QuickBooks Setup for Success

It’s the start of a new year and for many, this is the time to make changes to your QuickBooks before your season gets busy.

There are 4 major areas I consider when working with contractor clients:

  1. Software – So much depends on your setup and what setup you can do depends on your software! So, is your version of QuickBooks a good fit for your company?  Regardless of how long you’ve been in QuickBooks, this is always good to review.  This will give you a start:
    1. Start with creating 2 lists – what you need and what you want. Realize that you may not get everything you want, so you might have to rank some features. Also, keep in mind that QuickBooks is an accounting package so it won’t be the best for CRM, scheduling and time tracking.  Here are several questions to help guide you:
    2. How many need access? This may quickly narrow your options
    3. Who needs to be able to do what? For instance, if you just want someone to track their time, you might want a mobile time tracking product that integrates with QuickBooks instead of giving them access to QuickBooks.
    4. Do you need to job cost? The desktop version of QuickBooks still beats the online version Online when it comes to job costing!  (Intuit has not made QB Online’s Projects available to most add-on products yet, you can’t job cost labor, and no job cost reports yet.)
    5. Are you currently using a 3rd party product or considering one? If so, which versions of QuickBooks do they integrate with?  Some will integrate with both but not with all the same features.  And some will integrate with desktop only or online only, so you need to know!
    6. If you want mobile access, what you do you want to be able to do when you’re not in the office? Sometimes an add-on product might be a better option. 
    7. For those of you in Pro Plus, or Premier Plus or Enterprise, let me know so we can price your current plan and see if there’s a plan that can save you money and/or give you more for your money. When you call Intuit directly, you won’t always get someone who has your best interests at heart – they have sales quotas & goals ;-)
    8. A couple resources that might help you more:
      • My feature comparison chart – this makes it easier to compare
      • An article I wrote comparing QuickBooks Desktop (Pro/Premier/Enterprise) with QuickBooks Online. In spite of the rumors, Intuit is not giving up on the desktop versions of QuickBooks – they are still the bigger money makers for them.
      • Videos showing the differences between the products
    9. And if you want to make a change, let us know. There are promotions we can’t always advertise, and there are often life-long discounts we can get for you versus a short-term discount followed by full price later.

  2. Setup – I often see problems in the setup, which can explain why you can’t get the reporting or information you want. So here are some major areas to consider:
    1. Classes – Classes are unique to QuickBooks. I think of Classes as way to do side-by-side comparisons of Profit Centers. You can see a sample report below.  For contractors, that’s usually your divisions.   Here are some examples to get the wheels turning.
    2. Landscapers, often use maintenance, Installs, Irrigation, Lighting, and Snow (or some variation).
    3. Painters might do interior and exterior work and/or commercial vs residential (I can create a P & L for Customer Type if you don’t want to use classes).
      • Construction might want New construction, remodel – maybe even historic, if that’s a specialty of yours.
      • For those of you with multiple offices, then you might want to use location – especially if those locations are in different sates
      • Other ideas: Sales rep, partner, crew, program….
      • You can even have sub-classes; just keep in mind that they don’t collapse (i.e. the P & L by Class won’t just show the “parent” classes when you “collapse the report).
    1. Chart of Accounts – Those not using Classes are usually doing it in their Chart of Accounts. I used to start here but I found that once we setup Classes, we were going back & changing the Chart of Accounts, so now Chart of Accounts is 2nd ;-). My main strong recommendation for all you contractors:
      • Your job costs belong in the Cost of Goods section. The sample service file in QuickBooks is a great idea of what NOT to do!! My rule of thumb – if you had to spend that money for that job (e.g. buy materials, pay for labor, rent equipment, etc.) then that’s a direct cost.  Some of you have all your payroll in payroll expenses – you’ll want to separate office staff from field staff since that’s such a large component of your job costs. You’ll like the separation when looking at your Profit & Loss reports as is the example above.  Also note in the above example, they did NOT pull out field labor as I recommend (tsk tsk!).  Knowing your Gross Profit after job costs will help you know what you need to cover overhead plus have a profit!  It also makes estimating easier because then you’ll know what % profit margin you need to attain from the job in order to cover your overhead and still yield a nice profit.
    2. Items – The key to job costing in QuickBooks is in your Items – NOT your Chart of Accounts!
      • Decide what Items you need. My rule of thumb for Items (Products & Services) is (1) What do your customers need to see and (2) What do you want to see in your job cost reports
      • For contractors, if you do T & M invoicing (Time & Materials), you want your Items to have a cost side as well as an income side. That way you can see what you paid for the different materials and subs as well as what you invoiced.
    3. Jobs – Many of you provide more than one service for your customer and there is often crossover in time period. So if you want to see the job costs for one job, you need to be able to specify the job. In some cases, I just see a list of customers, so it’s hard to pull out the costs for a specific job.   If these are one-time customers, 1 short job or 1 service, then you may not need jobs, but most contractors I work with need to specify jobs.
    4. Payroll There are many different options for payroll. If you want job costed payroll, still the best options are Enhanced or Assisted Payroll with Intuit and I can get your pricing discounted as well as help explain how they work and which might be your best option.  Feel free to reach out directly to our payroll specialist, Amber Burke:  520-848-5649 or  Amber_Burke@intuit.com
      • If you want to outsource your payroll, there are a couple different “tricks” to get the labor costs – let me know if you need to know.

