nice woman who works in your office, Mrs. Peabody. Here’s what will happen when you do that: Late one afternoon during the week following Mrs. Peabody’s first payroll, she’ll ask to meet with you – to talk about why Mrs. Raleigh makes $15,000 more per year than she (Mrs. Peabody) does, and also to ask why she (Mrs. Peabody) makes only $2 per hour more than Wayne, the idiot who works in the warehouse. Because you’re a nice person, Mrs. Peabody will leave a few minutes later with a $1.50-per-hour raise. And, at that point, you’ll remember, vaguely, my earlier caution about the problem of saving maybe $2,000 per year in payroll service fees but then having to give Mrs. Peabody an extra $3,000 raise. Ouch.
Get professional help
A quick point: You can probably get a CPA to sit down with you for an hour or two and show you how to enter a handful of transactions in QuickBooks. In other words, for a cost that’s probably somewhere between $200 and $300, you can have somebody hold your hand for the first three invoices you create, the first two bills you record, the first four checks you write, and so on.
You should try to do this if you can. You’ll save yourself untold hours of headache by having someone who knows what she or he is doing provide an itty-bit of personalized training.
Use both the profit and loss statement and the balance sheet
And now, my final point: You truly want to use your profit and loss statement (which measures your profits) and your balance sheet (which lists your assets, liabilities, and owner’s equity) as part of managing your business. In other words, get used to producing a QuickBooks profit and loss statement each week, or month, or whatever. Then use that statement to determine your profitability. In a similar fashion, regularly produce a balance sheet to check your cash balances, the amounts customers or clients owe, and so on.
Maybe this advice seems obvious, but there’s a semi-hidden reason for my suggestion: If you or you and the bookkeeper do the accounting correctly, both the QuickBooks profit and loss statement and the balance sheet will show numbers that make sense. In other words, the cash balance number on the balance sheet – remember that a balance sheet lists your assets, including cash – will resemble what the bank says you hold in cash. If the QuickBooks balance sheet says instead that you’re holding $34 million in cash, well, you’ll know something is rotten in Denmark.
Chapter 2
The Big Setup
In This Chapter
▶ Getting ready to run QuickBooks Setup
▶ Stepping through QuickBooks Setup
▶ Taking the next steps after QuickBooks Setup
I know that you’re eager to get started. After all, you have a business to run. But before you can start using QuickBooks, you need to do some upfront work. Specifically, you need to prepare for the QuickBooks Setup process. And then you need to walk through the Setup steps. In this chapter, I describe how you do all this stuff.
Getting Ready for the QuickBooks Setup
You need to complete three tasks to get ready for QuickBooks Setup:
✔ Make an important decision about your conversion date (the date you convert from your old accounting system to QuickBooks).
✔ Prepare a trial balance as of the conversion date.
✔ Go on a scavenger hunt to collect a bunch of stuff that you’ll need or find handy for the interview.
The big decision
Before you fiddle with your computer or the QuickBooks software, you need to choose the date – the so-called conversion date – on which you want to begin using QuickBooks for your financial record keeping.
This decision is hugely important because the conversion date that you choose dramatically affects both the work you have to do to get QuickBooks running smoothly and the initial usefulness of the financial information that you collect and record by using QuickBooks.
You have three basic choices:
✔ The right way: You can convert at the beginning of your accounting year (which is, in most cases, the same as the beginning of the calendar year). This way is the right way for two reasons. First, converting at the beginning of the year requires the least amount of work from you. Second, it means that you have all the current year’s financial information in one system.
✔ The slightly awkward way: You can convert at the beginning of some interim accounting period (probably the beginning of some month or quarter). This approach works, but it’s slightly awkward because you have to plug your year-to-date income and expenses numbers from the old system into the new system. (If you don’t know what an interim accounting period is, see Appendix B.)
✔ The my-way-or-the-highway way: You can convert at some time other than what I call the right way and the slightly awkward way. Specifically, you can choose to convert whenever you jolly well feel like it. You create a bunch of unnecessary work for yourself if you take this approach, and you pull out a bunch of your hair in the process. But you also have the satisfaction of knowing that through it all, you did it your way – without any help from me.
I recommend choosing the right way. What this choice means is that if it’s late in the year – say, October – you just wait until January 1 of the next year to convert. If it’s still early in the year, you can also retroactively convert as of the beginning of the year. (If you do this, you need to go back and do your financial record keeping for the first part of the current year by using QuickBooks: entering sales, recording purchases, and so on.)
If it’s sometime in the middle of the year – say, Memorial Day or later – you probably want to use the slightly awkward way. (I’m actually going to use the slightly awkward way in this chapter and the next chapter because if you see how to convert to QuickBooks by using the slightly awkward way, you know how to use both the right way and the slightly awkward way.)
The trial balance of the century
After you decide when you want to convert, you need a trial balance.
“Yikes,” you say. “What’s a trial balance?” A trial balance simply lists all your assets, liabilities, and owner’s equity account balances as well as the year-to-date income and expense numbers on a specified date (which, not coincidentally, happens to be the conversion date). You need this data for the QuickBooks Setup process and for some fiddling around that you need to do after you complete the QuickBooks Setup process.
Just to split hairs, the trial balance should show account balances
