How To

It’s probably one of your toughest challenges. How do you encourage customers to make payments faster?

Cash flow is a problem for so many businesses right now. Unless you sell products or services that are in high demand during the COVID-19 pandemic, you’re probably struggling to get payments from customers who are also cash-strapped. Adding a line to your invoices that says something like, “We appreciate your prompt payment” isn’t making a difference.

QuickBooks provides numerous ways for you to nudge customers who have let payments slide beyond their due dates. You don’t have to be heavy-handed about it (though you may have to be eventually on seriously delinquent accounts). Here are four ways you can speed up your receivables.

Assess finance charges on late payments.

You don’t want to make customers unhappy, but consumers and businesses are accustomed to having interest assessed on late or partial payments. QuickBooks can help you set up finance charges. Once you’re logged in as the Admin, open the Edit menu and select Preferences | Finance Charge | Company Preferences. You’ll see a window like this:

Setting up and assessing finance charges can be complicated. We suggest you consult with us if you want to take this route.

You might consider what you pay some of your other vendorswhen you’re deciding on variables like Annual Interest Rate (%) and Grace Period (Days). Keep in mind that in some jurisdictions, you can’t charge finance charges on existing finance charges, so you’ll need to know your local laws if you want to check that box. Then, tell QuickBooks how you want it to calculate the charges.

To see who owes finance charges and have them applied, click Customers | Assess Finance Charges. Select the Assessment Date and the customers who should be charged. If you click the box in front of Mark invoices: “To be printed,” QuickBooks will print a separate finance charge invoice in addition to the main invoice for each customer. Otherwise, the charges will just be included on their next statement.

Warning: Please let us work with you if you decide to add finance charges. We can help prevent mistakes that will most likely make your customers very unhappy.

Allow your customers to pay online.

This is actually our number one suggestion. You’re not penalizing your customers in any way. You’re simply providing them with an easier way for them to settle up their debts. It’s a courtesy to them, actually. They don’t have to dig for their checkbooks and stamps, address an envelope, and get their payment to the post office. QuickBooks adds information to your invoices telling customers exactly how to proceed.

The benefits to you are obvious: You’re more likely to get paid quicker, and you won’t have to deal with cashing checks and chasing down deposits. You’ll have to first sign up for QuickBooks Payments, which will allow you to accept credit card, debit card, and ACH bank transfer payments electronically. There are no monthly or setup fees, but you’ll of course pay transaction fees. The money should be in your bank account by the next business day, and QuickBooks takes care of all the background work, matching payments with invoices. We can help you get set up here.

Send statements.

You can always run an A/R Aging report to see who’s past due. But you’ll also learn which customers are in arrears if you create and send statements. Click Customers | Create Statements to produce comprehensive lists of your customers’ invoices and payments. You can define a date range and send statements to everyone (or a hand-selected group). You’d be more likely to send statements to everyone who is a specified number of days past due, as pictured below.

You can tell QuickBooks which customers should receive statements by completing the fields in this window.

Polish up your invoices and send them promptly.

You have more control over your sales forms’ content and layout than you might realize. Open the Lists menu and select Templates. Double-click on the invoice form you use the most, then click Manage Templates. Highlight the desired form and click Copy (it’s best not to alter your existing templates until you’ve practiced a bit). Give it a new Template Name if you want, then click OK. You can change colors and fonts in the window that opens. Click Additional Customization at the bottom of the window, and you’ll be able to add, edit, and delete fields and columns in your forms.

Send your invoices as soon as possible after you’ve completed the sale. You want customers to remember shortly after the fact that they need to pay you.

Poor cash flow is a perpetual problem for a lot of small businesses – and not just during a pandemic. If we can help you use QuickBooks’ tools to evaluate your current cash flow and forecast into the future, or if you need further explanations of anything we discussed here, please don’t hesitate to contact us.

You’re accustomed to money going in a certain direction, but sometimes you have to pay your customers. Here’s how it’s done.

QuickBooks is very good at helping you get paid by your customers. It comes equipped with customizable invoice templates for billing customers and sales receipts for recording instant sales. It supports online payments, so you can accept debit or credit cards and electronic checks. It simplifies the process of recording payments and it offers reports that let you keep track of it all.

There are times, though, when you have to issue a payment to a customer. QuickBooks provides forms that allow that transfer of funds: credit memos and refunds. Do you know when and how they should be used? Here are the basics.