  3. Work Flow – This is another big area where I hear complaints and work to help my clients streamline. You usually know where the work slows to a crawl – could be time tracking, payroll, invoicing, payables, tracking cash flow or getting job cost data or some other type of reporting.  Poor workflow adds to your overhead and stress, so while it’s not a hard cost like field staff, it definitely affects your bottom line. It’s good to list the areas that are a problem – then you can begin to look at solutions. 

  4. Reports – This is often the issue that prompts changes. What reports are you unable to get, and/or doing them in Excel? Which reports take too long to get? What information would you like to see in reports but are not?  From there, we can begin to address the issue.

If you would like to make a change in your QuickBooks or want help in addressing your setup, please contact our office. Now’s the time to do it before you get really busy!

Here’s to a year that will provide better data and smoother and faster workflow! 

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QuickBooks Year-end Checklist

There’s lots that needs to be done at the end of the year to get your books ready for taxes. Here’s a list of to help you; those who have been diligent about bookkeeping will find this list will be shorter.

  • Order Forms: If you haven’t done so already, get the forms you need like your W-2s, W-3s, 1099s, and 1096s.  Even if you e-file with Uncle Sam, you still have employees and vendors needing documents. 
  • RECONCILE !! I can’t tell you how big this step is.  This is a good step to verify that you have tracked all money into and out of the company and will help you find missed entries, duplicates, checks not cashed, and more.  You will save money with your accountant if they don’t have to reconcile.   And DO NOT simply rely on Bank Feeds or go into the register and check off transactions. I promise that using the reconcile feature inside a QuickBooks will not only be faster but more accurate. Accounts to reconcile would include
    • Bank and credit card(s)
    • Loan accounts- Remember, interest is an expense – it doesn’t reduce your loan balance, so do review; your bank may have that online as well as sending out a statement.
    • Other balance sheet accounts, such as employee advances, prepaid insurance, customer prepayments, etc.
  • List of loans and terms – Make a list any new loans, lines of credits, etc. that you took out this year. Your accountant may want to see a copy of the terms and interest rate.
  • List of equipment purchased – Your accountant will want to know of any equipment, vehicles, furniture etc. that you purchased during the year. If the purchase is large enough, rather than expense the purchase in full, your accountant will depreciate the purchase over a few years. Ask your accountant what size purchase – frequently it’s been purchases of 500 or 1000, but with tax law changes their answer may be different.  Usually your accountant will want a copy of the receipt or purchase document with the price.  In the case of a vehicle where you had a trade-in value and/or down payment, then they would want that information as well.
    • FYI – for future reference there is a Fixed Asset list where you can keep lots of pertinent information. you can click on List, Fixed Asset List.  In the future, when you purchase a fixed asset, you can use an Item (instead of account) and select Fixed Asset so you can put in the detail.
  • Employees
    • Unemployment – unemployment rates frequently change each year in part based on how many employees in any claim with your company. The state of Maryland usually sends you a letter in November with the number to call to see what your new rate will be. If you process payroll yourself in QuickBooks, look to see if your version will let you enter the new rates for the upcoming year – new versions do. If you need help entering the new rates, call us for help.
    • Employee withholding – it’s good to check whether employees’ withholding will be the same or if they want to revise it, so have them do a new Federal W-4 and state withholding forms (sometimes they decide after their taxes are done!)
    • Before you print out your w-2’s,
      • Run the Payroll Summary Report and compare to the W-2’s
        • Besides wage and taxes, you may also need to review fringe benefits that need to be on a W-2
      • 1099 Vendors –Review your list of vendors. To get your list, Click on Vendors, Print 1099’s
        • Be sure that all who need to get a 1099 are marked as 1099 eligible. When in doubt either call them, ask your accountant or make them 1099-eligible. Best to err on the safe side!
      • Confirm that contact information is correct, ask for tax ID or have them send a W-9.
        • Some companies make it a policy to obtain a W-9 before they ever pay a vendor – that’s incentive to get the form returned to you!!
        • Here’s the link to the IRS website to get the W-9 – they’re listed right at the top (left side)
      • If you need to update several, the Add/Edit Multiple Lists is a great tool for updating this information. Simply click on Customize Columns and select the Tax ID field (and any others you might want); remove those you don’t need at this time.  This does NOT remove any data from your QuickBooks; this is simply a feature to simplify editing.

