Introduction
Thousands of small companies and nonprofit organizations turn to QuickBooks to keep company finances on track. And over the years, Intuit has introduced editions of QuickBooks to satisfy the needs of different types of companies. Back when milk was simply milk, you either used QuickBooks or you didn’t. Now that you can choose milk from soy beans as well as cows and five different levels of fat, it’s no surprise that QuickBooks comes in Simple Start, Pro, Premier, Online, and Enterprise editions, which, in some cases, are dramatically different from their sibling, as well as six industry-specific editions. From the smallest of sole proprietorships to burgeoning enterprises, one of the QuickBooks editions is likely to meet your organization’s needs and budget.
QuickBooks isn’t hard to learn. Many of the techniques that you’re familiar with from other programs work just as well in QuickBooks—windows, dialog boxes, drop-down lists, and keyboard shortcuts, to name a few. With each new version, Intuit has added enhancements and new features to make your workflow smoother and faster. The challenge that remains is knowing what to do according to accounting rules, as well as how to do so in QuickBooks.
What’s New in QuickBooks 2009
Despite the fluctuating size of the tax code each year, accounting and bookkeeping practices don’t change all that much. Many of the big changes in QuickBooks 2009 are in the Enterprise edition or the Premier Accountant’s edition. Although the changes in the Pro and Premier editions tend to be small tweaks and subtle improvements, a few additions might be just what you’ve been waiting for:
Multiple currencies. If your company has gone global, you can now set up accounts (Creating an Account), customers (Entering address information), and vendors to use either your home currency (the one you use most of the time) or a foreign currency. QuickBooks creates additional Accounts Payable and Accounts Receivable accounts for each currency you use. When you record transactions in foreign currencies and apply exchange rates (Recording Deposits), the program calculates the amounts in your home currency. You can also keep track of the gains or losses you’ve incurred due to currency exchange rates (Reviewing expenses by vendor).
Company status dashboard. To see all the key info about your books in one place, simply open the Company Snapshot window (The Company Snapshot). This window is a mashup of your income and expenses, account balances, outstanding invoices and bills, and reminders. To take a closer look at anything in the Company Snapshot window, hover your pointer over an entry. When the cursor switches to a magnifying glass, double-click to see a quick report.
Share your company file with your accountant more easily. In QuickBooks 2009, you can set up an external accountant user so your accountant can access every part of your company file—except for your customers’ sensitive financial information like credit card numbers. In addition, your accountant has new tools (like the Client Data Review feature described on 1099s) to help her review and work on your company file.
Collaborate with colleagues. The QuickBooks Messenger sits quietly in the Windows System Tray (usually at the lower-right corner of your monitor) until you want to send a message to others working on a company file (for example, to ask them to log off so you can perform administrative magic on the file). Double-click the QuickBooks Messenger icon (Adding New Users) and you can start chatting with another person logged into the file. Or you can send a message to everyone logged into the file.
QuickBooks 2009 is also better behaved in a multi-user environment. People don’t have to log out of a file while QuickBooks is backing it up. And the Server Busy messages that used to pop up far too frequently no longer appear.
Improved online banking. The Online Banking Center is better-looking and makes online banking tasks easier. If you forgot to record transactions, you can select a downloaded transaction and fill in the missing info right in the Online Banking Center. You can match a downloaded deposit to a payment you forgot to record in QuickBooks or even to an open invoice. If you already reconciled transactions, you can easily delete downloaded transactions that you don’t have to match.
Live Community. If you turn to QuickBooks’ message boards for answers, Live Community (Live Community) brings those discussions one step closer. In QuickBooks, choose Help → Live Community to open a window where you can search for answers from other QuickBooks fans—or answer someone else’s questions.
Commands on shortcut menus. In earlier versions of QuickBooks, some commands like Delete obstinately remained on the menu bar’s drop-down menus. You’d be working in a window like Create Invoices or Write Checks, and the only way to delete a transaction was to choose Edit → Delete Invoice or Edit → Delete Check. In QuickBooks 2009, you can right-click these windows (and others) and choose commands from shortcut menus.
Big numbers. If your company is wildly successful, QuickBooks can keep up with your ever-increasing income—now that it can handle numbers up to 10 trillion.
