income tracking Archives - Number Nerd Bookkeeping Solutions

February 20, 2018

Bookkeeping Tip: How to Setup QuickBooks Online Expense Accounts

Whether you are setting up a new business in QuickBooks or evaluating profitability for an established organization, setting up Expense Accounts in QuickBooks Online (QBO) with the right Category and Detail Type will provide you with the information needed to make sound business decisions. In this article, we’ll discuss how Categories and Detail Type are helpful, how to properly set them up, and how to automate them with Bank Rules.

Categories are the different types of accounts you can set up in QBO. Examples include bank, income, expenses, asset, equity, other expense, long-term liabilities, other income, credit card, cost of goods sold, etc.

Detail Types are specific to the Category chosen. Examples include bank (checking, savings, cash on hand), income (service, sales, discounts), and expenses (advertising, auto, legal & professional fees). There are several Detail Types to choose from in each main category and for expenses, there are over 25 detail types to choose from.

Why are Categories and Detail Types necessary?

QuickBooks Categories and Detail Types will provide:

Detailed information that you and your CPA will use for reports and forecasting.
Detailed information about where you are spending money.
Comparison information about revenue streams and year-to-year performance.
Detailed information on your overhead expenses.
The ability to set up a realistic budget.

How do you set up QuickBooks Expense Detail Types?

First, identify all of your necessary business accounts: bank, income or revenue, expenses, assets, loan accounts, etc. Set up Categories for each type of account. Tip: Download the free worksheet below will help you with this process!

After you have identified your Categories, you will need to identify subcategories, or Detail Types, for each Category. Detail Types determine where the expense will appear on your financial reports. For example, if you have “Expense” as a Category, your subcategories, could be “Car Payments”, “Insurance”, “Gas”, etc. Detail Types should be customized and specific to your business and the terminology that you use. Avoid using general categories like “Other Income” or “Miscellaneous Expense” as much as possible.

Now that you have identified Categories and Detail Types, you are ready to set them up in QuickBooks:

Click the Gear Icon.
Click Chart of Accounts.
Click New in the top right corner and fill out the screen.

DOES EACH BANK ITEM HAVE TO MATCH A QUICKBOOKS CATEGORY?

Yes, each transaction should be matched to a category. But, good news! You can automate the matching process by setting up Bank Rules in QBO. Bank Rules scan your bank items and automatically assign them to the predetermined Category you have set up.

To Create a Rule:

On the left menu, select Banking.
Select Bank Rules.
Select New Rule.
Fill in all the fields on the screen.
Select Save.

STILL NOT SURE YOUR QUICKBOOKS DATA IS SET UP PROPERLY?

If you think your books might need help, they probably do! Don’t hesitate to reach out and connect with me. As a QuickBooks ProAdvisor, I’d be happy to help train your team, review your data and/or work with you to customize a package for the type of help you need after a Number Nerd Review.

January 16, 2018

Why You Should Always Have Your Eye on the Numbers

If someone asked what your gross income was for last year, you could probably spout it off within a few hundred dollars. After all, it’s part of your business’s bottom line–and an easy number to use to measure growth from year to year.

But if someone asked what your profits were last month or what your total overhead is in third quarter, you might have to stop and think a bit. And while you can’t expect to know all your business numbers off the top of your head, you should have them at your fingertips at all times

Those numbers are very telling in your business, and they can tell you more about your business than you might realize. Know your profit margin and overhead, and know what you can learn about your business by keeping your eye on the numbers in your business.

Know your profit margin and overhead. They’re just as important as your revenue. Click To Tweet

What’s coming in and going out?

You have to have a handle on your cash flow and be able to forecast what’s coming up in your business. If your forecast says that you’ll fall short of cash in a few weeks, it’s time to buckle down and find some new streams of revenue–or hold off on a new investment. And if you’re not keeping a watchful eye on your numbers, how will you know if all your clients have paid up this month? You need to stay on top of your accounts receivable so your accounts stay in the black and you know when the next check will hit your account.

Are you paying for something you’re not using?