  • Inventory – If you have inventory do a physical inventory (Inventory > Physical Inventory Worksheet) and then compare with what QuickBooks says.
    • I also recommend you do NOT print out the Quantity On Hand column so no one can get lazy and use the numbers in the system
    • For those with large inventories, you may want to consider “cycle” counting – i.e. you systematically do counts on just some of your inventory checks (daily, weekly, monthly – whatever works), but this way it doesn’t get away from you
  • QuickBooks Version – Intuit supports 3 years, so in May they will “sunset” QuickBooks 2016. Doesn’t mean 2016 won’t work, but if you download bank transactions, use payroll or email reports, invoices, or statements, those features will no longer work. 
    • Here’s a link to my article discussing the new 2019 QuickBooks products.
    • This page has 2 videos highlighting the differences between the different versions,
    • This page has a comparison chart of the different QuickBooks versions; we can also provide demos if you need
    • You can also download a 30-day trial of Enterprise here.
    • I’ve mentioned before but I’ll mention it again ;),
      • For those of you using Enhanced Payroll and paying for direct deposit fees, Enterprise Gold is often a better deal – even if you’re in QuickBooks Pro or Premier. 
      • Those of you on Intuit’s “older” Enterprise plan, you may find the subscription is a better deal – especially since Intuit is raising their prices on the older plans – substantially. We can help you navigate your options so you can get the plan that’s best for you –whether that’s staying with your current plan or changing.
    • For those of you considering moving to the online version but want job costing, check out this article.
    • If you would like to upgrade, let us know – we can help you get a good price and assist with the upgrade if you need.
      • Review your QuickBooks setup. This is a great time to make changes in your QuickBooks setup.  Even I do this!  Perhaps you want to use Classes or change your Classes.  Or maybe the Chart of Accounts needs some cleaning up.  And often the Items list can use some (or lots!!) of clean-up (including mine!).   We’ll be happy to help you review, make recommendations, and even give you tips to make it go faster!
    • Other Services – Calendar or fiscal year-end can be a good time to review other services – whether you need them and or want to change them.
  • Customer payments and credit cards – If you would like to process checks in QuickBooks instead of having to go to the bank, or want customers to pay you online or have customers asking you to accept credit cards, Intuit Payments is definitely worth reviewing – they have simplified and lowered their rates.   I can promise that Intuit is NOT going to give away their integration with QuickBooks to another provider.  With no double-entry, the ease of reconciliation and the time saved, it’s often a smart decision.  Let us know if you are interested or reach out to George Madenian – George_Madenian@intuit.com 818-436-8158!

Payroll – This is a great time of year to review your payroll options.  This page has a simple chart comparing the payroll products.  Let us know if you have questions. Keep in mind we can get you discounted pricing.  Don’t just look at tangible costs. Also consider job/project costing (if that’s an issue), amount of time to handle payroll tasks, risk (of under payments or missed payments) or fraud (I’ve known of bookkeepers and even a payroll company).   For those who don’t want the hassle of the payroll tax filings and w-2’s, there are Intuit products that will do that for you, but do contact us so you can get discounted pricing or feel free to reach out directly to our payroll specialist, Amber Burke:  520-848-5649 or  Amber_Burke@intuit.com

  • Adjustments to make to your books. While some adjustments are best left for your accountant, there are a few that you can do or at least get the information pulled together for your account.
  • Bonuses – It’s great to give bonuses to employees at year-end, but it’s not so great to forget about the tax part of it. Bonus checks should always be run through payroll, but often are not, which requires an adjustment after the fact.
  • Work in Process– For those of you who have projects that span over a few months and need to track work in process there are usually two methods – one simply for year-end for tax purposes and the other method is done monthly; typically only my larger commercial clients track monthly. If you use QuickBooks Enterprise, you’ll love the WIP Summary Report. Contact our office if you want help with that.
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Get A Jumpstart on 1099’s for Contractors

In a little over a month, it will be 2019 and time for year-end accounting chores.   One of those chores is getting your 1099s out, and now is a good time to tie up loose ends so the year-end process can go smoother.  Here are some tips to do just that:

  • Go through your vendor list and make sure each contractor that you are paying is marked as a contractor eligible for a 1099.
    • In 2013 and higher, this is found in the Tax Settings for the vendor
    • If you have a large list of vendors, here’s another way to verify they are marked 1099 eligible, you have the Tax ID and address. Click on Lists>Add/Edit Multiple List Items, then select the Vendors list and customize the columns so all the appropriate fields are easily seen and can be edited.
  • Obtain a W-9 form from each contractor if you haven’t already, and update the address and federal EIN for each contractor.  This will ensure that you have the most current information for each contractor and that they will receive their 1099 promptly.  A good practice is to get one when you first start working with a new vendor/contractor and BEFORE you pay them the first time (payment will motivate them to send you their W-9)

If you need to make any changes in the way you are paying them or withholding taxes, you’ll have a chance to update that information as well.