Credit Memos

A credit memo is just what it sounds like. A customer returns an item for which they’ve already paid, and you have to credit him or her for its cost.  This is the more complicated of the two and requires more bookkeeping, since you’re tracking the sale, its payment, and the return item. You can deal with the amount of the credit by:

• Retaining the funds in the customer account.
• Issuing a refund.
• Applying it to the next open invoice.

When you issue a credit memo to a customer, you have three options for returning the money they paid.

To create a credit memo, click Refunds & Credits on QuickBooks’ home page or open the Customers menu and select Create Credit Memos/Refunds. The Credit Memo window opens. Select the correct Customer:Job. In the line item section of the form, choose the merchandise returned in the Item column and enter a quantity. Repeat the process if more than one item was returned, then click Save & Close. The Available Credit window, pictured above, will open. Click the button in front of the option you want.

Select the first option if that’s what you want and click OK. The window will close, and the customer will have had that credit amount applied to his or her own account. You can see this in the Customer Center if you click on Customers in the navigation toolbar (or Customers | Customer Center). You can then either click on the Customers & Jobs tab and scroll down until you can highlight your customer’s record or click on Transactions | Credit Memos.

Click on Give a Refund to open the Issue a Refund window. Everything should be filled in here except for the payment method. If you select Cash from the Issue this refund via drop-down list and then pick the correct account from the list that opens, the refund amount will be subtracted from the account. Select Check and then the Account, and check the box in front of To be printed. That refund will be in the list the next time you open the File menu, then Print Forms | Checks. Choose a credit card and check the box in front of Process credit card refund when saving box to issue a credit card refund automatically.

Tip: Can’t work with credit cards because you don’t have a merchant account? We can help you set this up.

The Issue a Refund window

If there is an open invoice, the Apply Credit to Invoices window will open, containing a list of unpaid bills. If there isn’t already a checkmark in front of the invoice you want to apply it too, click in the first column to create one. QuickBooks will tell you how much credit was applied and whether any remains. When you’ve checked the screen for accuracy, click Done.

Dealing with Overpayments

Let’s say a customer is catching up on multiple outstanding invoices and he or she sends you a check for the total but overpays you. Open the Receive Payments window by going to Customers | Receive Payments or clicking Receive Payments on the home page. Select the customer and enter the Payment Amount and Check #. QuickBooks will have put a checkmark in front of all the outstanding invoices listed to indicate they’ve been paid.

In the lower left corner, you’ll see a section titled Overpayment. The extra amount and your two options for dealing with it appear here. You can either credit the customer or issue a refund. Click the action you want to take, then save the transaction.

If a customer overpays you, you can use QuickBooks’ built-in tools to credit him or her.

You can also issue refunds through the Write Checks window, but this is a more complicated procedure. It’s easier to process a credit memo.

If you’re at all unclear about what we’ve described here, please contact us for assistance. Refunds or credits that come through incorrectly (or not at all) can make customers very unhappy and may affect future sales. So, let us help you get it right the first time.

The data in your QuickBooks company file contains some of the most sensitive information on your computer. Make sure it’s secure.

Your customer list is gold. And those Social Security and bank card numbers in your payroll, client, and vendor records need to be protected from intruders and only viewed by authorized employees.

It’s not just large corporations and financial institutions that get hacked. That’s what the bad guys want you to think. In reality, small businesses are often the victims of data breaches because their owners think they’re immune from data theft and destruction.

Even if you’re password-protecting your PCs and running antivirus and anti-malware software, there’s more you need to do when it comes to your accounting records. Here’s what we suggest.

Restrict access by setting up user permissions.

If you have multiple staff members using QuickBooks, don’t share the same user name and password. That obviously gives everyone access to all data and activity. If something goes awry, you have no way of knowing when or how it happened, and who was responsible. To protect yourself and everyone else who logs in, it’s critical that all users have their own unique logins. They should only be allowed to access information and functions that relate to their job duties.

You can restrict QuickBooks users to certain screens and activities.

To assign these permission levels, open the Company menu and click on Set Up Users and Passwords, then Set Up Users. This opens the User List window, where you should be identified as the Admin. Click Add User. Enter a user name and password for an employee who needs access (this can be changed later). Check the box in front of Add this user to my QuickBooks license.

Tip: Not sure how many users are allowed under your current license? Click F2 and look in the upper left corner. If you need to add licenses, let us know.