When was the last time you did an audit of your monthly or yearly expenses? Chances are, you’re probably paying for some services that you’re no longer using, seeping cash out of your business on a regular basis. Or maybe you forgot to cancel the project management program you recently moved away from. Whatever it is, you’ll want to do an audit on your accounts so you can cancel any services that you no longer use–saving cash in the process.

Are you charging enough?

Numbers go beyond the money; they include your time as well. Be sure to keep track of how much time you’re spending on a particular project or with a specific client so you can calculate whether you’re charging enough for the work you do. This also helps you avoid scope creep: when you’re actually doing more work than originally agreed to in the contract. When you start to “do this real quick” for a client, your profit margins stall and you’re no longer making the profit you want. Harvest is a good tool for this, and it’s what I use, and Toggl is another good option.

What’s coming in and going out in your business? What other numbers do you need to pay attention to? Click To Tweet

As the business owner, it’s your responsibility to stay on top of the numbers. The health and longevity of your business depends on it. That doesn’t mean you should obsess about it, day in and day out. But do know the financial health of your business so you can make educated decisions about what you’re investing in and how you charge your clients.

If you need help setting up a simple system to keep tabs on everything, let me know! I’m releasing a mini course soon to help you get on track. Sign up for my list at the side of this page to be among the first to know about it!

January 2, 2018

How to Get Your Budget Ready for 2018

If your budget isn’t ready for the new year, now’s the time to do it. You should be budgeting in December so you can be ready to roll once January 1 is here. But if you haven’t, it’s not too late. And this is not something you should overlook.

Every business needs a solid budget in place to ensure they are (and remain) profitable. But candidly, there are few business who actually go through this process. Either they aren’t sure what to do or they feel like they’re not making enough money to have a budget in place, this is probably the most-skipped (but also most necessary) step in business ownership.

Your accountant should spend time with you, helping you to understand your numbers and how to lower your tax burden in 2018. Whether that’s investing and donating, changing your business status or lowering your own pay grade, there are a lot of things you can do to help lower your tax bill.

It’s time to sit down and take a good look at your 2017 numbers so you can plan for 2018. Click To Tweet

But you also need to take a good look at your numbers from last year so you can plan financially for this year. I recommend blocking out a few hours over the course of a few days to walk through this process.

Note that this is a simplified process for budgeting and that not all businesses are created equal. You may need to look at different metrics to help you determine the right budget for your business. But this is a place for you to get started. And of course, it is helpful if you have all of your expenses categorized correctly as well.

First, know what your revenue was for 2017. We’re talking your overall billing–the gross amount you brought in. Then, divide that total amount by 12. This is the average that you made each month last year.

Next, take a look at your profit and loss statements for each month to determine what you spent each month and what you had coming in. If you had a big launch last year or took an extended vacation, you’ll see some variations in your income. While there’s nothing wrong with that, you’ll want to take note of this.

Now it’s time to project your numbers for the new year. Do you have anything new coming up this year that may impact your income? A launch? A speaking gig? New services you’re adding? Even though you may not have it all figured out yet, my guess is that you have some idea of what’s coming up in your business. Determine what month(s) these changes will come about.

Use last year’s numbers to help you project what this year is going to look like financially. Click To Tweet

If you haven’t already estimated this year’s expenses, you’ll want to do that now. Looking at your monthly profit and loss statements, you’ll be able to see what you spent in your business over the last year. I recommend also going through your bank statements to see what subscriptions you have that you’re forgetting about–and cancelling them if you’re no longer using them or they’re no longer serving their purpose.

Take each of your expenses and break them down by month, so you know exactly what is leaving your business account each month, quarter and year. Now that you know what you need to bring in to break even, make sure that number is more than your monthly expenses. And take into account your slower months, so you’re not slipping into the negative during the year. To make it simple, you can simply take the total number for the year (for each category) and divide by 12 for 2018.

Creating a budget can be stressful and uncomfortable, but you need one–no matter what size your business. As you grow, your budget can grow and develop but you’ll still have a guideline for what’s coming in and going out of your business on an ongoing basis.