  • Ask your contractors for a worker’s compensation certificate.  If you don’t have one, you might need to add their payment totals to your payroll amounts on your worker’s compensation audit worksheet.
  • Contractors paid with a check will require 1099s. Contractors paid via PayPal or credit card will not.
    • If you have PayPal set up as bank account in QuickBooks and when you make payments from PayPal then you may either have a PayPal transaction number for the check number or you may have left it blank. Put the form of payment (PayPal in this example) in the check number as shown below
  • Consider re-evaluating each contractor as to whether they meet the employee versus contractor tests from the IRS.
    • If you are accidentally misclassifying a contractor who the IRS defines as an employee, you will be responsible for social security, withholding, and other payroll taxes, plus penalties and interest which can add up to huge numbers for small businesses.
  • This is a “red flag” area for the IRS, meaning they are looking to “bust” employers. However, they also have a Voluntary Classification Settlement Program for people who have been misclassifying workers in the past and want to come clean.

Following these five steps will put you in great shape for year-end.

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It’s Bonus Time!

Year-end is a great time to think about rewarding your staff for a job well done in 2018.  Here are a few quick tips to help you make the most of bonuses while protecting your business and cash flow.

  1. Timing.  Would you be better off timing bonuses in this year to reduce 2018-year taxes or to wait until next year so they impact the 2018 tax year?  It’s something to consider before you dish them out.  Do what’s best for your business.
  2. The pretty holiday envelope.  It might be tempting to hand out envelopes of cash but it’s oh-so illegal!  Making payroll in cash is illegal in most states, and bonuses are part of payroll.  Stick to the payroll system to generate your bonuses even if it’s boring, and you’ll stay out of trouble.
  3. Pesky deductions.  Bonuses are subject to payroll deductions just like any other payroll check, so please don’t forget that.  If you write a check for $1,000 to an employee, you will be liable for taxes on the gross-up, and this ranges between 20% to 30%.  So that $1,000 bonus just turned into $1,200 or $1,300, which is quite generous but might not be what you really meant!  And if you forget to gross up the bonus, then your employee may be unpleasantly surprised at their tax bill.

If you use Intuit’s Enhanced or Assisted Payroll, here are steps to help you calculate (much simpler than trial and error!!)

  1. Sticking around.  Bonuses are a great motivator and can help keep employees from leaving, thereby reducing your turnover costs.  If possible, announce a bonus structure ahead of time so employees will have something to work toward and “earn.”
  2. Invisible costs of bonuses.  Bonuses will drive up your workers compensation, state and federal unemployment costs, and any other costs that are related to gross wages, so do take all of that into consideration when issuing bonuses.
  3. Beyond money.   Money is a great motivator, but you may want to provide non-cash bonuses to your employees for extra special memories.  If you do, your tax accountant can help you get the transaction recorded properly.         

Bonuses are fun for everyone, and we hope these tips will help you make the most out of them in your business.

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Is It Time For a Change

Is it time to make a change with your bookkeeping and accounting products?  As you get near the end of 2018, it’s a good time to evaluate whether or not you need to make some changes.  Here are some questions to help you decide if you need to make some changes regarding the Intuit products:

Version of QuickBooks:  QuickBooks comes in different “flavors” and they aren’t all equal. You may be using your current version because that’s what you used when you got started, or that’s your accountant or peer recommended or that’s what you saw in CostCo, BJ’s or Sam’s or on the Intuit website.  As your business evolves, you may find the version that you were using, is no longer the best suited for you.  Start with a needs and a wish list.  Then see which version can offer most, if not all, that you want/need. Here are 4 key questions where the versions differ:

  • Scalability
    • How many need access? The higher the version, the more users you can have.
    • Who needs access to what? g. view reports, enter estimates, run payroll, create invoices, enter bills, reconcile bank accounts, etc.
      • Controlling who can do becomes more critical as you add users.
      • There’s just no comparison between controlling user access in Enterprise and Pro/Premier – Enterprise wins hands down.
    • Job Costing – While Intuit is “pushing” QuickBooks Online, the desktop products are still best for those of you with job costing and/or inventory. See my article on QB Online vs QB Desktop
      • Premier has additional job cost reports and Enterprise has WIP and Committed Cost reports.
    • Inventory If your business involves inventory, there are major differences between Pro, Premier and Enterprise. I have both a comparison chart and videos highlighting the differences (see the link below in the green box).
    • Intuit direct deposit: If you’re in Pro, Premier, or Enterprise and using Intuit direct deposit when paying employees, those direct deposit fees or per employee fees can add up quickly– especially if you have a weekly payroll! Enterprise Gold may save you money because it includes your payroll subscription AND direct deposit and per employee fees. Contact our office and we can help you compare costs and determine what’s best for you.

