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How to Specify Payment Terms for Invoices in Quickbooks

Quickbooks allows you to specify payment terms invoices. If you are sending an invoice to a customer, for example, you can specify the date by which he or she must pay it. When the customer receives the invoice, he or she will see the due date. As a result, the customer is less likely to overlook or miss paying the invoice on time. How do you specify payment terms for invoices exactly?

Steps to Setting Up Payment Terms

To set up payment terms for invoices, log in to Quickbooks and click the “Lists” menu at the top of the home screen, followed by “Customer & Vendor Profile Lists” and then “Terms List.” Next, click the “New” button under the drop-down menu for “Terms.”

From here, you’ll have one of two options: Standard or Date Driven. Standard allows you to specify the number of days the customer has to pay the invoice from its listed date. If you choose standard with 10 days, for instance, the customer will have to pay the invoice within 10 days of the invoice due date.

Date driven, on the other hand, automatically calculates the invoice’s due date according to date-based criteria. With date driven, you can specify the day of the month by which the invoice is due. If you choose date driven with the 20th day of the month, the customer will have to pay the invoice by the 20th day of the month.

Applying a Discount to Payment Terms

You can use discounts to encourage customers to pay their invoices on time. How do discounts work exactly? When setting up payment terms, you’ll have the option of applying a discount to invoices if certain payment conditions are met. When a customer meets the requirements, he or she will receive an automatic discount that reduces the amount owed by the invoice.

As you set up payment terms, you can enter a discount percentage for a specific due date. The discount due date doesn’t have to be the actual due date of the invoice. Rather, it can be an earlier date. If an invoice is due within 10 days, for instance, you can specify a discount due date of five days. If the customer pays the invoice within five days, he or she will receive a discount as specified in the payment terms.

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An Introduction to Class Tracking in Quickbooks

Class tracking is a feature in Quickbooks Desktop that allows you to segment account balances for tracking purposes. While not required, many businesses — as well as accountants — use it. With class tracking, you can create “classes” for your accounts that are independently tracked. You can then view the transactions and balances associated with those classes rather than the whole accounts with which they are associated. For a better understanding of class tracking and how it works, keep reading.

The Basics of Class Tracking

In Quickbooks, class tracking is used to segment account balances for tracking purposes. In other words, you set up classes to track specific segments of one or more accounts. A common example is a retail store with multiple locations. Instead of using a single account, you can segment the account into multiple classes. Class tracking allows you to create a class for each location. Quickbooks will then compile the data for each account, allowing you to see the revenues generated by each location. This is just one of many ways to use class tracking in Quickbooks. You can use it to track any account segment.

How to Set Up Class Tracking

To get started with class tracking, open your Quickbooks company file and choose “Preferences” under the “Edit” menu. Next, select “Accounting,” followed by “Company Preferences.” You should then see a box labeled “Use class tracking for transactions.” Click this box to place a checkmark in it. When finished, click the “OK” button.

With class tracking enabled, you can now set up classes for your accounts. This is done by clicking the “Lists” menu and selecting “Class List.” Next, click the “Class” drop-down menu and choose “New.” Quickbooks will then prompt you to enter a name for the class. Since it’s used for tracking purposes, you should give it a relevant name that’s easy to remember. After entering a name, click the “OK” button.

Assigning Classes: What You Should Know

Assuming you’ve followed these steps, you should now be able to assign the newly created class. Quickbooks supports the use of classes for many different types of transactions. You can assign them to invoices, estimates, bills, purchase orders, sales orders, sales receipts, paychecks, credit card charges and more. Once assigned, you can run reports for the various classes to view and compare their respective balances.

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What Is a Credit Memo in Quickbooks?

Have you come across credit memos when using Quickbooks to track your business’s financial transactions? If so, you might be wondering what they are. Based on the name alone, many business owners assume that credit memos are nothing more than notes used for reference purposes. Credit memos, however, can actually affect account balances. So, is a credit memo exactly, and when should you use them?

Overview of Credit Memos

A credit memo is essentially a note stating that your business owes a customer money. Maybe a customer returned a product, or perhaps the customer was overcharged for a product. Regardless, if your business owes a customer money, you can create a credit memo to adjust his or her account.

Credit memos add a negative balance to the customer’s account. When you create an invoice for a customer, it will add a positive balance to his or her account. Credit memos work in the opposite way by adding a negative balance to the customer’s account.

How to Create a Credit Memo in Quickbooks Desktop

If you use Quickbooks Desktop, you can create a credit memo by selecting “Create Credit Memos/Refunds” under the “Customers” menu. Next, you’ll need to select the customer for whom you are issuing the refund under the “Customer:Job”  menu. After entering the product or products associated with the refund, click “Save & Close.”

