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8 posts from January 2012

Building Better Business Finances - The QuickBooks Profit and Loss Report

Are you running a profit and loss report (aka an income statement) for your business every month?

If not, you should be!

WHAT IS THE PROFIT AND LOSS REPORT?

This report gives you a very handy recap of your income and your expenses. And of course, the difference between the two (and this is where we cross our fingers that there is more income than expenses!).

The profit and loss report quickly summarizes the various transactions that you have entered throughout the day, week, month, etc. (i.e. invoices, checks, etc.)

THE PROFIT AND LOSS REPORT IN QUICKBOOKS

Click Reports (in the menu bar) > Company and Financial > Profit and Loss Standard. From there, you'll see the report for the current month-to-date as shown in the sample below (click the image for a larger view):

Profit and Loss Report


This report helps you quickly see how your expenses stack up against your income. From there, you can develop plans to either increase your income and/or reduce your expenses in the weeks or months ahead.

Don't run this report only at tax time. Better - run it at the end of every month so there are no surprises. It will help you know exactly what is going on.

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See the current availability of an inventory item in QuickBooks

Did you happen to notice the button at the bottom of your Item list that says "Activities"?

Take a look there and you'll see an option that will help many manufacturing, distribution and wholesale businesses that use QuickBooks - the "Current Availability" option (if you don't see this, you are likely using an older version of QuickBooks that did not contain this functionality - save 20% on your QuickBooks upgrade).

Select an inventory part or inventory assembly in your item list, then navigate to the Current Availability option to get a screen that looks like this (click the image for a larger view):

Current Availability Option

 This screen is packed with critical information to help manage your inventory of that item in QuickBooks, including:

  • Quantity on Hand
  • Quantity on Sales Orders
  • Quantity Reserved for Assemblies
  • Quantity on Purchase Orders
  • Quantity on Pending Builds

For any of the amounts listed, you can head to the bottom of the screen and see all the details. For example, you can see all the open purchase orders, all the open sales orders, etc.

In case you are wondering, this is the same as the "Current Availability button" that appears within the various screens in QuickBooks as shown below:

Current Availability Button

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Why Does My Sales by Rep Report Show "No Sales Rep"?

This question was recently submitted, and it may be the same question many of you may be asking:

Q: Dear Scott: "How come my Sale by Rep report shows "No Sales Rep"? I know I entered the rep for each customer on the customer screens."

A: The Sales by Rep report is actually looking to your sales documents (i.e. invoices and/or sales receipts) to pull the proper information. If the rep field is not showing up on either of these documents, QuickBooks will substitute the "No Sales Rep" as the salesperson.

The fact that you have entered the sales rep on the customer screen allows QuickBooks to remember the association between that customer and that sales rep on each future transaction. However, it is essential to make sure the sales rep field is also showing up on your sales forms as shown in the example screen shot below:

 

Sales Rep Box on Invoice


Once it shows up there, it will then be included in any totals on the Sales by Rep report:

 

Sales by Rep Summary Rpt

If there is no sales rep listed on the sales form, QuickBooks will default to the "no sales rep" as shown in the report above.

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QuickBooks Enterprise 2012: FIFO Inventory Costing - Right or Wrong?

The Advanced Inventory Add-on for QuickBooks Enterprise 2012 offers the ability to use FIFO costing instead of the average cost method historically used in all versions of QuickBooks.

So I did some investigation on this new feature to see how if/how it works and I wanted to share those results with you.

RESULTS THAT MAKE YOU GO HMMMMM.....

I used a sample QuickBooks data file for testing, as it already had some inventory parts with history associated with them.

First, I turned on the FIFO option in the Inventory Preferences (Edit > Preferences > Items and Inventory > Company Preferences > Advanced Inventory Settings). This was easy to do (under the assumption you have purchased the Advanced Inventory add-on for QuickBooks Enterprise).

Then, I ran an inventory valuation summary report right after I turned on the FIFO costing to get my baseline. Using the item called Exterior Wood Door, here is what the valuation looked like:

FIFO - Beginning 12_15_16

As of my test date (12/15/2016), we had 16 units at a cost of $308.51 each, for a total value of $4,936.10. (Note: This is the exact same as the average cost of these units just before turning on the FIFO option).

Ok, so far so good.