Enterprise Clients: Intuit has made several changes to their pricing structure over the last year or two, so contact our office to see if you have the best deal you can get with your Enterprise.

How “old” is your product? Intuit supports only 3 years (tech support, bug patches, payroll, payments) so 2016 will “sunset” on May 31, 2019. However, I strongly advise all my clients to review the new features EVERY year before deciding whether or not to upgrade.  There are times the new version will actually save you money with the new feature(s).  So don’t be penny-wise and pound-foolish!

Payroll – This is the best (and easiest) time of year to make a change to your payroll.  Intuit has several payroll products and offers the best in integration.

  • If job costing is important, then Enhanced and Assisted are still the best options and we can get you discounts on both products.
    • Assisted Payroll files your payroll taxes and reports so you don’t have to worry missing deadlines (and our discount is for the life of your subscription.
    • Through our office you get a discount for 1 year on Enhanced payroll (you do the paychecks and tax filings). However, if you have enough employees, sometimes Enterprise Gold will cost you less so let us help you compare your costs.
  • If you don’t need job costing, then I encourage you to look at Intuit’s Full-Service Payroll (IFSP)- it’s what I would use!
  • Not sure what’s best for you? Contact our office so we can help you or reach out to our payroll specialist Amber Burke, Amber_Burke@Intuit.com or 520-848-5649      
  • Regardless of which payroll products, there’s a chance we can get you discounted pricing – our payroll specialist, Amber, will have the answer Amber_Burke@Intuit.com or (520) 848-5649

Payments (Checks & Credit cards)– Intuit has the best integration, no monthly fee AND NO contract, so I always recommend trying it out. If you don’t like it, simply stop using it!  Our payment specialist, George (or one of his team – Joe, Marvin or Gabor), can give you the rates and any discount available through me.

George Madenian – George_Madenian@intuit.com 818-436-8158

So is it time to revisit your Intuit products?  Let us know if you would like to review and/or make a change and we’ll be happy to help you decide what’s best for your business and get the best deal.

Posted in Business Finance, Credit Card Processing, Merchant Services, Payroll, QuickBooks, Year End | Tagged , , , , , , , , , | Leave a comment

Optimize Your Revenue Mix for More Profitability in 2019

Many small business owners focus on generating more revenue every year, and that’s a great objective.  But not all income is created equally.  If you have more than one type of division/service and/or service/product, then it’s worthwhile taking a closer look at the profitability of each.

Although it’s fun to watch your income grow, it’s the bottom line (your profit) that really matters.  If your expenses grow faster than your profits, that means you have a lot of activity going on, but you don’t get to keep as much of what you make, which is what really matters.

Most of you have different divisions/departments in your company – maybe even locations. Hopefully those are set up as Classes in QuickBooks so you can quickly compare.  And for those of you who have projects/jobs (which is probably most of you reading this), then I’m hoping that your job costs are in the cost of goods section so you can compare profitability of your different divisions before you look your bottom line after overhead expenses.

One way to increase your profitability is to increase your most profitable division/product line/service and do less of the least profitable of your divisions in terms of dollars.

Here’s another way to look at your revenue mix.  Then ask “what if?” to optimize your profits.

Your Revenue Mix

Let’s say you offer three different services: Services X, Y, and Z (e.g. maintenance, installs & snow).  To keep the math simple we’ll say your revenue pie looks like this:

X:  $700,000 or 70% of the total

Y:  $150,000 or 15% of the total

Z:  $150,000 or 15% of the total

Total:  $1.0 million

In this example, Service X is clearly the service making you the most revenue in your business.  But is it making you the most profit?

Let’s say you notice that the profit you receive from each of these service lines is as follows:

X:  $80K

Y: $10K loss

Z:  $30K

Total:  $100K

While Service X is generating the most profit volume for your business, it’s actually Service Z that’s the most profitable.  Earning $80K on $700,000 yields 11.4% profit margin on Service X, but earning $30K on $150K yields nearly double the profit margin at 20%.  Service Z generates the higher profit margin.   And if possible, Service Y may need to be discontinued or turned around.  With the aid of Classes and Customer Types from QuickBooks, you can get more insight into those numbers.

If you are using Classes for your divisions/departments, you can quickly have QuickBooks calculate the profit margin for you.  Simply click on Customize Report, then check % of Income on the Display tab

Exporting out to Excel lets you color code making it even easier to review the profitability of your different divisions.

Optimizing Profits

Your strategy for a more optimum revenue mix might be to sell as much of Service Z as possible, while eliminating or fixing the problem around Service Y.

Of course, there are many more variables besides profit, such as:

  • Which service do you prefer to work on?
  • Are you able to sell more of the most profitable service or are there marketing limitations?
  • Is one service a loss leader for the others?
  • Are you able to adjust price on the lower margin services to increase your profits?
  • Is one type of customer more profitable than a different type for the same service?

