One of the challenges of setting up and maintaining your QuickBooks file, especially after you’ve been in business for a while is keeping the information organized. Over time there is a tendency to add accounts, rename accounts and generally create a mess in your chart of accounts. This becomes a problem when your Balance Sheet and your Profit and Loss statements become difficult to read. One symptom of this is when you are reviewing your accounts and as you are going down the list you look at an expense account and think, “haven’t I seen this already?”
You can fix a disorganized chart of accounts in QuickBooks very easily with 2 features that QuickBooks offers.
Creating sub accounts in QuickBooks
QuickBooks lets you easily create sub-accounts which means you have a parent account and a series of accounts underneath that, indented so that groups of related accounts can be shown in a way that makes the profit and loss statement presentable and logical without looking like someone simply threw the oatmeal on the floor and said, “hey look how we did!”
There are a few ways to do this, but if you are dealing with accounts that already have transactions posted to them then you have to be careful. The video below will demonstrate how to do this without creating the dreaded “Other” category when you run your P&L. Simply put this means you want to make sure that you don’t have any accounts at the parent level with transactions posted just to the parent.
The rule on sub-accounts in QuickBooks is that you never post to the parent account.
Merging Accounts In QuickBooks
If you realize that you have 2 separate accounts that really represent the exact same thing, or for that matter you don’t care to distinguish then you can easily merge accounts in QuickBooks. All you have to do is re-name the losing account to be the same as the surviving one. In other words whichever account has the name you want to “keep” is the surviving account. The other one is the losing account. Rename the losing account to be the same exact spelling as the surviving account and when you go to save it QuickBooks will warn you that you already have an account with this name and ask you if you want to merge this account.
Note if you merge 2 asset or liability accounts in QuickBooks and they were reconciled then QuickBooks will warn you that you will lose those reconciliations. In other words you will have to re-reconcile the account.
Another way to organize information in QuickBooks is through the use of memorized reports. The real trick to this is adding the Memorized reports list to your icon bar and then creating reports that are useful to you. I like to create a “report group” called “Seth’s Reports” and then memorize key reports there.
Of course this will save you the trouble of having to re-create the reports every time you want to look at them and also it will make it easy for you to access these reports quickly which for me is so important! One thing I have noticed while training many small business owners in QuickBooks is that they will almost always have very specific reports that they want to be able to look at. This is where you really want to develop your skills at customizing reports in QuickBooks and then of course memorizing them.