QuickBooks® 2012 For Dummies®, UK Edition

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Table of Contents

About QuickBooks
About This Book
What You Can Safely Ignore
What You Should Not Ignore (Unless You’re a Masochist)
Three Foolish Assumptions
How This Book Is Organised
Part I: Quickly into QuickBooks
Part II: Daily Entry Tasks
Part III: Stuff You Do from Time to Time
Part IV: Housekeeping Chores
Part V: The Part of Tens
Part VI: Appendixes
Cheat Sheet
Conventions Used in This Book
Part I: Quickly into QuickBooks
Chapter 1: QuickBooks: The Heart of Your Business
Why QuickBooks?
Why you need an accounting system
What QuickBooks does
No Really, Why QuickBooks?
So What’s Next?
How to Succeed with QuickBooks
Budget wisely, Grasshopper
Don’t focus on features
Get professional help
Use both the profit and loss statement and the balance sheet
Chapter 2: Answering Mr Wizard
Getting Ready for the QuickBooks Setup
The big decision
The trial balance of the century
The mother of all scavenger hunts
Stepping through the QuickBooks Setup
Starting QuickBooks
Using the Express Setup
Setting Your Financial Year
Registering QuickBooks
The Rest of the Story
Should You Get Your Accountant’s Help?
Chapter 3: Populating QuickBooks Lists
The Magic and Mystery of Items
Adding items you might include on invoices
Creating other wacky items for invoices
Editing items
Customers Are Your Business
It’s Just a Job
Adding Suppliers to Your Supplier List
The Other Lists
The Fixed Asset list
The Price Level list
The Billing Rate list
The Class list
The Other Names list
The Sales Rep list
Customer, Supplier, and Job Types lists
The Terms list
The Customer Message list
The Payment Method list
The Ship Via list
The Vehicle list
The Memorised Transaction list
The Templates list
The Reminders list
Organising Lists
Printing Lists
Exporting List Items to Your Word Processor
Dealing with the Chart of Accounts List
Adjusting bank balances
Describing customer balances
Describing supplier balances
Entering your VAT liability or refund
Camouflaging some accounting weirdness
Supplying the missing numbers
Checking your work one more time
Part II: Daily Entry Tasks
Chapter 4: Creating Invoices and Credit Notes
Making Sure That You’re Ready to Invoice Customers
Preparing an Invoice
Fixing Invoice Mistakes
If the invoice is still displayed onscreen
If the invoice isn’t displayed onscreen
Deleting an invoice
Preparing a Credit Note
Fixing Credit Note Mistakes
History Lessons
Printing Invoices and Credit Notes
Setting up the invoice printer
Printing invoices and credit notes as you create them
Printing invoices in a batch
Printing credit notes in a batch
Sending Invoices and Credit Notes via E-Mail
Customising Invoices and Credit Notes
Chapter 5: Collecting Your Just Rewards
Recording a Sales Receipt
Printing a Sales Receipt
Special Tips for Retailers
Correcting Sales Receipt Mistakes
Recording Customer Payments
Correcting Mistakes in Customer Payments Entries
Making Bank Deposits
Improving Your Cash Inflow
Tracking what your customers owe
Assessing finance charges
Dealing with customer deposits
Chapter 6: Paying the Bills
Pay Now or Pay Later?
Recording Your Bills by Writing Cheques
Writing a cheque
Changing a cheque that you’ve written
Recording Your Bills the Accounts Payable Way
Recording a bill
Entering a bill with an early payment discount
Fixing Bill Mistakes
If the bill is still displayed onscreen
If the bill isn’t displayed onscreen
Deleting a bill
Remind Me to Pay That Bill, Will You?
Paying Your Bills
Printing Remittance Advices
A Quick Word on the Supplier Centre Window
Chapter 7: Stock Magic
Setting up Stock Items
When You Buy Stuff
Recording items that you pay for upfront
Recording items that don’t come with a bill
Paying for items when you get the bill
Recording items and paying the bill all at once
When You Sell Stuff
How Purchase Orders Work
Customising a purchase order form
Filling out a purchase order
Checking up on purchase orders
Receiving purchase order items
Assembling a Product
Identifying the components
Building the assembly
Time for a Reality Check
The Lazy Person’s Approach to Stock
How periodic stock systems work in QuickBooks
The good and bad of a periodic stock system
Chapter 8: Working with Your Banking Register
When Only a Cheque Will Do
Depositing Money into a Bank Account
Depositing money from customers
Depositing other money
Transferring Money Between Accounts
Setting up a second bank account
Recording deposits into the new account
About the other half of the transfer
Changing a transfer that you’ve already entered
To Delete or to Void?
Handling Bounced Cheques from Customers
The Big Register Phenomenon
Packing more into the register
Moving through a big register
Finding that transaction
Chapter 9: Paying with Plastic
Tracking Business Credit Cards
