How To Set Up and Use Loan Manager In QuickBooks®

dollars and penLoan Manager is a versatile tool that helps businesses manage their loans. Among other things, it’s capable of distinguishing between a ‘normal’ loan payment and an extra payment that’s made to shorten the loan’s duration. Blindly making payments to your loans without knowing the compound interest, principle interest, and payment dates is a costly mistake that business owners should avoid. Whether you have a single loan or half a dozen, you should set up Quickbooks Loan Manager to help you keep track of them.

Step #1) Create Multiple Accounts

The first step in setting up Quickbooks Loan Manager is to create all of the necessary accounts. A typical loan registered in Loan Manager requires three separate accounts: one for the loan, one for the escrow, and another for the interest expense. If you haven’t done so already, log into your Quickbooks and create an account for each of these elements.

Note: the loan lender must be assigned as a vendor in order to properly tag your Loan Manager.

Step #2) Loan Account

Once you’ve created the three accounts listed above, you’ll need to access your chart of accounts to create a ‘loan account.’ From here, you must enter the initial amount for the loan (without interest) in the window labeled ‘New Account.’ Alternatively, you can enter the loan amount as a new journal entry. Entering it as a new account is faster and easier, but opting for a journal entry allows for greater flexibility. Regardless of which method you initially choose, you can always go back later to change it.

Step #3) Enter Payments

With the loan now added to your Quickbooks, you should go back and enter any payments you’ve made. If you’ve made two payments since the initial loan date, for instance, you’ll need to enter these into your Quickbooks account. Loan payments can either be entered as checks, bills or journal entries, all of which serve the same basic purpose.

Step #4) Interest Expense

You aren’t out of the woods just yet. Unless you have an interest-free loan (which is practically unheard of), you must include the interest expense in Quickbooks. As previously stated in the first step, loan interest should have its own separate account. If your loan uses an escrow account, you should have an account set up for this as well.

Step #5) Open Loan Manager

The fifth and final step is to open Quickbooks Loan Manager, which is found under the ‘Banking’ menu. Click the ‘Add loan’ button and enter in all of the details. Your loan should now be included in your Quickbooks account!

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