A New Year, A New Mix

I hope you’ll spend some time analyzing your revenue mix and ask yourself “what if?”   If I can help you get the reports out of QuickBooks so you can easily review these numbers or want help structuring QuickBooks so this process is simpler, let me know.

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Year-End Review and Planning

By now you probably have a good idea of your year-end numbers.  As you look back over your year, take the time to list what worked – and what didn’t. Here are a few recommendations to help you review 2018 so you can plan for 2019.

  1. Profitability: Where were you most profitable? Where were you least profitable?  I would look at
    • Service line or division or department – You should easily be able to compare your different divisions. Total sales is not your only indicator! You want to compare AFTER your job expenses including field labor (cost of goods). If you use the Class tracking in QuickBooks, which I highly recommend, comparing divisions will be easy!
    • Type of customer – If you review your customer list and start looking for patterns as to the type, you may find you really like some and would love to drop others and your numbers support your decision. Some ideas for type could include residential, commercial, builder, HOA’s, property management, government, age or other demographics.  QuickBooks can help you track this easily. Identifying the type of customer(s) you like (besides those who pay quickly ;-) will also simplify your marketing.
    • Location – Are you finding a certain municipality or county or subdivision or… hasn’t been profitable? Or maybe it’s been a gold mine for you. Perhaps it’s time to consider moving to a new location so you’re more centrally located or it’s been so profitable it’s time to consider a second location.
    • Type of jobs – Over time you’ll find that there are certain types of jobs you enjoy, are more profitable, easier to estimate.  Maybe you decide certain types of jobs you will no longer do because you lose money on them or you just really don’t want that type of work or that they’re too small – or too large.  I know many are often afraid of turning away projects, but if you underestimate your costs or the crews are inefficient, you aren’t helping your business.  When you narrow the type of work you do, you’ll find it will be easier to estimate and your crews will be more efficient.  It will also be easier to market to the types of clients and jobs you prefer!
  2. Overhead: Have you reviewed your overhead costs lately?  If not, maybe it’s time!
    1. I find it’s easy to forget about payments that are automatically paid by credit card or deducted from your bank account. I know I made changes in a couple subscription plans that saved money in my own business.
    2. Some areas I sometimes see clients paying more than needed in areas I can help would include:
      1. Software
      2. Payroll
      3. Credit card processing
      4. Checks

I’m often able to get discounts or get clients upgraded to newer accounts that can save money so it’s always worth checking with your office.  Doesn’t cost you anything and if we can find a better deal, you save 😊.

  1. Staffing: Were there changes in staffing? Consider both out in the field and in the office. Sometimes a new employee could be a reason to add or drop something. For example, a new employee with certain skills may suggest you’d like to use more of those skills, which could mean different jobs or different clientele.
  2. Time: Many of you are conscious of time out in the field, but what about office time? I find few companies clock how long it takes to do office tasks and often there are inefficiencies.
    • Are you still doing paper time sheets or using the old punch time cards for employees to clock in/out? I know from personal experience just how consuming that can be. Maybe it’s time to go mobile – there are lots of good products out on the market – of course some better than others!
    • Are you entering data in one place and then some version of that same data in a second place (like a spreadsheet and then in QuickBooks – or vice versa)? Could there be a way to integrate the data so you don’t have double-entry resulting in saving time?
    • Are you doing work-arounds? Maybe it’s time to re-assess – can it be done in QuickBooks or will an add-in product solve your problem?
    • Are you running reports in Excel? If so, is that because you can’t get that information from QuickBooks? I frequently find that setup and lack of training are key reasons you’re not getting some of the reports you want/need from your software and hence using Excel to generate the report. I’m happy to help you take a look.
    • Are reports taking a long time to run? Perhaps there’s some file maintenance that needs to be done or upgrade in computers or networks. Slow computers add to your labor costs as people sit and wait – including you!
    • Are there faster ways to get your work done? Unless you live and breathe QuickBooks like I do, you might find there are features and/or “tricks” to get the information you want that you don’t know about.
    • Sometimes it pays to talk to a professional and I’m happy to take a look and discuss your situation.
  3. Software: Is your current software solution still a good fit for you?
    • QuickBooks Whenever I’m working with clients I start with discussing what version of QuickBooks you’re using and your pain points. Sometimes QuickBooks can do what you want – you just didn’t know it could or how to get the results you wanted.  If your current version won’t do all you want, we discuss pros/cons of keeping what you have, upgrading and/or getting an add-on product.  I recommend having a needs list and a wish list.  Most times, you won’t find something that fits all of your needs and wishes so you have to decide what’s most important – and that’s unique to your business.
    • Add-ons –Is it time to add a 3rd party product to solve for one or more of your pain points? Add-ons come in 2 “flavors”
      • Task specific – these often solve 1 issue – e.g time tracking, payroll, estimating, CRM, etc.
      • Industry specific – these products typically solve for more than one pain point within your industry and will use your lingo because they “understand” you. You’ll find that add-ons have differences so there’s no “one-size fits all” solution – you will still have to decide which one best fits your business.
      • And of course, I always want to know how the products integrate with QuickBooks; that’s one reason why I like the Intuit add-ons because I know the integration will be good. If job costing is important, there are better ways than others for those job costs to come in to your QuickBooks if you want to maximize the reporting in QuickBooks.

