Chapter 1. Creating a Company File
A company file is where you store your company’s records in QuickBooks, and it’s the first thing you need to work on in the program. You can create a company file from scratch or convert records previously kept in a small business accounting program or Quicken. The easiest approach is to use a file that someone else created. For example, if you’ve worked with an accountant to set up your company, she might provide you with a QuickBooks company file configured precisely for your business so you can hit the ground running.
If you have to create your own company file, this chapter tells you how to use the QuickBooks EasyStep Interview to get started, and points you to the other chapters that explain how to finish the job. If you already have a company file, you’ll learn how to open it, update it to a new version of QuickBooks, and modify basic company information.
Desktop icon. If you told QuickBooks to create a desktop shortcut during installation (Registering QuickBooks), double-click the shortcut to launch QuickBooks.
Quick Launch toolbar. The fastest way to open QuickBooks is to click its icon on the Windows taskbar—but first you have to put it there. In Windows 7, right-drag (that’s dragging while holding down the right mouse button) the program’s desktop shortcut onto the taskbar, as shown in Figure 1-1. In Windows XP, right-drag it onto the Quick Launch toolbar (to display the toolbar, right-click the taskbar, and then choose Toolbars→Quick Launch) and then choose Copy Here to create a second shortcut on the toolbar (if you’re trying to clean up your desktop, choose Move Here instead). You can also use the right-drag technique to copy or move a shortcut in Windows Explorer or from the Start menu.
Programs menu. Without a desktop icon, you can launch QuickBooks from the Start menu. Click Start→QuickBooks Pro 2011 (or QuickBooks Premier Edition 2011). If QuickBooks isn’t already listed on the menu, choose All Programs→QuickBooks→QuickBooks Pro 2011 (or QuickBooks Premier Edition 2011).
The first time you launch QuickBooks, you’re greeted by the “Welcome to QuickBooks” screen. You have to create or open a company file, and then you’re ready to dive into bookkeeping. The rest of this chapter explains how to create a company file and then how to open company files you create.
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. That way, you can hunker down in front of your computer and crank out a company file in record time. This section explains what you need to create your company file in QuickBooks.
To keep your entire financial history at your fingertips, you need to put every transaction and speck of financial information in your QuickBooks company file. But you have better things to do than enter years’ worth of checks, invoices, and deposits, so the comprehensive approach is practical only if you just recently started your company.
The more realistic approach is to enter your financial state as of a specific date and, from then on, add all new transactions in QuickBooks. The date you choose is called the start date, and you shouldn’t choose it randomly. Here are your start date options and the ramifications of each one:
The last day of the previous fiscal year. The best choice is to fill in your records for the entire year. Choose the last day of your company’s previous fiscal year as the company file start date. That way, the account balances on your start date are like the ending balances on a bank statement, and you’re ready to start bookkeeping fresh on the first day of the fiscal year.
Yes, you have to enter checks, credit card charges, invoices, and other transactions that happened since the beginning of the year, but that won’t take as much time as you think. And you’ll regain those hours when tax time rolls around, as you nimbly generate the reports you need to complete your tax returns.
If more than half of the year has already passed, the best approach is to be patient and postpone your QuickBooks setup until the next fiscal year. Intuit releases new versions of QuickBooks in October or November each year for just that reason. But waiting until next year isn’t always an option, particularly if your old accounting system vendor wants a truckload of cash for an upgrade. In cases like that, go with the next start-date option.
The last day of the previous fiscal period. The next best start date is the last day of the previous fiscal quarter (or fiscal month at the very least). Starting in the middle of a fiscal year makes the entire year’s accounting more difficult. Since your company file doesn’t contain a full year’s worth of detail, you’ll have to switch between QuickBooks and your old filing cabinets to prepare your tax returns and look up financial information. Starting just before a fiscal period mitigates this hassle but doesn’t eliminate it.
