For example, a recurring debit of $25 is posted for internet services. The person clears the $25 debit for ABC Internet Company dated 1/25/2012 but the $25 debit dated 4/25/2012 should have been chosen because s/he is reconciling the April 2012 bank statement. Or a check for $125 for office supplies cleared the bank for $110, the person cleared the check, had a difference of $15 and still pressed the reconcile now button. Here are some tips on how to fix account reconciliations without making your account out-of-balance the next time you reconcile the account:

Do NOT Do This – before I tell you what you could do, I want to tell you what you should not do. Do not delete the transaction. Deleting the transaction will definitely cause your future bank reconciliations to be off.

Do not change the dollar amount of a cleared transaction. This will cause the “cleared” transaction to “unclear” and will cause your future bank reconciliations to be off.

Modify the Reconciliation Discrepancy Journal Entry – If you press the reconcile now button and there is a difference in the reconciliation, QuickBooks will make a journal entry to increase or decrease your cash balance and the other side of the entry is recorded to an account called reconciliation discrepancies. Open a quick report through the chart of accounts. For the example above, look for the journal entry for $15 and open it. Change the account from reconciliation discrepancy to office supplies. In the memo write “ck#1234 for $125 cleared for $110″ and save the transaction.

Undo the Previous Reconciliation – You can undo the previous reconciliation and start over. That would let you fix the transaction and clear it properly. However, if you had an entry to reconciliation discrepancy you would need to delete it (I know, do not delete transactions, but this is an exception – the computer created a fake entry to make up for your mistake).

Use the Register – You can clear and unclear transactions using the register, but I recommend this step only for advanced users. In the register, there is a column with a checkmark. This means the transaction has cleared. Unclear a transaction by clicking the checkmark until it disappears and save the transaction. Next find the one you really wanted to clear and check that one. You may have to go back into the reconciliation screen and reconcile that one entry to keep your beginning balance correct for the next time you reconcile your bank account.

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Cash To Spend – Your BS shows you how much money you have available to spend on upcoming bills. As long as you are current with entering checks, debits, deposits, transfers, and other activity that flows through your bank account, you can generate your Balance Sheet to see how much money you have left that you can use to pay your bills or even pay yourself!

Looking at the bank balance daily online may assist you in figuring out if you have money available for bills, but the online bank balance fails to take into account checks you have written that have not been cashed yet and deposits (such as credit card payments) that have not been deposited into your account. So the online balance is not accurate and paying bills using this balance may cause you to suffer NSF fees and black marks with banks.

I had a client once who I told numerous times to stop calling in to find out his bank balance (this was years ago before the Internet was so popular to perform online banking). When I completed his bookkeeping, I informed him that if all the checks he had written cleared today then he would have about $17K negative bank balance. About a week later he called me to say that my impending doom never occurred, from which I asked if he received customer payments since seeing me and he had.

Payroll Liabilities – This account in your BS lets you know right away if you either have not properly paid your payroll taxes to the appropriate taxing agency or if you improperly recorded a transaction. Some clients use a payroll tax service which withdraws the payroll and the payroll taxes on the same day, so after recording the payroll the balance in the payroll liabilities account should be zero. For clients who pay the taxes when due, the balance in the account should equal the amount owed in the following month/quarter. And payroll taxes are not to be played with. The IRS, in my experience, is very aggressive, putting liens on peoples houses and sending them to jail. So look at your BS to make sure you are up-to-date with payroll taxes.

Wages Payable – If you use an outside payroll service, one way to record payroll is to record all net monies owed to employees to an account called Wages Payable. Then, when you record the checks individually written to the employee you also use the account called Wages Payable. This account should be zero after you record payroll and enter all the payroll checks.

Undeposited Funds – This account is unique to QuickBooks. If you receive a payment from a customer that has been applied to an invoice or you have received a payment from a customer through the sales receipt screen, by default QuickBooks records the amounts to Undeposited Funds. This account is important to look at when you view your BS. The account should go to zero as soon as you make the “deposit”. If this account continues to grow, then you are missing a step in your accounting process. And if you are missing this step AND download transactions, record the deposits as revenue, you are recording your sales two times and increasing your taxes!