Then, I created a purchase order for 10 of these units at $750 each (to give us some clear distinction in costs between "old" and "new"). I dated the purchase order 12/17/2016 (which is after the "FIFO start date" in QuickBooks) and received these items into inventory on the same date.

Here is what my inventory looked like after that transaction (this is the only transaction I made):

FIFO - After PO Receipt 12_17_16

Now I have a total of 26 items at a total cost of $12,436.10. That is the original cost of $4,936.10 + the purchase cost of $7,500 (10 units @ $750/each). Note that the cost per item which is now appearing is $478.31. To me, it looks like QuickBooks has just taken then $12,436.10 and divided it by 26 units to get an average cost of $478.31 per unit.

At this point, I'm not seeing any indication of FIFO costing just yet. But maybe I'm not understanding how Intuit is deploying this feature either.

NOW, LET' SELL SOMETHING AND SEE THINGS CHANGE AGAIN

The final part of the test was to record a sale and see how QuickBooks handles the costing of that.

So I created an invoice to sell 1 of these doors for a selling price of $599. Here is a screen shot of how the journal entry posted for that sale:

FIFO - Journal Entry for Exterior Door Sale

Good news: QuickBooks posted the cost of the sale as $308.51. This is exactly as expected in a FIFO environment. The first in is the first out, so the original cost from above of $308.51 is correct for the cost of goods sold.

Now, let's look at the inventory valuation one more time after this sale was made:

FIFO - After Item Sale on 12_18_16

QuickBooks is showing we now have 25 items (which is correct), with a total value of $12,127.59 and a cost per unit of $485.10.

Not so good news: To me, it looks like QuickBooks took the total value of $12,436.10 (after the purchase but before the sale) and subtracted the $308.51 (the cost of the item sold) to get a new inventory value of $12,127.59. That looks ok to me too.

From there - the $12,127.59 was divided by the on hand count of 25, resulting in a "cost" of $485.10.

HUH?

Based on this testing, it looks like QuickBooks is calculating a "blended cost" value for purposes of the inventory valuation report. It does NOT appear to be calculating based on "buckets" of inventory and may not be valuing the inventory on a true FIFO basis.

In addition, there is no way to verify how QuickBooks is doing these calculations behinds the scenes, as there is no type of audit report that I am aware of that will show the FIFO cost tracking information.

Remember, this is a sample data file that already had transactions in it, similar to how most businesses will be approaching the use of FIFO - they will turn it on in an existing file.

CALLING THE ACCOUNTANTS

So what is your take on this new feature? Are you using it in your business?

Is the way QuickBooks is valuing the inventory asset acceptable to you? Is this standard practice when dealing with inventory on a FIFO basis?

Please drop your comments in the box below - I'd love to get your take on this issue.

For now, I am unsure about this new feature in terms of the impact on the business balance sheet. l'll be doing some additional testing on this and report it in a separate blog post soon...

UPDATE:

After the initial post of this article, I had a great conversation with Catherine Fisse, a senior product manager for QuickBooks Enterprise about this issue.

After reviewing some pretty detailed examples and related information, I have concluded that QuickBooks Enterprise is properly tracking the value of the FIFO inventory on the balance sheet and valuation reports (I didn't have any concerns on the Profit and Loss - it was tracking just fine there).

We agreed there are a few reports where the presence of the column header that says "Average Cost" could be a bit misleading, but the data that is showing up within those columns is being calculated properly.

Since this FIFO inventory costing capability was new in QuickBooks Enterprise 2012, it will be interesting to see how Intuit continues to build on the reporting and functionality of this feature in future releases.

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Is Your Bookkeeper Up to No Good With Your Checkbook?

Have you double-paid your vendors by accident?

Is your bookkeeper up to no good with your checkbook?

Are there other potential "irregularities" in your QuickBooks financial information?

It is essential to know the answers to these questions so you can maintain financial control over your business.

SO MANY FINANCIAL CONCERNS, YET SO LITTLE TIME

AuditMyBooks logo

You'd like to do some further investigation on these questions, but don't know where to start, right?

Enter AuditMyBooks.

YOUR OWN INTERNAL AUDIT TEAM - EFFORTLESSLY

AuditMyBooks software helps put a team of auditors and fraud investigators to work on your behalf. Not literally of course. The team goes to work digitally.

