QuickBooks: Transactions Containing Both Income and Expense

You are probably already familiar with recording income through a deposit or recording an expense. There may be times that one transaction contains both. Do you record each separately? NO. You want to record a single transaction, so that the transaction amount matches the amount hitting your bank account. This makes for better tracking and easier reconciling.

An example of when this type of transaction occurs is when you pay a vendor a monthly subscription, but you also receive a sales commission. The vendor processes one statement each month that has both pieces combined.

Expense is More Than the Income

Let’s say you’ve just started a new vendor relationship where each month you pay $100 subscription fee to utilize their online shopping platform. You are also paid a monthly commission on the sales processed through their platform. Your first month’s commission is $60. In this scenario, you will record the transaction as a net expense.

Figure 1: Enter the expense for the $100 subscription fee as normal. Before hitting Save, you will add a second line under Account Details, but since it is income, it will be a negative amount. The net between the expense and income will be the amount of the transaction ($40 in this case).


Income is More Than the Expense

We still have the monthly $100 subscription fee, but the next month commissions earned is $120. In this scenario, you will record the transaction as a net deposit.

Figure 2: Enter the deposit for the $120 commission as normal. Before hitting Save, you will add a second line under Add New Deposits, but since it is an expense, it will be a negative amount. The net between the income and expense will be the amount of the transaction ($20 in this case).


**Note: you cannot duplicate a name as both a vendor and a customer. If you expect income to regularly exceed the expense, I would recommend setting it up as a customer. If you expect to the expense to regularly exceed the income, I would recommend setting it up as a vendor.

If you’d like additional help with handling combined transactions, please comment below or CONTACT ME today!


QuickBooks: Accounting for a Mix of Business and Personal Items

Last month I talked about Mixing Business and Personal Funds in a previous blog, so today I’ll go over in more detail how I account for this in QuickBooks. It’s totally doable when there’s some intermingling, you just want to be sure you’re keeping receipts and identifying business versus personal items.

These examples will be done under the assumption that you have separate business accounts, but use the wrong account for purchases. If you are like me, and have a shared account for business and personal, the easiest method for segregation is to set up classes in QuickBooks for each.

Example:  Business purchase made on personal account

Let’s say you inadvertently use your personal credit card to pay a vendor. In the expense module, choose your vendor as normal. I’ve set up a bank account called “Personal Funds,” which should always have a zero balance, and I’m going to proceed as I normally would with recording an expense.

Since this is not actually coming out of our business account, we’re going to have an account called “Owner Contribution.” This account is saying that you as an owner are contributing your personal money into the business. If you haven’t already set this account up, add it, with category type as Equity, and the detail type as Partner Contribution.

Notate in the description “paid with personal card.” Then we’re going to record a negative for the dollar amount. Notice how our total for the expense is zero. In one line we recognize the expense for the company, and the next line we recognize that the money came out of a personal account, which is why there will be a net zero affect to any of the banking accounts for your business.

Example:  Personal purchase made on business account

Let’s say you inadvertently use your business card to pay a personal bill. Choose the vendor, and this time since it’s coming out of our business bank account, choose that account. Our account coding is simply going to be an “Owner Distribution”.

You’ll want to set that account up if you haven’t already. An owner distribution means the same as if you had paid yourself a salary and then took those funds and paid your own bills. It’s the opposite of a contribution. Category type again is going to be Equity, detail type is Partner Distribution.

You don’t necessarily need to have a description in the expense, just add the amount. This will show as coming out of the business account but will NOT hit the business profit and loss since this is a balance sheet equity account.

Example:  Mix of business and personal purchase made on business account

Sometimes you may make a purchase that includes both business and personal items. Essentially, your expense entry will have both and expense line and equity line. Choose the business account, enter the expense amount for the portion that is business related. Then do Owner Distribution for the portion that is attributed to personal items.

If you’d like extra help on this topic please feel free to CONTACT ME and I can go over it in more detail with you.

