As your business grows, you may want to use purchase orders. While there’s no rule stating that purchase orders must be used, doing so offers a few key benefits, the most important being a paper trail. Purchase orders are essentially permanent records of the purchased items. So if you’re buying a bulk supply of a product or item that is necessary for your business, using a purchase order will create a receipt that can used for tax purposes.
Quickbooks allows users to create purchase orders in just a few simple steps. First and foremost, you’ll need to access Vendors > Creator Purchase Orders, at which point a new window will open. Next, select the vendor from whom you are purchasing the item or items by clicking the drop-down menu. This will list all vendors in your vendor list; click the one from whom are making the purchase.
You’ll also see a drop-down menu for “Ship To,” which as the name suggests is used to specify where you would like the order shipped. This menu contains a list of your customers, vendors and employees. Go ahead and choose the address where you would like your order shipped.
You can now confirm the purchase order date. Quickbooks will choose the current system date as the default order date. You can change this, however, by entering a new date in the field.
After confirming and/or setting the purchase order date, you’ll need to confirm the purchase order number. The purchase order number, also known as “P.O.” is a unique identifier that’s tied to the specific order. The accounting software works by assigning sequential numbers to purchase orders, placing the next number in the respective P.O. number field. Double-check this purchase number to ensure it is correct. If it is not correct, update it with the right purchase order.
Next, describe the items that you are ordering in the “Create Purchases Orders” window. This includes the item, description, quantity, rate and customer. When you are finished, print a copy of the purchase order so you’ll have an actual paper document. You should also save the purchase order by clicking the “Save & Close button.”
If not, you should be. There’s an old saying that goes, “if something can go wrong, it will probably will.” Following this mantra with your financial documents and accounting records is usually a good idea. You should hope for the best but prepare for the worst. If your financial records were ever stolen or destroyed, would your business stay afloat?
Unfortunately, many businesses have been forced to close their doors due to poor financial records. In some cases, the records are lost. In other cases, they are stolen or destroyed. Regardless, you should take the necessary steps to protect your financial records, and business, from disaster by creating regular backups. Having backups of your records will give you peace of mind knowing that your business will continue to operate in the event of a disaster.
So, how do you create backups of your financial documents? For paper receipts, it’s best to create digital copies by scanning them and saving them to an external device or the cloud. For digital documents, you can simply create digital copies, also saving them to an external device or the cloud.
The key thing to remember is that you want to save your backups to a location other than the primary source of your financial documents. If your financial documents are currently stored on your computer hard drive, for instance, you shouldn’t create and store a backup copy on your hard drive. In the event that your hard drive is damaged, lost, stolen, etc., it could result in complete data loss of both your main documents and the backup copy. This is why it’s a good idea to store backup copies on an external device or the the cloud. USB flash drives may suffice, assuming you store them in a safe, secure location that’s away from your main computer.
But there’s actually an even easier way to create backup copies of your financial documents: use Quickbooks. Developed by Intuit, Quickbooks supports automatic backups, meaning you can schedule the software to create backups of your financial documents at specific dates and times. This takes the burden of having to manually create backups off your shoulders, freeing up valuable time that can be used for other aspects of growing your business.
Tired of creating paychecks for your employees manually? Assuming you use the Quickbooks accounting software, you can have their checks directly deposited into their bank accounts. Quickbooks supports the use of direct deposits, facilitating the otherwise tedious and time-consuming task of paying your employees.
Note: if you wish to use this feature, you’ll need to sign up and active direct deposits in Quickbooks. Requirements for direct deposit include the following:
- A supported version of Quickbooks
- Active Quickbooks payroll subscription
- Federal Employer Identification Number (EIN)
- Internet access
- Bank account that supports Automated Clearing House (ACH) transactions (there are no ‘wire’ fees associated with ACH transactions for most banks)
To set up direct deposits, log into your Quickbooks account and choose Employees > My Payroll Services > Active Direct Deposit. From here, you’ll need to review and complete the form regarding your direct deposits. Proceed to enter the appropriate information, including the 5-digit zip code for your respective region. When you are finished, click the Submit button.
There are a few more steps left before direct deposit can be activated. After clicking the Submit button, you’ll need to read and agree to the terms and conditions at the bottom of the page. Tick the box labeled “I have read and agree to the terms of the service agreement,” at which point you can click the Sign-up button.