October 3, 2017

What You Should Be Tracking in Your Small Biz Bookkeeping

If you’re DIYing your business bookkeeping, you might be missing some important line items. Not tracking things like your taxes, expenses and income could result in more paperwork (and a larger tax bill) come tax time.

Let’s take a look at some of the most vital pieces of your business to track–and why you need this in place before you make any big business decisions.

Income

Obviously you need to know how much you’re bringing in each month, but there are other facets of your income to keep tabs on too. Where is that income coming from? Track the part of your business that’s bringing in the dollars and which specific product or service is doing the best. If your business thrives on referrals, you’ll also want to know who is sending you the most work–not only so you can thank them, but also so you can continue to nurture that relationship.

Expenses

Do you know exactly how much is coming out of your account each month to pay for things like your email provider, internet and any contractors you have working for you? What about those pesky subscriptions that you might have forgotten about? Having a good handle on your expenses is vital for ensuring you’re bringing in enough income to pay for all the overhead in your business.

If you don’t know what you’re spending each month, how to do you know if you’re profitable? Click To Tweet

Cashflow

Your cashflow is the combination of your income and expenses, and it will tell you if you can afford to hire a new team member or take time off or invest in that training program you’ve had your eye on. When you track your cashflow, you’ll also know when you should expect payment from specific retainer clients and when your bills are coming due–so you’ll know exactly how much you should have in your account at any given time during the month. This is vital information to have when unexpected expenses pop up (and they will!).

Taxes

Are you saving for your year-end tax bill? If not, you’re in for a rude awakening come tax time. Know how much you paid in previous years and what you should be saving for this tax year–and then set it aside. Better yet, make estimated quarterly taxes so you’re not hit with a big bill. (And check with your accountant, because chances are that the IRS is already expecting you to do this.)

Fail to plan for taxes and you’re planning to fail in your business. Click To Tweet

Are you missing one or more of these vital pieces in your monthly tracking forms? It’s time to get on top of it now, for the health of your business.

April 20, 2017

What is Bookkeeping, Anyway?

You hear a lot about keeping your books and making sure you’re on-budget. But what is bookkeeping, anyway? And what does it entail, when it comes to your business?

The official definition of bookkeeping, according to Google, is the activity or occupation of keeping records of the financial affairs of a business.

Okay, great. But that still doesn’t really tell anyone what, exactly, is included in bookkeeping.

In general, quality bookkeeping gives business owners a financial picture of a business during a specific time period. It’s the day-to-day recording of income and expenses; the details of your finances. And it allows the business owner and her accountant to see the big picture of what’s going into (and coming out of) the business.

Bookkeeping includes your invoicing, payments, purchases and categorizing each transaction so you can see what you’ve spent (and earned) in different areas of your business.

If you’re not keeping track of your books—either on your own or with the help of a bookkeeper—you’re doing a disservice to yourself, your team and your customers. You may know how much is in your bank account at any given point, but you likely can’t project where you’ll be a month from now. And that puts you in a position where you could run out of cash or you could be investing back in your business but don’t because you don’t think you can afford to.

If you don't have a handle on your books, you're doing a disservice to more than just yourself. Click To Tweet

When you have a good handle on your books, you have more power over your business. You can look at the numbers and make changes, before a financial emergency occurs. If you’re consistently earning more than you budgeted, you can easily see what part of your business is growing—and plot out ways to keep the growth moving. If you find that your dollars aren’t stretching as far as you expected, you can look at where your books are off and adjust your spending accordingly.

Whether you’re doing your bookkeeping yourself or you hire a professional bookkeeper, these are just a few things that you need to be doing on a regular basis in your business:

Tracking your revenue and income streams
Reconciling and categorizing transactions
Reviewing payroll and compensation of team members
Adjusting your budget to meet your business’s needs
Analyzing your expenses to ensure you’re not paying for anything you don’t need or use
Setting aside about 25 percent of your incoming revenue for taxes

First quarter of 2017 is long gone and we’re several weeks into second quarter. If you haven’t taken a moment to review your books, the time is now.