You aren’t out of the woods just yet. Quickbooks will now ask you to choose from one of three supported refund methods. You can choose to issue the refund as credit, give the customer an actual refund, or apply the refund to one of the customer’s outstanding invoices.

If you issue the refund as credit, the customer will be able to apply it on future purchases. Giving the customer a refund, on the other hand, means he or she will receive a payment for the amount of the credit memo. Finally, applying the refund as an invoice credit will offset the balance of the customer’s unpaid invoice. You can use any of these three methods to handle money owed to a customer.

In Conclusion

A credit memo is a note stating that your business owes money to a customer. In Quickbooks, they are used to add a negative balance to a customer’s account. When you create a credit memo for a customer, his or her account will receive a negative balance in the amount of the credit memo.

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How to Import Bank Transactions in Quickbooks

Are you trying to import bank transactions into Quickbooks? Banks typically offer statements containing all of the respective account’s transactions that occurred during a given period. Rather than adding transactions one by one to Quickbooks, you can import all of them at once. There are a few things you need to know, however, when importing bank transactions into Quickbooks.

Check Your Bank’s Supported File Formats

Before attempting to import bank transactions into Quickbooks, you’ll need to check to see what file formats your bank supports. For transaction imports, Quickbooks uses the QBO file format. Therefore, you can’t import bank transactions if your bank uses a different file format for statements, such as PDF or CSV. Your bank must support or otherwise offer statements in QBO format in order for you to import the transactions into Quickbooks.

QBO is Quickbooks’s file format for bank transactions. It’s designed specifically for importing bank transactions. While not all banks support it, many of them do. If your bank supports the QBO file format, you can easily import your bank transactions into Quickbooks. If it doesn’t, you’ll have to add the transactions manually.

Steps to Importing Bank Transactions

Assuming you have a QBO file containing your bank transactions, you can import it into Quickbooks in just a few simple steps. After logging in to Quickbooks, choose “File,” followed by “Utilities.” Next, click the “Import” option and select “Web Connect Files.” You will then be able to select the QBO file that you wish to import. Navigate to the QBO file on your computer — or any connected storage device — and click the “Open” button to begin the import process.

Quickbooks will then prompt you to choose from an existing bank account or to create a new bank account. If you’ve already added the bank account to Quickbooks, choose it from the list of available accounts. If it’s a new bank account, you’ll need to add it. When finished, click “Continue,” at which point Quickbooks will import the QBO file’s transactions. Once you see a message indicating that the import was successful, click the “OK” button to complete the process. That’s all it takes to import bank transactions into Quickbooks. Of course, you can avoid the hassle of importing transactions by setting up your bank accounts immediately after you create them.

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How to Record Accounts Payable In Quickbooks

Does your business owe money to a vendor? Regardless of what type of business you operate, you’ll probably have to buy products and services from various vendors. Nearly all businesses spend at least some money to execute their own money-making operations. When you owe money to a vendor, though, you’ll need to record the bill so that you can keep track of it. Thankfully, Quickbooks makes it easy to record accounts payable records such as this.

What Is Accounts Payable?

Accounts payable is a financial record stored in a balance sheet or general ledger that symbolizes money owed. If your business owes money that must be repaid over a short period, you can record it as an accounts payable. It’s important to note that accounts payable is not the same as liabilities. A liability is a type of formal debt, whereas accounts payable is simply money that your business owes to a vendor — or a different individual or business — with the obligation to repay it over a short period.

Steps to Recording Accounts Payable in Quickbooks

You can record accounts payable in Quickbooks in several ways, one of which is to create a purchase order. Assuming you use Quickbooks Desktop, you’ll have the option to create a purchase order. A purchase order, of course, is a bill stating that you owe a vendor money for one or more purchased products or services. You can enable purchase orders in Quickbooks Desktop by accessing the “Vendors” menu and choosing “Create Purchase Orders.” From here, choose “Add New” under the menu for “Vendor,” at which point you can complete the fields by adding information about the bill.

Another way to record accounts payable in Quickbooks is to create a bill for the money owed. From the home screen, choose the option for “Enter Bills,” followed by selecting the vendor to whom your business owes the money. Next, enter the date by which your business is obligated to pay the bill. You can then specify whether the bill is for an expense or an item. Expenses are ongoing financial obligations, such as utilities, wheres items consist of inventory, shipping and other financial transactions.

Regardless of which method you use, you’ll need to pay the accounts payable by its due date. Once recorded, though, you’ll be able to see the due date for all your business’s accounts payable records.

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Quickbooks Company File vs Portable Company File: What’s the Difference?

Quickbooks supports the use of several filetypes, two of the most important being a company file and a portable company file. Whether you use Quickbooks Desktop or Quickbooks Online, you’ll be able to create both of these files. Company files and portable company files aren’t the same, however. They are each designed for a specific purpose. So, what’s the difference between a company file and a portable company file?

