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QuickBooks Clean Up Improves Performance

Chief Mechanic · September 20, 2008 ·

checking_the_oil.jpg
Just like a car, your QuickBooks company file needs regular maintenance to perform optimally. At a minimum, that maintenance should be performed annually. We refer to our specialized program to maintain a QuickBooks company file as our QB Tune Up, something QuickBooks users often generically refer to as a “clean up.” This is the among the most requested QuickBooks consulting services.

QB_ES_9_product_information.jpg
From within QuickBooks, you can press F2 to produce the Product Information screen, a sample of which appears nearby. This display shows some basic facts about your QuickBooks installation, including overall file size, database file fragments, the number of list entries, and the date that QuickBooks internal clean-up was last run. This information is important because QuickBooks has limits on the amount of list entries. Overall file size and the number of file fragments impact performance.

Unfortunately, while this basic information is useful, it doesn’t provide much insight into what needs to be cleaned up. Most QuickBooks users define the need for clean up more broadly: improve the accuracy of their accounting data and the performance of QuickBooks.

There are some identifiable operational indicators that it’s time for you to get our QB Tune Up:

  • reports and financial statements produce unexpected results
  • balances shown on detail reports don’t match balance sheet accounts
  • GL chart of accounts has become unwieldy
  • lists contain many outdated entries, increasing transaction entry time and the risk of operator error
  • sluggish system performance

It takes a specialist to develop a specific action plan to solve these data reliability and performance problems. We’ll provide a free, comprehensive analysis of your QuickBooks data file and an estimate of what needs to be done during our QB Tune Up. All of our QuickBooks service programs include free email support for a specified time period.

You don’t want to keep running your accounting system without a regular QB Tune Up.

Contact us today to get started on the road to more accurate, reliable accounting data.

Certified ProAdvisor            Certified Enterprise Solutions ProAdvisor            Certified Point of Sale ProAdvisor            QuickBooks Logo Authorized Affiliate

Letting Inventory Levels Go Negative Results In Unreliable Numbers

Chief Mechanic · September 19, 2008 ·

A common problem for many inventory-based businesses is recording receipt of inventory before that inventory is billed to a customer. In retail settings, pressure to promptly take care of customers can lead to pressure to produce an invoice that hasn’t yet been received. Since producing an invoice is often a necessary first step to getting paid, many firms prioritize invoicing over properly receiving inventory. When invoicing results in inventory levels going negative, the results are inaccurate financial reports.

To see how, let’s start with the sample data included with QuickBooks for a products-based business, Castle Rock Construction. First, let’s review the firm’s Balance Sheet and Profit & Loss before we make any transactions. We start with a total inventory value of $30,121.33. Our starting cost of goods sold is $3,610.50. Castle Rock has incurred costs of $10,211.23 for customer Kathy Abercrombie, the customer we plan to invoice. Next, let’s add a new inventory item called “COGS Test” with an opening balance of 5 units costing $5 each. QuickBooks debits inventory for $25 and automatically posts an offsetting credit of $25 to Opening Balance Equity; both entries are marked as reconciled. Our opening balances before creating the new inventory item are shown below.

Negative Inventory Impact Initial Sale
For a simple example of the impact of letting an inventory level go negative, let’s sell all 10 units of our “COGS Test” item to Kathy Abercrombie. Since we only have 5 units of that item on hand, that will reduce our quantity on hand for this inventory item to -5. When we attempt to save the invoice, QuickBooks will warn us that we’re attempting to sell inventory that we don’t have, but we’ll ignore this warning. That’s where our trouble will begin.

At the time of the sale, QuickBooks had information on the average cost to that point in time. That cost was $5.00. But what if our cost for the item had changed and was now something other than $5.00? We can imagine that if we had to scramble to get this item for the Abercrombie order, we faced higher costs. Let’s enter a bill for 20 units dated after the date of the Abercrombie invoice. The date is very important, as we’ll soon see. The 20 units we received cost $7.50 each, or 50% more than our normal cost. Here’s our Balance Sheet and Profit & Loss after entering the vendor receipt.

Negative Inventory Impact BS If Negative Inventory

Negative Inventory Impact P & L If Negative Inventory

By letting inventory reach negative levels, QuickBooks accounted for the transaction as if we sold 5 units that cost $5 each and 5 units that cost $7.50. In effect, even though QuickBooks uses the average cost method, this transaction was treated on a First In First Out (FIFO) basis.1 A look at the Transaction Journal for the bill confirms this. Once we entered the new inventory at higher cost, QuickBooks automatically applied the extra cost of $2.50 per unit to the 5 units that we did not have in stock. Our cost of goods sold is now $3,673.00, an increase of $62.50. Our total costs for customer Abercrombie are $10,261.23, and our inventory value is $30,233.83.

We obtain totally different results if we record the bill for receiving inventory before invoicing the customer. Our cost of goods sold in this case is $3,680.50, or $7.50 higher than reported by allowing inventory to reach negative levels. Our inventory value is $30,226.33, or $62.50 higher than reported when we recorded the invoice before the bill. Our costs for customer Abercrombie are now $70 higher than when we started.

