Rustler’s Quickbooks Tips

Suppose you sell and your terms are 2/10/ net 30, that means 2% off if you pay within 10 days otherwise the full amount is due in 30 days.

When you make the sale you have no way of knowing if you will receive the full amount, or the discounted amount, so you make the sale and the sales account reflects the full price.  Let’s say you sold something for $100, if they pay within 10 days you will only receive $98, then what?

Set up an income account called Sales Discounts, and in the memo block make note that this is a “contra account” and the balance will normally be  a credit (a minus).

Set up an other charge item called Sales Discounts, set the rate to -2%, and point it to the Sales Discount account.

When you receive the discounted amount, Use receive payments, in the receive payments screen double click on the invoice to bring it up, and on the next line on the invoice enter the Sales Discount item. QB will calculate the discount, then click save, answer yes to your changing the invoice and do you want to save it.  That puts you back in the receive payments window and the invoice has the new balance, put a check mark by it and receive the money.

Undeposited funds reflects what you actually received, sales indicates the full amount of the sale, and the contra account Sales Discounts shows the amount that you discounted the sale as a negative.  When it is all added up to get total sales it balances out.

So you sell something you don’t have- what happens?

Inventory for the item goes negative.

COGS is correct, QB takes the average cost of the item and multiplies it to determine total cost for the sale and posts it to COGS.

Inventory asset is correct, the total cost of the sale is deducted from inventory asset.

Sales income goes up by the amount of the sale.

So what is the problem, everything is right. Well not exactly, there is a cost being booked that you have not paid for, that is one problem. And another is that the cost being booked is the old cost, you may buy stock at the same old cost then again you may not, and of course you have a negative quantity for the item in stock. And Inventory Asset went down by an amount that was not there.

And then you buy some, buy some at a higher cost.

QB makes some correcting entries for you.

Inventory is updated to reflect the purchase quantity less what was sold that you didn’t have.

Inventory Asset is increased by the amount of the purchase.

The difference between the cost that was booked when you sold stuff you didn’t have and the new cost is posted to:

COGS as a bill, yes a bill, so if you are seeing bills show up in COGS that is most likely the reason. The problem is figuring out why the bill is there. The bill is posted as of the date of the bill, and the original cost is posted as of the date of the sale, There is no way to correlate the two in QB.

And Inventory asset shows a bill for the difference in cost amount as a negative, just like it did when the cost of the sale was deducted at the time of sale. Same date problems exist and the same lack of correlation as with the posting in COGS.

Sorry unless you ponied up the money for Accountant, Manufacturing and Wholesale, Retail, and Enterprise editions, you are just out of luck.  Evidently the designers of QB think no one else has back-orders.

Now someone explain to me why an accountant edition would need to be able to track back-orders? What they run out of pencils?

Ok Ok I am being facetious, they need it cause in theory they audit the other high dollar versions.

In my view this is a major problem with QB, and it causes major problems by not having that ability in the versions used by most of us.  Not having a way to track back-orders means you can sell something you do not have - that is a problem!

QB Premier and higher allow inventory assemblies. An assembly is nothing more than a group of inventory items that when put together make something you sell. QB will allow you to build an assembly and then include that assembly in another assembly - something I think you should stay away from if at all possible.

QB does not auto-build assemblies (it should IMO, it’s competitors do, but many are against it and that is a whole ‘nother discussion as they say), so you have to build the assembly before selling it. Well you should build it before selling it, QB will sell it even if there are zero built, QB will warn you that there are not enough, but it will still sell it.

Selling something you do not have will cause problems down the road, try to avoid it if at all possible.

When you create an assembly, there is a list spot to select the items that make up the assembly, you enter each one and tell QB how many of that item to use when it builds one assembly. If you leave the quantity blank or enter a zero, QB will still use a quantity of one. The list of items in the build also shows the cost of the items, and that cost is what is totaled to determine the overall cost of the assembly.

But, what QB does is take the cost from the cost block on the item screen that is below the description block and display it in the build list. Sounds good huh? The problem is, that is misleading, the cost in that block most often reflects your most recent cost to buy the item, that recent cost is not necessarily the average cost. And guess what? QB uses the average cost when building an item, and when expensing it to COGS when sold.

The list of items in the build is usually referred to as the BOM (Bill of Materials) and QB does not have a way to print it, other than printing the assembly item itself which includes a lot of financial data you may or may not want on the print out.

