Accounting Cleanup Jobs Made Easy with Billbeez

This is the time of year when us accountants are being asked to clean up a lot of people’s books. March 15 has passed, and companies have had to go on extension because their books either aren’t ready, or they don’t exist at all. Accounting cleanup jobs are great for us accountants because we make good money on the cleanup work and then it usually turns into an ongoing customer engagement. And we love customers!

To execute a cleanup job we have to gather data. We start with the bank feeds, downloading, coding, and reconciling the banking activity. Much of what we reconcile is clear based on the payee. A restaurant will go to meals, and Staples will most likely go to Office Supplies, although we can’t be sure of that.

More and more we are running into things like Amazon, where we really need to see what was bought. In a case like this it could be anything from office supplies to computer equipment, or even personal (ie distributions). My customers don’t like when I code things there, because it means they aren’t deducting them as an expense, but if you want your books to be bulletproof then we need to follow the rules.

Because of the way things are done today more and more we need a way to be able to access copies of receipts and bills. As a company who provides a concierge like service to our customers, we don’t like to bug our customers for any information unless we absolutely have to. This is a big part of how we live up to our promise that we free our customers up to focus on what they do best.

Once we have everything categorized, we want a quick and easy way to send our customers a list of the uncategorized stuff. Then we want it in a platform that doesn’t require emailing back and forth.

Google Sheets or Smartsheet will work perfectly.

Billbeez makes this process drop dead simple. In a couple of clicks I can have the report in Google Sheets, but here’s the kicker. Unlike an export from QuickBooks Online, this report will include a column with a link to a PDF of the bill. My customers love this, because they don’t have to go hunting for the bills to figure out what it was.

They click the link.

Examine the bill.

Then comment right there in Google Sheets.

Then they can get back to work.

No email to send.

No attachment to attach.

Just close the spreadsheet and message us in Slack to let us know they’ve updated it. And I can set up notifications in Google Sheets so they don’t even need to do that last part.

My goal is to make my customers’ lives easy.

Watch the video (3 min) to see how easy Billbeez makes this process for me.

Also check out this Zoom I did a short while back on How To Price And Perform An Accounting Cleanup Job

Distributions In QuickBooks Online Explained

Distributions In QuickBooks Online will happen once the business gets up and running for a bit. Most small businesses need some capital to get started, and oftentimes it’s the business owner putting their own money into the business.

If all goes well, the business starts to make money, and the business owner can take money out. This is what is known as Distributions In QuickBooks Online. When a big (publicly traded) corporation pays dividends, this is a distribution.

If the owner had put the money in, with the intention of taking it back out, then it should have been classified as a Loan (liability). Then when the time comes to take money out, the business is simply repaying the loan from the shareholder or owner.

The distinction between calling it a loan vs contribution / distribution is really intent. If I take a distribution out of my company, it means I have no intention of paying it back. If I plan on paying it back I should record it as a loan.

In the end, and in most cases, it doesn’t make much difference.

Distributions and S-Corps

If you have an S-Corp then you need to be more careful about Distributions In QuickBooks Online. They can be subject to capital gains tax if they exceed your cumulative share of the net income.

Another really important thing with S-Corps and Distributions In QuickBooks Online. If there are two or more shareholders, they have to be in direct proportion to the ownership percentage. So an S-Corp with two 50/50 shareholders distributions have to be exactly equal between them.

If for some reason this is not the case, reclass the difference to a loan account.

Distributions are mainly going to be cash.

Contributions In QuickBooks Online Explained

When you start a business it is almost certain you will make contributions into the business. Of course I recommend using QuickBooks Online for your accounting, so it follows that you will want to know everything about recording contributions in QuickBooks Online.

If you missed it, be sure and check out the previous post, “Equity In QuickBooks Online Explained.”

  • Owner Contributions.
  • Shareholder Contributions.
  • Member Contributions.
  • Partner Contributions.

The above are all different ways of describing the same thing for different business types.

Owner Contributions – Sole Proprietor

Shareholder Contributions – Corporation

Member Contributions – LLC

Partner Contributions – Partnership

There are a number of things you may contribute into your business.

  • Cash
  • Property
  • Inventory
  • Other Assets

Any time you contribute as asset into the business, you increase that business’ value.

You can see this most clearly when you record contributions in QuickBooks Online.

Cash

When you record cash contributions in QuickBooks Online it is simply a deposit. The money is going into the bank account, and the account you book it to in the detail area will be the contributions account.

