Bookkeeping Archives - Number Nerd Bookkeeping Solutions

June 19, 2018

Wave vs. QBO: Which is Right For You?

There’s so many options available for the business owner who wants to take care of their own books. For some users, it’s a matter of price while others look more toward functionality and integrations.

I think it’s important to look at it all, especially what you need within your own business. Because no two businesses are created equal.

Let’s take a look at the difference between Wave and QBO, and you can decide which is the best bet for you. (Can you guess which is my go-to pick?)

Pricing

I know a lot of business owners are price-shoppers. While I don’t blame you, it’s important to still do your research. I believe you get what you pay for, which means that “free” isn’t always the best bet if you’re looking to cut costs. It just might cost you more in the long run if it doesn’t offer all the features you ultimately need.

QBO: Three pricing plans, depending on the features you need, starting at $10 a month
Wave: Free, with additional paid services for payroll and online payments

I know a lot of business owners are price-shoppers. While I don’t blame you, it’s important to still do your research. Click To Tweet

Integrations

How well does your bookkeeping software “talk” to other systems? In today’s ultra-connected world, your systems need to speak to one another to be more efficient–saving you time and money and ensuring that human error isn’t part of the equation.

QBO: 1,000+ with both Zapier and stand-alone integrations
Wave: Three – Etsy, Shoeboxed and Paypal only

Security

You’re dealing with bank feeds and log-ins that needs to be secure. Having something you can depend on, without the risk of your sensitive information falling into the wrong hands, is important.

QBO: Data encryption, backups and physical security
Wave: Data encryption, backups and physical security

Setup

This is the most important step, besides making sure the accounting program has all the features that you need based on your business type. If the program isn’t set up right from the beginning it will affect the accuracy of the data on your reports.

QBO: Setup in QBO is intense but straightforward if you watch the training and setup videos or have a professional help you. Expect to spend anywhere from 1 to 3 hours setting up QBO the first time. Another option is to have a professional set up your file. Then, purchase a block of training hours for particulars in the beginning.
Wave: Easier setup than QBO but still a learning curve. It might be best for a professional to help you set it up and give you some training. It will take roughly 1 to 2 hours for setup depending on the level of detail in how want to categorize your income and expenses. Wave has a great help section of webinars, videos, and guides.

Accounting

I recently wrote about cash vs. accrual accounting, a distinction that’s important for small business owners. Because many small businesses start with cash accounting, it’s important to have that option in your bookkeeping and accounting software. Only one of these systems does.

QBO: Offers both cash- and accrual accounting options plus a slew of reports
Wave: Only allows for accrual accounting

Reports & Features

Every business is different and a bookkeeping system should be able to grow with it. While you may not use all the features of a robust system early on, having access to inventory control, budgeting and tax support options is helpful as your business grows and matures.

QBO: Offers the above features, plus up to 75 different reports
Wave: Has 12 available reports, which are basic reports in QBO
QBO: Has an inventory option, category tracking and budgeting
Wave: Does not offer inventory, category tracking or budgeting
QBO: Has a reconciliation feature
Wave: Does not have a reconciliation feature
QBO: Can exclude transaction(s) but, not delete them
Wave: Can exclude + delete transaction(s)

Every business is different and a bookkeeping system should be able to grow with it. Click To Tweet

If you are planning on hiring a bookkeeper anytime soon you’ll want to do some research and find someone that works with the accounting system you’ve chosen, for both bookkeeping and training needs you might have. Find one to three professionals and schedule a free introductory call with them to discuss your options, what you are considering and why. They’ll also give you valuable information to consider in your decision making process as well. Keep in mind, professionals are biased as we are typically used to using certain programs and have our favorites. Here at Number Nerd we use a variety of programs for clients for various reasons. Feel free to schedule an introductory call with a Number Nerd professional to discuss your software options based on your business type.

I’m sure it’s so secret that QBO has long been my go-to favorite bookkeeping system for any client. It just makes sense to have the most streamlined options, and at a reasonable cost. Here’s a Wave comparison chart to the various versions of QuickBooks Online. Other things to consider when choosing a system is the learning curve and trainings available. And as you grow, you’ll want to know the best way to transition from one system to another. Of course, I think QBO is powerful enough to use with nearly any size business.

May 8, 2018

QuickBooks Online Features You Need to Use

When you start using a new tool in your business, it takes time to learn all the ways it saves you time and money. There are often little tricks hiding in the depths of the tool that you don’t find out about until months later–because you’re really just trying to get it up and running.