As I said QB leaves it to you to remember to build the assembly before selling it. And if you try to build it, and one or more of the items in the BOM have an insufficient quantity for the number you wish to build, QB will not build that number. It will tell you there is not enough of an item to complete the build, but it will not tell you which item or items. Well in a way it does, when the build assembly screen is up, the BOM is listed with available quantities for each item, you can scroll down the list and look for a balance that is below the number you wish to build. You would think in this day of computers that QB would highlight the item for you, but it doesn’t.

Purchase orders, sales orders, and pending invoices are non-posting records. They do nothing to the “books” in other words. You will not see them in any financial statements.

In preferences you can have Sales Orders reduce inventory levels if you wish, there is a toggle there to do it, but that is the only exception. All that does is reserve the inventory on the sales order, makes it appear, key word is “appear” as though the inventory is not there. Though it appears as though it is sold it is not, not until the sales order is turned into an invoice.

The problem with doing it that way is that if you do a physical inventory and compare what is on hand to what the item list says, there will be a difference because the sales orders have reduced inventory, well reduced what appears to be on hand.

A client retainer is when you take a deposit against work you will perform.  Typical used when you sell a service by the hours worked, web design, legal, etc.  You accept money in advance of work, so that value is a debt you owe, but it is also money you need to deposit.

On a sales receipt, I would use an “Other Charge” item (lets call it ‘retainer’) and point it to a current liability account for client retainers.  You can set the other charge item for the hourly rate you charge (lets say $250/hr). That gets the pre-paid deposit on the books as  a liability and the money will show up in undeposited funds.

Then you should have a service item for hours worked at the rate of $250/hr (sales price = $250).

When you invoice for hours worked, enter the service item an the number of hours worked (lets say 2 at $250/hr).

That gets the charge on the invoice for a total of $500.  Then  enter the other charge item retainer and enter a negative and the number of hours worked (-2 for 2 hours worked in other words at $250/hr), that gets a negative $500 and the invoice total is zero. And if you worked more hours than the retainer then the invoice will show an amount due.

QB will take the $500 out of the retainer liability account and send it to the sales income account. No money will show up in undeposited funds since you already have the money and all this does is reduce the liability and increase sales.

There may be a better way, and if there is I hope someone chimes in with it, but since QB lumps all retainers in one account there is no way to tell when a particular client has used up their retainer. What I do is create a sub account under the retainer account for each client and put their deposits in their account. It means I have to check the balance in their account before billing - major pain - but I haven’t found a way around it.

I have some old habits that started way back in the 8-bit DOS/CPM days, but they apply today too.  Those were the days, hard sectored 5.25 discs, no hard drives, and the 300 baud modem, …….but I digress.

First I never ever keep my data files (for any program not just QB) on the same drive as the program and operating system. Drives today are cheap - so put another one in your computer!  The main drive gets a lot of use, the main drive is where virus attacks happen, the main drive gets cluttered, etc etc.  When you get the second drive, make a folder called something like QB company data.  QB for some reason does not have a “Save as …” function under the File menu - stupid!  So you will have to find the company files and copy them to the new folder, then select open company and navigate to the new folder.  Once saved QB always opens the last opened file, so it will use the file on the second drive from then on.

And when you get a new computer, pull the drive and put it in the new computer - unless the interface for the drive changes in the new computer (EIDE to SATA as an example) it will work fine.  And there are EIDE to SATA adapters out there.

Backing up your data is just as important.  At a minimum back up to the second drive, in a different top level folder.  When hard drives crash, most of the time only some folders get ruined, there is a good chance some techie can rescue data in another folder, when they can’t from a sub-folder.

Buy a USB external hard drive.  you can find back up software on the net that is free (look for open source programs) that will make a back up of any folders and/or drives you want at what ever schedule you want.  Then if there is an evacuation and you have warning (hurricane, tornado, whatever) you can just pick up the USB drive and take it with you.

QB offers an online  back-up service that they charge for, but there are numerous free on line back-up sites on the net - find one you like and back up to there too.  If you have a company web site that is hosted off your property (you don’t have the server in other words) you can back up to your company web site.  Create a folder, and FTP  your data folder to that folder.

The test file.

You need a test file, let me say that again, you have to have a test file.