Equal Parental Benefits: Pros and Cons for your Company

Currently, FMLA requires employers with at least 50 employees to provide 12 weeks of unpaid leave after the birth of a child. Some companies take it one step further and provide a paid portion of leave, but it is typically biased towards the mother, with fathers being offered less, if any paid time off. This can translate to discrimination against women.

In her article discussing gender-neutral leave policies, Rachel Gillett (@RGillett23) points out that “studies have shown that when a company’s policy mandates that women take longer leaves than men, the same companies are more inclined to hire men over women and are less likely to promote women to high-powered positions.” If you ask me, this is detrimental to the growth and diversity that all companies need.

Personally, I did not want to ever get in a position where I had to choose between my career and starting a family, which was one huge motivating factor in working for myself.

Equal Parental Benefits: Pros

Gender-neutral leave policies help mitigate the discrimination against women by allowing them to feel secure in their decisions to take time off to bond with their babies. They no longer have to choose between promotions and raising a family. On the other hand, it alleviates fathers from feeling like they are expected to rush back to work before they are acclimated to the new challenges of the competing demands between fatherhood and work (which is something that mothers face all too often as well).

Employees will be less-stressed when returning to work if they have been provided ample time to adjust to the newness of parenthood. Being forced back to work too soon can cause resentment since parents deserve time off to bond and make memories with their children.

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Equal Parental Benefits: Cons

The obvious con to offering additional time off in order to provide equal benefits, paid or unpaid, is ensuring coverage of duties while on leave. This is a great time to utilize cross-training among individuals (which is a highly-advisable process to incorporate, especially before you need the coverage). Another option is to hire temporary workers to fill in the gaps or work with an independent consultant for the interim.

Other than job coverage, you have nothing else to lose by offering gender-neutral benefits! You may think that it costs more to provide extra time off, but the cost-savings from reduced employee turnover due to more desirable benefits will likely surpass any added expense.

What to Expect from Me as Your Accountant

You’ve been running your business and have come to a crossroads where you’ve finally made the decision to hire an accountant (if you’re still on the fence about that, read up on “When to Hire an Accountant”). Congratulations! You have just made a positively impactful decision. Next, I’d advise you to do some research on different accountants you have the opportunity of working with. Take the time to meet with them and learn about their work ethics, communication styles, and expectations when working with clients.

I always want my clients to get to know my personality since it’s reflected in how I run my business, how I handle my work, and how I correspond. When I partner with a new client, this is what they can expect:

More insight into their business than they’ve ever had before. My breadth of experience and attention to detail results in greater visibility and understanding of the story behind all those numbers.

A lot will be accomplished in a lesser amount of time. Through years of self-taught trial and error, I have nailed down many highly efficient processes for completing accounting tasks. Not only am I lightning fast on the 10-key, but I can work magic in Excel and QuickBooks like nobody’s business! I even had one client who would only respond in expletives because the turn-around time was so much less than anticipated.

Work smarter, not longer!

Work will be completed in a timely manner. Although this is contingent on my client’s providing source documents and responding to emails in a timely manner as well. Of course, things come up and a client may need some extra time to address a request, but correspondence on this is always appreciated so I can adjust my timeline accordingly (I also return the courtesy). I never want to underserve any of my clients so it’s essential for me to stay on top of my work.

They’re always invited to ask questions. My priority is for my client’s to not just hire me but for them to feel confident in the results of what I provide. I will never shy away from discussing a question or concern until my client is satisfied with their level of comfort in the matter. I also ask many questions since the more I know about their business and how it operates, the more value I can create in the long-run.

In most circumstances, the first month working together is an Evaluation Period. This not only allows me time to assess your business and services needed, but it allows for a non-commitment trial, if you will. Everyone has different ways to approach the same thing, not that any certain way is necessarily better, but is more so preferential-based. I strive to work with clients where we both feel comfortable with the dynamics of the partnership, so if either of us feels that we’re not best-suited in working together, then we can part ways with no hard feelings.

CONTACT ME today if you’re interested in meeting to see if we can work some magic together!

