Spring is finally here!
Whether you fully embraced or merely endured this past winter in Minnesota (or anywhere in the Midwest!), it’s safe to say that spring has been a welcome sight for everyone! Something about this time of year makes us want to throw open the windows and deep clean the house and garage. We want to clear out the clutter and freshen up for the next season.
You will want to take advantage of this season to declutter and refresh your QuickBooks. As a business owner, you’ve closed out the previous year, filed your taxes (or an extension), and Quarter 1 has wrapped up. Spring is an excellent time to dig in!
Here are six steps to ensure that QuickBooks works efficiently for you going into the next seasons of the year.
1. Enter Adjusting Entries
Once taxes are completed, be sure to enter any adjusting entries that your accountant made while completing your tax return. If you did not get this information from your accountant with your tax return, you may need to request it. Adjusting entries are commonly needed for depreciation, amortization and interest expenses.
You will then want to verify that your Profit & Loss Statement and Balance Sheet match what your accountant filed on your tax return. This will be next year’s taxes much easier for both you and your accountant/CPA.
2. Close out Shareholder Distribution
The “Owner Draw” or “Shareholder Distribution” account balance should be zero at the start of the new year. This adjustment is often overlooked at the end of the year.
For example, if you took $50,000 in draws from your business during 2018, you will need to debit Retained Earnings and credit the Owner Draw account. This should be dated January 1st of the following tax year. In other words, you would use 01/01/2019 for the 2018 tax year.
3. Review Accounts Receivable and Accounts Payable
Pull the Accounts Receivable (A/R) and Accounts Payable (A/P) Aging Summary reports to see what’s outstanding. You want to be sure that there is nothing unresolved, since this directly impacts your Cash Flow.
To clear up A/R issues, you may need to
- apply an open credit against an open invoice
- refund a credit balance to a customer
- send or re-send statements
- call a customer as a friendly reminder
- send an unpaid invoice to collections
- write off an uncollectible amount
To clear up A/P issues, you may need to
- call a vendor to ask about a refund for an outstanding credit
- compare your QuickBooks vendor balance to a recent statement from the vendor to ensure all bills and credits are recorded
- set up automatic bill pay to save time and money in the future
During this process, you may find that you’re overwhelmed by invoices or bills that have been overlooked for too long. Have you considered the many benefits of outsourcing?
4. Tidy Up the Item List and Chart of Accounts
Do you have items or accounts that are rarely or never used?
- Make items or accounts Inactive if they aren’t currently in use.
- Delete items or accounts if they’ve never been used.
- Merge accounts that are very similar. To do this:
- Change the item or account name to exactly the same name as the item or account that you want to keep.
- QuickBooks will then prompt you to merge them together.
5. Eliminate Checks Marked as “To Print”
You may notice stragglers on the list every time you do a check run. Clear these out by selecting them and choosing to “Print to PDF.” This tricks QuickBooks into thinking that they’re printed and will clear them from the list, but doesn’t waste any trees!
6. Review your Profit & Loss
Run your Profit & Loss Statement (P&L) for Quarter 1 (Q1). Compare it to last year’s Q1, as well as to Q4 of last year. Ask these important questions:
- How is your business trending?
- What goals do you need to set for Q2?
- If you have a budget, how does your P&L compare to your budget?
By putting in a little time and elbow grease, your QuickBooks will once again shine! You will be able to run your business with clear and accurate information that will help you to more easily enjoy the upcoming seasons of your business.
If the process of cleaning up your QuickBooks is conquering you, we can help! Contact us today.