And it makes more sense to have a file that has your accounts, your items, your customers, so that when you fool around trying to figure something out, you are used to what items you are using.  And you should fool around in the test folder, even if you read something here or on a forum, try it out on a test file first.

In windows, I have no idea how to do it on a mac, bring up windows explorer, find the drive and folder that holds the company data file, right click on the folder and select copy.  Then click on the top level of the drive and right click and select paste.  Windows will make a new folder called “Copy of <your folder name>”.  Right click on the folder and select “rename”, then rename the folder to include the word “QB TEST” in all capital letters to make it easy to find.

Open QB, from the file menu select open company and navigate to the test file folder, open the file.  The first thing you do when creating a test file like this is to open Company information, ( use the menu Company>Company Information) the very top line in the window that comes up is the company name, replace it with the words “TEST TEST” and click OK.  Then whenever the test file is open the main QB window title will read TEST TEST rather than the company name, an easy way to determine which file you are in.

Since QB always opens the last opened file, I developed the habit of opening the company file, and then closing down QB. That way it never opens with the test file open.

Inventory adjustments are a fact of life, things disappear, get broken, become demos, get used in the business, become obsolete, etc.  When that happens you have to adjust the number on hand.  When you make the adjustment QB has to know what “Adjusting Account” to use.  There is no hard and fast rule, but common sense should prevail.

When you make the adjustment QB takes the value of the item(s) out of inventory asset and puts that value in the adjusting account (some kind of expense) you pick.

If you use the item as a demo or in the business - Use an expense account that reflects what you are doing, promotion expense, advertising expense, operating expense, etc. And don’t forget use tax applies.

If you take the item for personal use use the owner equity drawing account. And don’t forget use tax applies.

If it just disappeared, broke, or became obsolete, then I would suggest a COGS-Spoilage account which reports on the Other line on IRS forms where you calculate the cost of inventory.

If you ship items to your customers you undoubtedly use shipping boxes and materials (packing, tape, labels, etc).  how you account for them can be a headache.  I carry them in inventory as an “Other Asset” and set the cost account to shipping expense, the income account to sales and a sale price of zero.

The tape, packing material, labels, stuff like that I treat the same way I suggest accounting for bulk items (see the TAG Bulk Item Acct’ng).  You can also use the same system for the boxes.

Short of putting the items on the invoice as packing materials or something (which looks kind of flaky IMO) there just is not any other way to do it that I can see.

Because this blog won’t let me tag a page, it only tags an entry, and I can’t see duplicating things, click here
Depreciation parts 1 and 2

QB doesn’t seem to have any way to indicate that an invoice was mailed or e-mailed (and of course that includes the product shipment too).  What I do is enter the date I mailed it or e-mailed it in the memo block.  Then if you click on the column headers in the customer center you can customize the column headers and add the memo block so you can easily see the memo comment.  If you use delivery confirmation as I sometimes do, this is also a good place to make that note.

You can also add the memo field to most all reports, so reporting on aging as an example will show the memo entry. Handy if you sent a late notice, when that happens to me I enter LTE and the date the late letter was sent.

Drop shipping is when you do not stock the item being sold, someone else does and you tell them to ship it using your return address so it looks like it comes from your business. So basically what you order is your cost of goods sold, and I see no reason to keep an inventory list. Drop shipping can have two conditions:

Condition 1. You get the order and the full payment, you order the item and pay your cost.

I would create a service income item for sales, and use that on the sales receipt to record the income from the sale. In the description block you could put what was sold.

Then order the items from the supplier using a generic non-inventory item that has COGS as the expense account. That will give you a payable that is your cost.

Condition 2. The order goes to the shipper and the shipper gets paid, you get a check for your share of the purchase.

Create an Other Charge item and call it something like sale-cost, and select the COGS account as the expense account.

I would create a service income item for sales, and use that on the sales receipt to record the income from the sale. In the description block you could put what was sold.

Then put the Other Charge item on the next line, enter a -1 (negative one, or higher of course if you had more than one ordered) and enter the cost.

That sends the cost to COGS, and the sale to sales income, the amount on the sales receipt will reflect the check you received and that amount will go to undeposited funds.

——

The drawback to doing it this way is a lack of detail on what is selling and what is not, but I would expect (I don’t use drop shippers so I am guessing here) that periodically the drop shipper will send you a recap of your activity showing what was sold.