What Is a Company File?

Using the QBW extension, a company file is a Windows-supported filetype that contains all your business’s recorded financial data and other information. Any data that you enter into Quickbooks will be saved in a company file. With that said, Quickbooks supports the use of multiple company files. Each business, though, should have its own company file.

You can create a company file by launching Quickbooks and choosing “Create a new company” in the “No Company Open” field. Next, select either “Express Start” or “Detailed Start,” after which you can enter the required information about your business. When finished, Quickbooks will create a new company file.

What Is a Portable Company File?

A portable company file, on the other hand, is a Windows-supported filetype that only contains essential financial data. Portable company files use the QBM extension, but that’s not what distinguishes them from company files. Rather, portable company files are distinguished by their smaller size.

Rather than containing all the data that you enter into Quickbooks, a portable company file only contains essential financial data. They still contain your business’s transactions, but they omit nonessential data like logos, graphics, templates and letters.

When to Use a Portable Company

Considering that they are smaller and contain less data than company files, you might be wondering what purpose portable company files serve. For starters, they allow for faster file transfers. If you work an accountant, you may need to send him or her your business’s financial data. The problem with company files is that they are bloated with unnecessary data. A portable company file is a smaller filetype that only contains essential financial data. Therefore, your accountant can download it in less time.

Creating a portable company file is also a convenient way to back up your business’s financial data. Since they are smaller than company files, you can create them more quickly. Keep in mind, though, that portable company files don’t contain logos, graphics, templates and letters. If you want to back up this data, you’ll need to create a Quickbooks Backup File, which uses the QBB extension.

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How to Record Equipment Purchases in Quickbooks

If you’ve recently purchased equipment for your business, you might be wondering how to record it in Quickbooks. Assuming your business needs the equipment to perform its revenue-generating operations, you can write it off on your taxes. There’s no option specifically for “equipment” in Quickbooks, however, leaving many business owners to believe that it’s not possible to record such transactions. While Quickbooks doesn’t have an option for equipment, you can still record the transaction.

Equipment Is a Fixed Asset

In Quickbooks, equipment is typically recorded as a fixed asset. Fixed assets, of course, are long-term resources that you don’t intend to consume or sell within the fiscal period in which you purchased it. As a result, most types of equipment are considered fixed assets. You may keep a piece of equipment for several years, all while using it to facilitate your business’s money-making activities. Because equipment is typically a fixed asset, that’s how you’ll need to record it in Quickbooks.

Steps to Recording Equipment Purchases in Quickbooks

You can record equipment purchases in Quickbooks by labeling them as fixed assets. After logging in to your Quickbooks account, click the gear icon on the home screen, followed by “Chart of Accounts” below your company’s name. Next, click “New” in the upper-right corner. You can then choose the option for “Fixed Asset” under the menu for account type.

Assuming you’ve followed these steps, you should now be able to enter the details about the equipment purchase, including the type and original cost. You’ll also be able to create a unique name for the fixed asseet account.

Keep in mind that Quickbooks supports depreciation tracking of fixed assets. If you click the box labeled “Track depreciation of this asset,” Quickbooks will add a subaccount for depreciation. Once created, you can track the equipment’s depreciation over time. Of course, depreciation tracking is optional, meaning you aren’t required to use it. Nonetheless, many business owners and accountants use this feature to track how much their equipment has depreciated in value.

After completing all the required fields, as well as setting up depreciation tracking, you can complete the process by clicking “Save and close.” Congratulations, you’ve just recorded the equipment purchase. You’ll now be able to view the transaction by looking at your business’s fixed asset purchases in Quickbooks.

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5 Tips on How to Go Paperless in Your Office

How much paper do you typically use in your office? Research shows that office workers in the United States use an average of 10,000 sheets of paper annually. Some workers, of course, use far more paper. If your office is cluttered with paper, though, you should consider the following tips on how to go paperless. By making just a few small changes to your workspace and daily work activities, you can reduce or potentially even eliminate the need for paper.

#1) Take Notes on Your Smartphone

Many office workers create notes on printer paper or sticky notes. A better idea, however, is to use your smartphone for note-taking. Whether you own an Android- or Apple-powered smartphone, you can download a note-taking app. Note-taking apps live up to their namesake by allowing you to take notes on your smartphone.

#2) Use a Whiteboard

In addition to your smartphone, you can use a whiteboard to create notes and other temporary messages. A whiteboard, of course, is a dry-erase board that supports the creation of temporary messages. After writing a message on a whiteboard, you can erase it with a dry cloth.

#3) Scan Documents

To truly go paperless in your office, you’ll need to invest in a scanner. Using a scanner, you can create digital copies of paper documents. Rather than keeping large file cabinets full of paper documents, you can convert those documents into digital files. Known as digitizing, it’s become increasingly popular among office-based businesses.

