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I’ve noticed a lot of recent activity on my QuickBooks posts. Rather than write a new post that may or may not meet your needs, how about if you feel free to ask me your five most pressing QuickBooks questions? I’ll create posts that answer those questions. While I’m at it, I’ll create a FAQ.
Why ask me? I’m QuickBooks Pro Certified. I also teach a QuickBooks online class at the local woman’s business center, have an MBA in Finance, and have taught business courses at the local community college. I’m a writer who has used QuickBooks for my own writing business for years.
Why am I suggesting this? Continue reading
This Getting Started, Creating a Company and Chart of Accounts Post is the first in a series on QuickBooks for Writers.
The first thing you’ll need to do is create a company in QuickBooks:
- Open QuickBooks.
- Ignore the first pop-up box and and click File – New Company on the Menu Bar.
- Now you have a pop-up box that says Create New Company. It will ask for the Company Name, the Legal Name. Usually these are the same. If you’re a sole proprietor and you call your business something else and have a dba account (you know who you are), use the dba for the Legal Name. Otherwise, just use the Company Name in both places.
- Enter your Address, Country, and the Start Date for your company.
- Income Tax Form for a sole proprietor is Form 1040 (Sole Proprietor) on this list. If you’re not sure what you need, leave it blank and continue.
- Federal ID is the ID you are using for your business. It’s either your SSN or the number you got for your company.
Next you’ll need to create a chart of accounts. For your purposes, QuickBooks has several Industries for you to choose from. For a writing business, you can start with the General Service-based Business. There are accounts here for most of what you need. You may want to check Merchant Account Fees if you take payment by credit card or have direct deposit that charges a fee per transaction. If you’re not sure. Just use it as is until you have reason to add or delete additional accounts.
[By the way, a chart of accounts is a list of the accounts you need for your business. (NOT the names of the vendors or clients. The names of the accounts in the chart of accounts. They’re related but not the same.) The accounts will be asset accounts – things that are in your favor – such as your checking account and the money that is due to you from your customers. The accounts will also be liability accounts – things that are not in your favor – such as money you owe to loans or bills you need to pay. That’s pretty much the big picture of the Chart of Accounts – except you also have a section that shows the equity – the accumulated profit and loss – as one number. That shows up on the Liabilities side, too. (If you’d like a longer explanation of any of this, just let me know and I’ll do another post.)]
This is a lot of information to digest. I’ve been walking small business through this process and using QuickBooks for my own business for years. I’m putting a form here for you to submit questions if you have any, so ask away!
So here you are. It’s nearly the end of the first week of February and you have done nothing proactive about the accounting mess you pledged you’d clean up. Your receipts are piled up on your desk – a good start – and you have scribbled notes about who owes you what when. You could enter that information into a spreadsheet, but why not enter it into QuickBooks and get some real use out of the information and effort?
QuickBooks is the best-selling accounting software for small businesses. It has more bells and whistles than you probably care about, BUT it does have the ability to track the things you need to track if you think about it before you set it up. What exactly does “think about it before you set it up” mean? I’ve been using QuickBooks for years and have also been QuickBooks certified for several years. In addition, I have my MBA and was a financial analyst and small business consultant for many years. Here is what I’ve learned along the way.
As a writer, you most likely want to know these things on a regular basis:
- How much money is due to you? Who owes it to you? When is it due to you?
- How much money do you owe? Who do you owe it to? When must you pay?
- How much money is in your checking account? How much money do you have in savings?
- Are there any charges on your credit card that are related to your writing business.
Let’s tackle the first one – how much money is due to you – in this post.
How much money is due to you is also known as your Accounts Receivable. The total of your Accounts Receivable is the total of the money due to you. The tricky thing with writing is that you don’t always know a definite payment date since it is often “upon publication.” For me, that makes it easy to overlook a Receivable – something I do NOT want to do.
As a way around that, when I submit a query to a new client, I create a Customer Record for that client. It takes very little time. All I do is put in a name, address, and other contact info. In the notes, I put some information about the query itself. This way, if I get the assignment, I can go on to the next step. If I don’t get the assignment, I can make the customer inactive or delete it entirely. For the time from the query to the response, I have the potential client in my system – safe and sound where I can’t lose it!
When I get the assignment, I create an Invoice. The invoice may or may not be the one the client wants from me – if they even want one from me. Very often they send a contract and I sign and return it. My payment comes without an Invoice from me. So why create a Contract? Because it takes very little time but yields a bunch of useful information for my purposes. Plus, it sits there with the potential due date, letting me know when that date is approaching so I can watch my mailbox and follow up if necessary.
What information can I get from the invoice? I can tell what sort of writing paid me the most, if that is important to me. I can tell which Clients paid me the most. I can keep track of my time if I’d like, and see which writing was the most profitable.
For me, the most important part of entering the information and creating an Invoice is that I have one place to look to see who owes me money, and a system that keeps track of when it is due without any additional effort on my part.
QuickBooks for Writers – Getting Started
PayPal. The ubiquitous money-mover that’s popping up ever more often as a method of payment. The question is, do you use it as a way for people to pay for your services?
Let’s consider the pros and cons. Since I like my bad news first and quick, I’ll start with the cons:
- PayPal takes a 3% fee for each payment made to you via a PayPal button on your shopping cart. (The majority of similar services also take a fee.)
- In the case of a customer dispute, it will take approximately 8 weeks for the funds to be re-deposited to your account if you are victorious. Yes. Eight. Weeks. If your business is as cash-starved as mine, that will be a very looooonnnnnggggg eight weeks. And I’m here to ensure you that no amount of pleading, crying, whining, threatening, or cajoling is going to make that less than eight weeks. Even if the customer informs his credit card company that the charge was correct and he was in error. Eight weeks. Just saying’
- You could have your client deposit your funds into your bank account automatically – without any fees.
Then again …
- The fee is tax deductible. Truly. Check it out for yourself in IRS Publication 334.
- The money is in your account and ready to use – immediately.
- For many individuals who are using your services, using PayPal is simple, easy, and not a matter of a cash outlay on their part.
Bottom line? The entire time I was waiting for my money to re-appear in my PayPal account, I swore I’d never use PayPal again. Then I had over sixty families in four separate locations registering for my KidWrite program and – what can I say – PayPal was once again a no-brainer.
Next time – Getting your money out of PayPal!