This is one way to do the core thing, there are probably other ways to do it. I’ve assumed only one item that has a core charge, obviously if you have more than one item, the core charge and core item will have to be specific, you will have more than one of each in other words.
(i.e. core-alternator, core-starter, core-injector)

A core charge is when you are required to get the used item back so it can be rebuilt. Like a starter motor for a car, you buy a new one, but it is actually a rebuilt core you are buying, so the shop charges you a core charge, if you bring back the core, you get that charge refunded.

So you need to charge for the core at the time of sale, and the customer will do one of three things:

Condition 1. Pay the core charge at the time of purchase

Condition 2. Have the core to turn in at the time of purchase

Condition 3. Bring in the core some time after the purchase.

Obviously we need a charge item, an income item, an inventory item, and an account to track core charges and refunds.

Set up an income account called core.

Set up an other charge item called core-charge and select the income account core, enter the amount of the core charge.

Set up an inventory item called core-item select the income account core and set the price as the same as the core charge.

Condition 1. Create the invoice, enter the part being purchased and then the core charge - receive payment.

Condition 2. Create the invoice, enter the part being purchased, and then the core charge, then enter the core-item and a quantity of -1 (negative one), the core-item should have the same price as the core charge. (if you get a warning about not having enough to sell, ignore it)

Condition 3. Condition one has already happened (the core charge was paid in advance). Bring up Create Credit Memo/Refunds, select the customer, then enter the item core-item, a quantity of one (positive one for this action), and the amount, click save and close. QB asks if you want to refund or carry a credit. If you refund, the screen comes up, Select the account and type of refund, click close.

Behind the scenes:
When you charge for a core, the amount goes to the income account for cores. When the core is returned, the inventory item “core-item” increases the amount on hand, the negative amount is sent to the core income account and zeros out the core charge that was posted there. If a refund is issued, the refund is credited to the core income account, again zeroing out the amount received. Since the inventory item “core-item” has no cost, there is a zero entry in COGS.

Inventory increases the number of cores on hand even though you entered a negative one on the invoice (I have no idea don’t ask), so you can see how many cores you have and send them off to be rebuilt when you have enough.

So let’s say that you sell bobcats (the machine not the animal) and have them in inventory. And the business is thriving and you are going to expand so you want to take one bobcat out of inventory and make it a fixed asset because you are going to start using it to clear some land.

Now you would think that QB would have thought this one through, but …

Logically you should be able to use inventory adjust, and move the item to the fixed asset account, and you can. The problem is that it does not make an entry in the fixed asset list, the value of the item just sits in the fixed asset account.

Since you really need to have it in the fixed asset list that poses a problem.

The only way I can figure to do it is to use the inventory adjust and as the adjusting account select “cash”, lower the quantity on hand by one. That takes the cost out of Inventory asset, lowers the number on hand, and increases cash by the cost of the bobcat.

Then go to “Enter bills and expenses” and on the expense tab under account select the fixed asset account. QB will ask you if you want to set up a fixed asset, do that and pay the bill with cash. In the memo block of all transactions I would say something about this being an internal transaction and why.

And don’t forget to include this transaction in your calculations for use tax.

Took me awhile to figure out the relationship on the invoice.

Each item has a taxable status you can set (either on the invoice or set the default for it on the item screen)

The invoice total can be set to taxable, non-taxable, or any of the kinds of taxes you have set up.  If you set it to non-taxable then even if the items are set to taxable, nothing is calculated.

And then there is the customer tax code which can be changed on the invoice but is normally set on the customer edit screen on the additional info tab.

The customer tax code overrides everything.

So I suggest setting all items to taxable, and if you have a customer who does not have to pay sales tax, set that customer to non-tax and let the customer tax code override the taxable item setting.  That way when you do sell to a customer who does have to pay the sales tax, the invoice will do it right without any extra input from you.

When you create an inventory item and tell QB how many are on hand, and the total value QB creates what is called an opening balance entry in the inventory asset account and the Opening Balance Equity account. You added value to the company.

If you made a mistake and entered an inventory item as having an opening balance and later the bill comes in, that poses a problem. If you pay the bill you are either doubling inventory, or increasing an expense that shouldn’t be.