Account Balances and Transactions
Unless you begin using QuickBooks when you start your business, you need to know your account balances as of your selected start date to get things rolling. For example, if your checking account has $342 at the end of the year, that value goes into QuickBooks during setup. You also need every transaction that’s happened since the start date—sales you’ve made, expenses you’ve incurred, payroll and tax transactions, and so on—to establish your asset, liability, equity, income, and expense accounts. So dig that information out of your existing accounting system (or shoebox). Here are the balances and transactions you need and where you can find them in your records:
Cash balances. For each bank account you use in your business (checking, savings, money market, petty cash, and so on), find the bank statements with statement dates as close to—but earlier than—the start date for your QuickBooks file.
Gather deposit slips and your checkbook register to identify the transactions that haven’t yet cleared; you’ll need them to enter transactions, unless you download transactions from your bank (Online Banking Using Side-by-side Mode). If you have petty cash lying around, count it and use that number to set up your petty cash account (Tracking Petty Cash).
Customer balances. If customers owe you money, pull the paper copy of every unpaid invoice or statement out of your filing cabinet so you can give QuickBooks what it needs to calculate your Accounts Receivable balance. If you didn’t keep copies, ask your customers for copies of the invoices they haven’t paid or simply create invoices in QuickBooks to match the payments you receive.
Vendor balances. If your company thinks handing out cash before you have to is more painful than data entry, find the bills you haven’t yet paid and get ready to enter them in QuickBooks so you can generate your Accounts Payable balance. (To reduce the number of transactions you have to enter, simply pay those outstanding bills and record the payments in QuickBooks.)
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 (yet another reason to start using QuickBooks at the beginning of the year). If you haven’t filed a tax return for your company yet, the asset value is typically the price you paid for the asset.
Inventory. For each product you stock, you need to know how many items you had in stock as of the start date, how much you paid for them, and what you expect to sell them for.
The basic QuickBooks editions like QuickBooks Pro and QuickBooks Premier aren’t very good at working with inventory that you assemble from components or raw materials. See Product Items to learn how to track such inventory.
Payroll. Payroll services are a great value for the money, which you’ll grow to appreciate as you collect the info you need for payroll (including salaries 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 yeah—and you need payroll details for each employee. Chapter 14 explains the ins and outs of payroll in QuickBooks.
About the EasyStep Interview
Keeping books requires accuracy, attention to detail, and persistence, hence the customary image of spectacled accountants hunched over ledgers. QuickBooks can help you keep your books without ruining your eyesight or your posture—as long as you start your QuickBooks company file with good information.
In QuickBooks 2011, the Interview is relatively short and sweet; it takes about 30 minutes. All it wants to know is some company information, the industry you’re in, and the features you want to use. QuickBooks then sets your preferences and creates a few accounts (like basic income and expense accounts and your checking account), but you have to do the bulk of the setup work later.
Starting the EasyStep Interview
You can create a brand-new company file by choosing File→New Company (or by clicking “Create a new company” from either the “Welcome to QuickBooks” screen or the No Company Open window). What Intuit considers an “easy” interview seems to change with every new version of QuickBooks, but the Interview covers the basics of creating and customizing a company file to fit your business. After you start the Interview, click Next or Back to move from screen to screen.
The Get Started screen assures you that you’ll be ready to start using QuickBooks in about 30 minutes. Start by clicking one of the following three buttons:
Convert Data. If you have existing records in Quicken or another accounting program, you’re in luck. Converting your books (Converting from Another Program to QuickBooks) is easier than starting from scratch.
Skip Interview. If you’re something of a QuickBooks expert, this option lets you set up a company file without a safety net. It opens the “Enter your company information” window, followed by a few screens of data entry. If you need help during the process, you can always click the “Get answers” link.
Start Interview. If you don’t fit into either of the previous categories, this one’s for you. The following sections take you through the process step by step, from start to finish. Keep in mind that, if you leave the interview before QuickBooks creates your company file, the program won’t save any of the information you entered. So make sure you have at least 10 minutes to complete the first set of steps.
After you click the Start Interview button, the first setup screen (Figure 1-2) asks you for the basic 411 about your company, such as its legal name and tax ID. (If any of the fields confuse you, try clicking the “Get answers” link in the upper-right corner.) Click Next when you’re done filling out the fields.
