QuickBooks 2011 offers a new advanced Balance Sheet by Class Report that differs from other QuickBooks reports because it gives users the option of selecting “Classes” (fund, location, profit center, or other category) as their column grouping. This will enable QuickBooks users to perform divisional accounting with QuickBooks, which was previously impossible or required significant duplication of effort.
While this report has been one that has been requested by many QuickBooks users and the accounting professionals who support them, it is not without limitations and drawbacks, making this a report that will be able to be used by some companies and in some instances but not all.
QuickBooks calculates the class allocations for the report each time you run the report. Because of this, you must enter transactions in a very specific way. Follow these guidelines to ensure an accurate report. If you enter transactions differently, the report can produce unexpected results.
General Guidelines for Using the Balance Sheet by Class Report:
Verify/enable class tracking: From the QuickBooks Edit menu -> choose Preferences -> select Accounting -> and click on the Company Preferences tab. Here you will want to make sure that the Use class tracking and Prompt to assign classes are checked – turned on.
Right click on the image to enlarge it
Set up/modify your Class List: From the Lists menu -> choose Classes, this displays a list of your current classes.
- If you are new to QuickBooks this list might be empty and you will need to create your list of classes.
- If you have been using QuickBooks for a long time there may be entries in the List window.
Be aware that transactions will have to be entered in a very specific manner and there are many data entry transactions that are not supported by the Balance Sheet by Class Report; which still cause additional data manipulation and work, for example:
- Each transaction can only have a single class.
If you enter one class on every transaction, you’ll avoid most unexpected results.
There are a few transactions where you can’t enter a class. In these cases, QuickBooks assigns the class based on the “original” transaction in the work flow.
Important: although you can enter multiple classes on certain transaction, it is NOT recommended that you do so. If you do enter multiple classes you will see unexpected results in the report.
- Use standard work flows in QuickBooks
When entering transactions, use the windows and order suggested on the QuickBooks Home Page. For example, standard workflows in QuickBooks include:
- Enter Bills -> Pay Bills
- Create Estimates -> Create Invoices -> Receive Payments -> Record Deposits
- Enter Time -> Pay Employees -> Pay Liabilities -> Process Payroll Forms
Right click on the image to enlarge it.
The biggest hurdle to using the Balance Sheet by Class Report is knowing which transactions are unsupported and learn how to solve the problems they produce.
- Journal entries with “unbalanced” classes.
- Paychecks allocated to multiple classes.
- Payroll liability payments.
- Sales Tax payments.
- Prepayments from customers entered in Receive Payments window.
- Discount entered in Receive Payments Window.
- Discounts entered in Pay Bills Window.
- Using multiple currencies.
- Pay bills with credit (with different classes).
- Use Funds Transfer window to transfer funds between classes.
View this video by Intuit demonstrating the Balance Sheet by Class Report in action.
Over the next few articles we’ll be discussing each of these unsupported transactions and how to work with them.
 |
Request our FREE 142-page “What’s New in QuickBooks 2011? eBook, by completing a simple request form.
This eBook will provide you with with all the information I’ve posted here in our blog, plus MORE! Once you’ve completed our simple request form, you’ll have instant access to this 142-page .pdf eBook, designed to be duplex printed and put in a binder for future reference. |
Payroll is an essential part of your business – not just a weekly, bi-weekly, or monthly annoyance. Payroll is the primary way that employees are rewarded for good job performance and retained. If you are issuing late or incorrect paychecks it can lead to dissatisfied, unmotivated workers – or worse. It’s hard to keep good employees when a company gets payroll wrong.
The relationship between employees and employers is highly regulated by the government and many of these regulations involve payroll. There are literally hundreds of things that you have to know, as well as hundreds of mistakes that you can make. As a result, the payroll process is much more complicated than anyone who has never done it can possibly know.
The consequences of some mistakes can be more serious than just your paychecks simply being incorrect. Many mistakes result in getting a very hard time from people you don’t know (and certainly don’t want to know) – the federal and state enforcement types.
Below are 5 of the most common payroll mistakes which happen during the hiring stage.