Accounts Payable, Accounts Receivable, & Inventory – Generate your BS. Then generate your Accounts Payable aging report, Accounts Receivable aging report, and Inventory Valuation report using the same date as your BS. Assuming your reports are all on an accrual basis, the aging and valuation reports should equal the balances on your Balance Sheet. For example, if the AR Aging report shows $23,500 as the total balance as of 3/31/12, then the Accounts Receivable balance on your Balance Sheet as of 3/31/12 should also be $23,500. If not, you have an error with your data entry and need to fix this problem.

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Ask a LOT of Questions – if you do not understand a payroll report or the purpose of a deduction on an employee, ask your service provider. Do not assume that the information is accurate. Sometimes errors occur, but you are ultimately responsible for payroll taxes, not your payroll service provider.

Read Your Reports Before Signing Them – do not blindly assume that your payroll tax forms are accurate before signing them. Again, if you do not understand the report, ask your service provider to walk you through the lines step-by-step so you understand the form you are about to sign and certify is accurate.

Create Check Figure Reports – if you use QuickBooks, you can easily modify reports and create check figure reports to back check your payroll company to verify the information is accurate. You should confirm that the quarterly wages in QuickBooks matches the payroll tax forms. Also create a payroll tax liability check figure report to make sure the balance zeros out after you pay your taxes. Sometimes the wages recorded in QuickBooks will not match the payroll tax forms and it is not an error. Again, talk to your payroll company to understand what it reports as wages versus what you record in QuickBooks as wages to determine if the difference is explainable or an error.

Communicate With Your Service Provider – some payroll companies offer different service levels. One option is to have the payroll company do all your payroll for you: generate payroll checks/direct deposit, file payroll taxes on your behalf, and file payroll tax forms on your behalf. A more common option because it costs less, which I do not recommend unless you fully understand your payroll reports and tax liability calculations, is to have the payroll company process the payroll, give you reports so you see how much tax you owe, and sends forms for you to sign. In this scenario, the payroll company assumes you made the payroll tax payments on time, for the full amount, and made no mistakes.

If you make a mistake and pay a different amount for payroll taxes or forget to make a payment, immediately contact your payroll company. This will affect amounts reported on the payroll tax forms. And if you receive a letter from the IRS or other tax agency, fax or scan & email it to your payroll company right away even if you do not understand the letter. Get the letter to the payroll company first and then call to ask what it means.

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Record Gross Sales – Some credit card processing firms take out a service fee before depositing the money into your bank account while others charge fees that are withdrawn separately from your bank account based on the transaction. Square is a firm that withdraws its service fee before you receive your money, so sales have to be recorded as well as the service fee. For example, if you received $47.51 from Square $47.51 is not your revenue. Of that $43.27 may be sales, $3.03 may be sales tax, and $1.21 may be the credit card processing fee. Do not record the net amount received as sales. Break the transaction into separate line items to properly record the deposit.

Download Transactions Into Excel – Square allows you to download transactions into Excel in monthly time frames. Why would you want to do this? I am glad you asked! The Excel file will show you total sales, sales tax, tips, total money received from the customer, the fee taken from Square, and the net amount deposited into your bank account.

Each individual transaction will be on the Excel file, so you may have 10 or more swipes a day and see multiple line items. One trick I use to save time is to sort the data by date and then by time. Depending on the time of day you swipe a credit card depends when the deposit will be made. For example, you may have total sales of $150 today but one credit card was swiped after 11PM for $35. The $35 payment may be deposited with your sales for the following day.

After sorting the data I use the subtotal feature. For the most part the subtotal for the day matches the amount deposited in the bank account. For those receipts that miss the cut-off for the day and are deposited with the following day’s sales, I put a thick box around the receipts that were deposited together from the two days so I know that matches the deposit made into the bank account.

Create an Import File – I do not know if the time spent creating an import file would be more cost effective than entering the transactions manually, but I wanted to let you know that the option exists. For QuickBooks Pro and Premier for the desktop version and QuickBooks for the MAC you could create an .iif file to import the details into QuickBooks (sorry, .iif files do not import into the QuickBooks Online program to the best of my knowledge).

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Accounting – Some tax preparers/CPAs like to use chart of account numbers. In this preference section you can tell the program to use account numbers.

Class tracking, a useful feature for real estate firms, non-profits, and companies wanting to analyze data in more depth turn on this feature in this section.

You can set a closing date with or without a password in the Accounting preferences area. By setting a closing date, you will be reminded to not record transactions in the previous year after giving your QuickBooks file to your tax accountant or to not mess up your sales tax reports after remitting payment to the applicable agency.