Entering Credit Card Transactions
Recording a credit card charge
Changing charges that you’ve already entered
Reconciling Your Credit Card Statement and Paying the Card
So What about Debit Cards?
What about Customers Who Pay by Credit Cards?
Chapter 10: Working with Multicurrency
Getting Ready to Use Multicurrency
Turning on the feature
Understanding exchange rates
Activating currencies in the Currency List
Updating currencies
Selling in a Foreign Currency
Adding a foreign or domestic customer
Updating existing customers
What about jobs?
Preparing an invoice
Preparing a credit note
Getting paid
Buying in a Foreign Currency
Adding a foreign or domestic currency supplier
Updating existing suppliers
Entering a bill
Paying your bills
Did I Gain or Lose?
Making a home currency adjustment
Editing a home currency adjustment
Part III: Stuff You Do from Time to Time
Chapter 11: Managing VAT
VAT Schemes in QuickBooks
Adjusting Your VAT Settings
Understanding How QuickBooks Handles VAT
What are VAT Items?
Adding VAT Items
What about VAT Codes?
Adding VAT Codes
Generating VAT Reports
The VAT 100 Report
The VAT Detail Report
The VAT Exception Report
Submitting Your VAT
Paying VAT or Getting a VAT Refund
Closing the Books
Dealing with Special VAT Circumstances
Trading with EC businesses
Printing the EC Sales List
Fuel scale charges
Chapter 12: Payroll
Registering as an Employer
Getting your Employer PAYE Reference number
Signing up for the PAYE Online Service
A Word about Tax Forms
Adding Employees to Your Employee List
Getting Tax and NI Details Right
Getting Ready to Do Payroll with QuickBooks
Getting year-to-date amounts
Stepping through the YTD wizard
Housekeeping entry
Double-check your work
Schedule your payroll
Add or edit payroll items
Paying Your Employees
Printing or E-mailing Payslips
Fixing payroll mistakes
Releasing Employees
Paying Payroll Liabilities
Determining the liability
Paying the liability
Receiving a refund
Filing the Employer Annual Return
Using the Payroll Year End Wizard
Printing P60 forms
Getting Help with Payroll
Chapter 13: Building the Perfect Budget
Is This a Game You Want to Play?
All Joking Aside: Some Basic Budgeting Tips
A Budgeting Secret You Won’t Learn at University
Setting Up a Secret Plan
Adjusting a Secret Plan
Forecasting Profits and Losses
Projecting Cash Flows
Part IV: Housekeeping Chores
Chapter 14: The Balancing Act
Balancing a Bank Account
Giving QuickBooks information from the bank statement
Marking cleared cheques and deposits
Ten Things to Do if Your Bank Account Doesn’t Balance
Chapter 15: Reporting on the State of Affairs
What Kind of Reports Are There, Anyway?
Creating and Printing a Report
Editing and Rearranging Reports
QuickZooming mysterious figures
Customising a report
Memorising a report
E-mailing a report
Exporting report data to Microsoft Excel
The other buttons and boxes
Reports Made to Order
Processing Multiple Reports
Last but Not Least: The QuickReport
Viewing the Company Snapshot
Chapter 16: Job Estimating, Billing, and Tracking
Turning On Job Costing
Setting Up a Job
Creating a Job Estimate
Revising an Estimate
Turning an Estimate into an Invoice
Comparing Estimated Item Amounts with Actual Item Amounts
Charging for Actual Time and Costs
Tracking Job Costs
Chapter 17: File Management Tips
Backing Up Is (Not That) Hard to Do
Backing up the quick-and-dirty way
Getting back the QuickBooks data you backed up
Working with Portable Files
Using an Audit Trail
Part V: The Part of Tens
Chapter 18: Tips for Handling (Almost) Ten Tricky Situations
Entering Depreciation
Selling an Asset
Selling a Depreciable Asset
Repaying a Loan
Writing off a bad debt
Owner’s Equity in a Sole Proprietorship
Owner’s Equity in a Partnership
Owner’s Capital and Drawings Transactions
Owners’ Equity in a Limited Company
Writing a Dividend Cheque
Chapter 19: (Almost) Ten Secret Business Formulas
The First “Most Expensive Money You Can Borrow” Formula
The Second “Most Expensive Money You Can Borrow” Formula
The “How Do I Break Even?” Formula
The “You Can Grow Too Fast” Formula
How net worth relates to growth
How to calculate sustainable growth
The First “What Happens If . . . ?” Formula
The Second “What Happens If . . . ?” Formula
The Economic Order Quantity (Isaac Newton) Formula
The Rule of 72
Part VI: Appendixes
Appendix A: Installing QuickBooks in Ten Easy Steps
Appendix B: If Numbers Are Your Friends
Let me introduce you to the new you
The first day in business
Look at your cash flow first
Depreciation is an accounting gimmick
Accrual accounting is cool
Now you know how to measure profits
Some financial brain food
And now for the blow-by-blow
Blow-by-blow, Part II
How does QuickBooks help?
Appendix C: Sharing QuickBooks Files
User permissions
Record locking
Appendix D: Printing Cheques
Cheat Sheet

