December 2000

Here is your complimentary copy of The Desktop Accountant, our periodic newsletter with tips and tricks for using QuickBooks and QuickBooks Pro.

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The Sleeter Group has been busy the past several months developing a number of new products and services to help you learn, teach or troubleshoot accounting systems using QuickBooks. In this issue, we'll tell you about several of them and bring you up to date on the new events in the marketplace for desktop and online accounting systems.

The biggest news is Intuit's announcement of it's online accounting product, QuickBooks for the Web. We're just getting our first look at the product, but our initial reviews are quite positive. This product is aimed straight at the market that NetLedger and others are attacking, so it will be very interesting to see how things play out. Intuit clearly has the customer base and they should be able to capture the lion's share of the market relatively quickly. Intuit always develops GREAT software - and they test it before they release it. The same cannot be said for some of the other developers in the online applications world. So even if Intuit appears somewhat late in the game, we expect them to be the powerhouse in the emerging online accounting market. Stay tuned for our upcoming review of this new product.

QuickBooks 2001 was recently released by Intuit. We're developing an article on all the enhancements to fill you in on the specifics, but so far, this new version looks great. One of my favorite things, the iconbar is back! Stay tuned... For a list of new features, follow this link - http://www.quickbooks.com/quickbooks/2001/whats_new-qb.html

State Payroll Reporter News - In case you haven't heard, The Sleeter Group has discontinued the sales and support of the State Payroll Reporter software. All rights have been returned to DGR Software. For more information, see our press release. Note that you must upgrade to DGR's new product "ReportWiz" in order to process FORM DE-7 for year 2000.

Online Accounting - The Continuing Debate - Should You Switch to Online Accounting?

In my last newsletter, I predicted that online accounting "would replace desktop software" by the end of 2003. After spending most of 2000 looking closely at NetLedger and other online applications, I'm starting to soften my position. Why? Because I'm still looking for some answers to some very difficult questions. For example:

1) How soon will mainstream users have access to high-speed Internet connections?

As I travel around the country I find that by far most small businesses are still connected with 56k baud modems or slower. I don't see how online applications can succeed when the market is still surfing at such slow speeds. And in order for the online applications to survive they need critical mass soon because their business models are built on thousands of users paying monthly fees. Will the investors have the patience to wait for the infrastructure to mature?

2) Can web-based applications ever measure up?

Small businesses are spoiled by some VERY good software such as QuickBooks, Peachtree, MYOB, etc. These applications are fast, functional, and easy to use. People have spent years with these applications and for the most part, users are happy with their overall value.

So when people start looking at online accounting applications, they naturally expect that the online application will be at least as good as their desktop application. Unfortunately, the human interface, basic functionality, and the overall robustness of these applications are not even close to that of the desktop products in the market. So how long will it be before the online applications evolve to the point where switching to them doesn't mean going backwards in functionality, ease-of-use, and robustness? I think it will be a while, but I hope I'm wrong.

3) Will users ever get comfortable with storing their accounting records on someone else's server?

I've done quite a bit of talking on this point, but people are still very concerned about not having local copies (or even backups) of their accounting data. This problem needs a solution before the market takes off. I don't think people will ever get used to it.

4) Integration is probably the biggest reason to switch to online accounting. But will the users really be able to integrate all their applications without the aid of a programmer-level consultant?

We're very excited about the openness of applications such as NetLedger with full support of XML. However, will normal users be able to set up the integration between their favorite webstore, payroll service, merchant account, time & billing and online accounting applications? We'll see how this plays out, but I'm afraid it will take programmer-level consultants and it will cost the online application developers quite a bit of support dollars.

The bottom line here is that I just cannot see things moving ahead until we have good solutions to each of these points. Using online applications is a nice idea and there are plenty of needs that it solves, but online software developers have a long way to go. I just hope the venture capitalists that have placed so many bets in this area will hang in long enough.

The Sleeter Group now certifies QuickBooks consultants. Through our network of certified consultants, we provide thousands of small business owners with the training and support they need to maximize their accounting systems. To obtain certification, consultants must pass a rigorous examination that tests their knowledge of QuickBooks, accounting and computers. For details about the program, or to find a consultant in your area, go to our website.

