Another 5 QuickBooks Tips

Many nonprofit organizations use QuickBooks.  In order to assist you with using QuickBooks and improve the accounting process, we’ve provided tips on using the software in past blogs – 5 QuickBooks Tips for Nonprofits and 5 More QuickBooks Tips for Nonprofits.  Here are another 5 tips.

Voiding checks.  If a check in QuickBooks is voided using the “void check” option, it will remove the original check as of the date it was originally written.  This causes issues when the check was written in a prior period, as it changes prior period balances.  Instead of just using the “void check” option in QuickBooks, you should do the following to maintain the original balances from the prior period.

1. From the check register, find the check that needs to be voided and select “void check.”
2. Enter a journal entry dated the same date as the original check.  Select the account that was debited when the original check was created and enter the check amount in the debit column.  Then select the appropriate checking account that the original check was written from and enter the check amount in the credit column.
3. Enter a journal entry dated in the current period, reversing the entry in #2.
4. When you prepare the next bank reconciliation, you must clear the two journal entries that you made above and the voided check for $0.00.  Otherwise these transactions will continue to show up on the bank reconciliation report as outstanding transactions.

Bank reconciliations.  Your organization should have a document retention destruction policy in place stating how, where, and for how long documents are kept.  Best practices is to maintain bank reconciliations for 7 years.  QuickBooks allows you to reconcile the bank account within the software; however, after the bank account has been reconciled within QuickBooks, the actual reconciliation should be printed and maintained with the organization’s other financial documents.  The report printed should be the detailed version of the report that shows the detail of all reconciling items.  The reconciliation can either be kept in paper or electronic format but it should be maintained outside of the QuickBooks software, preferably with the actual bank statement, and with the proper review and approval noted on the face of the reconciliation. 

Offsetting open items in receivables.  It’s not uncommon for offsetting debits and credits to be included in the accounts receivable listing.  While in total the receivable listing is correct, the individual amounts should be netted and cleared from the listing.  These are normally created from payments received that were not properly applied against an invoice or journal entries entered to receivables.  To clean up these items you can do the following:

1. Under Customers, select Receive Payments.
2. Click on the arrow next to the right of the Received From box to select the appropriate customer’s name.
3. Place a checkmark in front of the open receivable that shows up in the grid below.
4. Click on the Discounts & Credits button and place a checkmark in front of the available credit that matches the receivable amount.  Then click Done.

Utilize a credit card account.  Many organizations make use of a credit card for various purchases.  In order to make sure that those expenses are recorded properly, you should utilize a “credit card account” in QuickBooks.  In the chart of accounts, make sure you have added your credit card and that they type of account is a “credit card account”.  As purchases are made with the credit card, they should be entered into QuickBooks using the “credit card account”.  Each transaction should be entered separately using the date of the charge and recorded to the proper expense account.  This will ensure your expenses are recorded on the appropriate date and to the correct category.  When you receive your credit card statement, you can then reconcile the activity in QuickBooks to the credit card statement using the “credit card account”.  The payment should be made against the “credit card account” since all expenses have already been recorded when they were incurred. 

Duplicate customer and vendor names.  Within QuickBooks, there exists a list for your customers (people that pay you) and vendors (people you pay).  Make sure that you don’t have multiple customer or vendor names with slightly different spellings.  For example, “Dan Smith” and “Daniel Smith” or “ABC Company, Inc.” and “ABC Company.”  Multiple spellings of the same name will show up as separate customers or vendors with separate transactions, when in fact they are the same and should be included under one name. 

Posted by: Carrie Minnich, CPA