If you need help either getting this data or wondering how to adjust your setup and/or procedures, let me know – I’ll be happy to work with you

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Determining Your Most Profitable Sales

It’s time to review your sales to see where you were most profitable in 2018 and see what changes, if any, you’ll make for 2019.  When looking at profitability, there are a few different factors you can review using QuickBooks.  So here are 5 areas to consider.

  1. Identify Your Most Profitable Division/Service Line: If your divisions or service lines or departments are classes, this can be simple to evaluate. Run your P & L by Class, then customize the report.  % of Income lets you compare profit margins and % of Row lets you see which division is bringing in the most revenue.  Then not only will you have a comparison by dollar amount, but the percent of your business income AND expenses. If you take the time to allocate your overhead (either on a monthly or quarterly basis), you can get an even better picture.
  1. Identify your Most Profitable Products/Services – If your Items are double-sided, AND you use the items tab when you receive your bills, then the Item Profitability Report can be helpful as well. Choose Year to date or Year to last month for your date range. Is it time to drop a service or product?  Or maybe you want to sell more of a particular product or service line.

Note: If you haven’t been good using Items in your job costing this is an area that may not reflect true profitability. If so, put it on your list to improve for 2018 ;-)

  1. Identify Your Most Profitable Customers: Look at the Job Profitability Summary It will run on an accrual basis only, so you could have some unpaid invoices in there.  But hopefully your customers will be forthcoming with payment.  The default date range is all, since some jobs cross over years, and in some cases, multiple years.  If that’s true for you, then you may want to keep that setting. But for most of you, the jobs tend to be shorter, so I would recommend running it just for this year.  For the purposes of identifying the top customers, you can collapse the report so you just have the customer names. Export the report to Excel and then you can sort for the Difference column which should be your profit.  Of course, this assumes you’ve been good about costing all your labor and materials to the job ;-). For those of you who outsource your payroll, you may find that not all your labor costs are in.
  2. Identify Your Most Profitable Types of Customers: When you look at the top customers above, do you see a pattern as to the type of customer? Perhaps they’re commercial or government or residential or landlords, or …. You get the picture. (I use industry for type).   You can also use subtypes.  If you want more top customers, it’s helpful to have a better picture of just who they are.

If you use the Customer Type field, you can create a Custom Summary report with Customer Type for column headings. (Click on Reports>Custom Reports>Summary).   You can also turn on % of Row if you’d like.


  1. Identify Your Most Profitable Jobs: Click on Reports>Jobs, Time & Mileage> Job Profitability Summary. You can export this out to Excel as is or filter on the customers you identified above.  Unless all your jobs have unique names/numbers this will take more work before you can easily sort in Excel. Perhaps the quickest way is to copy the customer name down so it is with the job name and then sort by Difference (your profit). You can use the Auto Filter feature in Excel to remove the rows with blanks in the job column.

Also look to see if there is a pattern in the type of job you do for that customer.  Some types of jobs are more profitable than others. Makes more sense to stick to the more profitable jobs!

As you go through these steps, you might also want to take note of which ones are the bottom of the list. Perhaps it’s time to drop those customers, jobs, products or services.

When you can identify your true top customers and jobs, then you have a better idea of how to market, and you can focus on more profitable customers and jobs, which will boost your bottom line rather than trying to be everything to everyone.

If you need help getting this setup in QuickBooks, contact our office.

Would love to hear if you had any “a-ha’s” as you look at these reports!

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What’s In Your Top 20?

You’re probably familiar with the Pareto Principle, which states that 80% of your results come from 20% of your work. Have you ever stopped to look at the Top 20 in your business? You can identify the top 20% of your customers, types of customers, products/services, sales reps, expenses, etc. in QuickBooks.  While it won’t always be an 80/20, you can still see what floats to the top and bottom.

The company snapshot can at least begin to give you a visual. (Here’s a video if you aren’t familiar with it). But here are some reports/graphs that might be helpful.

  • Profit & Loss – Choose whatever date range you want, then select Customize Report. In the lower right- hand corner, you’ll see an option for % of income and % of Choose one or both – could be an eye-opener!

