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.