Right click on the inventory item in the items list, select Quick Report and set the date range to all. The first entry will be the opening balance entry, double click on it and then use the menu Edit>Delete to get rid of it. Then enter the inventory purchase as you normally would.

Remember back in grade school when you were learning positive and negative numbers, they showed you a number line?  There was zero in the middle and positive went to the right and negative went to the left.  Turn that number line on its’ end so positive is up and negative is down.

Debits increase, positive goes up.  Credits decrease, negative goes down.

When you have a negative balance, you owe money, that balance (credit) would be low on the number line, below zero.  Then when you pay the bill, you debit the account.  A debit increases right?  Look what happened to the point on the number line, it increased, it went closer to zero.

Well simplistic maybe but it helps me keep it straight.

Have I confused you? ROFL - yea well.

In QB and on all the forums, everyone talks about inventory as being something you have for sale, or something you use to create something for sale. And I fell into this habit too, …….. my bad.

What about that other stuff you have that you want to track, what we think of as equipment inventory? Desks, computers, copiers, filing cabinets, all that stuff. It is inventory to the business, even if you expense it off using the Section 179 deduction, it still exists in the business and you want to make sure you still have it.

To do that you have know you have it, or have 5 filing cabinets, 4 desk lamps, etc etc.

Unless you just like following obscure uses for QB, or have a need to track this stuff, go read something else cause this in going to get real complicated.

When you set up an inventory item you generally pick the COGS and sales accounts and leave the asset account alone - it defaults to inventory asset. BUT, if you change that asset account to something like Office Equipment (an Other Asset account) then the cost of the inventory item you are creating or buying will go to that account and the number on hand will reflect how many you bought. (You do have to keep a COGS and an income account on the item screen, but since you are not going to sell it, it makes no difference.)

In the item list you should segregate these items away from the inventory you sell. Make a blank line, a divider and label it non-sale items or equipment or something. Then make the desk item a sub item of that divider.

If you do it this way then the shortcut I talked about in the Misc Category under Section 179 Deduction wouldn’t be used. But interestingly enough, when you have a desk with a value of say $498.00 as an inventory item (in the Office Equipment asset account), and you do a journal entry to expense $498.00 off to the Section 179 expense, QB **only** removes the value from the asset account, the quantity on hand is still there.

So now you have a piece of equipment in “Equipment” inventory that you can track, the cost is easily found, and if it is expensed to the Section 179 Deduction that is also easily found. If you need to do the actual depreciation for an item of equipment then you can - the cost is readily available.

The other way to accomplish the same thing is to use the shortcut Section 179 deduction that I explained. That expenses the item off the books right away. Then create an inventory item with zero cost and the quantity of the item on hand. With zero cost it makes no difference what asset account you use, but you should use the Office Equipment asset account to keep things logical. I don’t particularly care for this way of doing it, because the cost is just too hard to track. When I buy the item and put it in the Equipment Asset account the cost is there in that account, and then the entry to move that cost to the Section 179 deduction is also there.

And hopefully at some point your business will make too much money to qualify for the Section 179 deduction, then you will have to cope with depreciation on the desks, copiers, etc. And if the cost is in the Equipment asset account, that makes it easier.

In the invoice layout designer there is a ruler down the left side, I put the tear off line at the 3.5 inch mark (which is the first fold for a tri-fold letter). What I did was add a text box, extend it all the way across the invoice, and entered the words “Please separate at the dotted line and return the top part with your payment. Thank You.”

Then right click on the box and select properties. Click the tab titled “Border”, insure there is a check mark on for the bottom border, select dashed in the pattern area, and I used a “3pt” line, with black color. When you click OK move the text box with the dotted line so the line is at the 3.5 inch mark.

As you can see the fancy stuff is on the tear off portion, but on the lower portion which my customer will keep, the business information and my copyright notice is there in case after they have paid it they need that information.

You can add a labor charge to an invoice or add one to an assembly build.

Set up an other charge item, mark it as being used in an assembly, select the COGS account for labor and the sales account, give it a cost and sales price (usually the same), save it and then add it to the build list or just use it on an invoice.

Renting poses some problems in QB. QB treats inventory as being sold when you put it on an invoice, and in a rental situation it is not sold, but it is not there either, so it should not be in inventory, but you still own it so the value should stay on the books.

In my view a capital asset is the easiest. Capital assets are things that cost a lot and have a long life, like a back hoe.