Coming soon - The Sleeter Group's New, Improved Website
Our website has been undergoing reconstructive surgery. We have been working hard to build a new site with a new look. Best of all, we are building more features geared at helping consultants and their clients take advantage of Internet technology. Here are just some of the new features that we will be "unveiling" towards the end of January 2001:

Exchange files between consultants and clients online in a secure environment (no need for email or ftp)!
Update your online profile anytime.
Links to websites with great software, QuickBooks add-ons, consultants, tax sites and more.
Online forums that provide answers to your questions.
Online searchable Knowledge Database for Consultants.
Sleek easier-to-use interface.

Above all, our site will have TONS of content for people who need help with accounting software. Visit our website at www.sleeter.com in late January for the new improved site!

Changing Sales Tax Rates at the Beginning of the Year:
If your sales tax rates change, you have to carefully time your modifications to the items in QuickBooks so that you'll properly record sales both before and after the effective date of the change.

If your sales tax rate changes effective 1/1/2001, you must make this change after you record the last sale for 2000, but before you record your first 2001 sale. There is no need to make new sales tax items. Changing the rate WILL NOT affect the rate charged on previously entered transactions. When you create a sale transaction, QuickBooks uses whatever rate currently shows in the item definition, regardless of the date on the sale transaction. Be careful not to change the rate before you've finished entering sales transactions for 2000, otherwise those transactions entered after changing the rate will use the new rate.

Last but not least, your success is what we are all about. Please feel free to drop us a line and let us know how we can be of greater service to you (newsletter@sleeter.com)

This Month's Newsletter Topics are:

"How to Record Daily Cash Sales Summaries from Cash Registers", and
"How to Record Billing Summaries in Medical Offices"

I hope you enjoy our tips! Drop me an e-mail with your comments.

Doug Sleeter

Recording Daily Sales Summaries

If you use a cash register or Point-of-Sale (POS) system to record sales in your retail business, you need to record those sales in QuickBooks, at least in summary. Summarizing these sales properly will allow you create accurate financial statements in QuickBooks as well as reconcile your bank statements and track sales tax. The method you use to record these sales depends on the answer to several questions, including:

Do you collect sales tax?

Do you accept credit cards as well as cash and checks?

Do you want to track sales by item in QuickBooks using the same items that are used in the register or POS system?

Do you sell anything on account (store credit)? If so, do you need to keep track of each credit customer’s account balance in QuickBooks?

Do you need to record some sales individually for any reason?

The more questions with a ‘Yes’ answer, the more complicated the method you need to use. We are going to use an example of a computer store that sells computer hardware and software. We will start with a simple situation in which the store accepts only cash and checks and needs to record only total sales per day. Second, we will add some complexity by recording sales by item in QuickBooks and by accepting credit cards. Lastly, we will look at a situation where all the above questions are answered ‘Yes’.

For our first example, assume that Computer Mania records all sales in the register or POS system and that they accept only cash and checks. Assume further that the only information they need in QuickBooks is total sales for the day, sales tax, and total bank deposit. The store does not extend credit to any customers.

Example One

On this day, Computer Mania sold $500 worth of hardware and software and collected $25 in sales tax. In this very simple case, you can use a Cash Sale screen to record the total sales. Make a generic item that is taxable and is mapped to a sales account.

Notice that QuickBooks will correctly accrue the sales tax. Sales tax reports will work and sales tax can be paid in the normal way. QuickBooks will increase Sales, Sales Tax Payable and your Checking account.

If you make any sales to tax exempt customers, you can use the same item on two lines. Click in the rightmost column of the line with the tax-exempt sales to remove the ‘T’ and mark those sales as non-taxable. Alternatively, you could create another item that is set as non-taxable and use it for tax-exempt sales. QuickBooks will calculate tax on only the taxable sales.

Use Write Checks to record the cash payments you made that day. These payments would be for expenses such as office supplies or postage, not for refunds. Refunds would simply decrease the total sales figure in the Daily Summary. Notice that the check is drawn off the Cash Holding Account.

This method provides complete tracking for expenses since you have all the functionality of the Write Checks screen such as items, job costing and class tracking.

Example Two

To complicate matters, let’s assume that Computer Mania decides to start accepting MasterCard, Visa, Discover and American Express. They also decide that they want to split the sales in QuickBooks into Hardware sales and Software sales.

Also, VISA and MasterCard are deposited together, so you only need one payment item for VISA/MC.

You’ll also create payment items for AMEX (American Express) and Discover.