QuickBooks® For Dummies®, UK Edition

by Stephen L. Nelson, CPA, MBA (finance), MS (taxation) and Loredana Stroup, DPhil, MBA


About the Authors

Stephen L. Nelson, CPA, MBA (finance), MS (taxation), has a simple purpose in life: He wants to help you (and people like you) manage your business finances by using computers. Oh, sure, this personal mandate won’t win him a Nobel Prize or anything, but it’s his own little contribution to the world.

Steve’s experiences mesh nicely with his special purpose. A CPA in Redmond, Washington, his past small business experience includes a stint as an adjunct professor of taxation (S corporations and limited liability companies) at Golden Gate University graduate tax school and a few years working as a senior consultant and CPA with Arthur Andersen & Co. (er, yeah, that Arthur Andersen — but, hey, it was nearly 30 years ago). Steve, whose books have sold more than 4 million copies in English and have been translated into 11 other languages, is also the bestselling author of Quicken 2012 For Dummies.

Loredana Stroup, DPhil (Oxon), MBA, has over a decade of experience working with businesses in various capacities including management consulting, software training, and technology systems design and integration. Her passion is to help people run their businesses more efficiently and effectively, especially through the use of proven digital technologies. She founded and runs Alta Training Limited which specialises in QuickBooks setups, training, and troubleshooting. Intuit, the maker of QuickBooks, has recognised her expertise and tapped it in the development, testing and launching of QuickBooks (UK), and also in engaging her to write training materials and deliver training programmes across the country.


To the entrepreneurs and small-business people of the world. You folks create most of the new jobs.

– Stephen L. Nelson

To my family.

– Loredana Stroup

Authors’ Acknowledgments

Hey, reader, lots of folks spent lots of time working on this book to make QuickBooks easier for you. You should know who these people are. You may just possibly meet one of them someday at a produce shop, squeezing cantaloupe, eating grapes, and looking for the perfect peach.

First, a huge thanks to the wonderful folks at Intuit who helped me by providing the beta software and other friendly assistance for this and past editions of this book.

Another big thank-you goes to the editorial folks at Wiley Publishing, Inc., including Kevin Kirschner (project editor), Teresa Artman (copy editor), and Bob Woerner (executive editor). Thanks also to David Ringstrom for his technical assistance and superb attention to detail. Finally, thanks, too, to the composition staff.

– Stephen L. Nelson

Firstly, my wholehearted and affectionate thanks to Saxby and Saskia for their patience, to George for his enthusiasm and strong support, and to Carmen and Aurel for their special practical help that made this book possible.

Secondly, a huge thank you to the team at John Wiley & Sons, especially Sara Shlaer (senior project editor), Shena Deuchars (copy editor), and Chris Webb (associate publisher). Thank you to Antony Stemp for his technical assistance, and to the very helpful team at Intuit for supporting this project in many ways.

– Loredana Stroup

Publisher’s Acknowledgments

We’re proud of this book; please send us your comments at For other comments, please contact our Customer Care Department within the U.S. at 877-762-2974, outside the U.S. at 317-572-3993, or fax 317-572-4002.