This is true for QuickBooks Online (QBO) and its features, especially when business owners start to use it without taking the time to set it up and learn what it’s all about.

There are so many features in QBO that it’s my go-to bookkeeping system of choice for any client. But you have to be willing to take the time to set it up right if you’re going to make the most of it.

If you’re investing in a tool for business, set it up right so you can make the most of it. Click To Tweet

Here are some of my favorite features that often get overlooked by business owners who choose to DIY their QBO set-up:

Connecting Bank Feeds

From time to time, I meet with potential clients or new clients that are not utilizing the bank feed feature at all. Either they are stuck in the old-school way of doing things or simply are not aware that QBO has this feature and the purpose of using it.

It’s the simple task of connecting your bank and credit cards accounts in QBO. And yes, that means entering your login credentials for that site into QBO and mapping that account accordingly. It is a bit scary for the non-tech savvy business owner but, once I explain it and the amount of time it will save them, they are sold.

By connecting the bank feeds you’ll see new transactions download every time you log in. You’ll see your QBO populate with each and every transaction, saving you time and limiting the chance of error.

Categorizing Transactions

QBO will automatically categorize, or code, your transactions for you–if you take the time to set up the bank rules. Doing this saves you the time of manually categorizing when you reconcile your accounts. Keep in mind you will need to invest time to do this when you first setup your QBO and each time you add a new bank or credit card account.

If you’re not setting up rules in QBO, you’re losing a lot of time categorizing manually. Click To Tweet

Without rules, QBO will try to categorize your transactions for you. And while it can often do this correctly, keep in mind that QBO is not a human and doesn’t always know what each transaction is for. It’s up to you to correct the categorizations and create rules to help QBO do a better job next time. Yep, this takes time. But it’s worth it in the end!

Account Reconciliation

You need to know where you stand financially at any given moment. When you connect your bank feeds and set up categories in QBO, reconciliation is a cinch. It’s a matter of verifying your month end statement bank balances from each bank and credit card at month end against what was recorded in QBO. This bookkeeping task is a must-do at the end of every month.

You are probably wondering, why–what’s the purpose?

Well, you want to ensure that the bank feed didn’t have a glitch and inadvertently download 2 of every transaction or skip a few. If that happens it means that your expenses are overstated and less profit in your business. Another common issue I see is overstated income, by recording customer payments twice. This happens when you use the receive payment feature and add the bank deposit in the bank feed. That means you’ve counted it twice and overstated your income. Whoops! Both overstated income or expenses are a problem and ultimately affect the business bottom line and the amount of tax you pay. So, it is a good idea to ensure the numbers are correct by using the reconciliation feature.

Time and time again I see plenty of clients that come to us for help and don’t understand why the numbers don’t make sense. Unfortunately, too many business owners skip this vital step–reconciliation–costing them loads of time later in the year. Hopefully, your CPA checks to ensure you have completed your bank reconciliations before they prepare your tax return. This step ensures the accuracy of the data they are using to prepare your return.

QuickBooks Online is truly my go-to bookkeeping tool of choice, and it’s simple enough for any business owner to use. But if it’s not set up correctly, you’re likely to get frustrated and turn to less intuitive and robust systems.

If you’re using QBO and want to get a better handle on how to fit it into your weekly bookkeeping tasks, grab my Weekly Workflow Template today! If you need help now check out our Support and Training packages and let’s chat.

April 17, 2018

How To Set Up Your Internal Accounting Processes

When you’re hiring an accountant or bookkeeper, it’s important to have a good handle on your numbers already. You’ll need to provide a list of recurring expenses and access to bank accounts, along with some other information. The bookkeeper you hire should guide you through this process like we do at Number Nerd.

But even if you’re not ready to hire an accountant now, there’s a lot you can and should do to prepare for when you are. Because the more you grow, the more complicated your bookkeeping will be–and eventually you will want to have a pro on your side to help.

These are my non-negotiables for every business owner. If you’re doing these things, and doing them well, from Day One, the transition from DIYing your bookkeeping to working with a pro will be seamless.

