Still Dealing with 2019 in QBO? Clearing the Way for 2020

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If you have a nagging feeling this month that you’re not caught up with your accounting tasks, it’s time to clean up your unfinished 2019 work.

It would be great if you could have closed out 2019 knowing that you were all caught up with your accounting work. You sent all your invoices, paid all your bills, and wrapped everything up with a series of reports and a proverbial bow.

Unfortunately, December rarely goes that way. You’re making last-minute adjustments for your taxes. Dealing with the holiday rush if you’re a retailer. Handling end-of-year employee issues, trying to make your monthly sales quotas, and doing something special to make your customers feel appreciated at this time of year.

On top of your daily accounting work, you’re feeling pressure in December to get a clear picture of your finances for the entire year. Then the holidays hit, and suddenly you’re ringing in the New Year without having had time for that.

Here are five things you can do clean up 2019 and make way for 2020.

1. Create two critical A/R reports: Accounts Receivable Aging Summary and Open Invoices.

This may make you feel both better and worse. On the bright side, you’ll know where you stand in terms of who owes you what and how big the problem is. On the other hand, you may find it disheartening to see how many payments are past due. These reports are easy to find. Click Reports in the left vertical pane and scroll down to Who owes you.

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The Open Invoices report can show you quickly who’s past due.

Now would be an excellent time, too, to develop some strategies to be proactive and keep your accounts receivable more up to date in 2020. We’d be happy to sit down with you and help you with this difficult task.

2. Create two critical A/P reports: Accounts Payable Aging Summary and Unpaid Bills.

Add “Stay Current with Bills” to your list of 2020 goals. But first, you have to see where you stand right now. Click Reports again and scroll down to What you owe.

Who is responsible for paying bills? If it’s you, maybe it’s time to hand over that task to someone without your managerial responsibilities who can make it a priority.

3. Create statements for all customers who are past due.

Things slip for your customers toward the end of the year, too. Give them a chance to catch up. Their invoices might have gotten lost in the year-end confusion, but you need to get current with your accounts receivable. So, send statements to those in arrears.

Click +New at the top of the left vertical pane, then go to Other | Statement. 

4. Clean up your customer and vendor lists.

Customers and vendors come and go, but their QuickBooks records are forever unless you do something about them. You can easily make them inactive – after confirming they have no open activity. Click Sales | Customers in the left vertical pane. Click the box in front of customers you want to make inactive and then click Batch actions | Make inactive.

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Cleaning up your customer and vendor lists will save you time in the future.

5. Always look carefully at your dashboard when you log in.

The block in the upper left corner is the most important here. You can see at a glance how much money you have tied up in unpaid invoices and how much money needs to be deposited. This will help you keep QuickBooks Online cleaned up.

More to Do

There are certainly other things you can do to clean up QuickBooks. For example, if you carry inventory, January is a good time to run the Physical Inventory Worksheet report and make some decisions about where your purchasing emphasis should be in 2020. Need help interpreting your product movement and sales priorities? We can help with that.

Finally, sometime this month—certainly in the first quarter of 2020—let us create the critical standard financial reports (under For my accountant in Reports) that you could actually generate in QuickBooks Online, but which would be difficult for you to analyze. These are the reports you would need if you were going to apply for a loan, for example, or request a business valuation. But the insight they provide can give you a sophisticated overview of your finances.

How to Clean Up QuickBooks for 2020

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We know December is a busy month. However, take some time now to make sure QuickBooks is ready for 2020.

Yes, it’s here again: the end of the year. You probably have a lengthy to-do list full of tasks that must be done before December 31. There’s one task—or rather, a series of tasks—that you should definitely add to that list: year-end QuickBooks cleanup. Following the guidelines provided here will do three things. It will:

  • Ensure that you’ve processed every 2019 transaction (or that you know why you can’t).
  • Give you a sense of closure, knowing that you’ve dealt with all your 2019 financial data.
  • Allow you to start your 2020 QuickBooks activities with as clean of a slate as possible.

First Things First

Before you start looking at transactions and running reports, check to make sure that your fiscal year is recorded correctly in QuickBooks. Open the Company menu and select My Company. Click the pencil icon in the upper right to open the Company Information window, then click Report Information in the tabs to the left. This window opens:

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Is your company’s fiscal year recorded correctly in QuickBooks? If not, please contact us. Don’t try to fix this on your own.

Account For All Of Your Income

You certainly want to have received all the money owed to you by December 31 if at all possible. So, run a report to see which customers have outstanding, overdue balances. Open the Reports menu and select Customers & Receivables | A/R Aging Summary. 

The first column here will read Current. You don’t have to worry about these customers. It’s the next four columns that will require follow-up. If your default payment terms are 30 days, you’ll see columns for 1-30, 31-60, 61-90, and >90. Customers with dollar amounts in those columns have not met their obligations and are past due by those date ranges. 

Note: If your default terms are different (like 15 days), you’ll need to customize the report. In the toolbar at the top, you’ll see a field labeled Interval (days). Change it to reflect your own default terms and click Refresh in the upper right corner. 