Checking – If you use online banking, this is the section to change how you view and record downloaded transactions. The default is Side-by-Side Mode but I always change it to Register Mode because of the limitations of the default selection.

Desktop View – By default, the computer program remembers all the screens and reports you have open. So if you had ten screens open when you closed QuickBooks, when you open the file again the same ten reports will open, sometimes taking a lot of time to open all the screens. To save time, change the preference to not save the desktop when closing the company file.

General – These preferences depend on how you input data into the program. You may or may not want to change them, but this is what I recommend. Make the program treat the enter key like a tab key. Turn off the annoying pop-up commercials. And automatically recall transactions.

Items & Inventory – If you want to use purchase orders and create inventory items, you have to turn it on in this section.

Jobs & Estimates – For those who want to be able to invoice a percentage of an estimate in multiple invoices, turn on progress invoicing.

Payments – Turn off using undeposited funds as a default. This will allow you to choose your checking account if you only have one customer receipt. Otherwise, you have to perform an additional step for each transaction that was deposited all by itself.

Reports & Graphs – By default, the reports are on an accrual basis. If you want the reports to be on a cash basis for the most part, change the preference here. You can always modify a report and toggle to the accrual basis temporarily if you need to.

Sales Tax – For companies that have to charge sales tax to customers, turn on the feature here.

Send Forms – In this section you can customize the verbiage of invoices, estimates, statements and more that you email to customers, vendors, and employees. If you are curious as to how creative you can be, use my services. I email invoices and you can see what I write in my emails.

Tax:1099 – This preference is turned on by default. However, you have to choose which chart of accounts will be used when generating 1099s and 1099 reports.

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Budgets – So you entered in a budget for the year. Later you decide to make some accounts “inactive”. For example, you made an account called Pager Services “inactive”. However, when you generate the Budget Overview report or the Budget vs. Actual report there is $560 in the account called Pager Services. You go back into your budget screen and do not see a line item for Pager Services. Your QuickBooks file must be corrupt, right? Maybe not.

When you make an account “inactive”, the program does not delete information used on that account. If you return to the chart of accounts, make the account “active”, go back into the budget screen, put in $0 for Pager Services, the budget reports will no longer show the account called Pager Services. Now you can make the account “inactive” again.

Merge Accounts – If you have created a new chart of account to add more detail to your accounting records and later decide you do not want the detail, you can either make the account “inactive” or you could merge the account with an existing one. For example, if you created a sub-account called Yellow Pages under Advertising and later decide that you want to record all advertising expenses to Advertising, you could make the sub-account called Yellow Pages “inactive” so you cannot use it anymore or you could merge it with the account called Advertising.

Rebuild Data – If you still think that your program is possessed, you could run a utility called “Rebuild”. This feature typically fixes issues that make QuickBooks act strangely. However, if in the past your computer has crashed and corrupted the file the “Rebuild” may not work. I have also seen that files with several years worth of data or a large data file can cause oddities with the program that “Rebuild” cannot fix. You could also use the Condense Data utility to enhance the performance of your file.

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Generate Reports – QuickBooks Online does not have the option to backup data like with the desktop version, so I suggest exporting reports to Excel to compare with your newly converted file. Unfortunately, QuickBooks Online reports are limiting, such as the number of lines that can show up in a single report. When generating a detailed report, make sure to scroll down to the bottom of the page to verify that no error message shows up. It says something like there is too much data. To get around this, change the date range to a smaller size, such as quarterly, and export the information to Excel in multiple exports.

Edit Customer:Jobs – QuickBooks Online allows you to make a “customer” into a job and vice versa. But in the desktop version, once a customer is created you cannot make it a job of another customer. So if you have ever wanted to put customers under a single name, the time to do it is before you convert the file. For example, if you have contracts with several sub-divisions but one company makes the payment, jobs would be handy to use.

Set Aside Time – Once you start the conversion process, QuickBooks lets you know that it may take a couple hours to a couple of days to convert the data. You receive an email with a link to the converted file and must download the new file. The new file takes at least 20 minutes to magically become a QuickBooks desktop file.

Verify Data Post-Conversion – According to the instructions provided by Intuit, if there are duplicate chart of accounts after the conversion, the duplicated account should show up with an OE next to it. However, I have not seen that happen. Instead, I have seen the same exact name appear. This can cause an error with the program and make other functions of the program not work properly. Verify your data after the conversion to see if you receive an error message stating that duplicate list items exist.

