Chasing Your Money

Recently we talked about how company owners can sometimes

have trouble figuring out how to pay someone they owe money to and how

they should best go about maintaining records in QuickBooks © Online

which for repetition’s sake will further be written as QBO . While it’s very

pertinent information to know, it’s not particularly fun information. After all, it

can be quite painful to know how much money you are spending,

particularly if the dollar amounts are very high. However, almost everyone

on planet Earth cracks a smile when they get more money in - especially

when they’ve earned it - and this concept of receivables is what we are

going to talk about today.

So what is a receivable? A receivable is any amount of money that is

owed to a particular company, person, or business. Receivables are always

regarded as an asset for the entity that owns them. It’s essentially money

that you have earned, but not yet received . This is incredibly important

because if you don’t stay on top of your company’s receivables, you might

find yourself running into horrible cash flow problems that really stem the

ability of your company to operate. For example, If it takes roughly $20,000

to operate your company monthly, but you are making $100,000 or more a

month, that’s obviously great. However, if you only receive $15,000 of the

money you’ve earned in a particular month, then you’re actually attempting

to operate at a $5,000 deficit, even though your company is theoretically

cash positive. This is dangerous because if you don’t collect your money

sooner rather than later, your business can run out of cash and that will

undoubtedly cause you a litany of problems. Thus, it’s integral to make sure

you know who owes you money and when that money is expected to be

received. QBO has many tools at your disposal that you can use to track

your receivables, and even bill customers when it’s time for them to pay up.

The proper steps one should take in order to correctly use

receivables in QBO is quite simple. The first step you should take is

creating an estimate. Now if whatever deal you’re working on didn’t or won’t

have an estimate as part of the procedure you can skip this step,

otherwise, you should make sure to include it because it will make finalizing

the transaction easier later. Click the estimate button on your QBO create

menu (the plus sign near the top right of the program), and type in the

necessary information, then save your estimate. Next, when your deal has

been finalized, you should roll your estimate over into an invoice. Find the

estimate in question (or simply create an invoice if a previous estimate

didn’t exist) and change or add whatever you need to in order to get your

invoice in QBO to match your deal in real life. The next step in the process

is when you actually get paid. Once the payment has physically (or

digitally) been received, click the “receive payment” option, not directly to a

bank account, but rather to the “undeposited funds” account to confirm to

QuickBooks © that you have the money. This is where most people believe

the process is finished, but you still have one more step! Finally, you must

make a bank deposit. Use the bank deposit feature to move the money you

received from a client from your undeposited funds account to your actual

bank account. You should only do this once you’ve physically gone and

deposited the check into your bank account in real life. It’s best to get into a

rhythm of doing things this particular way because then you won’t ever

accidentally tell QBO that you’ve put money into a bank account when you

actually haven’t. If you simply receive all of your payments into your bank

account, then QBO will assume every time you get paid that the money a

client pays you is instantly hitting your bank account, but the truth is that

quite often we end up with checks on our desks that we haven’t personally

deposited yet. If you forget to deposit a check or if your bank has some

kind of error in doing so, now your financials will continue to look wrong and

you’re just creating extra headaches that you didn’t need to. Instead, follow

the method described above and your records will stay sharp.

QBO has many uses, but not everyone is a computer whiz or a

financial genius. Because of this, it’s easy to get lost attempting to correctly

implement all of your records into the program. Stay tuned, we will continue

our discourse regarding QBO and share some tips and tricks with you for

navigating it that you won’t find in any QuickBooks © tutorials.


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