SMEs Finance Analysis in QuickBooks
Overview of QuickBooks
QuickBooks is an accounting and financial software used online and offline, such as desktops for small and micro business accounting enterprises. The software program helps businesses to manage and keep track of their financial revenues and expenditures (Daniel & Daniel, 2012). Moreover, QuickBooks Online was designed to work spontaneously, faster, and more straightforward for the user. Thus, the user interface is friendly and has few clicks and directed procedural in the desired task; hence can be used by one. Various financial activities can be done in QuickBooks, such as invoicing customers, billings, financial report generation, carryout out employee services, and prepare payment of taxes.
QuickBooks offers new users a learning environment through demos and provides a trial that is a free package for 30 days. However, after 30 days trial, the user can buy the software at 50% off regardless of the version you intend to purchase. For example, Simple Start, User Essentials, and User plus are provided in the platform (Beckman, 1995). Advantageously, The QuickBooks software allows for two more accounting into the platform subscribed to as an allowance.
Review of Revenue Activities
- Tracking sales
QuickBooks can be designed in a dashboard way to categorize reports and details of the information about the sales. These are created under the vendors’ window where purchases and sales made are balanced to the ledgers or balance sheets to give losses or profit. The products and their sales to the customers are kept in one folder called vendors center (Beckman, 1995). For example, when creating a report of sales to customers, the report shows the sale of the company to various customers per month, depending on the petitions by the accountant. This would be more informational when you want to review full-month sales, maybe to one of the customers.
QuickBooks gives a clear procedure to perform this in the online software. The use of filters will let you change the scope of the report depending on the need. Therefore, QuickBooks only filters what is needed by the company or the user and defines it as a report. Filters can be applied to exclude any transactions that are not required at the moment. This, therefore, implies that QuickBooks only restricts the sales to customers instructed to perform (Daniel & Daniel, 2012). However, filters can be applied as a combination or at a single time to perform a duty.
- Invoicing
Invoicing of payment in QuickBooks can be easily entered and created to select a customer, add date, and add invoice numbers and sales taxes. The chosen products and services are qualified, described, and rated using the GST codes (Lal & Kochikar, 2001).
The folder will help the sellers to describe the discounts offered to their customers and display the messages on the invoice receipts. Lastly, it is easier to email the invoice to customers through attachments. For example, when the company want to receive payment of the invoices that were sent to their customers, it would be flexible and accessible to use QuickBooks for receipts of payments.
Review of Expenditure Activities
- Expense on purchase and suppliers
There is a category in QuickBooks that respects the outward resources by the company and includes how expenses and supplies of goods have been prepared. Reports in this category are always sensitive to the company when giving out the cash to the suppliers and receiving the goods (Beckman, 1995). Therefore, the company must be sensitive to the goods received from the supplies, so as to ensure they are of good quality to entice customers. For example, the company can purchase goods using QuickBooks in numerous ways, such as; purchase items or by vendors.
For example, In Purchases by Vendor, QuickBooks give the information on the company’s total purchases from the intended vendors or purchases by item needed – QuickBooks gives suppliers the information about each item or service your company purchased (Beckman, 1995). Both are found in the purchase report menu, where the company can inquire by summarizing or detailing the request.
Windows of the expenses are easily used to select the account to which the payment can be deposited for purchased goods. Additionally, it is easier to pay petty cash by using credit cards. This payment details include the expense transaction of the payee, the reference number, the date, and tax inclusion. For example, when allocating expenses to the relevant account details in which products or services are paid, they must be mentioned in the ledger (Lal & Kochikar, 2001).
- Paying Bills
When working with QuickBooks, the company enters all the bills as they are occurring and also when there is a need to pay them at once. It is easier to pay bills like electricity and water supply, as entered in the QuickBooks data (Daniel & Daniel, 2012). Therefore, QuickBooks has steps and clear procedures to pay the bills. QuickBooks update the payments column as you select the bills to pay while using the billing amount as the default payment. At the same time, you can change the payments as you wish by typing the values in (Beckman, 1995). QuickBooks automatically calculates the bills as the amount lessens in the systems of vendors’ credits.
However, when the vendors’ credit exits, QuickBooks assumes the relationships and applies the outstanding vendors on credits, reducing the amount owned by a particular vendor. For example, when you have decided to pay bills, QuickBooks always give a simple procedure of expense to the supplier’s window, which navigates to create windows that will help you pay the bills (Daniel & Daniel, 2012). In the Supplier Centre bar, you will be directed to click on the money bar and locate suppliers and pay against the invoices.
Review of Other Accounting Activities
- Payroll and payment of employee
Running payroll in QuickBooks for paying the employees requires simple steps that will allow you to develop an easier way of handling payments. QuickBooks Online Payroll needs a basic set up that will require employees and employer information related to the business (McGill, 2003). The steps that include developing payroll in QuickBooks online are simple and clear procedures to follow. The employer needs to collect information about the bank accounts from employees and makes a tax payment scheme as the employee earns (Lal & Kochikar, 2001). The employer should include all the benefits and deductions, such as health insurance, retirement plan, etc.