  • Sales by Customer Summary – Again, choose your date range then select Choose % of column and Sort by Total
  • Sales by Item Summary – Choose your date Percent of Sales is already an option. If you don’t want some of the other information, then select Modify and get rid of any columns you don’t want to see. In the report screen, you may also want to click on collapse if you have numerous subitems – it’s sometimes easier to read with fewer items listed.  If you just want to see % of Sales and Gross Margin, you’ll need to export to Excel and hide the unwanted columns
  • The Income and Expense graph can be customized (Reports>Co & Financial>)- you can look at account, customer or class, and choose income or On the right, you’ll see the percentages of income and expense plus a pie chart for a visual. As they say, sometimes a picture is worth a thousand words!
  • The Sales Graph can also be You can see sales by item, customer or sales rep and again you’ll see percentages and a pie chart.

Some of these reports don’t address actual profit from customers, i.e. perhaps sales were high, but so were expenses or perhaps you’ve invoiced, but have yet to be paid or paid in full. You can run a P & L by Job and customize so you just see Income and Job Costs (Cost of Goods) and use % of Income if you want to compare Profit Margins and % of Row if you want to see who brought in the most dollars.  This is a report you may decide to export to Excel so you can do more with the data.

So, with these tools, you can now focus 80% of your time on the 20% that is most productive and profitable for your business. You can email me if you have problems with these reports.

I would love to hear if there were surprises when you ran these reports.

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Using QuickBooks to Find Your Niche

In our last article, we discussed the benefits of specializing versus generalizing.  So let’s take a look at how QuickBooks can help you.

Decide what you want to track.  Obviously you want to look at profitability but here are some ways you could look at where you are most profitable:

  • Geographically – region of the country, state, county, city, subdivision…
  • By division/department – maintenance, construction, irrigation, remodeling, painting…
  • Type of customer – general contractor, homeowner, retiree, young family, property management co., HOA, government agency…
  • Type of Project/Job – retaining wall, outdoor kitchen, kitchen remodel, new home…
  • Service/Product – mowing, painting, framing, designing…

When you can narrow down within each of the above, you’ll have a better picture of the type of business you want.

Use Your QuickBooks Tools

  • Classes – Classes can really help you easily compare different aspects of your business. Many use divisions or departments as classes, but some use states or type of project (e.g. new construction vs remodel), project manager, partner or a combination. If you have not been using this feature, you will love it – you can easily compare profitability with side by side comparisons. You can also use sub-classes, although the reporting is a little more cumbersome.
  • Customer Type – This under-utilized tool is found in the Additional Info section of your “edit customer”. How do you describe your customers? Retirees, singles, young families with pets, government agencies, non-profits, service businesses? Work up your list – you can even do sub –types.  So for me, I have contractor as a type, but my sub-types are the different kinds of contractors. You can even have a type for the customer and a different type for a job for the customer.  Below is a custom report comparing profitability of Customer Types.


  • Job Profitability – Run a P & L by Job, click on Customize Report and add the sub-column for % of Income (% Profit Margin). You can compare the profitability of different jobs and start to look for patterns. You might even want to take a look at the Gross Profit and divide by the number of hours on the job (found in the Time by Job Summary) and see how jobs compare.
  • Job Type – You will find over time that certain types of jobs are better for your business than others, so use job type to help you refine. While you can’t run a P & L by Job Type (definitely on my wish list), you can filter a P & L for a specific job type or you can export out to Excel and take a closer look.

Items: – These are your products and services.  Most of you have several (maybe many), but if you have them setup as double-sided Items and enter your costs using the Items tab, then the Item Profitability report may be eye-opening.

  • Custom Fields – I love Custom Fields! In fact, mine are all used up! You can use Custom Fields to track demographics, source of lead, and information about the property or the different services they use. Wouldn’t it be nice to really identify who your ideal type of customer is?!  Not just their name and location, but something about their age, family status, pets, size of yard, type of yard, whether this is a historic property or size of the business. What I also like about Custom Fields is you can pull them into invoices, filter on them, and use them reports – that’s sooo much better than using the “other” field (which you can’t pull into a report or filter on) or having some of this info in the notes or descriptions.
  • Templates – Once you have your lists and fields setup, next is to use them! There will be a Class field on all your transactions, so you simply click, from the drop-down. If you want to track sales by sales rep or crew or foreman or source of lead, you will need to have sales rep on the invoice, too. That’s true for custom fields as well. The screen shot to the right shows how to add these to your invoice templates. Keep in mind they don’t have to print out on the customer’s copy, but will provide valuable information for you.
  • Reports – Once you started to collect the data, the next step is to look at your reports. You’ve already seen a few in this article that you can create to review. Seeing the numbers or seeing it in a chart of graph form will help you evaluate your business so you can refine it.  You will get some interesting aha’s” when you review these reports with new information.

Contact our office if you have questions or would like assistance.

Posted in Business Finance, Features, Job Costing, Power Tips, QuickBooks | Tagged , , , , , , , , , , , , , | Leave a comment