After you complete the basics, the EasyStep Interview walks you through several screens of questions. Here’s what QuickBooks’ EasyStep Interview wants to know before it creates your company file:
Your industry. Choose carefully on the “Select your industry” screen. The list of industries is robust, so chances are good you’ll find one that’s close to what your company does. Based on your choice, QuickBooks adjusts its settings and the chart of accounts it creates to match how your business operates. For example, the program creates income and expense accounts for your type of business and automatically turns on features like sales tax and inventory if your industry typically uses them. If QuickBooks makes assumptions you don’t like, you can select different options during the interview or alter your preferences (Deleting Downloaded Transactions) and accounts (Creating an Account) later.
If you don’t see an obvious choice in the Industry list, scroll to the bottom and choose either General Product-based Business or General Service-based Business.
The type of company. The tax form you use depends on the type of business entity you have. The “How is your company organized?” screen lists the most common types, from sole proprietorships and partnerships to corporations and nonprofits. When you select an option on this screen, QuickBooks assigns the corresponding tax form to your company file. After you finish the Interview, you can see the tax form it selected by choosing Company→Company Information, which brings up the Company Information window shown in Figure 1-5 (page 25). The Income Tax Form Used box at the bottom of this window lists the tax form for your company type.
The first month of your fiscal year. When you start your company, you choose a fiscal year. On the “Select the first month of your fiscal year” screen, QuickBooks automatically sets the “My fiscal year starts in” box to January because so many small businesses stick with the calendar year for simplicity. If you start your fiscal year in another month, choose it from the drop-down list.
The administrator password. The administrator can do absolutely anything in your company file: set up other users, log in as other users, and access any area of the company files. Surprisingly, setting an administrator password is optional. QuickBooks lets you click Next and skip right past the “Set up your administrator password” screen, but this is no time for shortcuts, as the box below explains. Type the password you want to use in both the “Administrator password” and “Retype password” boxes, and then keep the password in a safe but memorable place. (Setting Up the Administrator explains how to change the administrator name and password.)
Creating Your Company File
After you set the administrator password and click Next, the “Create your company file” screen appears. If you’re new to QuickBooks, click the “Where should I save my company file?” link, which opens a QuickBooks Help window that explains the pros and cons of storing files in different places. When you’re done reading it, or if you’re a QuickBooks veteran, click Next to specify the filename and location.
QuickBooks opens the “Filename for New Company” dialog box, which is really just a Save As dialog box. Navigate to the folder where you want to store your company file. QuickBooks automatically sets the “File name” box to the company name you entered, and the “Save as type” box to “QuickBooks Files (*.QBW, *.QBA)”. Here are some guidelines for the name:
If you want to call the file something other than the company name you entered earlier in the Interview, simply type a new name in the “File name” box. For example, you may want one that’s shorter or that better identifies the company’s records within.
Consider storing your company file in a folder with the rest of your company data so that it gets backed up along with everything else. For example, you could create a Company Files folder inside your My Documents folder—if you’re the only person who uses QuickBooks. See Where to Store Your Company Files for more about choosing a location for your company files.
When you click Save in the “Filename for New Company” dialog box, QuickBooks may take a minute or so to create the new file. In the meantime, a message box with a progress bar appears. Go grab a coffee, because when the company file is ready, the EasyStep Interview displays the “Customizing QuickBooks for your business” screen. Click Next to dig in.
At this point, the progress bar in the left margin of the EasyStep Interview window is depressingly short because you still have to do the bulk of company file setup. If you need a break before continuing, click Leave. The next time you open that company file, the EasyStep Interview continues where you left off.
Customizing Your Company File
The next several screens in the EasyStep Interview ask questions about your business to help QuickBooks decide which features to turn on, what to include on your QuickBooks Home page, and so on. The Interview displays “(recommended for your business)” next to the options that are typical for a company in your industry, as you can see in Figure 1-3.