So lets say you are buying 5 back-hoes to rent. If this the first time you will have to create a fixed asset account, and then buy the item on the expense tab of “Enter bills and expenses”, when you select the fixed asset as the expense QB will ask if you want to bring up the fixed asset list and add the item, say yes and fill in the blanks - that gets it on the books. I would suggest you enter each back-hoe as an individual entry, rather than a quantity of 5, that will make selling or disposing of one later on easier. (Capital assets have to be depreciated, see the entry on depreciation in the Bean Counting 3101 category in this blog)

Now you need to track it. Create an inventory item called back-hoe, and then use enter bills against inventory and “buy” 5 back-hoes for zero dollars. When you rent an item, use the inventory item back-hoe on the invoice, that gets it out of inventory but does not increase COGS since the cost of the back-hoe in inventory is zero. When the item is returned use inventory adjust and increase the number on hand by the quantity of the item returned. If you want to identify each back-hoe specifically you will have to either enter each one by serial number as an item, or enter the serial number on the invoice itself, QB does not track specific items at all.

If the rental is month to month then you will also need to create a service item called something like rental. For following months use the service item to invoice for the monthly rental and in the description block put the item being rented. Kind of a pain, but QB does not really handle rentals very well.

In truth if all you do is rent items you could list all items for rent this way, even if they are not normally considered capital assets, say something like a circular saw, jig saw, etc etc.

But let’s say you also sell items as well as rent them, saws, drills etc. That poses a new problem, well several problems. If you rent an item, the value has to stay on the books but you have to know it is not there ready to sell. And if you sell an item that has been rented, you probably will not sell it for full retail value either, so you have to know how many new items you have for sale and how many used items (returned rentals).

There are two ways to do it that I know of - both require attention to detail, neither is a good solution IMO but in QB you have to work around what it will an will not do.

1. Use a sales order to show items being rented. Add the column “On Sales Order” to the item list (click the column header and select customize, then add the column). When you look at the item list you can do the mental math to subtract the items being rented (on the sales order) from what is on hand and only sell what is on hand. Use a service item to rent the item (do not put the item on the invoice, but you can put the description of the item rented in the description area of the invoice). But you have to look at the item list before selling, QB will sell an item in inventory even if it is on sales order, sales orders are non-posting. So if you do not look at the item list first, QB will sell the item and it may not be there at all, it is rented.

2. Create a sub-item called something like widget-rented. When you rent an item use inventory adjust to decrease the number on hand of the parent item widget and increase the sub item widget-rented. That moves the item out of the parent item and shows it being rented, so when you go to sell the item (parent item) only the number of widgets on hand and available for sale is there.

I would also create a sub item called something like widget-available to show items that are used (have been rented) and are on hand. Then if you want to sell a used item, you can use that item on the invoice. When the item comes back from being rented use inventory adjust to move the item from the widget-rented item to the widget-available item to show it is back in the shop and can be rented.

When you go to print an invoice or sales receipt, some things print, some don’t. You control what does or does not print.

Click customize when an invoice is open, then edit, the window that pops up gives you control over what prints and what is seen on the screen.

Do not use a non-inventory item in an assembly build, it does not work the way QB help says it will. What will happen is that the cost you enter in the cost block on the non-inventory item will go to COGS immediately when the build is created. That is wrong the cost should be held in the cost of the build and not sent to COGS until the build is sold.

QB does not hold the value of a non-inventory item marked for resale as it should, so when you use it in a build there is no value to add to the cost of the build. So what QB does is take the amount you entered in the cost block of the non-inventory item and send it to COGS immediately.

Since you had an expense when you bought the non-inventory item, using the non-inventory item in a build, adds that expense again in COGS. Not only is doubling expenses, but COGS should not have an entry until the assembly is sold.

Correction

Charlie Russell said it worked for him (see the comments for this entry) so I went back experimenting. IF, the key word is IF, you or QB enters the cost of the non-inventory item in the cost block below the description block before using it in an assembly (building the assembly), then it will work. For some reason my version of QB will not make that entry when I buy a non-inventory item.

What I did notice though, was the assembly build is keeping average cost based upon the  previous builds too, so if the earlier builds used the non-inv item without the cost block filled in, the average cost is wrong.  When the cost block of the non-inv item is filled in it works as Charlie says and the average computed cost starts increasing.