If your report contains only a sea of zeroes in those four columns, everyone is paid up. If not, you can send statements to anyone who is at least one day past due to remind them of what they owe. Open the Customers menu and select Create Statements to see this window:

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Partial view of the Create Statements window

Make sure the Statement Date is correct since QuickBooks will use this to calculate aging. Then you can either enter a specific Statement Period or request All open transactions as of Statement Date. If you choose the latter, you’ll most likely want to limit the statements to customers whose payments are overdue. So, you’d click in the box in front of Include only transactions over [your number here] days past due date.

Below these options, you’ll be able to indicate which customers should receive statements. The most common choice is All Customers (who fall into the group you just defined), but you can also send to one or multiple customers, for example. QuickBooks will display a list if you select one of these. The right pane of this window contains several additional options that you can check or uncheck. When you’re satisfied, you can Preview, Print, or E-mail the statements.

Pay Outstanding Bills

You should also try to settle your Accounts Payable before the end of the year. Open the Reports menu and select Vendors & Payables | A/P Aging Summary. Look for dollar amounts in the columns that show aging beyond the first column. You can also run the Unpaid Bills Detail report and look at the Aging column, as pictured here:

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Look in the aging column of this report to see which bills are past due and by how many days.

Note: QuickBooks has multiple Preferences that relate to reports and aging. We can go over these with you if you haven’t explored them.

There are other tasks you should complete before December 31, some of which may require our assistance. These include reconciling all accounts, running year-end reports, and clearing any deposits that remain in the Undeposited Funds account. We’re here if you need us now, otherwise we can connect in the New Year.

Setting Up Sales Tax in QuickBooks®, Part 2

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Now that you have your sales taxes set up, you’ll be able to use them in transactions and reports.

Last month, we talked about the process of setting up sales taxes in QuickBooks. To recap a bit, you first have to go to Edit | Preferences | Sales Tax to make sure the software is set up correctly for this use. This means you’ll need to understand exactly what your state and local sales tax rules are. You can learn this by going to your state’s Department of Revenue or Department of Taxation website.

State sales taxes are considered Items in QuickBooks; you create them like you would create product records. When local sales taxes are also required, you can set up Sales Tax Groups. You’ll be assigning these Items as well as Tax Codes to customers.

Using Sales Taxes

Once you have sales taxes set up, you can start using them in transactions. You can create them on the fly from within transactions, but we recommend taking care of this important housekeeping task before you start.

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QuickBooks applies the Sales Tax Item or Sales Tax Group that you assigned to the customer on your invoices. You can see the others that are available.

Start by creating an invoice. When you reach the Tax column for your first line item, you’ll see that QuickBooks has already assigned Tax or Non to it based on the information in the item’s record.  You can mix taxable and non-taxable items on the same invoice. You can also add a new sales tax on the fly from the invoice itself. Click the down arrow in the Tax column and select <Add New>. 

Be sure you’re not required to pay sales tax on an item when Non is selected. You may not have to charge sales tax on, for example:

  • Nonprofit organizations
  • Out-of state sales
  • Items that your customers will resell

Tip: If you’d like, you can create more specific sales tax codes for these situations. You could use OOS for out-of-state sales, for example, LBR for labor, and NPO for nonprofit organization.

QuickBooks already includes Sales Tax Codes Tax and Non, but you can add additional ones that are more descriptive.

Be very careful with your sales tax classifications in QuickBooks. As we said last month, such errors will be discovered in a sales tax audit, should you ever be subject to one. 

Once you’ve entered all the line items in the invoice, look down toward the bottom of the screen, directly beneath the table containing invoiced items and above the Total. QuickBooks will have calculated the sales tax due using the Sales Tax Item or Group you assigned to that customer during setup, placing it in the Tax field.

Look to the left of those numbers, and you’ll see the actual rate that was applied. To the left of that is a drop-down list containing the correct Sales Tax Item or Sales Tax Group. Click the down arrow if you want to see the list of other options. And in the lower left of the screen, you’ll see the Customer Tax Code.

The Sales Tax Center

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The Manage Sales Tax window

When it’s time to pay sales taxes, you’ll open the Vendors menu and select Sales Tax | Manage Sales Tax. From the screen that opens, you’ll be able to:

  • Access Sales Tax Preferences.
  • Generate sales tax reports that will help you fill out required forms.
  • Visit related screens.

There are two reports you’ll need to run: Sales Tax Liability (displays total sales, amounts that are taxable and at what rates, taxes collected, and how much sales tax is due to each taxing agency) and the Sales Tax Revenue Summary (breaks down total sales into taxable and non-taxable). These reports are, of course, customizable, so you can filter them, for example, by Sales Tax Code.

A Delicate Balance

Collecting the correct amount of sales tax on taxable items and submitting the right tax totals to the right agencies takes vigilance. You don’t want to charge customers for unnecessary taxes, but you also don’t want to end up paying taxes you should have invoiced out of your own pocket. 

We can help you get this straight from the start. It’s much easier to spend some time setting up sales tax accurately in QuickBooks than it is to go back and untangle inaccurate records. Give us a call and we’ll set up a consultation.