Some of the people who helped bring this book to market include the following:

Acquisitions, Editorial

Project Editor:

Associate Publisher: Chris Webb

Assistant Editor: Ellie Scott

Copy Editor: Shena Deuchars

Technical Editor: Antony Stemp

Editorial Manager: Jodi Jensen

Senior Project Editor: Sara Shlaer

Editorial Assistant: Leslie Saxman

Cartoons: Rich Tennant (


Associate Marketing Director: Louise Breinholt

Senior Marketing Executive: Kate Parrett

Composition Services

Senior Project Coordinator: Kristie Rees

Layout and Graphics: Lavonne Roberts

Proofreaders: Jessica Kramer, Linda Seifert

Indexer: BIM Indexing & Proofreading

UK Tech Publishing

VP Consumer and Technology Publishing Director: Michelle Leete

Associate Director–Book Content Management: Martin Tribe

Associate Publisher: Chris Webb

Publishing and Editorial for Technology Dummies

Richard Swadley, Vice President and Executive Group Publisher

Andy Cummings, Vice President and Publisher

Mary Bednarek, Executive Acquisitions Director

Mary C. Corder, Editorial Director

Publishing for Consumer Dummies

Kathleen Nebenhaus, Vice President and Executive Publisher

Composition Services

Debbie Stailey, Director of Composition Services


Running or working in a small business is one of the coolest things a person can do. Really. We mean it. Sure, sometimes the environment is difficult – but it’s an environment in which you have the opportunity to make a lot of money. And it’s also an environment in which you can build a company or a job that fits you. In comparison, those working in the big-company, corporate world are furiously trying to fit their round pegs painfully into square holes. Yuck.

You’re wondering, of course, what any of this has to do with this book or with QuickBooks. Quite a lot, actually. The whole purpose of this book is to make it easier for you to run or work in a small business by using QuickBooks.

About QuickBooks

Let us start off with a minor but useful point. QuickBooks comes in three different flavours: QuickBooks SimpleStart, QuickBooks Pro, and QuickBooks Premier. QuickBooks SimpleStart is a much simpler version of QuickBooks Pro. In fact, it’s so simple you won’t need much help using it. But if you do, this book can help guide you. QuickBooks Pro is a good choice for established businesses where fancier features like stock item backorders, multiple units of measure, tracking time and expenses by customer (or job) and using that information to invoice customers, are not important. And of course, QuickBooks Premier is the top of the range flavour – it has all the bells and whistles. We should also mention that up to three users can be working in QuickBooks Pro simultaneously, while up to 30 users can work with QuickBooks Premier at the same time.

To write this book, we used the QuickBooks Premier Accountant Edition, which is just QuickBooks Premier by another name. By describing how you use QuickBooks Premier, we also tell you how to use QuickBooks Pro. That’s because most things we talk about in this book apply both to QuickBooks Premier and to QuickBooks Pro. Where there are differences, we point them out.

remember.eps The bottom line? Yes, there are several flavours of QuickBooks, but if you’re just trying to get started and want to use QuickBooks, this book works for both QuickBooks Pro and QuickBooks Premier.

About This Book

This book isn’t meant to be read from cover to cover, like some Stieg Larsson page-turner. Instead, it’s organised into tiny, no-sweat descriptions of how you do the things you need to do. If you’re the sort of person who just doesn’t feel right not reading a book from cover to cover, you can (of course) go ahead and read this thing from front to back. You can start reading Chapter 1 and continue all the way to the end (which means through Chapter 19 and the appendixes).

tip.eps We don’t think this from-start-to-finish approach is bad because we tell you loads of stuff (tips and tricks, for example) along the way. We tried to write the book in such a way that the experience isn’t as rough as you might think, and we really do think you get will get good value from your reading.

But you can also use this book the way you’d use an encyclopaedia. If you want to know about a subject, you can look it up in the Table of Contents or the index and then you can flip to the correct chapter or page and read as much as you need or enjoy. No muss, no fuss.

We should, however, mention one thing: Accounting software programs require you to do a certain amount of preparation before you can use them to get real work done. If you haven’t started to use QuickBooks yet, we recommend that you read through the first few chapters of this book to find out what you need to do first.

remember.eps Hey. There’s something else you should know. We fiddled a bit with the Windows display settings. For example, we messed about with the font settings and most of the colours. The benefit is that the pictures in this book are easy to read. And that’s good. But the cost of all this is that our pictures look a little bit different from what you see on your screen. And that’s not good. In the end, however, what the publisher found is that people are happier with increased readability. Anyway, we just thought we should mention it here, upfront, in case you have any questions about it.