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Excel Tip: Pivot Tables

Today I’m going to go over pivot tables in Excel. When you have large volumes of data to analyze, pivot tables allow you to summarize and manipulate the data quickly and easily. I’ll be using a sample set of data to show you the steps to creating and modifying a pivot table.

With the use of pivot tables, you’re going to want to start with data that is organized. In this sample data, it’s organized by date, region, rep, item, units, unit cost, and total. You want to make sure that your data is in some organized fashion.

To create a pivot table, go to the insert tab of the ribbon, click on Pivot Table, and then you’ll be able to select a table or range. We’re going to make sure to include the header and go all the way down to the bottom of the chart. Hit OK.

Once you scroll back to the top of your spreadsheet, you’ll see where your pivot table will be inserted. To the right, is your pivot table fields. This is where you will choose what will go into your pivot table and where. You can check next to the items if you want them included. My preference is to drag and drop the items into the sections where I want them.

I’m going to first summarize by region and drag it down into the rows section. All of that data will be categorized by Region in the rows. Let’s say I want to know how much in dollars there is per region. I’m going to take the Total and drag it into the Values section. Now I can see the dollars by region. We can also subcategorize the regions by pulling the Reps down into the rows section. Now I can see by region, by rep, the total dollars for each.

I can also move items around. Let’s say I want to move the Region into the columns. Now I show the Reps in the rows, categorized in each column by the Region.

Once you have your pivot table the way you want it set up, you can easily change the rows and columns by clicking on the down arrow. You can choose just to have a few items show, or add them all back in. You can also sort in whichever direction you want.

If you want to change the look of your pivot table, you can go to Format as Table under the home tab and to have it formatted with those colors.

Those are the basics of creating and modifying a pivot table. If you’d like me to go over a specific functionality of a pivot table in a future blog, please comment below or EMAIL ME and I’d be happy to go over it.

When to Hire an Accountant

Today I stumbled upon a Forbes article, “When To Hire A Professional (And Which Ones To Hire First) At Your Startup.” I assumed – no, I was certain – that Accountant would land the list. Low and behold, you will find Accountant as one of only four professionals listed in this article. So, what gives? Why is hiring an accountant so critical to the success of your business?

In the article, Jesse Kolber points out that “the cost of an accountant doesn’t necessarily equate to quality, but if you don’t find a good accountant from the beginning, you could pay

Photo Credit: Graphicstock.com

dearly later on.” This statement hits a home-run in my mind, as I’ve worked with numerous clients looking to get their books straightened out – after-the-fact. Some clients may have already been in business for only a year, or they could have been in business for many years.

Typically, either the client is so overwhelmed that they continue to dodge out on even starting their catch-up work, or they end up with a fairly big financial hit, since catch-up work can be tedious and time-consuming. Catch-up projects can be prone to missing information, which equates to extra research time for both accountant and client.

Another key point is to hire a good accountant who has the breadth of experience needed to truly assist small business owners. One thing that sets me apart from some accountants is that I have a wide-range of industry experience and have been exposed to multiple facets of business operations. I often work with clients in retail who would not have known about things like sales and use tax reporting, and finding out about those types of requirements later on can cost a business owner big bucks in fines and interest.

Kolber also writes “Our first accountant loved to use fancy words and actually called me a neophyte during our initial consult… [your accountant] should articulate information clearly and thoughtfully answer your questions.” This is great advice for any business owner. Yes, you want your accountant to know their stuff, but you need to know it, too! Trying to lead your business by blind faith in others puts you in a very volatile and risky position.

Photo Credit: Graphicstock.com

When you are looking to hire an accountant, have them glance over your financials and discuss one or two things that jump out at them. Do you fully comprehend their explanation or does their accounting jargon go right over your head? My personal approach is to broadly state things in formal terms and then take the extra time to educate the client on my thought process. Sometimes we may go over the same concept multiple times, but I’m okay with that because I sincerely want my clients to have confidence in what story their financials are telling.

Don’t wait! From day one, keep your eyes open for a great accountant so you can keep your books in order from the start. If you think I might be a good fit for your company, please reach out to me for a free consultation.