Click Next. The next screen lists three options. You can grant access to all areas or to selected areas. You can also create a login for us as your external accountant, which lets us see everything except sensitive customer data. Select the second option and click Next. You can see in the image above that you can give the employee different levels of responsibility. When you’ve made your choice, click Next. The subsequent nine screens deal with different areas of QuickBooks and their related activities.

Tip: When you need to change your password, which you should do at a minimum every three months, go to Company | Set Up Users and Passwords | Change Your Password.

Save your company file elsewhere.

You should always be backing up your company file to an external storage device (like a CD or thumb drive).  To set this up, open the File menu and select Back Up Company, then Create Local Backup. This window will open:

The Create Backup window

Make sure Local backup is selected, then click the Options button below (not pictured here). Click Browse to see a directory of your PC and select the correct destination. Leave the two boxes below it checked; this will add the backup date/time to the filename and limit the number of backup copies to three.

By default, QuickBooks will remind you to back up your file every fourth time you close your company file; you can change this number if you prefer. Leave the Complete verification option checked and click OK, then Next. Specify when you want to save your backup copy and click Next again. You can schedule regular backups of your company file on the next screen if you’d like. When you’ve completed this screen, click Finish.

You should also consider saving a copy of your company file to the cloud. Intuit offers its own service for this; it costs $9.95/month or $99.95 annually, but it gives you 100 GB of storage space, so you can back up other critical business files, too.  If you can’t swing this financially, at least store your backups to a portable device that you can carry offsite.

Warning: If you already pay for cloud storage from another vendor, don’t assume you can just copy your QuickBooks file to it. Talk to us.

Other Steps

There are other things you can do to protect your QuickBooks data, including:

• Insist on strong passwords. Yes, it’s a pain to create and remember them, but it’s critical here.
• Keep everything That includes your operating system and anything else that requires updates.
• Minimize web browsing on work computers and remind employees about smart email behaviors.

We strongly recommend that you consult with us as you’re setting up any kind of backup system for QuickBooks. The software’s instructions are straightforward, but we don’t want you to do anything that would jeopardize the integrity of your company file.

Once you have recorded the items and jobs into QuickBooks, you can start using them in transactions, and eventually track your progress by generating reports.

Let’s say you worked eight hours on website development for your promotion job. You’d open the Employees menu and select Enter Time | Time/Enter Single Activity to open this window:

You can enter individual, billable activities and assign them to jobs.

In the example above, you’re limited to recording one day’s work on a specific SERVICE ITEM. You’d verify the date and select from the drop-down lists to complete the fields for employee NAME, CUSTOMER: JOB, and SERVICE ITEM. You can either use the timer to time the job or enter the number of hours manually in the DURATION box. Click in the Billable box to create a checkmark and add NOTES if you’d like. The CLASS field is optional; talk to us if you’re not familiar with this feature.

If you worked on two separate service items on the same day for that CUSTOMER: JOB, you would create two individual records. You can also enter billable activities directly on a timesheet by clicking Employees | Enter Time | Use Weekly Timesheet. Once you select the employee NAME at the top, any single activity(ies) you created that week will appear as individual records, and vice versa.

Writing a check or using a credit card for a job-related purchase that should be billed to the customer? You’d fill out these forms in QuickBooks like you usually do, making sure that you document the items or services by highlighting the Items tab, select the correct CUSTOMER: JOB, and make a checkmark in the BILLABLE? column.

If you write a check or charge your credit card for purchases that can be billed to a CUSTOMER: JOB, be sure to record it in QuickBooks.

If you’ll be doing some billable driving for your job, you should also be tracking your mileage in QuickBooks. Open the Company menu and select Enter Vehicle Mileage. If you haven’t created a VEHICLE record in QuickBooks, click <Add New> and easily do so. Complete the rest of the fields and save.

Tip: Do you want to see some of your overhead expenses on job costing reports? Create a CUSTOMER: JOB named “Overhead” and assign related costs to it.

Billing the Billables
When the time comes to invoice your customers (Customers | Create Invoices), you’ll see how your careful work in QuickBooks simplifies that task. Open an invoice form and select a CUSTOMER: JOB. If you’ve entered billable items for him or her, this small window will open:

When you create an invoice for a CUSTOMER: JOB who has billable time, mileage, or other expenses, QuickBooks can automatically add them.