What You Can Safely Ignore

Sometimes we provide step-by-step descriptions of tasks. We feel very bad about having to do this so, to make things easier for you, we describe the tasks using bold text. That way, you know exactly what you’re supposed to do. We also provide a more detailed explanation in the text that follows the step. You can skip the text that accompanies the step-by-step boldface directions if you already understand the process.

Here’s an example that shows what we mean:

1. Press Enter.

Find the key that’s labelled Enter. Extend your index finger so that it rests ever so gently on the Enter key. In one sure, fluid motion, press the Enter key with your index finger. Then remove your finger from the key.

Okay, that example is extreme. We never go into that much detail, but you get the idea. If you know how to press Enter, you can just do that and not read further. If you need help – maybe with the finger part or something else – just read the nitty-gritty details.

technicalstuff.eps Can you skip anything else? Let’s see now. . . . You can skip the Technical Stuff icons, too. The information next to these icons is intended only for those of you who like that kind of technical stuff.

tip.eps For that matter, we suppose that you can safely ignore the stuff next to the Tip icons, too – even if our accumulated wisdom, gleaned from long hours slaving over a hot keyboard, can save you much weeping and gnashing of teeth. If you’re someone who enjoys trying to do something another way, go ahead and read the tips.

casestudy.eps Sometimes, we use made-up examples (along with examples from our own experience) to help you understand how some topic or area of QuickBooks helps you and your business. We mark these examples with the Case Study icon. This is just our way of continuing the giving. But sure, you can skip them.

What You Should Not Ignore (Unless You’re a Masochist)

warning_bomb.eps Don’t skip the Warning icons. They’re the ones flagged with the picture of a 19th century bomb. They describe some things that you really shouldn’t do.

Out of respect for you, we don’t put advice like ‘Don’t smoke!’ next to these icons. We figure that you’re an adult and you can make your own lifestyle decisions. So we reserve the Warning icons for more urgent and immediate dangers – things akin to ‘Don’t smoke while you’re filling your car with petrol.’

remember.eps This icon is a friendly reminder to do something. Not to be too pushy, but it’s probably not a good idea to ignore these icons.

Three Foolish Assumptions

We make three assumptions about you:

check.png You have a PC running Microsoft Windows. (We took pictures of the QuickBooks windows and dialog boxes while using Windows 7, in case you’re interested.)

check.png You know a little bit about how to work with your computer.

check.png You have or will buy a copy of QuickBooks for each computer on which you want to run the program.

tip.eps This book works for QuickBooks 2012, although in a pinch, you can probably also use it for QuickBooks 2010.

By the way, if you haven’t already installed QuickBooks and need help, jump to Appendix A, which tells you how to install QuickBooks in ten easy steps.

How This Book Is Organised

This book is divided into six mostly coherent parts.

Part I: Quickly into QuickBooks

Part I covers some upfront tasks that you need to take care of before you can start using QuickBooks. We promise we don’t waste your time here. We just want to make sure that you get off to a good start.

Part II: Daily Entry Tasks

The second part of this book explains how to use QuickBooks for your daily financial record keeping: preparing customer invoices, recording sales, and paying bills – that sort of stuff. Oh, and yes, multicurrency is covered here too.

Just so you know, you’ll be amazed at how much easier QuickBooks makes your life. QuickBooks is a really cool program.

Part III: Stuff You Do from Time to Time

Part III talks about the kinds of things that you should do at the end of the week, the end of the month or the end of the year. This part explains, for example, how to manage your VAT, do payroll, and create a business budget.

While we’re on the subject, we also want to categorically deny that Part III contains any secret messages that you can decipher by reading backwards. Yllaer.

Part IV: Housekeeping Chores

Part IV talks about some of the maintenance tasks that you need (or someone needs) to perform to keep your accounting system shipshape: account reconciliations, financial report generation, job-costing mechanics, and file management.

Part V: The Part of Tens

Gravity isn’t just a good idea; it’s a law.

By tradition, the same is true for this part of a For Dummies book. The Part of Tens provides a collection of lists: ten tricky situations and ways to handle them, ten things to do when you next visit the Canary Islands – oops, sorry, wrong book.

Also by tradition, these ten-item lists don’t need to have exactly ten items. You know the concept of a baker’s dozen, right? You order a dozen scones but get 13 for the same price. Well, For Dummies ten-item lists have roughly ten items. (If the Dummies Man – the bug-eyed, pale-faced guy suffering from triangle-shape-head syndrome who appears on the back cover of this book and on icons throughout these pages – were running the bakery, a 10-scone order might mean that you get anywhere from 8 to 13 scones.) So exacting that it’s scary.

