in QuickBooks. In QuickBooks, the date you choose is called the start date and you shouldn't choose it arbitrarily. Here are your start date options and the ramifications of each:

GEM IN THE ROUGH : Using a Sample File

QuickBooks comes with two sample files: one for a product-based business and the other for a service-based business. To experiment with QuickBooks features before you put them in production, in either the Welcome to QuickBooks window or the No Company Open window, click "Open a sample file" and then choose either "Sample product-based business" or "Sample service-based business." If you botch your experiment, you can always reinstall the sample files from the QuickBooks CD.

These files aren't suitable as your company file because they come with accounts, customers, vendors, and transactions such as checks, invoices, and purchase orders. Besides, QuickBooks sets the date to 12/15/2007, which makes transactions later than you or your vendors would like.

• The first day of the year. If you're setting up QuickBooks during the first half of the year, bite the bullet and choose the first day of the company's fiscal year as the QuickBooks start date.

  Yes, you have to enter checks, credit card charges, invoices, and other transactions that occurred since the beginning of the year, but that won't take as much time as you think. You'll regain those hours when tax time rolls around and you nimbly generate the reports you need to complete your tax returns.

• Any other day of the year. You can choose any other date during the year as your QuickBooks start date.

When you produce hundreds of invoices, bills, and paychecks each month, data entry takes time no matter how helpful QuickBooks is. So if your company churns out transactions, a mid-year start date might be the only sane thing to do. If you've made it to the last few months of the year, you can always postpone your QuickBooks setup a few more weeks and start fresh with the next fiscal year.

Note

Using a mid-year date reduces your data entry–you enter opening balances and create any open transactions (such as unpaid bills and invoices). You won't have a full year's detail in your reports and you might have to dig into your fling cabinet to research pre-start date transactions.

Finding account balances and open transactions

Unless you begin using QuickBooks when you start your business, you have to enter opening balances to get things rolling. For example, if your checking account had $342 at the end of the year, that value becomes the opening balance for your QuickBooks checking account. Here are the balances you need to know and where you can find them in your records:

• Cash balances. For each bank account you use in your business (checking, savings, money market, and so on), find the bank statements with statement dates as close to but earlier than the start date for your QuickBooks file. The ending balance from a statement becomes the opening balance for that account in QuickBooks.

  Check deposit slips and your checkbook register for transactions that haven't yet cleared in your bank accounts. Then enter those as transactions (as described in the rest of this book) so your company file is up-to-date with your real-world bank account. If you have petty cash lying around, count it and use that number for the opening balance for your petty cash account.

• Customer balances. If customers owe you money, pull the paper copy of every unpaid invoice or statement out of your filing cabinet. If you didn't keep copies, you'll have to figure out how much you sold in services and products, the discounts you applied, what you charged for shipping and other charges, and the amount of sales tax. As a last resort, you can ask your customers for copies of the invoices they haven't paid.

• Vendor balances. If your company considers handing out cash more painful than data entry, find the bills you haven't paid and get ready to enter them in QuickBooks. If you'd rather reduce the transactions you have to enter, pay those outstanding bills.

• Asset values. When you own assets such as buildings or equipment, the value of those assets depreciates over time. If you've filed a tax return for your company, you can find asset values and accumulated depreciation on your most recent tax return. If you haven't filed a tax return for your company, the asset value is typically the price you paid for the asset and you won't have any depreciation until you file that first return.

Note

You don't have to enter an opening balance for the Accounts Receivable asset account. QuickBooks calculates it for you using the opening balances for each of your customers.

• Liability balances. Unpaid vendor bills that you enter in QuickBooks generate the balance for your Accounts Payable liability account. However, you must find the current balances you owe on any loans or mortgages.

Tip

If you have outstanding payroll withholdings such as employee payroll taxes, send in those payments so you don't have to enter those open transactions in QuickBooks.

• Inventory. For each product you stock in inventory, find the records that show how much you paid for those products. You also need to know how many items you had in stock as of the start date.

Note

QuickBooks isn't very good at working with inventory that you assemble from components or raw materials. The QuickBooks Premier Manufacturing Edition offers inventory assembly that's a start.

• Payroll. Payroll services offer great value for the money, which you'll grow to appreciate as you collect the information you need for payroll (including salary and wages, tax deductions, benefits, pensions, 401(k) deductions, and other stray payroll deductions you might have). You also need to know who receives withholdings, such as tax agencies or the company handling your 401(k) plan. Oh yes, you need payroll details for each employee. Chapter 11 explains the ins and outs of payroll using QuickBooks.