When QuickBooks May Not Be the Answer
When you run a business (or a nonprofit), you track company finances for two reasons: to keep your business running smoothly and to generate the reports required by the IRS, the SEC, and anyone else you have to answer to. QuickBooks helps you perform basic financial tasks, track your financial situation, and manage your business to make it even better. Before you read any further, here are a few things you shouldn’t try to do with QuickBooks:
Work with more than 14,500 unique inventory items or 14,500 contact names. QuickBooks Pro and Premier company files can contain up to 14,500 inventory items and a combined total of up to 14,500 Company:Job, Vendor, Employee, and Other names. (The Enterprise Edition increases these limits to 100,000.)
Track personal finances. Even if you’re a company of one, keeping your personal finances separate from your business finances is a good move, particularly when it comes to tax reporting. In addition to opening a separate checking account for your business, track your personal finances somewhere else (like in Quicken). If that somewhere else is QuickBooks, at least create a separate company file for your personal financial information.
Track the performance of stocks and bonds. QuickBooks isn’t meant to keep track of the capital gains and dividends you earn from investments such as stocks and bonds. But companies have investments, of course. A machine that costs hundreds of thousands of dollars is an investment that you hope will generate lots of income and you should track it in QuickBooks. However, in QuickBooks, these types of investments show up as assets of the company (Ship Via List).
Manage customer relationships. Lots of information goes into keeping customers happy. With QuickBooks, you can stay on top of customer activities with features like To Do items, Reminders, and Memorized Transactions. But for tracking details like membership, items sold on consignment, project progress, and scheduled events, another program like Microsoft Excel or Access would be a better solution.
Note
Intuit sells an add-on product called Customer Manager (Entering address information). Also, some third-party customer management products integrate with QuickBooks (Finding Third-Party Integrated Applications).
Choosing the Right QuickBooks Product
QuickBooks comes in a gamut of editions, offering options for organizations at both ends of the small-business spectrum. QuickBooks Simple Start and Online Edition cover the basic needs of very small operations. Enterprise Solutions are the most robust and powerful editions of QuickBooks, boasting enhanced features and speed for the biggest of small businesses.
Warning
QuickBooks for Mac differs significantly from the Windows version, and you won’t find help with that version of the program in this book. As of this writing, only QuickBooks Mac 2007 was available, but rumors about QuickBooks Mac 2009 abound.
This book focuses on QuickBooks Pro because its balance of features and price make it the most popular edition. Throughout this book, you’ll also find notes about features offered in the Premier edition, which is one step up from Pro. Whether you’re willing to pay for these advanced features is up to you. Here’s an overview of what each edition does:
QuickBooks Simple Start is more of a marketing tool, because you’ll quickly outgrow its limitations. (At that point, you can move your data to QuickBooks Pro or QuickBooks Online.) But, it’s a low-cost option for small businesses with simple accounting needs and only one person using QuickBooks at a time. It’s easy to set up and use, but it doesn’t handle features like inventory, tracking time, or sharing your company file with your accountant.
QuickBooks Online Edition has most of the features of QuickBooks Pro, but you access it via the Web instead of running it on your PC. It lets you use QuickBooks anywhere, on any computer, so it’s ideal for the consultant who’s always on the go.
QuickBooks Pro is the workhorse edition. It lets more than one person work in a company file at a time: you can purchase licenses in single- or five-user packs. QuickBooks Pro includes features such as invoicing; entering and paying bills; job costing; creating estimates; saving and distributing reports and forms as email attachments; creating budgets automatically; projecting cash flow; tracking mileage; customizing forms; customizing prices with price levels; printing shipping labels for FedEx and UPS; and integrating with Word, Excel, and hundreds of other programs. All QuickBooks Pro name lists—customers, vendors, employees, and so on—can include up to a combined total of 14,500 entries. Other lists like the Chart of Accounts can have up to 10,000 entries.
QuickBooks Premier is another multi-user edition. For business owners, its big claim to fame is handling inventory items assembled from other items and components. In addition, Premier editions can generate purchase orders from sales orders or estimates and can apply price levels to individual items. You can also track employee information and get to your data remotely. This edition includes a few extra features typically of more interest to accountants, like reversing general journal entries. Premier edition comes in different flavors targeted to several specific industries (see the next section, The QuickBooks Premier Choices). Like the Pro edition, Premier can handle a combined total of up to 14,500 list entries.