Part VI: Appendixes

An unwritten rule says that computer books have appendixes, so we include four. Appendix A tells you how to install QuickBooks in ten easy steps. Appendix B explains small business accounting, provides a short biography of an Italian monk, and explains double-entry bookkeeping. Appendix C describes how to set up QuickBooks for use by multiple users – and for multiple users on a network. Yikes! Last but not least, Appendix D describes how to print cheques using pre-printed cheques.

Cheat Sheet

We have also included an online Cheat Sheet packed with top secret codes to help you become a more efficient QuickBooks user. You’ll find things like fast ways to open and close windows, enter dates, perform calculations, edit transactions, and so on. You can find the Cheat Sheet at this (top secret) url:

Conventions Used in This Book

To make the best use of your time and energy, you should know about the conventions that we use in this book.

When we want you to type something, such as Few would dispute that Marmite is an acquired taste, it’s in bold type. When we want you to type something that’s short and uncomplicated, such as Jennifer, it still appears in boldface type.

Except for passwords, you don’t have to worry about the case of the letters you type in QuickBooks. If we tell you to type Jennifer, you can type JENNIFER or follow poet e. e. cummings’ lead and type jennifer.

Whenever we tell you to choose a command from a menu, we say something like “Choose Lists⇒Items”, which simply means to first choose the Lists menu and then choose Items. The ⇒ separates one part of the command from the next part.

You can choose menus, commands, and dialog box elements with the mouse. Just click the thing you want.

Please note that some special symbols used in this eBook may not display properly on all eReader devices. If you have trouble determining any symbol, please call Wiley Product Technical Support at 800-762-2974. Outside of the United States, please call 317-572-3993. You can also contact Wiley Product Technical Support at

Part I

Quickly into QuickBooks


In this part . . .

All accounting programs – including QuickBooks – make you do a bunch of preliminary stuff. This may be a bit of a downer, but getting depressed about it won’t make things go any faster. So if you want to quickly get up and go with QuickBooks, peruse the chapters in this first part. We promise that we get you through this stuff as quickly as possible.

Chapter 1

QuickBooks: The Heart of Your Business

In This Chapter

arrow Why you need a tool like QuickBooks

arrow What QuickBooks actually does

arrow Why QuickBooks is a good choice

arrow What you need to do (in general) to get started

arrow How to succeed in setting up and using QuickBooks

We’ll start this conversation by quickly covering some basic questions concerning QuickBooks, such as “Why even use QuickBooks?”, “Where and how do I start?” and, most importantly, “What should I not do?”

This little orientation shouldn’t take more than a few minutes. Really. And the orientation lets you understand the really big picture concerning QuickBooks.

Why QuickBooks?

Okay, we know you know that you need an accounting system. Somebody, maybe your accountant, friend, or spouse, has convinced you of this. And you, the team player that you are, have just accepted this conventional viewpoint as the truth.

But just between us, why do you really need QuickBooks? What does QuickBooks do that you really, truly need done? And just to be truly sceptical, also ask the question “Why QuickBooks?” Why not, for example, use some other accounting software?

Why you need an accounting system

Let’s start with the most basic question: why do you even need an accounting system? It’s a fair question, so let us supply you with the two-part answer.

The first reason is that it is a legal requirement that you keep accounting records for tax purposes. Maintaining an accounting system – be it a paper-based ledger system, a spreadsheet or fully fledged accounting software – will help you meet your legal obligations. If you decide just to blow off this requirement – after all, you got into business so that you could throw off the shackles of bureaucracy – you might get away with your omission. But if HM Revenue & Customs (HMRC) examines your return and you cannot prove the numbers, HMRC gets to do your accounting the way it wants. And you can bet the HMRC way means that you pay more in taxes.

Here’s the second reason for maintaining an accounting system. Our strong belief – backed by more than 35 years of business experience and close-hand observations of several hundred business clients – is that you can’t successfully manage your business without a decent accounting system. Success requires accurately measuring profits or losses and reasonably estimating your financial position.

This second reason makes sense, right? If your friend Kenneth doesn’t know when he’s making money, which products or services are profitable, and which customers are worth keeping (and which aren’t), does he really have a chance?

We don’t think he does.