Here are some guidelines for answering the questions on the screens that follow:
The What do you sell? screen is where you tell QuickBooks whether you offer services, products, or both. When you choose one of these options, QuickBooks figures out which types of income accounts you need. If you select “Products only” or “Both services and products”, another screen later in the Interview asks whether you want to track inventory.Figure 1-3. The Interview sticks to the basics, so you’ll have more setup to do later. As you step through the screens in this section, make a list of the features you’re turning on (and the corresponding page numbers in this book) for reference. If you decide to change any of these settings later, Chapter 23 tells you how. Happily, the QuickBooks 2011 interview skips the sales pitches its predecessors had for add-on features that cost extra like selling online, getting an Intuit credit card, or ordering Intuit checks.
The Do you charge sales tax? screen has only Yes or No options. If you’re one of the unfortunate souls who has to navigate the rocky shoals of sales tax, select Yes. If you don’t charge sales tax, select No. For detailed instructions on dealing with sales tax in QuickBooks, see Setting Up Sales Tax.
On the Do you want to create estimates in QuickBooks? screen, select Yes or No to turn the estimate feature on or off. If you prepare quotes, bids, or estimates for your customers and want to do so in QuickBooks (Estimating Jobs), select Yes.
If you use QuickBooks Premier, the “Tracking customer orders in QuickBooks” screen asks whether you want to use sales orders to track backorders (Using Sales Orders for Backorders) or other orders that you plan to fill at a later date. QuickBooks Pro doesn’t include this sales order feature.
Using statements in QuickBooks is where you tell the program whether you generate statements to send to your customers (Generating Customer Statements). For example, your wine-of-the-month club might send monthly statements to its members. Or, a consultant could send invoices for work performed and then send a statement that summarizes the fees, payments, and outstanding balance.
On the Using invoices in QuickBooks screen, select Yes to tell the program that you want to use invoices, which you probably do because invoices are the most flexible sales forms (Choosing the Right Type of Form).
The Using progress invoicing screen asks whether you invoice customers based on the percentage you’ve completed on a job. To learn why (and how) you might use this feature, see Comparing Estimates to Actuals.
Managing bills you owe asks whether you plan to write checks to pay bills immediately (select No) or enter bills in QuickBooks and then pay them later (select Yes). You can read about bill preferences on Bills and payment preferences on Multiple Currencies.
Tracking inventory in QuickBooks is the screen where you tell QuickBooks whether you keep track of the products you have in stock. This screen provides a few examples of when to track or bypass inventory, and Should You Track Inventory with Items? has more about whether tracking inventory makes sense for your business.
If you bill by the hour, Tracking time in QuickBooks is ideal. Select Yes to track the hours people work and create invoices for their time. Chapter 8 explains how to set time tracking up properly.
Do you have employees? is where you specify whether you want to use QuickBooks’ payroll and 1099 features (select Yes). If you use non-Intuit services to run payroll or generate contractors’ 1099s, select No.
When you click Next on the “Do you have employees?” screen, you see the “Using accounts in QuickBooks” screen and the progress bar indicates that you’re almost done with the Interview. With a few more steps, you’ll have your start date and most of the accounts you want to use. Click Next to set up these final things:
The Select a date to start tracking your finances screen summarizes what you learned about start dates on Before You Create Your Company File. If you’ve already decided which start date to use, select the “Use today’s date or the first day of the quarter or month” option. You can then type or choose any date you want in the box, such as the last day of the previous fiscal period. To start at the beginning of this fiscal year (which QuickBooks can figure out using the current calendar year and the starting month you selected), select the “Beginning of this fiscal year: 01/01/11” option instead. (The year you see listed depends on the current calendar year.)
The Review income and expense accounts screen lists the accounts typically used by companies in your industry, as shown in Figure 1-4.
When you click Next, you’ll see a bright orange, but premature, “Congratulations!” You still have a few more steps to complete before you can open your company file. Click “Go to Setup” and read the next section.
Beginning to Use QuickBooks
After you create a new company file and click “Go to Setup” in the EasyStep Interview window, the QuickBooks Setup window opens with additional steps you have to complete, such as adding bank accounts and items you sell. If you want step-by-step guidance through these processes, click one of the Add buttons. For example, to create items, you can fill in a service or product name, description, and price; QuickBooks takes care of the rest. You can even copy and paste information from an Excel spreadsheet.