That Item list sure gets hard to read and find one thing sometimes, so I created separators for the assembly portion of my item list (I almost always sell assemblies). See how nice and easy it is to read, the items are sorted together. When you have the list open you can drag and drop the items anywhere you want - within the type at least.

I created an assembly item since I am sorting assemblies, (use an inventory item if you are sorting inventory), for the name I gave it one hyphen (-) and selected an income account, then move it to where I need it. Each one has to be a seperate name though, so the next one has two hyphens (–), and so on. It does use up the name list but I have room, and if it come to push or shove I can always merge them all and mark it inactive.

Odd but QB does not require a build list to create an assembly item.

Income is what the business makes, pretty obvious huh? Don’t get that confused with profit. Profit is what is left after you pay all the different costs of operating your business, including buying inventory, insurance, advertising, rents, etc., and of course paying uncle sam and nephew (the state) his taxes.

Now I don’t begrudge paying taxes, and no matter what you feel about how high they are, I can tell you from having lived all over the world that we pay some of the lowest taxes there is.  But just because I don’t begrudge paying taxes doesn’t mean I want to pay more than I have to.

And that is the reason I have  a partnership with no employees.  By not having employees the business doesn’t have to pay the various state and federal unemployment taxes, the business does not have to match social security contributions, and best of all the business doesn’t have to pay for a payroll service just to keep up with the changing taxes withheld.

What I am hoping to do (and please realize this is not a recommendation, just my opinion) is to take on help when that day comes as a limited partner.  Limited in that they do not get a vote as to operation or fiscal planning decisions.  The new partner will get a guaranteed draw and have to file estimated taxes, but I have a spread sheet that does that calculation easily and each partner can have a copy.  That means that the guaranteed draw has to be higher than a straight salary since the partner is paying the tax, but, and the key word is but, if I can show the business growing, the new partner will also share in profit.  That lure of a “bonus or profit sharing” check will, I hope, mitigate the lower guaranteed draw.

And let’s face it, if an “employee” has a stake in the business, gets a profit share, they hopefully will be more concerned with the business relationship with vendors and customers.

Want to see what difference it makes?  Take last years P&L, add up the cost for your payroll service and the total costs of unemployment taxes, the business contribution to social security and any other taxes and fees you pay because you have employees - then add that figure to net profit. (And if you use QB payroll include the cost of “upgrading” to a new version of QB every three years, since they sunset the payroll service.)

Less taxes (and associated costs)  paid equals higher net profit - pretty simple.

Inevitably, this not being a perfect world, you will come across a dead beat who does not pay his debts. The IRS and what accounting standards I can find all say that you should not make the determination that a debt is a bad debt until you have exhausted all the ways of collecting it - judgment decision. But when that happens you will need to create an expense account called something like “Bad debt expense” and set up an “Other Charge” item called Bad-debt which points to the bad debt expense account. If you normally sell and collect sales tax make the Other Charge item taxable.

Bring up the customer center and use the drop down arrow by the button that says New Transactions and select Create Credit memos/refunds, that opens a window. Fill in all the fields, under item use the Bad-debt item. Remember that if the customer pays sales tax, you need to enter the amount less sales tax, then QB will calculate the sales tax on the amount.

Then save and close the credit memo, when you do that QB will ask you what you want to do - select apply to an invoice, then select the invoice it applies to. When you do the invoice will be marked closed, the amount will be removed from accounts receivable, the sales tax amount will be removed from the sales tax payable account, and the bad-debt expense account will show an increase.

Since you did not get whatever you sold back, there is no entry made to inventory or cost of goods sold.

QB will not let you set a flat rate for sales tax, nor will it let you create an other charge item and point it to sales tax payable - dumb!

You cannot customize and save a default invoice, but you can use one as the template. Just above the drop down box for what kind of template you have displayed (when an invoice is open on the screen) is a button titled “Customize”, click it and the template list comes up, select the default template and then click New, that uses the template but allows you to save it under a new name.

Since QB sorts all lists alphabetically, I preface all my invoices with the business initials, that keeps them together in the list. Explore the tabs that are provided, one nice function is the ability to have information on the screen that is not printed, so make sure when all is said and done that you bring up an invoice and use print preview to insure that what you designed is what you are going to print. You cannot do this from the designer, you must exit the designer and bring up an invoice normally.