To summarise, your business must have a decent accounting system, no matter how you feel about accounting and regardless of how time-consuming and expensive such a system is or becomes. Successful business management depends on such an accounting system.

What QuickBooks does

Okay, let’s go on to the next question that we need to discuss: what does QuickBooks do to help you maintain an accounting system that measures profits and losses and other stuff like that?

QuickBooks truly makes business accounting easy by providing windows that you use to record common business transactions. For example, QuickBooks has a window (you know, a Windows window that appears on your monitor’s screen) that looks like a cheque. To record a cheque, you fill in the blanks of the window with bits of information, such as the date, the amount, and the person or business you’re paying.

QuickBooks also has a handful of other windows that you use in a similar fashion. For example, QuickBooks supplies an invoice window that looks like an invoice you might use to bill a customer or client. You fill in the invoice window’s blanks by recording invoice information, such as the name of the client or customer, the invoice amount and the date by which you want to be paid.

And here’s the great thing about these cheque and invoice windows: when you record business transactions by filling in the blanks shown onscreen, you collect the information that QuickBooks needs to prepare the reports that summarise your profits or losses and your financial position.

For example, if you record two invoices (for £10,000 each) to show amounts that you billed your customers and then you record three cheques (for £4,000 each) for your spending on advertising, rent, and supplies, QuickBooks can (with two or three mouse clicks from you) prepare a report that shows your profit, as shown in Table 1-1.

/Table tb0101


remember.eps The brackets, by the way, indicate negative amounts. It’s an accounting convention, but back to the real point of this little narrative.

Your accounting with QuickBooks can be just as simple as we described in the previous paragraphs. In other words, if you record just a handful of business transactions using the correct QuickBooks windows, you can begin to prepare reports like the one shown in Table 1-1. Such reports can be used to calculate profits or (ugh) losses for last week, last month, or last year. Such reports can also be used to calculate profits and losses for particular customers and products.

This accounting stuff is cool! (For the record, that’s the only exclamation point in this chapter.) Good accounting gives you a way of managing your business profitability. And obviously, all sorts of good and wonderful things stem from operating your business profitably: a materially comfortable life for you and your employees; financial cushioning to get you through the tough patches; and profits that can be reinvested in your business, in other businesses, and in community charities.

Let us also mention a couple other handy things that QuickBooks does for you, the overworked business owner or bookkeeper:

check.png E-mail invoices and payslips: QuickBooks can e-mail invoices to your customers and payslips to your employees in a secure way. This can save you time and money.

check.png Online Filing: QuickBooks can file your VAT returns online and submit your payroll forms electronically – another timesaver.

check.png Print cheques: QuickBooks can print your supplier cheques or employee paycheques with a few mouse clicks. If you’ve had to write 20+ cheques by hand on a regular basis, you know what a timesaver this is.

No Really, Why QuickBooks?

No question about it – you need a good accounting system if you’re in business. But you know what? That fact doesn’t explain why you should use QuickBooks. (We ignore for one moment that you’ve probably already purchased QuickBooks.) Therefore, let us suggest to you two reasons why QuickBooks is an excellent choice to use as the foundation of your accounting system:

check.png Ease of use: QuickBooks historically has been the easiest or one of the easiest accounting software programs to use. Why? The whole just-enter-transaction-information-into-windows-that-resemble-forms thing (which we talked about earlier) makes data entry a breeze. Most business people already know how to fill in the blanks on these forms. That means that most people – that probably includes you, too – know almost everything they need to know to collect the information that they need to do their books with QuickBooks. Over time, other software programs have tended to become more QuickBooks-like in their ease of use. The team at Intuit have truly figured out how to make and keep accounting easy.

warning_bomb.eps We should tell you, however, that there is a downside to the ease-of-use quality of QuickBooks. Part of the reason why QuickBooks is easy to use is because it doesn’t possess all the built-in internal control mechanisms that some more traditional accounting systems have. Those internal control mechanisms, of course, make your financial data more secure, but they also make the accounting software more complicated to use.

check.png Expense: QuickBooks, especially compared with the hardcore accounting packages that accountants love, is pretty inexpensive. Different versions have different prices, but for a ballpark figure, you can get an excellent accounting software solution for a few hundred quid. Not to go all grandfatherly on you or anything, but not so very long ago inexpensive accounting software packages often cost several thousand quid.

So What’s Next?