After you finish the additional steps, click “Start working” to open the Start Center window. You can click commands to open the corresponding features, click “Go to setup” to return to the QuickBooks Setup window, or click the X at the top-right of the window to close it so you work directly in the program.
If you’d rather perform these tasks later on or want more control over setup, click the Close button (the X at the top-right corner of the QuickBooks Setup window). Modifying Company Info tells you where to go in this book for more detailed instructions on the rest of the setup you need.
After you close the QuickBooks Setup window, you see the QuickBooks Home page (The QuickBooks Home Page), which includes icons for the features you turned on during the EasyStep Interview.
You may also see the QuickBooks Learning Center window (you can open this window anytime by choosing Help→Learning Center Tutorials) with links to tutorials and Help topics about new features (Other Kinds of Help). In the window, click a link to watch a video on a topic. To ask a question in the QuickBooks Live Community, choose Help→QuickBooks Help, and then click the Live Community tab. Live Community explains how to use this feature.
Modifying Company Info
In the EasyStep Interview, QuickBooks gets the basic facts about your company in small chunks spread over several screens. But after you create your company file, you can edit any of this information in one dialog box, shown in Figure 1-5. To open it, choose Company→Company Information. Remember, the legal name and address are the ones you use on federal and state tax forms.
The EasyStep Interview and the QuickBooks Setup windows help you complete quite a bit of setup, but you may need guidance for the rest. Look no further than the book in your hands. Here are the ways you can flesh out your company file:
Set up your users and passwords. See Assigning the Administrator User Name and Password on page 644.
Review and/or change the preferences that QuickBooks set. See An Introduction to Preferences on page 562.
Set up or edit the accounts in your Chart of Accounts. If you didn’t set up all your accounts yet, you can create them now. See Creating Accounts and Subaccounts on page 47.
Create a journal entry to specify accounts’ opening balances. See Creating General Journal Entries on page 433.
See Recording Owners’ Contributions to learn how to record your initial contribution of cash or assets to your company.
Create items for the products and services you sell. See What Items Do on page 93.
Set up sales tax codes. See Setting Up Sales Tax on page 120.
Set up your 1099 tracking. See Tax: 1099 on page 595.
Sign up for Intuit Payroll Service if you want help with payroll. See Choosing a Payroll Service on page 372.
Opening an Existing Company File
After you’ve opened a company file in one QuickBooks session, the next time you launch the program, it opens that same company file. If you keep the books for only one company, you might never have to manually open a QuickBooks company file again.
For irrepressible entrepreneurs or bookkeepers who work on several companies’ books, you don’t have to close one company file before you open another. You can open another company file in QuickBooks any time you want. The following sections describe the different ways to do so.
Opening a Recently Opened Company File
If you work on more than one company file, you may frequently switch between them. The easiest way to open a recent file is to choose File→Open Previous Company, and then choose the file you want to open, as shown in Figure 1-6. If the Open Previous Company menu doesn’t list the file you want to open, follow the steps in the next section instead.
Opening Any Company File
Sometimes, a company file you want to open falls off the recent file list. (The box on Fast Access to Several Companies explains how to tell QuickBooks how many files to list on the Open Previous Company submenu.) Say your bookkeeping business is booming and you work on dozens of company files every month. Or maybe you want to update a file from a previous version (see the box on Updating a QuickBooks File). Here’s how to open any company file, no matter how long it’s been since you last used it:
Choose File→“Open or Restore Company”.
If the No Company Open window is visible, you can click “Open or restore an existing company” instead.Figure 1-6. To open a company file you’ve worked on recently, select it on the Open Previous Company submenu. If the No Company Open window is visible (you can see part of it here), you can open recent files by double-clicking one of the filenames in the list of recently opened files. (Opening a sample file is the only task that the No Company Open window performs that you can’t do from the File menu.)
In the “Open or Restore Company” dialog box, select the “Open a company file” option and then click Next.