When you take care of your books NOW, transitioning to an accountant or bookkeeper is seamless. Click To Tweet

List of monthly expenses

If you have a budget with a clear list of your monthly expenses, you’re doing pretty well. But when you have that same list outlined and categorized, you’re doing even better. Knowing how much you’re spending each month in different categories (like bank charges, dues + subscriptions, insurance, continuing education, marketing, merchant processing fees, software, utilities, etc.) is key to finding leaks in your accounts. You’ll then want to review your numbers monthly and compare to the prior month (and ideally your budget) and ensure that you aren’t spending more than you anticipated and on track. It all depends on what kind of business you have, of course, but it’s something to audit quarterly.

Folder for receipts

You’re saving receipts, right? In the event you get audited, you need to have receipts to back up any business expenses and write-offs. But throwing all your year’s receipts in a folder or shoebox isn’t the best way to go, especially if you have a lot of expenses.

Saving your receipts in a shoebox isn’t going to help you keep your books organized. Stop. Now. Click To Tweet

I recommend using Evernote, Google Drive or that manilla folder to organize your receipts on a monthly basis. Each month should have its own space, and if you’re using hard copies of documents, clip them together by month. You can also group receipts by category or vendor if you have recurring expenses from similar vendors. When storing them electronically, be sure to have a standardized file naming convention. You also want to write on the expenses what they were for before you scan and save them. For example:

VendorName_TypeOfExpense_Date.pdf

XyzCoffeeShop_Meeting w/123 re xxx_Date.pdf

Have sales process documented

Every business has a step-by-step process they go through when acquiring a new client or repeat sale. Even if it’s not explicitly documented. The key is to get that process documented. How do you bring clients on? When do they pay your deposit? The rest of your fees? How will you deliver the product or service? Or do they pay at time of purchase?

Having your process documented allows you to better track costs and revenue on every sale so you can start to tighten up the process and your profits.

The more organized and efficient you are, the better. You’ll save time getting the accountant or bookkeeper up-to-speed. And even if you’re not ready to hire someone to help you keep your numbers in check, you’ll have a much better picture of your books if you keep tabs on everything now. Not only that, but you’ll be much less stressed come tax time.

Need to get your books organized? Download my 2018 Biz & Books Planning checklist to get started. And feel free to scour the blog archives as well for other helpful posts that will help you get a great handle on your bookkeeping.

April 3, 2018

Cash vs. accrual accounting – what’s the difference?

Accounting and bookkeeping can be a slippery slope, especially if you’re not a number nerd. There are taxes and cash flow and budgeting to think about, plus you want to make sure you keep track of your numbers, so there’s enough money to keep the lights on. Let alone simplify what needs to be done at year-end for your CPA.

There are two types of accounting that businesses use to keep their finances on track: cash and accrual accounting. And while I have a preference (continue reading to find out), it’s important to know the difference between the two so you can make the decision about which type to use when setting up your accounting software.

During the initial setup, one of the (many) choices you need to make is whether or not you will choose cash or accrual for your method of accounting. Keep in mind the default is always set to cash. The reason being is it is a standard in the accounting world. Also, keep in mind, in your accounting software, you can toggle the reports to cash or accrual view – depending on how you need to see your numbers. But, remember, you will need to do the bookkeeping in accrual format if you want the accrual reports to look right. Note: you can setup your software to be cash and view all of your reports in accrual. A lot of Number Nerd clients do this.

There are reasons you would choose accrual. If you have a large accounts receivable and your invoices are not paid for 30+ days or more. Accrual would be my choice for you. Now, this particular instance is simple in an accounting program because you would simply toggle your Balance Sheet to accrual for the accounts receivable to show up.

Typically accrual accounting doesn’t come into play until you have been in a business awhile or when your CPA gets involved at tax time and tells you that you should make the switch and why. Unless of course, you know ahead of time (when you initially started your business) you are going to have inventory or have a large account receivable (money people owe you for services). Thus, making it a no brainer to setup your bookkeeping in the accrual method for reporting purposes. The difference is unless you meet the requirements listed in the next sentence you can choose which method you will use. The IRS states that if you are a C corporation or gross more than $5M in annual sales or have an inventory with gross sales over a $1M then you are required to use accrual accounting for tax purposes.

Know the difference between cash & accrual accounting so you know which to use in your business. Click To Tweet

Accrual Accounting – A Definition

According to Intuit, accrual accounting involves recording income when you complete a service or when goods are shipped and delivered. It recognizes expenses when they’re incurred and revenue when it’s earned, not when the payment is made or received.