Last bit not least, print the “Direct Deposit Getting Started Guide” and then click the “Return to Quickbooks” button. After reading the following the guide, you should be ready to create direct deposits. Keep in mind that all payroll information must be submitted to Intuit prior to 5:00 PM PST at least two days before the check day. Intuit allows business owners, however, to submit their payroll information up to 45 days in advance. Direct Deposit also requires an Internet access to function. If you do not have an active Internet connection, or if your connection has a tendency to go in and out, you may want to skip this feature and look for an alternative payment method.
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Small business owners must pay close attention to their financial transactions, including both expenses and income. While income may come from a variety of different sources, there are generally two different forms of income: net and gross. Some accounting software and systems automatically decipher this information, whereas others require the business owner to manually update his or her net and gross income.
So, what’s the difference between gross and net income? Gross income refers to the total amount of income before deductions are made, whereas net income refers to the total amount of income after deductions are made.
Regardless of niche/industry, all small businesses will have some form of operating expenses. This may include employee payroll, utilities, building rental, marketing and advertising, customer acquisition, accounting, etc. Even if the business earns $300,000 in annual revenue, it may only “profit” $150,000 after deducting all of its related operating expenses. In other words, its gross revenue would be $300,000, while its net income would be $150,000. It’s a rather simple formula that should become second nature to business owners and entrepreneurs.
Both gross revenue and net income are equally important when tracking your financial transactions, although net revenue is indicative of your business’s profits.
In addition to gross revenue and net income, there’s also gross margin, which is the percentage of profit earned after adjusting the gross income. Using the same example cited above, a business with a gross income of $300,000 and a net profit of $150,000 would have a gross margin of 50%. $150,000 is 50% (half) of $300,000; therefore, the gross margin is 50%. If a business notices a decline in its gross margin, it may want to reevaluate its operations to try and turn this number back in a positive direction.
Hopefully, this will give you a better understanding of gross revenue, net income and gross margins. Generally speaking, gross income is the total amount of income that a business (or individual) has earned before taking into account deductions. Net income is the total amount of income after deductions have been made. And gross margin is the percentage of profits that a business has earned, calculated by diving gross margins and net profits, expressed as a percentage.
With tax day right around the corner, business owners across the country are scrambling to find those last-minute deductions. While the exact deductions for which you are eligible will vary depending on your type of business, one of the greatest deductions is often the home office. Assuming you work from home, either partially or fully, you can deduct this expense from your taxes.
For tax years 2012 and prior, business owners were required to use an old method for calculating their home office deduction. This consists of calculating the actual expense of their home office, including mortgage/rent, insurance, electricity, gas, water, repairs, etc. But keep in mind that only the portion used for business-related activities can be deducted. So if you only work from your home office — and your office is 1/4 the size of your entire home — you would calculate the deduction by adding up all of the aforementioned bills and dividing it by four. As you may have guessed, this method was somewhat confusing and tedious, which is why the IRS began offering an alternative method for calculating home office deductions for tax years 2013 and later.
The new method simplifies the process by eliminating the need to calculate all of your expenses (e.g. mortgage/rent, utilities, etc.). Instead, business owners can calculate their home office deduction based on the square footage of the space used for business-related purposes and activities. If you work in a home office that’s 250 square feet, for instance, you simply multiply 250 by the prescribed factor, which for the tax year 2015 is $5. 250 by 5, is $1,250, which is how much you can deduct for your home office.
Of course, business owners can still use the old method if they prefer. However, the new method simplified the process by clearing out the otherwise confusing task of having to calculate all of your home office expenses. This is why it’s generally the preferred choice for small business owners who work at home.
To learn more about the home office deduction and how it works, check out the official IRS webpage here.
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Looking to change the sales tax rate in Quickbooks? If you are reading this, I’m assuming the answer is yes. Quickbooks has become the world’s most popular accounting software account, offering a simple and convenient way for small business owners to keep track of their expenses and income. But if you move into a new state, or if you existing state updates its tax code, you may be required to adjust your sales tax. To learn more about changing the sales tax in Quickbooks, keep reading.
Thankfully, there’s a quick and easy way to change the sales tax in Quickbooks. After logging into your Quickbooks account, add the new sales tax item to the item list. This is done by accessing Lists > Item Lists. Keep in mind that the item name must be different from the name that you are currently using. If you happen to use more than one sales tax item, you include all of them here. ALso, you cannot delete the rate of your existing sales tax item sinc you’ll need the item to calculate your sales tax return — and that’s okay. Just add the new sales tax as an item list and proceed to the next step.