The “Open a Company” dialog box appears.
Navigate to the folder with the company file you want and double-click the file’s name.
You can also click the filename and then click Open.
If the QuickBooks Login window appears (which it will if you’ve assigned a password to the Administrator user account or set up multiple users), type your user name and password.
If the Administrator is the only user, the Password box is the only one that appears. But if you have more than one user for the company file, both the User Name and Password boxes appear.
The company file opens and you’re ready to keep the books.
Restoring a Backup File
Backup files are the answer to the adrenaline rush you get when you do something dumb with your company file, your hard drive crashes, or a plume of smoke wafts up from your computer. To restore a backup file, choose File→“Open or Restore Company”. In the “Open or Restore Company” dialog box, select the “Restore a backup copy” option and then click Next. To learn how to create backup files in the first place, as well as the details on restoring them, see Backing Up Files.
Opening a Portable Company File
Choose File→“Open or Restore Company”.
The “Open or Restore Company” dialog box opens.
Select the “Restore a portable file” option and then click Next.
Navigate to the folder with the portable file and double-click its name.
QuickBooks opens your file.
Converting from Another Program to QuickBooks
If you launched your small business from your basement and kept your records with Quicken Home & Business Edition, your accountant has probably recommended that you make the leap to using QuickBooks. On the other hand, you may have used another accounting program like Peachtree or Small Business Accounting and have decided to move to QuickBooks. Regardless of which other program you used, the command to convert your records to QuickBooks is the same: Choose File→Utilities→Convert. Then choose From Quicken, From Peachtree, or From Microsoft Small Business Accounting or Microsoft Office Accounting. The rest of this section explains what to do after that.
Converting from Quicken Home & Business
Quicken doesn’t report your business performance in the way that most accountants want to see, nor does it store your business transactions the way QuickBooks does. If you want the conversion to proceed as smoothly as possible, do some cleanup in your Quicken file first.
For example, you have to record overdue scheduled transactions and send online payments before you convert your Quicken file. Also, delete accounts you don’t want in QuickBooks because, once they’re in QuickBooks, you can’t delete accounts that have any transactions. And make sure that customer names are consistent and unique. QuickBooks doesn’t support repeating online payments, so you also have to send an instruction in Quicken to delete any repeating online payments you’ve set up. In addition, you need complete reports of your past payroll because Quicken payroll transactions don’t convert to QuickBooks.
Intuit publishes a detailed guide to help you prepare for a Quicken conversion, but finding it isn’t easy. If you try searching the QuickBooks support site, keywords like “quicken quickbooks convert” or “Quicken to QuickBooks Conversion Guide” don’t return the answer you need. Instead, go to http://tinyurl.com/2af78q5and follow the instructions there.
If you run into problems converting from Quicken to QuickBooks, contacting Intuit’s technical support could just intensify your headache. You’re likely to get bounced back and forth between Quicken and QuickBooks tech support, with neither one being particularly helpful. If you’ve already cleaned up your Quicken file and run into conversion problems in QuickBooks, check the QuickBooks company file for errors by choosing File→Utilities→Verify Data, described on Running the Verify Data Utility. Another potential solution is to remove transactions prior to the current fiscal year before converting the file. If nothing you try works and you’re willing to send your financial data to Intuit, QuickBooks technical support may agree to convert the file for you.
When your Quicken file is ready for conversion to QuickBooks, you have two options in QuickBooks:
Choose File→New Company. In the EasyStep Interview window, click Convert Data and then choose Quicken.
Choose File→Utilities→Convert→From Quicken.
Converting from a Non-Intuit Program
To convert files created in other accounting programs like Peachtree or Small Business Accounting, you have to download a conversion tool from the QuickBooks website. Choose File→Utilities→Convert and then choose the program you want to convert from. In the dialog box that opens, click Yes to tell QuickBooks to go online to download the QuickBooks Conversion Tool. Then scroll down to the bottom of the web page that opens and click the “Get free downloadable Conversion Tool” link. Fill in the boxes for your name, company name, and email address and then click Submit.