An Introduction to Quickbooks Online Advanced
Choosing the right accounting software is essential to your business’s success. Research shows that nearly half of all small- and medium-sized businesses spend over 40 hours a year on accounting. With the right software, you’ll be able to record and track financial transactions more quickly and accurately. Intuit, however, offers several types of accounting software, one of which being Quickbooks Online Advanced. If you’re thinking about using it, there are a few things you should know about Quickbooks Online Advanced and how it works.
What Is Quickbooks Online Advanced?
Quickbooks Online Advanced is the premium version of Intuit’s cloud-based accounting software. There are two primary types of Quickbooks software: desktop and cloud. Desktop refers to Quickbooks Desktop, which is installed and operated locally. Cloud refers to Quickbooks Online, which is installed and operated on the cloud. Quickbooks Online Advanced is the premium version of the latter type.
Features in Quickbooks Online Advanced
Being that it’s the premium version of Quickbooks Online, it shouldn’t come as a surprise to learn that Quickbooks Online Advanced is packed with features. It offers more features than the standard version of Quickbooks Cloud.
Quickbooks Online Advanced offers batch invoicing, for example. With batch invoicing, you can create and send multiple invoices to groups of customers in batches. It’s a faster way to facilitate your business’s invoices. If your business has a lot of customers — and your business uses invoices to collect payments — you may want to use this feature in Quickbooks Online Advanced. Batch invoicing eliminates the need for creating and sending invoices individually. Intuit, in fact, claims that batch invoicing is 37% faster than traditional invoicing.
Quickbooks Online Advanced also comes with premium support. You’ll have 24-hour access to Intuit’s support team. If you encounter a problem — or if you simply need an answer to a question — you can reach out to Intuit’s support team by phone or email. You can even connect your Quickbooks Online Advanced account to your Google account. In doing so, you’ll be able to export your business’s accounting data to Google Sheets.
Other features in Quickbooks Advanced include the following:
- 1099 preparation
- Inventory tracking
- Location tracking
- Payment scheduling
- Profitability tracking
- Class tracking
- Workflow automation
- Company data restoration
- Custom chart building
- Role-based access customization
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An Introduction to Equity Financing and How It Works
You can’t expect to keep your business afloat without financing. All businesses need money to facilitate their operations. Depending on the type of business you run, you may need to purchase supplies, equipment, insurance, advertising services and more. While you can always obtain a loan from a bank, another financing method to consider is equity financing. In this post, you’ll learn more about this alternative financing method and how it works.
What Is Equity Financing?
Equity financing is a fundraising process that involves the sale of equity to an investor or group of investors. Investors are different than lenders. Lenders offer loans that must be paid back — typically with interest. Investors, conversely, offer to purchase equity in a business. If you need additional money to keep your business afloat, you can reach out to an investor about the possibility of equity financing.
How It Works
Although it sounds complex, equity financing is quite simple. It revolves around the sale of stock shares to an investor or group of investors. As a business owner, you probably own most if not all equity in your business. Equity is reflected in stock shares. You can sell these stock shares to an investor. The investor will benefit from receiving equity in your business, whereas you’ll obtain capital that you can use to finance your business. That’s essentially how equity financing works. There’s no obligation to repay the money from equity financing; you just have to sell equity in your business.
Pros and Cons of Equity Financing
By using equity financing, you can obtain money very quickly. It’s typically faster than traditional financing methods, including loans. You can sell some of your business’s equity to an investor, and after the transaction has closed, you’ll have money to use for business-related purposes.
You don’t have to worry about credit problems with equity financing. Unlike with loans, equity financing doesn’t require good credit. Rather, you can use it as a financing solution for your business with bad credit or even no credit.
On the other hand, you’ll have to give up equity in your business to the investor or investors from which you can secure equity financing. Some business owners are unwilling to give up equity. They want to “own” all of their business, so they avoid equity financing.
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Fiscal vs Calendar Year for Accounting: What’s the Difference?
When planning your business’s tax returns, one of the decisions you’ll have to make is whether to use fiscal or calendar year accounting. In other words, do you intend to report income — as well as claim deductions — for the last fiscal year or the last calendar year? Some businesses use fiscal year accounting, whereas others use calendar year accounting. To determine which method is right for your business, you’ll need to learn the differences between them.
What Is a Calendar Year?
Calendar year accounting is the most common method. A calendar year is an annual period that runs from January 1 to December 31. It consists of 12 consecutive months. A calendar year begins on New Year’s day and ends on New Year’s Eve.
What Is a Fiscal Year?
The Internal Revenue Service (IRS) doesn’t require businesses to use calendar year accounting. It allows businesses to choose between calendar year or fiscal year accounting. A fiscal year is simply a 12-month-long period. Unlike a calendar year, though, it doesn’t begin on January 1, nor does it end on December 31. By definition, a fiscal year can’t begin on January 1 and can’t end on December 31. It must have a different starting date and a different closing date.