If you leave the first option checked and click OK, another window will open that lists all of the expenses you’ve marked as billable to the customer, arranged by type. Click in the first column of each expense you want to include and click OK. Your invoice containing those entries will open. Do any editing necessary, and then save it.

Note: You’ll probably notice two fields in the Choose Billable Time and Costs window that refers to Markup. This is an advanced concept that we can explore with you, should you want to charge customers more for expenses you’ve incurred on their behalf.

Related Reports

QuickBooks contains a wide variety of reports related to your work billing customers for jobs. Click Reports in the navigation pane or Windows menu, then Jobs, Time & Mileage to see what’s available. Choose a date range and click Run to see them appear with your own data.

If you’ve never worked with jobs in QuickBooks, we strongly recommend that you let us help you here. There are a lot of moving parts, and you don’t want to miss out on any of your efforts or expenses that are billable.

You may hate to have to do it, but assessing finance charges for late payments may improve your overall cash flow.

There are a myriad of ways to bring in customer payments faster and improve your cash flow. You can:

• Get a merchant account and let customers pay you electronically
• Offer a discount for early payments
• Shorten the payment due cycle (21 days instead of 30 days, for example)
• Be more aggressive about collections

QuickBooks can help you take all of these steps. It also offers a fifth option: assess finance charges for tardy remittances.

Maybe you don’t want to do this because it seems like a less-than-friendly way to treat customers – especially valued ones. But you’re not in the business of lending money, which is what you’re doing when you continue to let your accounts receivable slide. So, here’s how to do add finance charges to your payment policies.

Multiple Issues Involved

Before you can start adding finance charges to tardy payments, you’ll need to let QuickBooks know how you want them handled. Open the Edit menu and select Preferences. Click the Finance Charge tab in the left vertical pane, then the Company Preferences tab in the window that opens. You’ll see something like this:

You’ll need to decide on your QuickBooks Finance Charge settings before you can begin to apply these late fees.

What Annual Interest Rate will you charge? Will there be a Minimum Finance Charge? Do you want to offer a Grace Period? If you’ve never worked with finance charges before, you might be at a loss as to how you should answer these questions. We can talk it through with you if you’d like, and make sure you’re selecting the correct Finance Charge Account. In our example, QuickBooks defaulted to 70100 – Other Income, which may be the best option for you.

The next question may require some research. Some jurisdictions don’t allow you to Assess finance charges on overdue finance charges; you’ll need to find out. If there’s any doubt, make sure that the box in front of that option isn’t checked.

QuickBooks also needs to know on what date it should start calculating finance charges: on the due date or invoice/billed date. Finally, check the box in front of Mark finance charge invoices “To be printed.” QuickBooks doesn’t include finance charges on invoices themselves; it bills them on separate invoices. Check this box if you want the software to print all of them as a batch.

When you’re done here, click OK.

Applying the Charges

By selecting an Assessment Date, you’re telling QuickBooks how many late days should be included in its finance charge calculations.

When you’re ready, open the Customers menu and select Assess Finance Charges. A window like the one in the image above will open.

QuickBooks, of course, performs all of the required calculations in the background. But it must first know what specific date you plan to actually assess the charges so that it can determine the number of late days that should be included. This may not be the current date, so be sure the Assessment Date is correct before proceeding.

All you have to do here is make sure there’s a check mark in front of every finance charge that should be invoiced (they’ll probably already be there, but you should verify this). If you send statements, clear the box in front of Mark Invoices “To be printed.” The finance charges will appear on the next statement.

When you’re satisfied, click Assess Charges.

Dispatching the Charges

Your finance charges have now been recorded in QuickBooks as individual invoices. When it’s time to print, open the File menu and select Print Forms | Invoices. You’ll see your numbered finance charge invoices displayed like this:

You can see your finance charge invoices when you go to print them.

(Of course, if you email invoices, you’d click on File | Send Forms.)

It’s a good idea to notify your customers before you start assessing finance charges. This will give them a chance to catch up, and no one will be surprised to see the extra invoices.

QuickBooks does the hefty lifting as far as calculations are concerned, but it’s very important that you set your finance charges up correctly. Customers will be annoyed by mistakes. And it’s much easier for us to help you get this tool set up right from the start than to have to go in and untangle errors. Let us know if you plan to start assessing finance charges, and we’ll help make it work for you.