Managing your Money
Money. It “makes the world go round.” It’s “a terrible master but an excellent servant.” It's “the root of all evil” and unsurprisingly, it plays a paramount role in business and entrepreneurship. Money is the fundamental center of the working world. Businesses rise, fall, and adapt based solely on how much money they manage to make annually and how well they maintain good business practices in developing their wealth. This makes it crucial to any large financial corporation sure, but it trickles down all the way to an upstart entrepreneur. From lemonade stands to Uber drivers to independent contractors who run construction, knowing how and why you are or aren’t making money is critical. It is here that we most commonly find people who struggle the most with handling their money. Do they just not have the capability to control their finances? Is it a lack of understanding of how important tracking their capital is? Is it just laziness? Usually, the answer to these questions is a firm no. People who start their own businesses tend to be anything but lazy, they tend to understand how important money is to their success and they have the self-control to make good decisions. The biggest difference keeping them from understanding their financials as well as a “big business” however is their lack of assistance. You see, big businesses learned long ago that tracking your expenses and income are a very fundamental component of the business game and have since either developed ways within their own company or used other companies to track their financials for them. In the modern era, they’ve managed to take it one step further, using technology to help them to understand every piece of their cash flow they could possibly want to know. One such tool that these companies utilize to help them manage their money is QuickBooks© and over the next few weeks, we hope to make the process of learning QuickBooks© a bit easier. For today, we thought we’d start out with something simple that we see new and longtime QuickBooks© users alike struggle with - writing checks.
Often when people load up QuickBooks© and attempt to write a check, it’s because they have a bill to pay. Let’s say you owe a phone company $100 for your phone bill and that the bill is due 30 days from today. You’d go into “bills” and write the name of the vendor you owe, check the “net 30” box under terms to show that it’s a bill that needs to be paid in 30 days, type the $100 amount in and then choose a category that makes sense for this type of bill which for our purposes would be telephone expenses. From there you would save and close the bill. 30 days later when it’s time for the bill to be paid most people believe that they need to use the check feature in order to process the payment, but that’s where most people are making an enormous mistake. If you decide to write a check to the vendor, you’re not actually linking your bill and your check together. Meaning that your money may look right on a cash basis, but if you dig a little deeper and look at your cash flow through accrual, you’ll notice that you have double payments of $100 and that you’re down $200 total and your original bill is still unpaid on your accounts payable report. That’s because your file has had two $100 postings made to it, one where you owe $100 as an open accounts payable bill, and the other where you’ve paid $100 to the phone company as an expense. QuickBooks© won’t know what to do with the money unless you properly tell it where it needs to go. Instead when it’s time to pay the bill use the “pay bills” feature. When you open “pay bills”, it should show you a list of your unpaid bills. Click on the one you’d like to pay, click “make payment”, check the box to the left of the bill to confirm that you did, in fact, pay the bill and then save and close. Now instead of believing you to have paid twice, QuickBooks© will properly show everything zeroed out, leading to a healthy looking file and a lot fewer headaches for an accountant, or you, in the future.
QuickBooks© and similar products are a massive upgrade over a shoebox of receipts. Whether you’re looking to keep track of how much money you’re making or hoping to plan for your economic future, these programs have the tools required to help you manage every last penny. You just need to know how to use them and luckily, we’re here to help!