We’ve all been in situations where we thought we made a clear request. “How much did we have in sales last month?” “What did we spend in overtime on that project?” “How do our profits look so far this year compared with last year?”
When the information comes back, we know it doesn’t look right—but we don’t know what’s off. We get frustrated and would love to blame the blockhead who can’t find the answer a simple question.
Sometimes that appears to be QuickBooks (QB).
How can we make sure we’re speaking the same language, so the information we get is useful?
My Love for QuickBooks Isn’t Blind
QB has many terrific and useful reports built into the software. A wealth of information is just a click away. How come so many of my clients tell me their QB reports don’t make sense?
To answer that, I think we need to peek—not gaze—under QB’s hood. Think of it as a special kind of database, with its own language and assumptions.
Here are some easy things to remember and do so 1) your reports give you the information that you seek and 2) you understand what you’re seeing.
#1: Customize Your Reports
Both the desktop and online versions have a button on each report that says “Customize.” You can adjust your default report settings just by clicking this button. If you like your changes, then hit “Save” or “Memorize” to keep them for future reports.
#2: Decide How Many Columns
Most reports can be modified to display additional columns. When I run a profit and loss statement, I find it helpful to check the box for “percent of income.” This displays a column that shows every line item as a percentage of total income. This is very helpful in seeing your gross profit margin and identifying the large expenses that overshadow others.
QB will run comparative reports. This year-to-date compared with the same time last year is a favorite. You can also check boxes for columns that will display the dollar change and percent change from one period to another.
#3: Choose Cash or Accrual
There are the two methods of accounting. QB works equally well with both. Which should you use?
If you invoice your clients and carry accounts receivable, choose accrual. If you enter vendor bills today and pay these down the road, you are creating accounts payable—and should use accrual. If you get paid at the time of delivering service and/or pay vendors promptly upon receiving their bills, then cash basis reporting will work for you.
#4: Understand What QB Calls “Sales”
You can run plenty of sales reports in QB. Clients often ask me why what they see on their sales reports doesn’t equal the income on their profit and loss report. This happens because the sales reports only pull data from transactions associated with customers. The income statement uses all transactions. So if you recorded a bank deposit for income, but never associated it with a customer, the transaction won’t appear in a sales report.
#5: Know Who You Are
There are three primary relationships in the QB database. You are a customer, a vendor, or an employee. And QB makes reporting assumptions based on those categories.
For example, let’s say you have a vendor who owes you money for a faulty product you returned. This won’t show up on your accounts receivable aging. That’s because this report only pulls from customer transactions (like invoices and credit memos).
#6: Check for Unbilled Costs
Last month’s column addressed job costing. QB does a terrific job of tracking job-related expenses and helping you remember to bill your client for reimbursement. But it can only do this if you checked the little box that says “Billable” when you paid the money.
We All Would Prefer to Have Our Minds Read
The truth is that none of us could afford the investment we’d have to make so this would be possible in QB. You’ve done the next best thing, which is to learn more about its language.
These six items aren’t a comprehensive list, and QB contains many more features and options for reporting. But I hope this will help to move you from a frustrated beginner to a more satisfied intermediate user of financial reports.
And if you’re still stuck or confused, contact me. As you can tell, I love talking about QB and making it more useful for business owners.
Wishing you lots of positive cash flow.