The next step is to change the sales tax preferences so it uses the new item. To perform this operation, access Edit > Preferences > Sales Tax > Company Preferences. Whenever you create an invoice, sales receipt or credit memo, this sales tax item will be used instead of the old sales tax. You can even set your sales tax item before the tax is actually changed. So if you are expecting your state to change its sales tax rate, it’s a good idea to go ahead and create the sales tax item in your Quickbooks account.
The last step is to make your old sales tax item inactive. This is done by accessing the item list and double-clicking on the old sales tax item, at which point you can choose to make it inactive. You should perform this step on the date on which the new sales tax takes effect.
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Whether it’s a new computer that costs $900 or a $2 box of paperclips, you should keep track of all business-related expenses. Only saving the receipts for your “big” expenses is a serious mistake that will end up costing you in the long run. You have to remember that each of those small expenses will add up over the course of a year, allowing you to keep more money in your pockets and spend less in taxes.
Failure to Reconcile at the End of Each Month
It’s a good idea to reconcile your books at the end of the month to make sure they match your bank accounts. Reconciliations aren’t fun, but they are a necessary step towards preventing discrepancies. And if a discrepancy occurs, you’ll need to identify and fix it promptly; otherwise, the problem could snowball and affect other aspects of your financial documents.
Not Creating Backups
Remember the saying “it’s better to be safe than sorry?” Well, it holds true in the world of small business accounting. Hopefully, your financial documents will remain in tact, but if something happens to them you’ll want a backup copy on hand to continue your normal day-to-day operations. This is why it’s essential that small business owners create regular backups of their books. Assuming you use the Quickbooks accounting software, creating backups is a breeze. In fact, you can even set up the software to create backups automatically, eliminating the need to create them manually by hand.
Wrong Classification for Workers
As an employer, it’s your responsibility to classify workers correctly. There are to primary types of classifications for workers in the United States: employees or independent contractors. Employees generally have fixed schedules, whereas independent contractors work at their own according. In terms of tax obligations, employers must withhold federal and state taxes from employees but not independent contractors.
Lack of Communication
Keeping the lines of communication between you and your accountant, tax preparer, and employees/independent contractors is key to running a successful business. When the lines of communication break down, discrepancies may arise in the books, in which case you’ll have to go back and reconcile to find the problem. Whenever a change is made in the books, everyone should know about it.
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There’s a reason why Quickbooks remains the world’s leading accounting software for small-to-mid sized businesses: it’s user friendly, loaded with features, and backed by Intuit’s first-class support. But like all software, even Quickbooks is susceptible to various errors, some of which occur during the installation phase. If you’ve encountered an error when attempting to install the Quickbooks accounting software, you should try using the QBInstall Tool to fix it.
Before we start, it’s important to note that QBInstall isn’t going to fix all installation problems. The tool can be used to diagnose and fix a variety of installation errors, but it’s not a magic fix. According to Intuit’s official website, the QBInstall Tool can fix 1603 errors, 1935 errors, 1904 errors, 1402 errors, errors associated with damaged Microsoft .NEW Framework, and errors associated with damaged MSXML and C++. If you’ve encountered a different type of error, you may have to seek an alternative solution.
The first step to fixing the aforementioned installation errors is to download the Quickbooks Install Tool to your desktop. Don’t worry, the tool is completely free and can be found at http-download.intuit.com/http.intuit/Downloads/Tools/QuickBooksInstallDiagnosticTool.exe. Simply follow the link and download the tool to your computer’s desktop.
Once downloaded, double-click the exe file to begin the installation. Next, run the program to locate your installation files. In the event that you cannot see or find your Quickbooks installation files, you’ll need to run the installer again to populate the files in the temp folder. The QBInstall Tool will then use these files for its repairs.
Depending on the problem, you may see the QBInstall Tool return one of several different messages. If the tool says “No Error Details Found,” then it did not detect any errors associated with your Quickbooks installation. If it says “Error Detected,” then it detected at least one error associated with the installation. Assuming the latter is revealed, it will give you the option to fix the error by clicking “Proceed.” Simply follow the on-screen instructions and the QBInstall Tool should be able to fix the problem. Again, there’s no guarantee that it will work, but this tool can fix a variety of common errors and problems experienced during the software’s installation.
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