Negative Inventory Impact BS If No Negative Inventory

Negative Inventory Impact P & L If No Negative Inventory

All of these differences are due to the fact that by entering an invoice before a bill, we prevented QuickBooks from correctly calculating the average cost for our new inventory item. After all, we can’t expect QuickBooks to calculate average cost before we’ve entered that cost. By first entering the bill for inventory receipt and then recording the invoice, we stick to our inventory cost assumption. We started with 5 units costing $5 each, and we added 20 units costing $7.50. That produced an average cost of $7 for each of our 20 units. The results reported by entering transactions in the proper sequence are consistent with that average cost.

AccountInvoice Before Bill ($)Invoice After Bill ($)Difference ($)
Cost of goods sold3,673.003,680.507.50
Customer costs10,261.2310,281.2320.00
Inventory valuation30,233.8330,226.337.50
Item average cost7.507.000.50

The bottom line: when customer invoices are entered before vendor bills, your financial reports will be inaccurate. In our example, overall cost of goods sold, customer costs, and inventory were under-reported. That resulted in overstating income. Our average cost for the new item was reported as $7.50, rather than the $7.00 obtained by applying the average cost method consistently. We built our example around a discussion of this problem in the QuickBooks knowledge base.

If you’ve already made the mistake of entering invoices before bills that have resulted in negative inventory levels, we can help get your financial reporting back on an accurate track.

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  1. In August 2008, the SEC announced that some companies can report under International Financial Reporting Standards (IFRS) by 2010 and that all companies will be required to do so by 2014. IFRS, unlike US GAAP, requires FIFO costing where individual items are not identifiable. [↩]

QuickBooks 2009 Is Here!

Chief Mechanic · September 19, 2008 ·


QuickBooks Premier 2009
Intuit made QuickBooks 2009 available for electronic download on Monday, September 29th. The new version brings with it a host of important changes, new products, and in at least 1 case, the migration of a included feature into a extra-cost add-on.

We’ve prepared a short list of what we think are the most noteworthy new or improved features. Keep in mind it’s not an all-encompassing list. Here’s our top 10 improvements:

FeaturePro & Premier 2009Enterprise Solutions 9.0POS Basic 8.0POS Pro 8.0
Multi-currency supportYesYes--
Multi-user enhancementsYesYesYesYes
New company snapshotYesYes--
Improved sorting in bank reconciliationsYesYes--
Support for larger numbersYesYes--
PIN pad with signature capture--YesYes
Improved sales tax reporting--YesYes
New POS Webstores service---Yes
Improved inventory turn reporting---Yes
Improved re-order support---Yes

With the economy becoming increasingly global, multi-currency support for all global currencies is a timely addition. Pro, Premier, and Enterprise Solutions automatically convert currencies into a designated “home” currency. A new report, “Realized and Unrealized Gains & Losses,” shows the impact of currency fluctuations. In addition, wire transfers can now be performed directly within QuickBooks.

For Enterprise Solutions, the maximum number of users in multi-user mode increased from 20 to 30; for POS, it doubled from 10 to 20. Pro, Premier, and Enterprise Solutions now allow a back-up to be performed and reports to be printed while in multi-user mode. An instant messenger feature is now included to allow users to communicate using the familiar QuickBooks interface.

Less dramatic improvements for Pro, Premier, and Enterprise Solutions products include a new company snapshot, column sorting in bank reconciliations, and support for larger numbers (11 vs 8 digits).

One negative: the Financial Statement Designer that was formerly included at no extra charge with the Accountant edition has been replaced with the Intuit Statement Writer at a retail cost of $149. The program is included with the multi-user versions of Enterprise Solutions, but most accountants will find themselves having to buy something that was previously included at no charge.

QB_PINPadSigCapture.jpg
POS Basic got new support for PIN pads with signature capture (pictured at left), and QuickBooks now saves an electronic copy of the signature in case of disputed transactions, along with a doubling in the number of active workstations in each store from 10 to 20.

QB_CashRegisterPlus_2009.jpg
POS Pro received all of the POS Basic improvements plus a new Webstores service to allow companies to create a web store ringing up sales from a product catalog. Intuit also introduced a new product, Cash Register Plus, for those businesses that aren’t ready for POS. The program rings up sales and tracks customers, processes credit cards, and performs basic bookkeeping to track sales performance.

This is just a partial list of the improvements for 2009. Two features – multi-currency support or the multi-user enhancements – could tip the scales to justify upgrading right away. We’ve done an in-depth analysis of the new multi-currency features in QuickBooks in a post on our blog.

With the release of the 2009 version, QuickBooks 2006 is slated to become obsolete in April 2010. Time to upgrade! When you decide to upgrade, you can save by using the banner at the top of this page or you can review discounts on both QuickBooks and Quicken at our Buy QuickBooks page.

Hopefully, Intuit addressed more than a few items on your personal wish list.

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