#4) Use Credit or Debit Cards for Business Purchases

When purchasing products or services associated with your business’s operates, use either a credit or debit card. Why is this important? If you pay for a product or service using cash, you’ll only have a paper receipt. Using a credit or debit card, on the other hand, creates a digital trail. The vendor may still give you a receipt, but you’ll also be able to access your financial records digitally to view the transaction information.

#5) Recycle

You may not be able to eliminate all the paper in your office. Nonetheless, following these tips can help you go paperless by significantly reducing the amount of paper your office uses. And you can always recycle any remaining paper in your office — assuming you don’t need it. Even if it has ink on it, most types of printer paper is recyclable.

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Using Advanced Inventory in Quickbooks: What You Should Know

To stay ahead of your competitors, you’ll need to track more than just the total number of sales your business generates. While tracking total sales is important, it’s equally important to track where, exactly, your business’s sales come from. Even if most of your business’s sales from its main store, others may come from your business’s smaller stores in other regions. Alternatively, your business may generate some of its sales online. Using Quickbooks’s Advanced Inventory, you’ll be able to easily track your business’s inventory across various stores or sales channels.

What is Advanced Inventory?

Available in Quickbooks Desktop Enterprise, Advanced Inventory is a tracking feature that allows you to manage your business’s inventory across multiple locations. It doesn’t reveal how many sales your business generates at its various stores and channels. Rather, Advanced Inventory is used primarily to track product inventory across multiple locations.

Maybe your business sells its products at three different stores, or perhaps it has a half-dozen brick-and-mortar stores plus an online store. Regardless, you can use Advanced Inventory to determine how much inventory your business has at each of its active locations.

How to Enable Advanced Inventory

Assuming you have Quickbooks Desktop Enterprise, you can enable Advanced Inventory in just a few simple steps. Start by clicking the “Edit” menu and selecting “Preferences.” Under the left-hand menu, click “Items & Inventory,” followed by “Company Preferences.”

You should now see a box for “Inventory and Purchase Orders are Active.” If there’s currently no checkmark in it, click the box so that it adds a checkmark. When finished, click the box below this area labeled “Advanced Inventory Settings.” You can then save and close this page to complete the process.

Creating Inventory Sites

With Advanced Inventory enabled, you can begin to track your business’s inventory across multiple locations. First, however, you must create inventory sites. An inventory site is essentially a location where you’d like to track your business’s inventory.

You can create inventory sites in Quickbooks Desktop Enterprise by selecting the “Lists” menu and choosing “Inventory Site List.” On the next screen, choose “Site,” followed by “New.” You should see several fields where you can enter information about the site. Complete all the required fields, after which you can save and close this screen. Repeat this process for all your business’s locations, and you’re good to go!

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Gross Profit vs Gross Margin: What’s the Difference?

The terms “gross profit” and “gross margin” are often used interchangeably to describe how much a business generates from its activities. Regardless of their size or market, businesses must purchase products and services to conduct their own money-money activities. A retail store, for instance, must purchase inventory from a vendor so that it can resell the products to its customers. While gross profit and gross margin offer insight into a business’s profits, they aren’t necessarily the same. So, what’s the difference between gross profit and gross margin in accounting?

Gross Profit Explained

Gross profit is an accounting metric that shows how much profit a business generates from its activities. It’s calculated by taking the business’s net sales and subtracting that number by its Cost of Goods Sold (COGS). If a business generated $200,000 during a given month and its COGS was $60,000, its gross profit would be $140,000 for that month. Gross profit uses a simple formula to reveal how much profit a business generated during a particular period.

Gross Margin Explained

Also known as gross profit margin, gross margin is another accounting metric that, like gross profit, shows much much profit a business generates from its activities. With that said, it uses a different formula than gross profit. Gross margin is calculated by taking the business’s gross profits and dividing that number by its net sales. Therefore, it uses a slightly different formula that ignores certain expenses.

Differences Between Gross Profit and Gross Margin

The main difference between gross profit and gross margin is that the former takes into account all of the business’s expenses, whereas the latter does not. With gross profit, all expenses associated with a business’s money-money activities are factored into the equation. With gross margin, indirect expenses — advertising, administrative fees, interest, tax, etc. — are ignored. These expenses are ignored when calculating gross margin, so a business’s gross margin is typically smaller than its gross profit for that same period.

You can use gross profit or gross margin to track your business’s financial health and well-being. Gross margin, however, ignores the aforementioned expenses, so it offers a more cloudy and altered representation of your business’s finances. That’s why, in fact, it’s referred to as “gross margin” rather than simply “gross profit.” Hopefully, this gives you a better understanding of how gross profit and gross margin differ.

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