Enterprise Solutions is the edition for larger operations. It’s faster, bigger, and more robust. Up to 15 people can access a company file at the same time, and this simultaneous access is at least twice as fast as in the Pro or Premier edition. The database can handle lots more names in its customer, vendor, employee, and other name lists (100,000 versus 14,500 for Pro and Premier). You can have multiple company files, work in several locations, and produce combined reports for those companies and locations. With more people in your company file, this edition has features such as an enhanced audit trail, more options for assigning or limiting user permissions, and the ability to delegate administrative functions to the other people using the program.
The QuickBooks Premier Choices
If you work in one of the industries covered by QuickBooks’ industry editions, you can get additional features unique to your industry—for only a few hundred dollars more than QuickBooks Pro. Some people swear that these customizations are worth every extra penny. Others say the extra features don’t warrant the Premier price. On the QuickBooks Web site (http://quickbooks.intuit.com), you can tour the Premier editions to decide for yourself. Or, you can purchase the Accountant edition, which can run any QuickBooks edition, from QuickBooks Pro to the gamut of Premier industry-specific editions.
Accountant Edition is designed to help professional accountants deliver services to their clients. You can run any QuickBooks edition (that is, Pro, Premier, and industry-specific editions). In addition to being compatible with all other editions of QuickBooks, it lets you design financial statements and other documents, process payroll for clients, reconcile client bank accounts, calculate depreciation, and prepare client tax returns.
Contractor Edition includes special features near and dear to construction contractors’ hearts: job cost reports, different billing rates by employee, managing change orders, and other contractor-specific reports.
Manufacturing & Wholesale Edition is targeted to companies that manufacture products. It includes a chart of accounts and menus customized for manufacturing and wholesale operations. You can manage inventory assembled from components and track customer return materials authorizations (RMAs) and damaged goods.
If you run a nonprofit organization, you know that several things work differently in the nonprofit world, as the box on Accounting Basics—The Important Stuff details. Nonprofit Edition includes features such as a chart of accounts customized for nonprofits, forms and letters targeted to donors and pledges, help about using QuickBooks for a nonprofit, and the ability to generate the “Statement of Functional Expenses 990” form.
Professional Services Edition (not to be confused with QuickBooks Pro) is designed for the company that delivers services to its clients. Unique features include project costing reports, templates for proposals and invoices, billing rates that you can customize by client, billing rate by employee, and professional service-specific reports and help.
Retail Edition customizes much of QuickBooks to work for retail operations. It includes a specialized chart of accounts, menus, reports, forms, and help. Intuit offers companion products that you can integrate with this edition to support all aspects of your retail operation. For example, QuickBooks’ Point of Sale tracks sales, customers, and inventory as you ring up sales, and it shoots the information over to your QuickBooks company file. Similarly, Merchant Services (Merchant Services) and Virtual Terminal Plus let you take credit cards as payment, often far more cheaply than the deal you can get at your bank.
Accounting Basics—The Important Stuff
Intuit claims that you don’t need to understand most accounting concepts to use QuickBooks. However, the accuracy of your books and your productivity will benefit if you understand the following concepts and terms:
Double-entry accounting is the standard method for tracking where your money comes from and where it goes. Following the old saw that money doesn’t grow on trees, money always comes from somewhere when you use double-entry accounting. For example, as shown in Table 1, when you sell something to a customer, the money on your invoice comes in as income and goes into your Accounts Receivable account. Then, when you deposit the payment, the money comes out of the Accounts Receivable account and goes into your checking account.
Note
Each side of a double-entry transaction has a name: debit or credit. As you can see in Table 1, when you sell products or services, you credit your income account (you increase your income when you sell something), but debit the Accounts Receivable account (selling something also increases how much customers owe you). You’ll see examples throughout the book of how transactions equate to account debits and credits.
|
Transaction |
Account |
Debit |
Credit |
|
Sell products or services |
Service Income |
$1,000 | |
|
Sell products or services |
Accounts Receivable |
$1,000 | |
|
Receive payment |
Accounts Receivable |
$1,000 | |
|
Receive payment |
Checking Account |
$1,000 | |
|
Pay for expense |
Checking Account |
$500 | |
|
Pay for expense |
Office Supplies |
$500 |
Chart of Accounts. In bookkeeping, an account is a place to store money, just like your checking account is a place to store your ready cash. The difference is that you need an account for each kind of income, expense, asset, and liability you have. The chart of accounts is simply a list of all the accounts you use to keep track of money in your company. (See Chapter 3 to learn about all the different types of accounts you might use.)