Memorized Transactions & Reports – Memorized activities and reports do not come through with the conversion. You have to manually re-create them. If you want to set-up a memorized invoice, do not use a previous invoice as a template. Instead, create the invoice from scratch and then memorize it. For some reason, the first line of the Bill To address does not show up on invoices created in QuickBooks Online that were converted into the desktop version. By creating the invoice from scratch, you will avoid having a truncated address appear on the Bill To section of your invoice.

Bank and Credit Card Reconciliations – Unfortunately, after the conversion all transactions are “uncleared” so it appears as if you never reconciled your bank statement or credit card statement. The good news is that you do not have to reconcile each month again. Instead, you can reconcile it all at one time based on the last reconciliation you completed.

Work With a QuickBooks ProAdvisor – No, I am not saying this because I am a Diamond Level ProAdvisor and want you to use my services. However, if you have a ProAdvisor help you with the conversion, depending on the level of support the ProAdvisor has (I have unlimited phone and chat support at no extra charge), weird issues may be able to be resolved on-site immediately. If you do the conversion by yourself and have strange issues after the conversion, you would have to purchase Intuit support services, which is usually via the telephone and not the best service. Sometimes you have to wait 20 minutes to get a telephone support specialist. The online chat support service available to some ProAdvisors is much more efficient (1-5 minute wait time for an agent), and therefore is the most cost effective.

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FIAT 500C Lounge-this particular model is a two door hatchback with a 1.4L I-4 cylinder engine, 6-speed automatic, azzurro (blue) exterior and nero (black) interior. The car is a cute convertible that has three top options: a small opening, halfway, and all the way down. The rear window is actually glass, not plastic like most convertibles. The driver seat is bucket in style with a right-side armrest for cruising comfort. It is considered a “lounge” because it has the Bose speaker system with sub-woofer under the passenger side seat.

The Experience-this was a very sporty car! The weekend was sunny for the most part, so I drove with the top all the way down. I loved driving listening to the BPM (techno) station on Sirius XM with the bass booming music. For once I was the annoying driver with a vibrating car.

I felt like I was a race car driver in the FIAT 500C! The odometer section was both digital and on the outside it was manual, so I could watch all the instruments move as I drove like a race car driver. Vroom vroom! There is a sport button you can press that changes the feel of the drive, making it more sporty. I had that button pressed almost all the time. And for those who like a manual transmission, you can change your gears just like a manual stick shift without the hassle of pressing the pedal with your foot.

The gas mileage was great! From the dealership to my house was 28 miles. I did not drive too much during the weekend, but compared to my gas guzzling machine I expected to use a 1/4 tank one way. When the gas indicator stayed the same the whole time I thought it was broken. Only when I returned the car and was a few miles from the dealership did the gas gauge move one small block.

Thank You!-a big thank you goes out to Hendrick FIAT of Cary for allowing me the chance to test drive a really cool car for the weekend.

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Restricted Funds – in the non-profit world, as opposed to the for profit accounting world, you will hear words such as restricted and unrestricted funds. Restricted funds are money (or other assets) that are supposed to be used for a particular purpose. Unrestricted funds are monies (or other assets) that you can spend on anything you want. On the Balance Sheet a non-profit is supposed to show the amount of assets that are Unrestricted, Temporarily restricted, and Permanently restricted.

The Client’s Method of Recording a Temporarily Restricted Grant – the goal was to record a grant received and earmark certain amounts of that grant for specific programs. Here is how the activity is recorded:

Deposit the money into the checking account (unrestricted funds). Transfer the grant money into a fake bank account to represent temporarily restricted funds. Transfer the grant money to fake sub-accounts (also bank accounts) to earmark the funds to be spent on a particular program. Record the revenue as the money is spent and also record the amounts being spent out of the fake bank accounts.

The Issues – from an accounting perspective, I saw the creation of fake bank accounts as messy and difficult to reconcile. First, you have to record the initial deposit going into the checking account or else the bank account cannot be reconciled. Second, the client reduces the checking account to move money to be “Restricted”. However, this amount never literally came out of the checking account so the withdrawal will always float in the bank reconciliation screen as appearing outstanding. Third, after reconciling the checking account, you have to look at the balance sheet to make sure the sum of the checking and fake bank accounts matches the register balance in the reconciliation report.