Notice that these two payment items will record receipts and directly deposit them into the Checking account.

Since American Express usually deducts a discount fee before depositing your sales, select “Group with other undeposited funds” at the bottom of the item.

As you’ll see below, you’ll record the discount fees when you “Make Deposits” of your American Express receipts for the day.

At the end of each day, create a transaction summarizing the day’s sales as shown. Notice that the total sales are divided between the two items to reflect the sales of each for that day. This information will come from the cash register “z tape” or POS report.

If you want more detailed reports on items sold, you can create more items and record their sales separately.

To record separate amounts for each form of payment, use Payment items on separate lines of the transaction along with the amount collected for that type of payment.

If you have several cash registers, you might want to create separate customers (e.g. Daily Sales – Register 1, Daily Sales – Register 2, etc.) and then create separate transactions for each register. That way, you could get reports of sales by register using the sales by customer reports.

Now the Checking register shows a separate deposit for each type of payment. This will be important when you reconcile your bank account.

Example Three

Computer Mania has now decided to start extending credit to some customers and they need to keep track of the account balance for those customers in QuickBooks. In addition, they began renting computers and they need to record each payment received under the customer name so that they can run a report at any time and see a list of payments received from a rental customer for each rental contract.

Because you need to keep track of the account balance for your credit customers and since you probably want to keep a detailed record of their purchases, you need to create a customer record for each credit customer and record sales to them individually.

The payment method in the POS system will be something like ‘On Account’. You will need to create invoices in QuickBooks that total that number.

Since these sales will be included in the totals from the register Z-tape or POS report, you need to decrease total hardware and software sales on the Daily Summary Sales invoice by the sum of these invoices.

Computer Mania is now renting computers to customers on a rent-to-own basis. They need to keep track of the payments from each customer and each rental contract. This is important so that at any time they can run reports on a customer and see all their payments. These reports will allow them to calculate the remaining balance of the contract if a customer decides to pay if off early and let’s them see who is late on rent payments.

Create a customer record for each rental customer. Create a Job under the customer for each contract. Using jobs will allow you to track multiple rental contracts for a single customer.

When you receive a rental payment from a customer, create a cash sale to the Customer:Job using a ‘Rental’ item. This item should also be used in the cash register or POS system so the rental payments can be segregated from other sales. Create individual cash sales that add up to the total ‘Rental’ item on the POS report. Notice that the payment is included with other Undeposited Funds. Since this payment will not be deposited separately, you need to combine it with the other cash and checks received that day into a single deposit.

Now comes the hard part. Assume that the above two transactions are the only ‘special’ transactions for the day. All other transactions are cash sales paid for at the time of purchase. The register Z-tape or POS report says that Computer Mania had the following totals for the day:

Hardware sales $1,800.00

Software sales $568.00

Rental sales $50.00

Total sales $2,418.00

Sales tax $120.90

Total sales + tax $2,538.90

Cash/Checks $108.00

MasterCard/Visa $396.00

American Express $0.00

On Account $2,034.90

Total Payments $2,538.90

When creating the invoice to record the above totals, you must take the sales entered individually into account and reduce the daily summary sales invoice appropriately.

Our summary invoice should record the following totals for the day:

Hardware sales $300.00 ($1,800 - $1,500)

Software sales $130.00 ($568 - $438)

Sales tax $21.50 ($120.90 - $96.90 - $2.50)

The summary invoice for this day will look like this.

Notice the hardware and software sold on account is not included here. Those sales were recorded on a separate invoice. Also notice that no rental sales are recorded on this invoice. In fact, the rental item should never be listed on the summary invoice, because those sales always need to be recorded individually by customer and contract number.

The sales tax should automatically calculate correctly and total to the correct amount for the day. Again, if cash payments were made out of the cash drawer, use the method illustrated in example one that uses the Cash Holding Account.

A couple weeks later, Computer Mania receives a check from Jones Law Office for $2,034.90 in payment of the above invoice. If you do not record Accounts Receivable payments in the cash register or POS system, simply record the payment in Receive Payments and combine this payment with the other cash and checks received for the day. If you do record such payments in the cash register or POS system, there should be an item called something like ‘paid on account’. You will enter the $2,034.90 as a ‘sale’ using that item and show it as paid with a check. The register Z-tape or POS report shows the following totals for the day:

Hardware sales $500.00

Software sales $200.00

Rental sales $0.00

Total sales $700.00

Sales tax $35.00

Paid on account $2,034.90

Total sales + tax $2,769.90

Cash/Checks $2,434.90

MasterCard/Visa $335.00

American Express $0.00

On Account $0.00

Then, go to Make Deposits and select all cash and checks received.