Cash vs. Accrual Accounting. Cash and accrual are the two different approaches companies can take to document how much they make and spend. Cash accounting is the choice of many small companies because it’s easy. You don’t show income until you’ve received a payment, regardless of when that might happen. And you don’t show expenses until you’ve paid your bills.
The accrual method follows something known as the matching principle, which matches revenue with the corresponding expenses. This approach keeps income and expenses linked to the period in which they happened, no matter when cash comes in or goes out. The advantage of the accrual method is that it provides a better picture of profitability because income and its corresponding expenses appear in the same period. With accrual accounting, you recognize income as soon as you record an invoice, even if you’ll receive payment during the next fiscal year. If you pay employees in January for work they did in December, those wages are part of the previous fiscal year.
Financial Reports. You need three reports to evaluate the health of your company (described in detail in Chapter 17). The income statement, which QuickBooks calls a Profit & Loss report, shows how much income you’ve brought in and how much you’ve spent over a period of time. The QuickBooks report gets its name from the difference between the income and expenses, which results in your profit (or loss) for that period.
The balance sheet is a snapshot of how much you own and how much you owe. Assets are things you own that have value, such as buildings, equipment, and brand names. Liabilities are the money you owe to others (perhaps money you borrowed to buy one of your assets). The difference between assets and liabilities is the equity in the company—like the equity you have in your house when the house is worth more than you owe on the mortgage.
The Statement of Cash Flows tells you how much hard cash you have. You might think that the Profit & Loss report would tell you that, but noncash transactions, such as depreciation, prevent it from doing so. The statement of cash flows removes all noncash transactions and shows the money generated or spent operating the company, investing in the company, or financing.
About This Book
Despite the many improvements in QuickBooks over the years, one feature has remained mostly stagnant: Intuit’s documentation. For a topic as complicated as accounting software, all you get with QuickBooks is a small Fundamentals manual, which is little more than a list of tasks QuickBooks performs, with a reference to the Help topic for each. Any detail to be found is in the program’s online help.
QuickBooks Help now gives more in the way of technical background and trouble-shooting tips, although useful examples are still in short supply. The problem is finding the topics you want, because searching, the Relevant Topics feature (QuickBooks Help), and the new Live Community feature, which lets you ask your peers and experts for answers (Live Community), are your only options. The Help system doesn’t always tell you what you really need to know about using QuickBooks for accounting, like when and why to use a certain feature. And marking your place, underlining key points, jotting notes in the margins, or reading about QuickBooks while sitting in the sun are all out of the question.
The purpose of this book, then, is to serve as the manual that should have accompanied QuickBooks 2009. It focuses on the Windows version of QuickBooks Pro and Premier. Because the Mac version of the program differs significantly, you won’t find answers to QuickBooks for Mac here. (Mac fans are still working with QuickBooks Mac 2007 and hoping for QuickBooks Mac 2009.)
Note
Although each version of QuickBooks introduces new features and enhancements, you can still use this book if you’re keeping your company books with earlier versions of QuickBooks. Of course, the older your version of the program, the more discrepancies you’ll run across.
In these pages, you’ll find step-by-step instructions for using every QuickBooks Pro feature, including those you might not have quite understood, let alone mastered: progress invoicing (Creating Progress Invoices), making general journal entries (Balancing Debit and Credit Amounts), customizing forms (Changing the Order of Icons), writing off losses (Preparing for the First Reconciliation), and so on. If you’re just starting out with QuickBooks, you can read the first few chapters as you set up your company file. After that, go ahead and jump from topic to topic depending on the bookkeeping task at hand. As mentioned earlier, you’ll learn about some of the extra bells and whistles in the QuickBooks Premier edition as well. (All of the features in QuickBooks Pro—and in this book—are also in Premier.) To keep you productive, the book includes evaluations of features that help you figure out which ones are useful and when to use them.
QuickBooks 2009: The Missing Manual is designed to accommodate readers at every technical level. The primary discussions are written for people with advanced-beginner or intermediate QuickBooks skills. But if you’re using QuickBooks for the first time, special boxes with the title “Up To Speed” provide the introductory information you need to understand the topic at hand. On the other hand, people with advanced skills should watch for similar boxes called “Power Users’ Clinic,” which give more technical tips, tricks, and shortcuts for the experienced QuickBooks fan.