For example, someone who sells items on Amazon would record the sale immediately, even though the payment of that sale still takes several days to process (ship out the order). Likewise, a service-based business records a sale immediately, even though invoicing terms might be net 30.

What makes accrual accounting a little hairy is that it records income and expenses at the time of the transaction, rather than when the cash changes hands. It forces business owners to keep track both of the transaction and the bottom line when a transaction is completed. For small business owners, this can get cumbersome and confusing, sometimes resulting in overdrawing an account if you’re not careful. And it does require monthly and year-end journal entries in your accounting software to “accrue” for things. So, keep in mind that this would not be a do-it-yourself accounting solution. You are going to need an expert to help you and it will take more time and expense by a bookkeeper to get this done right.

Cash Accounting – A Definition

According to Intuit, cash accounting is a simple form of accounting with “a primary focus on when cash enters and leaves a company’s bank account.”

For small to midsize businesses, cash accounting is typically the way to go. It’s gives you a better big-picture view of where your finances stand day-to-day. It’s also an easier way to keep an eye on the money coming into and moving out of your account–because you literally don’t have more cash on any given day than what’s in your bank account.

Cash accounting is much more straightforward for the small business owner, and it’s easier to keep your bank account in the black. And it makes sense when you’re dealing with smaller amounts of cash. That $1500 invoice you sent out today may not be paid for another 45 days, regardless of your payment terms. So to count it as income now just doesn’t make sense.

For example, an attorney, business coach, or bookkeeper will record a sale the moment that sale is made regardless, while expenses are also recorded right at the time of purchase.

Which is Better for You

Always talk to your accountant before making a decision about how to handle the accounting in your business. Your accountant will likely have a preference, depending on your business type and size. Keep in mind that accrual accounting will take more time to do the bookkeeping and therefore carry an additional expense with that time.

Want to change up the way you keep your books? Talk to your accountant first! Click To Tweet

In my opinion, cash is always better unless you need to use accrual accounting financial or tax purposes. It gives a truer picture of where you are at financially in your business, and they money you have now, in the bank.

Do you know what your monthly overhead expenses are in your business? Keep track with my worksheet!

February 27, 2018

How to Lower the Overhead in Your Business

You want to reinvest in your business but you can’t because there never seems to be anything left over at the end of the month. Been there?

Growth is often heavy on the mind of entrepreneurs. That’s why many of us went into business for ourselves–because the sky’s the limit when you’re the boss. You get to make the decisions about investment and growth strategy. But that’s hard to do when there’s no cash left to play with.

Increasing sales seems to be the go-to when it comes to increasing cash. But there’s something even easier you can do. Lower your overhead.

Before you claim there’s no way to reduce your expenses, take a step back and look at your business from an outsider’s perspective. Then be really honest with yourself about what you’re spending.

It’s time to get real--and honest--about your expenses if you want to grow your biz. Click To Tweet

Take a Big-Picture Look

It’s hard to cut costs if you have a thriving business with team members. But look at who you have on your team and what they’re doing for you. Do you really need the function they perform? What’s that function doing to help your business? I’m not suggesting that you let anyone go, but maybe the team members’ talents would be better spent on other areas of your business. Or maybe it’s time to cut back on hours.

Another big-picture item is where you do business. If you don’t see clients in person, do you really need physical office space? Can you save that money for growth opportunities?

Take a Closer Look

There’s a lot of wasted money in business, even in small businesses with tight budgets. Once you have a good look at the big picture in your business, it’s time to take a closer look at where your money may be leaking out. Think of this like looking at your Starbucks habit. Sometimes you just don’t notice those $5 purchases until they happen five times a week!

Do an audit of any subscriptions or systems you’re paying for on a recurring basis. When you do this, be sure to involve your team. What are they actually using? Why choose that tool over something else? Is there something they could use that accomplishes the same task but doesn’t cost quite as much?

Do an audit of your subscriptions and recurring payments to save cash in your biz. Click To Tweet

Just like you would with your home budget, look at things like insurance coverage, legal fees and overhead costs like internet and phone service and try to negotiate new rates with your carriers. If you’ve been a loyal customer for some time, many providers are willing to lower rates for you without discounting your service.

If you already run a tight ship, you may not find any leaks you can plug. In cases like these, it’s important to have people on your side who can help you navigate through your finances to make the best decisions possible.

Have you determined that you can cut some expenses? I challenge you to cut 5 percent this quarter, then see if you can cut out another 5 percent later this year.