At this point, presumably, you know why you need accounting software and why QuickBooks is probably a reasonable and maybe even an excellent choice. In other words, you swallowed the line about QuickBooks hook, line, and sinker. That decision on your part leaves the question of what you should do next. In a nutshell, before you can begin working with QuickBooks, you need to do the following:

1. Install the QuickBooks software, as we describe in Appendix A.

2. Run through the QuickBooks Setup we describe in Chapter 2.

3. Load the master files, as we describe in Chapter 3.

If you’re thinking, “Hang on, that seems like a bit more work than what’s involved in installing spreadsheet software or a new word processor”, you’re right. You might as well hear the ugly truth about accounting software: Accounting software – all of it – requires quite a bit of setup work to get things running smoothly. For example, you need to build a list of expense categories, or accounts, to use for tracking expenses. You also need to set up a list of the customers that you invoice.

Rest assured, however, that none of the setup work is overly complex; it’s just time-consuming. Also, know from the very start that QuickBooks provides a tremendous amount of hand-holding to help you step through the setup process. And remember, too, that you have your new friends – the authors of this book – to help you whenever the setup process gets a little gnarly.

How to Succeed with QuickBooks

Before wrapping up the little why, what, and how discussion of this chapter, we ought to provide a handful of ideas about how to make your experience with QuickBooks a successful one.

Budget wisely, Grasshopper

Here’s the first suggestion: Please plan on spending at least a few hours to get the QuickBooks software installed, set up, and running. We know you don’t really want to do that. You have a business to run, a family to take care of, a dog to walk, and so on.

But here’s the reality sandwich you probably need to take a big bite of: it takes half an hour just to get the software installed on your computer. (This installation isn’t complicated, of course. You’ll mostly just sit there, sipping tea or whatever.)

But after the QuickBooks software is installed, unfortunately, you still have to run through the QuickBooks Setup process. Again, this work isn’t difficult, but it does take time. For example, a very simple service business probably takes at least an hour. If your business keeps stock, or if you’re a contractor with some serious job-costing requirements, the process can take several hours.

Therefore, do yourself a favour: Give yourself adequate time for the job at hand.

Don’t focus on features

Now here’s another little tidbit about getting going with QuickBooks. At the point that you install the QuickBooks software and start the program, you’ll be in shock about the number of commands, whistles, bells, and buttons that the QuickBooks window provides. But you know what? You can’t focus on the QuickBooks features.

Your job is simply to figure out how to record a handful – probably a small handful – of transactions with QuickBooks. Therefore, what you want to do is focus on the transactions that need to be recorded for you to keep your books.

Say you’re a one-person consulting business. In that case, you might need to figure out how to record only the following three types of transaction:

check.png Invoices

check.png Payments from customers (because you invoiced them)

check.png Payments to suppliers (because they sent you bills)

So all you need to do is discover how to record invoices (see Chapter 4), customer payments (see Chapter 5), and write cheques (see Chapter 6). You don’t need to worry about much else except maybe how to print reports, but that’s easy (see Chapter 15 for the click-by-click instructions).

“Oh,” you’re saying, “you just intentionally picked an easy business. I’m a retailer with a much more complicated situation.”

Okay, well, you’re right that we picked an easy business for the first example, but we stand by the same advice for retailers. If you’re a retailer, you probably need to figure out how to record only four transactions. Here they are:

check.png Sales receipts

check.png Bills from your suppliers

check.png Payments to your suppliers

check.png Employee payroll cheques

In this example, then, all you need to do is find out how to record sales receipts – probably a separate sales receipt for each day – (see Chapter 5), how to record bills from suppliers and cheques to pay your bills (see Chapter 6), and how to handle employee payroll (see Chapter 12).

Not to be cranky or careless here, but one truly good trick for getting up to speed with QuickBooks is to focus on the transactions that you need to record. If you identify those transactions and then figure out how to record them, you’ve done the hardest part. Really. You can focus on the other stuff (you know, the things that you do periodically like VAT returns and bank reconciliations) once you are up and running.

Get professional help

A quick point: you can probably get an accountant or QuickBooks Professional Advisor (for whom you can search on the Intuit website) to sit down with you for an hour or so and show you how to enter a handful of transactions in QuickBooks. In other words, for a cost that’s probably somewhere between £100 and £200, you can have somebody hold your hand for the first three invoices you create, the first two bills you record, the first four cheques 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 personalised training.

Use both the profit and loss statement and the balance sheet

And now, the final point: You really 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, 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 this 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 the state of Denmark.