QuickBooks: Making it Work for Your Practice

1 quickbooks : Making it work for your PracticePresented by: Karen Osborne, CPA, MBAL acher McDonald & Co., CPA sCourtesy of: Live Oak Should a Practice use quickbooks ? Q uickBooks vs. Practice Management Software Importance of up-to-date financial informationHow quickbooks Should be Used Using the Accrual Basis of AccountingDefinition of Accrual Basis:The accrual basis means recognizing revenue when it is earned (not only when the money is actually received) and recognizing expenses when they are incurred (not only when they are paid).Why use the Accrual Basis? Matches Revenue to Expenses Accurate financial pictureExample: Accrual BasisMonthly Revenue: Practice Management Report: Invoices = $100,000 Clients paid = $95,000 Accounts Receivable increased by $5,000 How much should Revenue be in quickbooks under the Accrual Basis?

2 Example: Accrual BasisReference Lab Expense: January Reference Lab Bill: Amount = $4,000 Date of Invoice = 1/31/13 Invoice Due = 2/20/13 How much should your Reference Lab Expense be in quickbooks under the Accrual Basis for the month of January?Set ALL Reports to Accrual BasisSet ONE Report to Accrual BasisHow to Set up quickbooks Goal: Meaningful Financial Statements Correctly use and set up your Chart of Accounts AAHA Chart of Accounts recommendedTo Access the Chart of AccountsHome screenMenu accessChart of Accounts Balance Sheet Accounts: Bank Accounts receivable (A/R) Other current asset Fixed asset Other asset Accounts payable (A/P) Credit card Current liability Long-term liability EquityChart of Accounts Income and Expense Accounts: Income Cost of Goods Sold Expense Other Income Other ExpenseRevenue Accounts Classified by Sources of Revenue Professional Fees Pharmacy Sales Laboratory Fees Vaccination Fees Boarding Fees Grooming Fees Diagnostic Imaging Fees Dental Fees Food Sales Wellness & Rx Retail Sales DiscountsRevenue You will put your revenue into these categories on a MONTHLY basis not daily These categories will summarize the revenue categories in your Practice Management SoftwareRevenueCost of Goods Sold Cost of Goods Sold Accounts Medical Supplies Prescriptions Lab Expense Food Wellness & Rx Retail Other Cost of Goods SoldRevenue & Cost of Goods SoldRecording Payroll Recommended Payroll Accounts.

3 Officer Salaries Salaries & Wages Staff Salaries & Wages Associate Veterinarians Payroll should be recorded at GROSS amountsExample Payroll AccountsExample: Payroll Journal EntryPayroll Tax expense (employer portion of payroll taxes)Gross pay for each employee typeMatches amounts deducted from bank by payroll companyExpense Accounts Appropriate level of detail Broad expense categoriesLiabilities Two parts of a loan payment Principal portion Balance Sheet item Interest portion Profit & Loss itemPrincipal and InterestExample Loan StatementExample Amortization ScheduleExample: Check for Loan PaymentBanking Menu Make DepositsEntering Daily DepositDeposits your deposits should be deposited in the bank at the GROSS amount Almost all merchant service providers (with the exception of Care Credit)

4 Will make your deposits at gross and deduct the fee at the end of each monthEnter Credit Card ChargesPractice Credit Card Charges Should be entering credit card charges Allows you to track your credit card balances Extremely important if you carry a balance each monthAccount Reconciliation Should be reconciling both bank and credit card accounts each month Account ReconciliationVendors MenuEnter BillsPay BillsEnter Bills/Pay Bills Allows you to record the expense in the correct period but pay in another period Helps you to match expenses to the corresponding revenueReference Lab Example: Check January Reference Lab Bill: Amount = $4,000 Date of Invoice = 1/31/13 Invoice Due = 2/20/13 Date the expense is recorded in the Lab Expense accountReference Lab Example: BillDate the expense is recorded in the Lab Expense accountCost of Goods Sold Entering invoices properly helps monitor this expense Invoices vs.

5 Statements You should be entering each individual invoice into quickbooks (Enter Bills function) Using your monthly statement to check off each individual invoice (Pay Bills Function)Enter Bills/Pay Bills What does entering the invoices accomplish: Allows you to check the statements you receive Makes sure the expenses are captured in the correct period Statement may span more than one month Statement may contain delayed billingExample Bill Invoice Total = $1, 10 items received 70% Prescriptions 20% Medical Supplies 10% Lab relatedEstimated amounts from invoiceWhen Not to Use Enter/Pay Bills When you are sitting down to pay an individual or company immediatelyPay Bills Hint #1 When the bill is selected the Amt. To Pay field is auto-filled with the Amt. DueChange Amt. To Pay field to whatever amount you actually plan to payHighlight the Amt.

6 To Pay to edit the fieldPay Bills Hint #2 Choose corresponding Bank or Credit Card accountChoose Method of Payment (Check or Credit Card) Practice Management Software Reports for entry into QuickBooks1. Accounts Receivable (AR) ReportA. Shows amount owed by clientsB. Want the report as of the last day of the month2. Inventory ReportA. Shows total cost of all inventory items in PracticeB. Want the report as of the last day of the month3. Sources of Revenue ReportA. List revenue generated by revenue categoryB. Want the report for a one month period ( 12/1/2012 to 12/31/2012)Make General Journal EntriesAccounts Receivable Updating will help the income (revenue) in quickbooks be accurate Decrease in Accounts Receivable from payments received on prior months services Increase in Accounts Receivable for clients not paying for current servicesAccounts Receivable EntryBeginning Accounts Receivable TotalNew Accounts Receivable Total from Practice Management ReportStep #3 Step #2 Step #1 Enter Journal Entry to increase Accounts Receivable TotalVerify new Accounts Receivable total matches Practice Management Report Step #4 Inventory Adjusting your Inventory total in quickbooks each month helps your Cost of Goods Sold total to be accurate your Cost of Goods Sold is supposed to represent the cost of materials used and products sold during the periodInventory Entry Very similar to Accounts Receivable journal entry we went through Different

7 Accounts will be debited and credited in the journal entry You will want help with these entries the first timeRevenue Allows you to: See very easily where your revenue is coming from Easily compare to industry benchmarks and your Practice Compare it to your Cost of Goods Sold accounts Revenue EntrySample Revenue ReportJournal EntryTotal Lab Categories (blue)Caution If you have not been tracking Accounts Receivable or Inventory in quickbooks previously you will want to get assistance from your CPA!Useful Reports: Profit & Loss Standard A lso known as an Income Statement Summarizes income and expense accounts Tells you if you are operating at a profit or a lossUseful Reports: Profit & Loss Prev Year Comparison S ummarizes income and expense accounts for the chosen period and previous period Can compare performance against same period last yearUseful Reports: Balance Sheet Standard S ummarizes a practices financial position Shows the value of the Practice s assets (what it owns) and liabilities (what it owes)Useful Reports: A/P Aging Summary S ummarizes the status of unpaid bills in Accounts Payable Shows: What you owe Who you owe it to And how much is overdueOther Useful Items: Find FeatureAdvanced tabSimple tabOther Useful Items.

8 Set up Users Allows users access to only certain areas of QuickBooksOther Useful Items: Additional DetailMouse pointer turns into a magnifying glassDrop-down Sorting options on top of reportOther Useful Items: Additional Detail (cont d)Report Totaled by Payee PayeeTotal for specific PayeeQuickBooks: Making it work for your PracticePresented by: Karen Osborne, CPA, MBAL acher McDonald & Co., CPA sCourtesy of: Live Oak