Choosing Between Calendar and Fiscal Year Accounting
You can typically use either calendar year or fiscal year accounting. Only a few types of businesses are required to use calendar year accounting. If your business doesn’t maintain books, for instance, you’ll have to use calendar year accounting. Alternatively, if your business operates as a sole proprietorship, you’ll have to use calendar year accounting. For most other cases, however, you can choose between calendar year or fiscal year accounting.
Calendar year accounting is the easiest of the two methods. You won’t have to worry about assigning — as well as using — a fiscal year. With calendar year accounting, you’ll report income and claim deductions for your business based on standard annual periods. Many businesses use calendar year accounting simply because it’s easy.
There are still reasons to consider fiscal year accounting. It can defer some of your business’s taxes, for instance. With fiscal year accounting, you’ll have more time to settle your business’s tax liabilities. Fiscal year accounting is also ideal for seasonal businesses. If your business generates all or most of its sales revenue during a specific time of the year, you may want to use fiscal year accounting.
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A Comparison of the 4 Types of Business-Related Expenses
In the world of business, you have to spend money to make money. All businesses have expenses. No matter what type of business you own and operate, you’ll have to buy various products or services. Known as expenses, they are essential to your business’s operations. There are different types of expenses, however. In this post, you’ll discover the four primary types of expenses.
#1) Fixed
Fixed expenses are those that stay the same. Your business may incur them on monthly basis. From month to month, though, fixed expenses will remain the same. Common examples of fixed expenses include insurance, interest on loans and certain utilities. An expense is considered “fixed” if it doesn’t change.
#2) Variable
Variable expenses, on the other hand, are those that do change. Variable expenses are intrinsically associated with production levels. The more products your business produces — or sells for that matter — the higher its variable expenses will be. You may have to pay for additional labor, raw materials, packaging materials, etc., all of which are variable expenses. Variable expenses are distinguished from fixed expenses because they fluctuate. Fixed expenses remain the same, whereas variable expenses change according to your business’s production levels.
#3) Accrued
There are also accrued expenses. Accrued expenses can be either fixed or variable. The term “accrued” simply refers to any expense that’s recorded in your business’s accounting books before your business pays it. They are part of the accrual accounting method. With the accrual accounting method, you’ll record expenses after receiving an invoice or bill. Accrued expenses are those that are recorded before your business pays them. Your business may receive an invoice, in which case you can record it as an accrued expense in your business’s books.
#4) Operational
Finally, operational expenses are those that play a direct role in your business’s operations. All businesses have operational expenses. Operational expenses consist of products and services that businesses need to perform their operations. Like with accrued expenses, they can be either fixed or variable.
There are four primary types of business-related expenses, including fixed, variable, accrued and operational. Fixed expenses are characterized by their persistent and static pricing. Variable expenses are characterized by their ability to change or fluctuate. Accrued expenses are characterized by the use of the accrual accounting method. Operational expenses are those that are essential to your business’s operations.
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Why Liquidity Is Important for Your Business
What’s the liquidity of your business’s assets? All businesses have assets. Assets are items of monetary value. They can be tangible or intangible. Regardless, if your business owns something of value, it’s considered an asset. Assets with high liquidity, however, are typically more valuable than those with low liquidity. To learn more about liquidity and why it’s important for your business, keep reading.
What Is Liquidity?
The term “liquidity” refers to the ease at which you can convert a given asset into cash. Most assets can be sold. When you sell an asset, you’ll convert it into cash. Assets with low liquidity are harder to convert — and often take longer to convert — into cash than those with high liquidity.
Secure Loans
Liquidity is important because it can affect your ability to secure business loans. Most banks and other financial lenders will look at your business’s liquidity ratio during the application process. When you apply for a loan, the bank or lender will analyze your business’ liquidity ratio to determine its overall financial health. A high liquidity ratio indicates that your business is capable of paying back borrowed money. A low liquidity ratio, on the other hand, indicates that your business may struggle to pay back borrowed money. To secure loans, you should focus on improving your business’s liquidity ratio.
Cover Unexpected Expenses
As a business owner, you’ll probably encounter expenses that you didn’t originally plan for. Unexpected expenses come with the territory when operating a commercial enterprise. Maybe you need to purchase a new piece of equipment, or perhaps you need to take out a new loan to finance your business. Regardless, unexpected expenses can and do occur in the world of business. Fortunately, a high liquidity ratio can help your business cover these expenses. When an unexpected expense arises, you can easily and quickly convert assets into cash. Using this cash, you can then pay off the expense.
Increase Cash Flow
With a high liquidity ratio, you can increase your business’s cash flow on the fly. Converting an asset into cash will result in a higher cash flow. Your business will have more cash on hand to cover both expected and unexpected expenses. A low liquidity ratio, conversely, can harm your business’s cash flow. You may struggle to convert assets into cash, resulting in a lower cash flow.
