New Business Direction LLCThe products and services your business sells make it unique. The same thing is true of how these items are set up in your accounting software. Whether you’re using QuickBooks Online or something else, getting your products and services set up right can impact the quality of the information you can get out of your accounting system.
Here are the types of items you can set up in most systems.
Inventory item
Inventory items are used in retail and wholesale businesses. They are physical items that the system can keep count of for you. You can purchase or make the items, and the associated cost is usually tracked when a shipping receipt or bill is entered. They are sold when a sale is made and an invoice or sales receipt is entered.
Transactions using inventory items impact a lot of accounts on both the balance sheet (cash, accounts payable, accounts receivable, and inventory) as well as the income statement (cost of goods sold, sales, and returns). The inventory item can be tied to default sales and purchase accounts in most systems.
Non-inventory item
QuickBooks offers a type of item called a non-inventory item. There’s a big difference in that non-inventory items do not have quantities associated with them. They don’t increase or decrease the inventory account. But they are able to be tied to default sales and purchase accounts like inventory items above.
Examples of non-inventory items include items purchased for a specific jobs, such as a contractor purchasing appliances for a custom home, items you sell but do not buy, such as an ebook or other digital product, and items you purchase but do not sell, such as shopping bags.
Service item
A service item is a special type of non-inventory item. There are no quantities, which makes sense because services are not physical items. They also are only connected to a sales account and not a purchase account.
With service items, you could set up service packages or hourly rates.
Bundle
A bundled item is a group of items that were designed to be sold together. For example, if you sell a gift basket of coffee products, you would bundle the items used to create the basket.
Assembly Item
An assembly item is a special type of inventory item where the quantity is tracked, but it differs from an inventory item in that it can’t be sold separately because it is a component and not a whole item. Assembly items are available in larger accounting and inventory apps, such as QuickBooks Enterprise, and are used in conjunction with a Bill of Materials or other build feature.
An example is a set of shelves. The assembly components are the individual shelves and the frame pieces that you may want to keep counts of. An inventory item that contains the shelves, the frames, and other parts is “built” from the assembly items. The nuts and bolts could be non-inventory items or assembly items, depending on whether you wan to keep count of them or not.
Sales Tax
Sales tax is a very special type of item used on an invoice or sales receipt to calculate sales tax due on the order. In many accounting systems, it’s usually kept in a separate list from the other product and service items. Rates can be entered for each sales tax jurisdiction.
Other
Some systems have an “other” category to capture items such as freight, shipping, handling, and other add-ons to the sale.
Tracking Profitability
Setting up the right type of products and services is critical to matching costs and revenue for accurate insights into gross margin. This section of your accounting system is also the one that’s most different from industry to industry and company to company. Be sure you get professional help from experts who know both the software and your industry for best results.
What the New Business Directions team is up to for the summer!
Rhonda – Rhonda is working away going through all her notes after attending Scaling New Heights, a premier unique educational experience for accounting professionals & small business advisors. For FUN, Rhonda is out hiking with Mr. Freckles the dog
Wayne – “I am working on my house and going to the lake or ocean as much as I can.” Wayne lives right here in the Mount Washington Valley and we often see him out and about around town!
Suzy – “I am out sailing, getting together with friends and family and enjoying the coast of Maine.” Suzy works remotely for New Business Directions and spends her summers on the coast of Maine and winters in Puerto Rico.
Britney – “I plan to work full-time and on my off time, I plan to do as much as possible with my family. Tom and I will do a lot of things with our four daughters. We plan to go to the beach a lot, amusement parks, hiking, camping, etc. We are hoping it will be a fun packed summer and we get lots of sun.”
Kendra – “I am working on enjoying every ounce of sunshine this summer has to offer with lots of trips to the beach and lake. I am spending most of my time swimming with my husband and my dog Olive as well!” Kendra lives in Freedom, NH and works in the Mount Washington Valley!
Trudi – “I am so enjoying the longer days and warmer temps!! Trying to work on many projects that have been put off over the long winter! Many of my Sunday afternoons are spent on Conway Lake with friends enjoying their boat and pot-luck cookouts! The best treat will be…. 10 days in Ogunquit … a family reunion and my daughters will be coming home!”
Kristen– Kristen is busy crushing the Art Scene in Portland, ME and traveling to different artist residencies in New England!
Fixed assets are special kind of assets in your business. They include land, buildings, equipment, furniture, and vehicles that your company owns. While we frequently look at expenses to cut costs, fixed asset management is another place we can look to find ways to better utilize our resources and, in some cases, improve our profits.
Fixed asset management is a discipline that requires keeping good records of the assets a company owns. In the case of furniture and equipment, many businesses place an asset tag on the item and assign it a number that goes in a spreadsheet where data is kept about the item. There are also software apps more sophisticated than spreadsheets that track all of the fixed assets for a company, including original cost, depreciation method and history, and tax treatment.
You never know how many of an item you might have until you record and count them. How many computers (and computer parts) do you have lying around your office? Extra desks and chairs? Maybe you even have extra office space or extra land.
Part of being a great entrepreneur is fully utilizing all the resources you have at your disposal. Where can you put to better use the extra assets you have? Could you sell the surplus items? Or donate them for a write-off? Do you have extra room to rent out to a tenant, earning rent?