I’m kind of a control freak so I don’t add fields from this screen, I would rather add what I can see and put it where I think it belongs - your choice.

Click “Layout Designer” and the invoice comes up with a drag and drop screen. You can add and delete what ever you want. If you are going to put a logo on the invoice you should make sure it is at least 300 dpi or better.

When you click in a field, it gets a funny border and that is when you can drag and drop, resize, etc. If you right click you can select properties. Some fields on my invoice I do not want borders, if you click the tab “Border” you can select which border you want, or none. Selecting the bottom border only allows you to put what looks like a fill-in the blank line, I use this for a field where I want the customer to enter the amount paid.

Since I print on plain paper, I don’t use a lot of borders, wastes ink and it takes longer to print. And for the most part the borders I do use are the thinest possible.

If you click the button “Font” then you change the size, color, bold, italic, etc etc. Interestingly enough if you select bold for a calculated field (like amount due) when QB automatically fills in that field with the total billed, the result will be bold.

The default green areas are for windowed envelopes, put your return and send to address fields in them and you can use windowed envelopes. I use normal printing for the return, and bold printing for the send to fields.

On the screen that has the button “Layout Designer” there are several tabs. Those tabs control what you see on the screen and what you see when you print it. Go through each one and set it to what you want. As an example, there is no reason to print sales tax or totals on the packing slip, so in the tab that says “Footer” make sure those items have no check marks under the print column at least.

In my business I need the following templates, you might need more or less, but what I did was get the first one right, then use it as the selected template to use when I clicked on “New” and rename it. My invoice names are”

EEC-invoice
EEC-invoice-overdue
EEC-invoice-revised
EEC-invoice-payments

I also have an EEC-packing slip which was created from the default packing slip.

The two invoices called revised and overdue have those words in large red capital letters right between the Amount due and the Amount paid fields on the top tear off portion of my invoice. Sometimes our contracts for service are revised and that is the reason I need that kind of invoice, changing the template allows me to make the changes in the detail part of the invoice without changing the invoice number or voiding and creating a new invoice.

The payments invoice I only use for those times that I have received a partial payment and need to rebill. My thinking is that human nature being what it is, if the customer sees a field that says “payments/credits” they will think to themselves that I accept (as a normal course of business) payments on invoices - without prior approval. I would rather they see the amount due and think the whole thing has to be paid and pay it, than take it upon themselves to only pay a portion of the amount due.

Since I am really lazy, I found an easy way to fold an invoice the right way every time. Bank of America, and I would imagine others, have fliers in the bank lobby. I found one that was a tri-fold and made out of heavy card stock. Slip the invoice into the flier face down and close the flier over it, then use the edge of the flier to create the first crease. Fold the rest of the invoice inside the folded part and crease again. Perfect fold each and every time.

If you need to put disclaimers or copyright notices on your invoice do that with a text box, I have found that Times New Roman and a font size of 9 is about the smallest most legible printing you can get.

Sometimes you want to provide a discount for the number of items ordered. Kind of like order more than 10 and the price is lowered by x-percent, more than 20 and a different discount is applies. All of QB’s competitors do this but, as usual, QB does not.

The work around is to use price levels, and remember to select the price level list on the invoice when you need to.

Create a price level list called “>10″ (to use the above example of a discount applying to a quantity of 10 or more).

Price level lists are funny, all the ways to manipulate them are not in the help file.

Click the “Mark all” to select all the items in the list - that is pretty obvious.

Click on one or more of the items (you have to click in the check mark column to select an item) and you can do interesting things to only the items clicked:

Click in the custom price column and enter the price you want to put there for each and every item selected.

Use the adjust up/down by a percentage to change all selected items by that percent

Tell QB how to round the result. Click adjust and it does just that.

But then you can go back and set a check mark by other items (clear the check mark from items that you do not want to adjust) and do it all again using different percentages or just entering a price. In other words you are not confined to one adjustment on the screen, just one at a time.

When you are done entering the price changes for this list click OK and it will be saved. To use it, just select it on the invoice or sales receipt and the price from the price list will replace the normal retail price you have on the item screen.

You can also use the price list to give special prices to a specific customer(s) - in the customer screen, on the “Additional Info” tab is a drop down box where you can select the price level to always use for this customer.