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Write-Off vs Write-Down in Accounting: What’s the Difference?
The terms “write-off” and “write-down” are often interchangeably to describe the devaluation of an asset. Regardless of what type of business you own, chances are it has assets. Nearly all businesses have at least some assets. Assets are things of monetary value, such as cash, equipment, materials, real property and even patents or other forms of intellectual property.
While both write-offs and write-downs do, in fact, involve lowering the value of an asset, they aren’t necessarily the same. Write-offs and write-downs are intended for different purposes. When recording
What Is a Write-Off?
A write-off is the complete devaluation of an asset. When you write-off an asset, you are claiming that it no longer holds any value to your business. If a piece of equipment is broken or obsolete, for instance, you may want to declare it as a write-off. You can write-off the asset by lowering its value to $0 in your business’s books.
You can also claim write-offs such as this as a tax deduction. The Internal Revenue Service (IRS) allows businesses, as well as freelancers, to deduct the cost of write-offs from their taxes.
What Is a Write-Down?
A write-down, on the other hand, is the partial devaluation of an asset. Assets can depreciate in value. In some cases, they may lose all of their original value in a short period. In other cases, devaluation occurs more slowly. A write-down is an accounting process in which you record an asset’s value as being lowering than its original value. The asset still has some value, but it’s less than the original value from when you initially purchased or acquired the asset.
Differences Between Write-Offs and Write-Downs
The main difference between write-offs and write-downs is that the former is the complete devaluation of an asset, whereas the latter is the partial devaluation of an asset. With a write-off, you are claiming that one of your business’s assets is essentially worthless. With a write-down, you are claiming that an asset has lost some but not all of its original value.
There are also nuances regarding the tax implications of write-offs and write-downs. Write-offs offer the greatest tax benefits. When you write-off an asset, you’ll lower your business’s tax liabilities for the year in which you claim it. Write-downs can lower your business’s tax liabilities as well, but they don’t have the same positive impact because they still recognize the asset as having some value.
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Pros and Cons of the Double-Entry Bookkeeping Method
Double-entry is a bookkeeping method that involves the use of a credit and a debit for each financial transaction. It’s designed to track a business’s money more closely. When using the double-entry bookkeeping method, you’ll record a credit and a debit for each of your business’s financial transactions.
If your business sells a product, for example, its liquid cash account will increase, whereas your business’s inventory account will decrease. The liquid cash account will receive a credit, while the inventory account will receive a debit. If your business buys a piece of equipment, conversely, its cash account will receive a debit and its asset account will receive a credit. Considering that many businesses use the single-entry bookkeeping method, you might be wondering what pros and cons the double-entry bookkeeping method offers.
Pros of Double-Entry Bookkeeping
Using the double-entry bookkeeping method creates a more accurate view of your business’s financial health. It’s considered a complete form of bookkeeping in the sense that it takes into account both credits and debits when recording financial transactions.
All financial transactions have a credit and a debit. Unless you record both of them, you won’t have a complete and accurate depiction of your business’s financial health. Using the same example from above, if you sell a product but only record it as a credit, your business’s inventory account won’t be correct. Selling a product will reduce your business’s inventory account, so you need to record a debit for it as well. The double-entry bookkeeping method requires the use of both a credit and a debit for each financial transaction, including product sales.
Cons of Double-Entry Bookkeeping
On the other hand, the double-entry bookkeeping method requires more work than its single-entry counterpart. It’s essentially twice the work of the single-entry bookkeeping method. For every financial transaction, you’ll have to record both a credit and a debit. That’s the basis on which the double-entry bookkeeping method works. If you run a small business, such as a sole proprietorship, you may discover that it’s not worth the additional time and energy.
Because it requires more work, the double-entry bookkeeping method is prone to more errors than its single-entry counterpart. If a transaction doesn’t have both a credit and a debit, the trial balance won’t be correct. As a result, you’ll have to go back and add the missing credit or debit.
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What Is the Realization Principle in Accounting?
Have you heard of the realization principle? It’s a common concept used in accounting. Many businesses use it to determine when revenue has been earned. To learn more about the realization principle and how it’s used in accounting, keep reading.
Overview of the Realization Principle
The realization principle is an accounting concept that involves the recognition — or the realization — of revenue when purchased products are delivered or when purchased services are completed. In other words, businesses don’t consider revenue to be earned until one of these actions has occurred.
A customer may pay for a product or service. Until the product has been delivered or the service has been completed, though, the business doesn’t consider the revenue to be earned. With the realization principle, revenue is only earned after the delivery of a product or the completion of a service.
Benefits of Using the Realization Principle
Using the realization principle offers several benefits. The main benefit is healthier financial records. It offers a clearer and more accurate representation of your business’s finances.