This is the easiest way to see the impact a contribution has on the business. Your bank account and the contributions in QuickBooks Online are now increased. You’ve increased the value of the business by contributing cash into the business.

Assets and Equity are both increased. This is all happening on the balance sheet.

Property

Sometimes your business needs equipment and you own it personally. You can contribute that equipment into the business.

Here again you are increasing assets, and since the business isn’t paying for them, you are increasing contributions in QuickBooks Online

When you contribute cash there is a bank deposit to record. Here nothing impacts the bank account, so you will record this with a journal entry.

You’ll need to value the asset. Sometimes this is clear, other times you may need to get an appraisal.

Once you have the value, the journal entry is simple:

Debit the asset

Credit Contributions

Inventory

I see many cases where the contribution is in the form of Inventory. Oftentimes and owner will transfer inventory from an old business into a new business. Or (S)he was operating as sole proprietor and now they’ve set up a corporation. Previously, the business owner personally owned this inventory. Now you have to record the contribution to the corp.

This one is a little tricker to record.

Like a property there is no cash contribution. So we can’t write a check.

We also can’t record a journal entry, because we need to track the items, quantities and their values.

The only way to do this is with a zero dollar check or bill. It doesn’t matter which. Watch the video to see how this works.

Other Assets

Any other asset contributions in QuickBooks Online are going to work the same as property. You’ll need to have a value. The general rule on valuing assets is the lower of cost or market. Then you record a journal entry on the date the asset contribution was made.

What about contributed services?

The short answer is that there will likely be no tax benefit to doing this. We had a lengthy discussion on this some years ago on my YouTube channel. Sorry I looked, I can’t find the video with this discussion. Ask your local EA or CPA why.

Watch the video to see what this all looks like and post your comments and questions below.

Equity In QuickBooks Online Explained

Equity is the book value of a business. Above all equity is what the business is worth at a given moment in time. So when we talk about Equity in QuickBooks Online, we’re talking about running the balance sheet and setting up that bottom section properly in the chart of accounts.

When you’re through here, make sure you check out the next post on Contributions in QuickBooks Online.

The simple formula for Equity in QuickBooks Online (or anywhere) is the following:

  • Beginning Balance
  • Plus / (Minus) Net Income
  • Plus Contributions
  • Minus Distributions
  • Equals Ending Balance

Depending on the type of company or entity (Corp, LLC, Partnership, Sole Proprietor…) and who owns it, the Equity in QuickBooks Online can take on many forms.

The entity type really just drives the nomenclature in the Equity Section.

Corporation = Shareholder

LLC = Member

Partnership = Partner

And yes, LLC can file as a corp or a partnership. Question is, do you want to build your chart of accounts based on how you file, or how you want to report the financial information about your company? There are many reasons for running a set of books that go well beyond just filing a tax return.

Investors, lenders, and of course you as the owner will need to be able to read these financial statements and understand what they say about the financial position of your company. As a result, when you set up
Equity in QuickBooks Online this will explain to them who owns the company and how much they’ve got invested in it.

Getting a tax return filed should be incidental. Making important decisions about how to grow the company should be paramount to all other things when deciding how to structure your Equity in QuickBooks Online.

At some point, probably as part of on boarding your accountant should be asking you what kind of company you have. And you should know. The very next question should be aimed at who all of the owners, shareholders, members, or partners are.

This is necessary to set up the Equity in QuickBooks Online section properly. Each owner has to get their own section.

Equity in QuickBooks Online might look something like this:

  • Seth David Capital
    • Contributions
    • Distributions
    • Equity / Capital
  • Retained Earnings
  • Net Income

I will get into contributions and distributions in two separate follow up videos and articles. The equity sub-account is where that owner’s share of net income should be distributed each year.

The retained earnings should be zero after you distribute net income to the individual owner capital accounts. This is only necessary if you have two or more owners in the business.

Net Income is a temporary account. The current year to date net income posts to the balance sheet to… well.. Balance it 🙂

Watch the video above to see what Equity in QuickBooks Online looks like.

QuickBooks Online Products and Services eCommerce Deep Dive

QuickBooks Online tracks your products and services in the Sales menu alongside All Sales, Invoices, and Customers. If you’re an eCommerce company you sell products and services online. You’ll want to study this QuickBooks Online products and services deep dive to get a better understanding of how this works.

Even if you don’t want to be an accountant, knowing this will help you get better at managing your business. To manage your business better, you will want to understand your basic financial statements; the Balance Sheet and Profit and Loss. Learn how QuickBooks Online products and services work, and you will have a clearer picture of how your transactions should impact these financial statements. Then you’ll know when something doesn’t look right, and you’ll know where to look to find the root of the issue.