Record a single deposit in QuickBooks for the total cash and checks received that day of $2,434.90.

Note: Some POS systems can create iif files containing summarized daily sales information that can be imported into QuickBooks. Be aware that many of these programs summarize these sales in QuickBooks using a journal entry. However since most of the sales reports in QuickBooks are item driven, using journal entries makes these reports less useful. Also, if journal entries are used, you also lose the sales tax tracking that makes preparing sales tax payments and reports so easy. One POS program we know that does things right is AccuPOS, from Attitude Positive. This product creates iif files with complete item-based information so that all of your QuickBooks reports are preserved. For more information, go to www.attitudepositive.com.

Summary

Recording daily sales from a cash register or POS system can be very simple or somewhat complicated depending on how much information you need to track in QuickBooks. As always, more information means more work. When entering summaries in QuickBooks, always keep in mind the affect on bank reconciliation, Accounts Receivable balances and sales tax tracking. Choose one of the above three methods based on your information needs and use it consistently.

Recording Medical Billing Summaries

Most medical and dental billing systems track revenue in great detail. The amount of this detail you intend to capture in QuickBooks will determine which of the two following methods will work best for you.

Our sample company, Gentle Dental Care, Inc., is a small dental practice that uses a billing system to track productivity and receivables and they use QuickBooks to write checks and generate payroll.

In the first example, the dental practice intends to capture summary information only – just what is necessary to generate an accurate profit and loss and balance sheet to streamline their year-end accounting and tax preparation.

In the second example, the practice intends to use financial reports in QuickBooks as a management tool and will track the following information:

1.     Productions and adjustments by two different departments (classes): Dentistry and Hygiene

2.     Productions by type of service performed (e.g. Root Canal, Filling, Oral Surgery, etc.)

3.     Adjustments by type (e.g. Courtesy discounts, collection fees, etc.)

4.     Cash receipts by type (e.g. VISA, American Express, Cash/Check)

In both examples Gentle Dental Care will enter summary information on a monthly basis because they do not have a need for daily or weekly management reports.

Example 1

The monthly billing reports for Gentle Dental show the following information:

Total Productions $47,835.00

Total Payments $43,827.40

Total Adjustments $ 4,879.54

Bounced Check #1 $ 386.10

Bounced Check #2 $ 120.80

Once productions, payments and adjustments (including bounced checks) are entered, any difference will be an increase or decrease in accounts receivable. Create an “Other Charge” item called “Receivable Change” and post to a contra-receivable account called Net Change AR, a sub-account of Accounts Receivable. Create the accounts with the following structure:

Each of these accounts must be an “Other Current Asset” type (i.e. not Accounts Receivable type) for the “Receivable Change” item to post correctly.

Recording Deposits

Each time Gentle Dental makes a deposit, they post all cash receipts from productions directly to the “Billing Receipts” other current asset account. They then post receipts for any other monies received directly to their respective accounts (e.g. officer loan or vendor refunds). After all deposits have been entered for the month and the billing system entry is posted, the balance in the “Billing Receipts” asset account should be zero (or an amount equal to cash receipts being held for deposit as of the end of the month). Cash will always be current.

Example 2

When tracking greater detail from the billing system, create separate items for each service performed, each payment received and each adjustment rendered. Since Gentle Dental wants a departmental Profit and Loss, they created a class column on the invoice form template.

This figure is the productions section of a larger invoice. (See below)

To simplify the monthly data entry, create item names that correspond to the code number from the billing system or include the code number in the description field.

With many medical billing systems, some adjustments that should be recorded as negative amounts in the billing summary will show as positive amounts on month end reports (and vice versa). To avoid confusion, provide specific posting information in the description field as shown here. For example, on the Family Discount item, the description is set to “Family Discount (enter as negative)”. This helps the data entry person know to enter discounts as negative amounts.

Memorize the invoice for future entry. To simply the monthly input, you may want to provide cross-reference notations between each line of the printed invoice and the corresponding line on the billing reports.

For more information, contact www.sleeter.com.

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