Just because a customer pays you for a product or a service, your business may not generate from it. The product could get lost or damaged during shipping. Alternatively, the customer may cancel the service before you have a chance to complete it. Regardless, there are instances in which your business may not generate revenue from a purchased product or service. If you recognize revenue as earned prematurely, it will throw off your business’s financial records. The realization principle offers a solution. This concept ensures that your business doesn’t recognize revenue as earned until the delivery of a product or the completion of a service.
Tips on How to Use the Realization Principle
There are a few things you should know when using the realization principle. For starters, you must track the dates when products are delivered and services are completed. After all, this is the basis on which the realization principle works. You’ll have to track the dates when products are delivered and services are completed to effectively use the realization principle in your business’s accounting strategy.
The realization principle works on a simple concept: revenue isn’t considered earned until the purchased product has been delivered or the purchased service has been completed. It’s designed to provide a better overall picture of your business’s finances by showing the true amount of revenue your business has earned.
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Why You Should Be Creating Profit and Loss Statements
As a business owner, you’ll need to create financial documents on a regular basis. Among the most important financial documents at your disposal is a profit and loss statement. Available in Quickbooks, it offers an overview of your business’s financial health. Why should you be creating profit and loss statements exactly?
What Is a Profit and Loss Statement?
Also known as an income statement, a profit and loss statement is a financial document consisting of your business’s revenue and expenses for a given period. Most businesses create them on a monthly basis. At the beginning of a new month, they’ll create a profit and loss statement for the previous month. This financial document shows how much money a business generated during this period as well as how much money a business spent during this same period.
Identify Unnecessary Expenses
With a profit and loss statement, you can identify unnecessary expenses incurred by your business. Maybe you subscribed to a second landline telephone that your business doesn’t use, or perhaps you’re overpaying for an office cleaning service. Regardless, a profit and loss report will show these and all other expenses incurred by your business. You can then review your business’s expenses to determine whether or not they are necessary. If you find an unnecessary expense, you can cancel it so that it doesn’t hurt your business’s profits.
Win Over Investors
If you’re trying to secure financing from investors, you’ll need to create profit and loss statements. Investors will look closely at your business’s expenses and revenue. After all, they want to know that your business is capable of growing and increasing its profits. With a profit and loss statement, you can show investors exactly how much your business earns in revenue as well as how much it pays in expenses. Investors will then feel more confident financing your business.
It’s Easy
Creating profit and loss statements is easier than you may think. You don’t need any formal training in accounting, nor do you need to hire a professional accountant. As long as you have Quickbooks, you can run a profit and loss statement. In Quickbooks, there’s an option to run a profit and loss statement. Using Quickbooks, you can quickly create a profit and loss statement for any period. As a result, you don’t have to manually calculate your business’s income and expenses.
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What Are Accrued Expenses in Accounting?
Accrued expenses are common when running a business. Whether your business operates in the B2B or B2C sector, it will probably face accrued expenses. As you buy products or services that are essential to your business’s operations, these expenses will generally increase. What are accrued expenses in accounting exactly, and how do they differ from other expenses?
Overview of Accrued Expenses
Also known as accrued liabilities, accrued expenses are costs incurred by your business that have been recorded but not satisfied. Not all business-related purchases require upfront payment. If you’re buying a wholesale shipment of products to resell, for instance, the vendor may simply send you an invoice. Vendors often have strong relationships with their clients. As a result, many of them allow their clients to buy products or services on credit. When you make a purchase for your business, an accrued expense is created until you pay for it.
Accrued expenses are considered liabilities because they haven’t been satisfied. Using the same example from above, an accrued expense is created if you buy products from a vendor. You must wait for the vendor to send you an invoice, after which you must pay the total amount denoted on the invoice.
Accrued Expenses vs Accounts Payable: What’s the Difference?
While they are both considered liabilities, accrued expenses and accounts payable aren’t the same. Basically, accounts payable are short-term liabilities that require payment in the near future. Accrued expenses, on the other hand, are usually long-term liabilities that haven’t been recorded. Payment dates can vary, but most accrued expenses are considered long-term liabilities.
Don’t Forget to Record Accrued Expenses
Some business owners neglect to record accrued expenses. They assume that an expense shouldn’t be recorded until it is paid. Of course, this is a bad habit that can adversely affect your business’s financial records. If you don’t record an accrued expense, you won’t be able to fully realize your business’s true liabilities and, therefore, its cash flow.
When your business generates an accrued expense, its liabilities will increase. An accrued expense is a liability, and like all liabilities, you must pay them at a later date. As a result, it’s important to record your business’s accrued expenses. Regardless of its total cost, accrued expenses can affect your business’s cash flow. By recording them, you’ll have a clearer and more accurate representation of your business’s financial health.
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