About the Outline
QuickBooks 2009: The Missing Manual is divided into five parts, each containing several chapters:
Part One: Setting Up QuickBooks, covers everything you have to do to set up QuickBooks based on your organization’s needs. These chapters explain how to create and manage a company file; create accounts, customers, jobs, invoice items, and other lists; and manage QuickBooks files.
Part Two: Bookkeeping, follows the money from the moment you rack up time and expenses for your customers and add charges to a customer’s invoice to the tasks you have to perform at the end of the year to satisfy the IRS and other interested parties. These chapters describe how to track time and expenses, pay for things you buy, bill customers, manage the money that your customers owe you, pay for expenses, run payroll, manage your bank accounts, and perform other bookkeeping tasks.
Part Three: Managing Your Business, delves into the features that help you make your business a success—or even more successful than it was before. These chapters explain how to keep your inventory at just the right level, how to build budgets, and how to use QuickBooks reports to evaluate every aspect of your enterprise.
Part Four: QuickBooks Power, helps you take your copy of QuickBooks to the next level. Save time and prevent errors by downloading transactions electronically. Boost your productivity by setting QuickBooks preferences to the way you like to work and integrating QuickBooks with other programs. Customize QuickBooks components to look the way you want. And, most important, set up QuickBooks so your financial data is secure.
Part Five: Appendixes, provides a guide to installing and upgrading QuickBooks, a reference to help resources, and a quick review of the most helpful keyboard shortcuts.
The Very Basics
To use this book (and indeed to use QuickBooks), you need to know a few basics. This book assumes that you’re familiar with a few terms and concepts:
Clicking. This book gives you three kinds of instructions that require you to use your computer’s mouse or trackpad. To click means to point the arrow pointer at something on the screen and then—without moving the pointer at all—press and release the left button on the mouse (or laptop trackpad). To right-click means the same thing, but pressing the right mouse button instead. Usually, clicking with the left button selects an onscreen element or presses a button onscreen. A right-click usually reveals a shortcut menu, which lists some common tasks specific to whatever you’re right-clicking. To double-click, of course, means to click twice in rapid succession, again without moving the pointer at all. And to drag means to move the pointer while holding down the (left) button the entire time. To right-drag means to do the same thing but holding down the right mouse button.
When you’re told to Shift-click something, you click while pressing the Shift key. Related procedures, like Ctrl-clicking, work the same way—just click while pressing the corresponding key.
Menus. The menus are the words at the top of your screen: File, Edit, and so on. Click one to make a list of commands appear, as though they’re written on a window shade you’ve just pulled down. Some people click to open a menu and then release the mouse button; after reading the menu command choices, they click the command they want. Other people like to press the mouse button continuously as they click the menu title and drag down the list to the desired command; only then do they release the mouse button. Either method works, so choose the one you prefer.
Keyboard shortcuts. Nothing is faster than keeping your fingers on your keyboard, entering data, choosing names, triggering commands—without losing time by grabbing the mouse, carefully positioning it, and then choosing a command or list entry. That’s why many experienced QuickBooks fans prefer to trigger commands by pressing combinations of keys on the keyboard. For example, in most word processors, you can press Ctrl+B to produce a boldface word. When you read an instruction like “Press Ctrl+A to open the Chart of Accounts window,” start by pressing the Ctrl key; while it’s down, type the letter A, and then release both keys.
About → These → Arrows
Throughout this book, and throughout the Missing Manual series, you’ll find sentences like this one: Choose Lists → Customer & Vendor Profile Lists → Customer Type List. That’s shorthand for a much longer instruction that directs you to navigate three nested menus in sequence, like this: Choose Lists. On the Lists menu, point to the Customer & Vendor Profile Lists menu entry. On the submenu that appears, choose Customer Type List. Figure I-1 shows the menus this sequence opens.
Similarly, this arrow shorthand also simplifies the instructions for opening nested folders, such as Program Files → QuickBooks → Export Files.
About MissingManuals.com
At www.missingmanuals.com, you’ll find articles, tips, and updates to QuickBooks 2009: The Missing Manual. In fact, we invite and encourage you to submit such corrections and updates yourself. In an effort to keep the book as up to date and accurate as possible, each time we print more copies of this book, we’ll make any confirmed corrections you’ve suggested. We’ll also note such changes on the Web site, so that you can mark important corrections into your own copy of the book, if you like. (Go to http://missingmanuals.com/feedback, choose the book’s name from the pop-up menu, and then click Go to see the changes.)
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