Most importantly if you are the eCommerce business owner you will be able to have a more intelligent conversation with your accountant when you know your financial statements don’t look right.

Do your sales on your income statement not look right?

Is the inventory number on your balance sheet not lining up with what you think you have in your warehouse?

This is where you’ll want to go to research why. Then you’ll either confirm that the information is correct, or you’ll find out what’s wrong and fix the issue.

QuickBooks Online products and services are the digital version of what is in your warehouse or on your shelves.

If you sell light bulbs on Amazon, then you need a product for that in QuickBooks Online.

What is a SKU anyway?

You probably sell all different kinds of lightbulbs. For each different kind you need a Stock Keeping Unit number, or a SKU.

You’ll need a name for each product. If you need to distinguish by color or size or any other feature, you may need a separate SKU for each variation.

Here’s how to decide if you need a separate SKU or not. Think in terms of how you want to track the quantity you have in stock. If you would need to know how many you have of an item with one variation of a feature vs another, then it’s a separate SKU. If you don’t care, then use the same SKU. You can always change this later if you find you made a mistake, so don’t get too hung up on it, and always err on the side of keeping it simple.

QuickBooks Online products and services give you the ability to track all of this information, and there are some other important things to consider.

When you purchase inventory you own it. It helps to think of it as though you may never sell that item. That’s why it is not an expense when you buy it. It goes on your balance sheet, and we call it “Inventory.”

When you sell inventory, four accounts are affected:

  • Sales
  • Cash or Accounts Receivable
  • Inventory
  • COGS (Cost of Goods Sold)

How Transactions Flow through QuickBooks Online Products and Services

The inventory you bought moves out of inventory (on the balance sheet) because you no longer own it. You sold it to someone else.

That inventory cost, becomes cost of goods sold (on the income statement), which is ‘like’ an expense, but it is actually called “contra-income.” This means it “goes against” income.

Hopefully we sold that inventory for something more than we paid for it. That “Sales” amount minus the COGS is your gross profit.

If you’re an eCommerce company, then you probably don’t have accounts receivable. The sale is made and cash (ultimately) is received albeit through some credit card processor with a few days delay.

Let’s say that you perform some “service” on the product before you ship it out. Maybe your light bulb goes inside some sort of casing, like the edison light that sits on my desk:

QuickBooks Online Products and Services eCommerce Deep Dive

The Services part of QuickBooks Online Products and Services

If you charge for this service (let’s say if it is some real custom work) then that will be a service item. You don’t purchase this item, so there is no inventory or COGS associated with it. If you pay someone outside (non-employee) then the cost of that service will be in your outside services account. If an you or an employee does it, then it is in the Payroll Expense for your company.

A service item is assigned an income and an expense account (if you pay someone outside for it). There is no inventory account to assign.

Now you have all of the pieces to set up QuickBooks Online Products and Services.  

When you set up an inventory part, you will need the following at a minimum:

  • Name
  • SKU
  • Sales / Income Account
  • Inventory Account
  • COGS Account

You will likely also want to include a description, but not necessarily. Especially for eCommerce, your descriptions will be on your website or sales channel.

Your Master SKU List

There has to be a mapping somewhere between the SKU’s.

There can only be one SKU per product. If your sales channels have different SKUs for the same product (and this is common) you will want to maintain a list somewhere that maps the Sales Channel SKU to the SKU in QuickBooks Online.

In QuickBooks Online there absolutely has to be one SKU per product. That’s why I like to call this the “Master SKU.”

You may be thinking that you use an app for your eCommerce business that keeps track of this. I would not rely on that. Apps make mistakes. Keep a list. Use that list to keep your app in check.

Two products that are great for tracking your Master SKU list are:

Now let’s take QuickBooks Online products and services a step further.

When you really understand how QuickBooks Online Products and Services work, you can get creative.

Lets say your customer prepays you? You want to invoice for that prepayment. This means you’ll want an item called something like “Prepayments.” But above we discussed that these items are linked to an income or expense account.

Here’s a secret: You can choose any kind of account to link to, where you normally link to an income account. If you get a prepayment, it is a liability. All you need to do is create your “prepayments” item and link it to the liability account instead of an income account.

Watch the video above to see what this looks like, and then check out Tracking And Managing Inventory In QuickBooks Online.

For more on the prepayments aka Customer Deposits check back for an upcoming post on Customer Deposits in QuickBooks Online.