Then when the money is spent, the money would get transferred from the fake sub-account bank account to make it “Unrestricted” and then a check would be written out of the account to pay for the expense. The last step would be to move the amount spent out of deferred revenue and into donation income. Not until the full grant amount is spent can the floating outstanding amounts in the bank reconciliation be cleared out, which may be months or span over a year. So the reconciliation report looks like junk.

In accounting lingo, the initial transaction sounds like: debit checking, credit unearned revenue; debit fake grant bank account, credit checking; debit fake specific program sub-bank account, credit fake grant bank account. When the money is spent the transaction sounds like: debit checking account, credit fake specific program sub-bank account; debit expense, credit checking account; debit unearned revenue, credit donation income.

I think this client used that methodology because class tracking was already used for a different purpose. However, my idea seems much easier and tracks the flow of information properly so reconciliations can be completed without fake floating transactions.

Open a Second Bank Account – for any money that is restricted for a particular purpose, deposit the money into a bank account that is used only for restricted funds. When the money is allowed to be spent, transfer it into the checking account and spend it.

Use Jobs to Track Money Spent in a Grant – for each grant that you receive that has to be spent on specific projects, create a new customer and then set-up jobs. For example, if you receive a $50,000 grant from Duke in 2012 to be spent on Education, Transportation, and Childcare, create a customer called Duke 2012. Create jobs under Duke 2012 called Education, Transportation, and Childcare.

Set-Up Budgets – create a budget for each job. This would represent the maximum amount that could be spent. As money becomes “Unrestricted”, transfer it from the second bank account into the checking account and write the check for the expense, tagging it to the appropriate job. To see if there is money left to spend, generate a Budget vs. Actual report. For example, if you earmarked $3,000 to Childcare and spent $300, the report would show an available balance of $2,700.

Profit & Loss by Job Report – after writing the check, record the revenue using a journal entry and tag it to the appropriate job. Then generate a Profit & Loss by Job report and the net income for that job should be zero.

By using my recommendation, the bank statement will properly be reconciled and any outstanding items should be valid and not fake. The Budget vs. Actual report will alert you if you have spent all the money that was allocated to the job. The Profit & Loss by Job report will alert you if you forgot to record the revenue associated with the expense.

Doesn’t that sound much easier and less painful?

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Mobile Access to Customer & Sales Data – with this feature you are supposed to be able to create estimates, email invoices, and access customer data from your mobile phone. But you cannot access other areas of QuickBooks. A program such as LogMeIn has a free app that lets you view and use your entire QuickBooks file from your mobile phone, and the service to control your computer is free!

Online Backup – this feature automatically backs up your QuickBooks data online. Supposedly it will backup other files too, to a limit of 100GB. If you do not want this service you could use a thumb drive to backup your data to take home with you.

Automatic Upgrades – disclaimer section says “when and if they become available”. QuickBooks Pro has free updates anyway. Depending on your subscription period, this feature would be useful if you had the subscription when the latest version of QuickBooks Pro came out. For example, if you used the service starting now with QuickBooks Pro 2012 then during the subscription period the program would be updgraded to QuickBooks Pro 2013 automatically.

24/7 Unlimited Phone Support – if you enjoy waiting twenty minutes to talk to a representative who may or may not be able to help you, then this feature is for you. However, if you are busy like myself running your business this feature may not be a great benefit. As a Diamond Level Pro Advisor I get this service included in my membership and have yet to see a benefit. For example, twice I used the support for POS questions for my client and both times the phone calls were a waste of time and my questions were not answered. Now, if the support plan included unlimited chats then it may be worth it. I like the chat support and have had positive results with that service.

Analysis – overall, you have to do a cost-benefit analysis to decide which program package would work best for you. If you want the added services, then purchase the QuickBooks Pro Plus. However, the subscription service is definitely more costly. Intuit discontinues certain services after three years, so depending on if you use the services that Intuit can turn off you may have to upgrade QuickBooks Pro every three years. That is a cost of $183.95 for three years ($61.32 per year) compared to a subscription cost of $932.85 ($249.95 per year plus $183 for the cost to buy the latest version of QuickBooks). The agent said if you keep the subscription for one year you can keep the QuickBooks Pro and not use the add-on services, but the disclaimer does not. The disclaimer states you have to purchase the most recent version to keep your data.

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