Sometimes we’re so focused on operating the core of our business that we don’t see what else is a money maker right in front of us. In addition to focusing on income and expenses from operations, consider the resources you have in your fixed assets.
At the very least, consider developing a spreadsheet that tracks the major items your business owns. Or reach out to us, and we’ll help you develop a fixed assets schedule and tracking process for your business.
And if you do sell some of your fixed assets, be sure to reach out to us so we can help you record the transactions properly.
Whether you call it bacon, Benjamins, or big bucks, cash – having enough of it – is key to running your business. Here are five tips related to managing and getting the most out of your business cash.
1- All banks are not the same.
Choose your bank wisely, and don’t be afraid to switch if you need to. Banks know they have a “high switching cost,” which means it’s one big time-consuming hassle for customers to change banks.
A couple of things that are important when choosing banks (some of which we never knew to ask five years ago) include:
- Is your accountant able to connect your accounting system with free bank feeds, saving you hours and hours of accounting work?
- How automated is your bank? The more automated, the fewer errors, and the more likely the bank is to have competitive services, features and prices.
- What is their policy on holding large deposits?
- Do they offer ACH services?
- Does your payroll withdrawal need to be approved each pay period?
Accountants have experience with banks, so if you are in the market for a new one, feel free to reach out and ask us our opinion on the easiest bank to work with.
2- Keep the number of cash accounts to a functional minimum.
Certainly, you’ll need at least a business checking account, often a business savings account, a business PayPal account, and perhaps a petty cash fund. You may also want a separate account for payroll; a lot of companies do. But if you need more accounts, there should be a functional business reason to support them. That’s already a lot of accounts to reconcile and keep track of each month.
The same is true of credit card accounts. It’s the keep-it-simple approach.
3- Reconcile all of your cash accounts every month.
Keeping all of your cash accounts reconciled each month is a good idea. If a bank error, accounting mistake, or even fraud occurs, you can catch it and get it resolved more quickly than if you delay.
You’ll also have more accurate information about your balances and can move and manage your money better.
As you learn your balances each month, you can also move money around. Unless you spend a lot out of PayPal, plan to move that money to pay off debt or into your checking account on a regular basis.
4- Maintain a cushion in your checking account.
If your checking account hovers close to zero more often than not, you may be wasting precious time watching your bank balance instead of spending time to manage your business. If you make a small error, you may get hit with costly overdraft fees, making your cash situation even worse.
Instead, consider depositing a fixed amount, like a cushion, that you never spend. You won’t get overdraft fees, and you won’t have to watch your balance so closely. You may give up some interest income, but the time freed up and the reduced worry will be worth a few extra pennies.
5- Watch your liquidity.
Cash is to business as water is to people; we can’t live without it. Make sure you have enough to cover future obligations, and when possible, build up several months of reserve for emergencies. Anything that you can liquidate quickly, such as accounts receivable, can count toward this fund too.
Try these five cash flow tips to keep bringing home the bacon in your business.
Social security is one of those topics that seems to be minimized by statements like, “You can’t count on it,” and “By the time you reach retirement age, it won’t matter.” Those statements are not only incorrect; they contribute toward a lack of education on what’s possible.
Social security is still a large part of how most seniors will be able to fund their final 20 to 30 years of life. The options we take toward claiming the benefits that are rightly ours are often permanent and can affect our lives and our finances significantly, often by tens of thousands of dollars.
No matter your age today, here are three things you’ll want to dive deeper into when the time is right for you.
Claim date
For retirement purposes, most people will claim their social security payouts any time from age 62 to age 70. It’s your choice to decide when you make the claim and start your benefits. But, and it’s a very big but, the amount you get each month will vary depending on your claim date. Generally, the later you wait, the higher your payout will be.
The federal retirement age for social security purposes depends on when you were born and creeps up a little each year. If you were born in 1954, your retirement age is 66 years old. If you file your social security claim on your retirement age, you’ll get 100 percent of your benefit. If you claim at 70, you’ll get 132 percent of your benefit, which can make a huge difference in payout over your lifetime: tens of thousands of dollars of difference. If you claim early at age 62, you’ll get far less.
Taxability
Your social security income may be taxable if you earn income in the same years you are collecting social security and if you surpass an earnings threshold. This takes many seniors by surprise. There are ways to plan for this, and they are so specific to each family circumstance and often so complicated that software has been developed to calculate all of the situations.
Eligibility
The amount of your social security payment is affected by dozens of factors, including family members’ ages, how much they paid into social security, pensions, previous marriages, and disabilities, to name a few. If any of your family members are disabled, there are payments for that in some cases.
If you are divorced and were married for more than 10 years, you are eligible for spousal benefits. And if you are married, you are also eligible for spousal benefits. If your spouse has passed away, you are eligible for survival benefits, which could increase an existing payment if your spouse earned more than you did.
Social security is clearly a topic where you don’t know what you don’t know. It’s so complex at this point that most people should work with an advisor who has software that can show multiple claiming options that optimize their lifetime payout or meet their financial retirement goals. If we can help, please reach out.
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Tips & Tricks in QuickBooks®