Once you connect AuditMyBooks with your QuickBooks data file, a complete scan of your financial information is performed.

A handy Excel report is created that recaps potential problems or areas for further investigation via 20 different reports as listed below:

Audit My Books Report Listing

Be sure to take a close look at the comprehensive list of reports above that AuditMyBooks provides. All of which come at the click of a mouse.

THE DASHBOARD HELPS YOU KEEP SCORE

AuditMyBooks keeps a handy dashboard front and center so you can see what is going on at all times (click the image for a larger view):

Audit My Books Dashboard

From the dashboard, you can run a scan of your QuickBooks file at any time, set a reminder for future scans, fine tune the settings and rules used by AuditMyBooks, and find answers to your questions in the support center.

As you can see, AuditMyBooks can be used as a tool to spot irregularities. In addition, it can be used as a great training tool for your accounting department - use the information it provides to help reduce mistakes and costly errors.

GET YOUR FREE TRIAL OF AUDITMYBOOKS

Want to "try before you buy"? Download your free trial copy of AuditMyBooks today so you can begin the crucial evaluation of your finances and uncover potential problems before they get out of hand.

AuditMyBooks is the recipient of the "Best New App" award from the Intuit Cloud Jam, a Sleeter Group "New Product to Watch" and other awards as well.

LIKE THE IDEA, BUT DON'T HAVE THE TIME?

I offer consulting services to businesses that see the value of putting a tool like this to work in their business, but don't have the time or manpower to get it going. Contact me and drop me a line. We can connect and figure out the details from there.

DID YOU KNOW?

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Can I use non-inventory parts on my QuickBooks invoices and sales orders?

There seems to be some confusion about this issue in QuickBooks, so here is the answer...

Yes, it is possible to use non-inventory parts on your QuickBooks invoices and sales orders. Even better, you can use non-inventory parts on quotes and purchase orders too!

A QUICK REVIEW TO HELP EXPLAIN

When working in the item list in QuickBooks, you can create the following types of items:

  • Service item
  • Inventory part
  • Non-inventory part
  • Assembly item (Premier and Enterprise only)

Here is a screen shot of the options available when you create an item in QuickBooks:

Types of Items

KEY DIFFERENCE BETWEEN INVENTORY AND NON-INVENTORY PART

The expectation is that when you set up an item as an inventory part in QuickBooks, you are concerned with tracking and managing an on-hand quantity of that item and keeping an inventory of it on a regular basis.

Not so with a non-inventory part. While it looks and behaves very similarly to an inventory part, you won't find any reference to on hand quantities or inventory asset accounts. But that doesn't stop you from using a non-inventory part on the various QuickBooks forms - quotes, purchase orders, sales orders (Premier and Enterprise only) and invoices.

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QuickBooks Enterprise 2012/12.0 Resource Center

Considering QuickBooks Enterprise 2012 for your business or organization?

0212.QB09ES_3D.EnterpriseHere is a list of helpful resources for you to have handy as you do your research...

Have a question about QuickBooks Enterprise 2012 or a resource to share? Click the Contact button below - your comments and questions are welcome!

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QuickBooks Pro 2012 - Now Limited to 3 Concurrent Users

Planning an upgrade from an older version of QuickBooks Pro soon?

Be aware of a significant change as you put your budget together for the upgrade.

BIG CHANGE IN QUICKBOOKS PRO

If you are using an older version of QuickBooks Pro with 4 or more concurrent users, you will have to move into either QuickBooks Premier 2012 or QuickBooks Enterprise 2012 - QuickBooks Pro 2012 only allows up to 3 concurrent users (this change actually took place in QuickBooks Pro 2011).

QuickBooks Premier will allow you to still have up to 5 concurrent users in a QuickBooks data file, and QuickBooks Enterprise will allow up to 30 users.

DON'T WORRY - YOUR DATA IS SAFE

If this change within QuickBooks Pro forces you to move into another version of QuickBooks, all of your data is safe and sound. It will upgrade seamlessly into the other versions.

In addition, there will not be any learning curve if you are forced to move into another version. The core activities (i.e. creating an invoice, writing a check, running reports, etc.) is the same across all of them, so you won't be slowed down by having to learn new software.

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