These are some of the information that will be required when setting up payroll in QuickBooks online such as Bank Account detail, separate payroll account from the checking, employee compensation scheme and benefits, and other additional or deductions. For example, when setting up payroll online, the QuickBooks operator needs to click the employee’s tab, click on the payroll (Beckman, 1995). This will allow the user to check on dates and summarize payment details.
- Payment of Liabilities
Some employers have more than one payroll depending on their business sizes and numbers of employees; therefore, the company might require having a different payroll tax that will help filling schedules. However, this is most common in the time that the employer has lots of employees to minimize errors and allow room for compatibility in the systems (Daniel & Daniel, 2012). Therefore, companies are frequently advised to supplement payroll with manual back-up to help in counter check the business expenditure on labor in the future.
Contrary, there have been mistakes by new QuickBooks users when it comes to payroll taxes and other their liabilities in the Write Checks window, which is not always recommended. Caution, users are warned not to use Write Checks window to pay liabilities since it will cause much error in the accounting systems (Lal & Kochikar, 2001). As an alternative, QuickBooks users are encouraged to create payroll liabilities checks to pay for a liability. This can help the QuickBooks to accurately track the amount taxes and liabilities have been paid as well still owned. For example, developing a Liability Check has a clear procedural way to set us on the vendor’s window, which includes entering a name (Beckman, 1995). Then column will to type all are listed as Liability Check, and then it will be easier to check-in and pay bills.
QuickBooks Strengths & Weaknesses
- Strength
- It has automating payroll. Most users are glad to use payroll automation, which is always a tedious job for various human resource assistants, where taxes are generated automatically and limits errors during the use. Nevertheless, it also enhances the accessibility of the computing systems by users at anyplace (Lal & Kochikar, 2001). Thereby providing them with a convenient and confidently secured system.
- QuickBooks Online allows a combination of banks, credit cards, and more financial software to work in a single unit. Most desirably, QuickBooks help to track expenses incurred by the company. Therefore, it can generalize gradually depending on the users’ requirements and create a broad expense nature and narrow it to specifics benefits. Additionally, free invoicing can be made to users since it has a better feature of transactions (Lal & Kochikar, 2001).
- Weakness
- It has limited management systems. QuickBooks tends to cause complications when addressing management systems concerns, which can only be solved with third-party applications and software. Another complication occurs when users find it distressing to use online accounting, since the additional time it provides result to incorrect values and due dates, that are automatically invoiced (Daniel & Daniel, 2012). Sometimes, when the category is changed, the invoices department is forced to restart. Furthermore, QuickBooks users experience syncing challenges with credit cards transacting.
- Reports in QuickBooks are so limited. Most customers are known to have limited reporting space that can customize their charts. Moreover, cleaning up of out-of-date report is time-consuming, as transferring it to excel and PDF format is somehow inconsistent and unreliable. Some users also complain that QuickBooks is difficult to learn as the simpler interface is not matching the rich set-up features (J. S. Beckman, 1995). Therefore, users find it complex and frustrating, when a single mistake occurs.
Conclusion
QuickBooks tackle the requirements of several small and microbusiness (SMEs) that help them account for their revenues and expenditures systematically. Similarly, like other software, QuickBooks has its benefits and challenges. Largely, it is a decent online software that requires training and skills to work efficiently without accumulating errors. I preferred QuickBooks because it’s one of the most popular accounting system that is easily manageable and inexpensive. After this assignment, I have gained more insight about different AIS software, and overall how to utilize this software to effectively manage and process financial transactions from the revenue to the expenditure, and accounting cycles. Today, I can assess a software that will provide great result for my firm in meeting all the needed requirements.
APPENDIX:
Figure 1: Layout of QuickBooks Home Page
References
Beckman, J. S. (1995). Chapter 12 – Accounting & Finance Software (J. S. B. T.-T. S. B. C. G. Beckman (ed.); pp. 133–153). Digital Press. https://doi.org/https://doi.org/10.1016/B978-1-55558-136-7.50016-7
Daniel, L. E., & Daniel, L. E. (2012). Chapter 40 – Accounting Systems and Financial Software (L. E. Daniel & L. E. B. T.-D. F. for L. P. Daniel (eds.); pp. 295–300). Syngress. https://doi.org/https://doi.org/10.1016/B978-1-59749-643-8.00040-7
Lal, R., & Kochikar, P. (2001). Article not available electronically: Intuit Quickbooks, Rajiv Lal, Purnima Kochikar. Journal of Interactive Marketing, 15(4), 71–84. https://doi.org/https://doi.org/10.1002/dir.1024
McGill, J. K. (2003). Financial management: five steps to producing effective financial statements. American Journal of Orthodontics and Dentofacial Orthopedics, 124(6), 611–612. https://doi.org/https://doi.org/10.1016/j.ajodo.2003.09.007
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