1. Misclassifying Employees as Independent Contractors -
There is one sure-fire way to avoid having to do payroll—-and that’s not having any employees.
Some small businesses avoid the costs (paying Social Security, Workers’ Compensation, State and Federal Unemployment Insurance, etc.) of having employees by classifying the people who work for them as independent contractors and paying them with Accounts Payable checks. While misclassifying employees as independent contractors will relieve your business of paying certain taxes the mistake is serious and illegal.
2. Incorrect or Missing Forms W-4, I-9, and W-9 -
It seems that every agency requires a form…they don’t necessarily want to see it but, they do expect you to have it completed and on-hand in the event that they do wish to see it during an audit.
For each hired employee you are required to have a completed Federal and State W-4 form. You are required to keep these on file. This information submitted by the employee is what you use to calculate tax withholdings from their paycheck then submitting to them a Form W-2 at the end of the year. Mismatching names and Social Security Numbers is one of the most common W-2 filing errors.
The U.S. Immigration and Naturalization Service (INS) requires a form as well – I-9 – for every employee.
Form W-9 is another very important form that you need to keep on file. It is used in conjunction with monies paid in excess of $600.00 per year to independent contractors for services performed for your company and is to be reported on Form 1099-MISC.
3. Salary or Hourly – Misclassifying a Worker’s Pay Type -
The major question here is whether your employees must be paid overtime or not.
The U.S. Department of Labor enforces the rules created by the Fair Labor Standards Act (FLSA). To make it simple: Salaried employees are “exempt” from overtime rules. “Non-exempt” employees are paid by the hour or by the day and must be paid overtime.
Many small business owners just don’t know the rules. One of the main “tests” to use when deciding which pay type is correct focuses on managing others and the authority to hire, promote, or terminate the employment of others.
Take the time to learn the rules and how to correctly apply them. Don’t ever fall into the notion that your mistakes won’t catch up with you! All it takes is one disgruntled employee calling the Wage & Hour Board and filing a complaint against you – - – to make your life miserable.
4. Misclassifying or Not Documenting an Employee Work or Trade Classification –
I see this happen most often with contractors who perform work on a Prevailing Wage job (Davis-Bacon, certified jobs, etc.) But, really, it applies to every business type – because the Workers Compensation experience rates are based on an employee Work or Trade Classification. If you work on a Prevailing Wage job your employees must be paid a specific rate according to their Work Classification.
The most common mistake I see with contractors who use QuickBooks and work on these types of projects is that they use the canned QuickBooks “hourly rate” payroll item for all employees with the applicable rate of pay for the specific Work Classification. The use of that canned “hourly rate” payroll item does not provide a good means of verifying the Work Classification/pay rate shown in the Wage Decision is indeed being paid. It’s best to create payroll items within QuickBooks for the various Work or Trade Classification that your employees are categorized under, pull those payroll items into their employee record and assign the applicable rate of pay there. Following this procedure, even a QuickBooks Payroll Summary Report will show which employees performed work under each specific Work Classification, for how many hours, and at what rate of pay. Because this information flows from QuickBooks into the certified payroll reports it makes Compliance Reviews far less stressful!
5. Not Displaying Wage Poster, Prevailing Wage Decision, or Notice to Employees –
Wage Posters, Prevailing Wage Decisions, and the Notice to Employees are not artifacts of the Industrial Age or required only in factories.
If you fail to display the Federal and State Wage Posters, are caught and convicted, the penalty for any person who willfully violates any provisions of the FLSA, including the displaying of the posters, may be imposed a fine of not more than $10,000.00 or imprisonment for not more than 6 months, or both. For more information visit www.dol.gov or your local State Department of Labor office or website.
Part 2 will cover 7 Common Payroll Mistakes Which Occur During Payroll Processing.
Estimating and Job Costing needs will vary depending on the type of contractor you will be dealing with, so if anyone dares to suggest that one “Chart of Accounts or bookkeeping method” will work for all contractors – well you just shouldn’t listen to them, and here’s why:
- Harry Handyman will have simple job costing needs, as he is usually a one-man operation with little to no overhead costs and will be charging his customers for materials and his time.
Meet Harry Handyman.
Harry is probably nearest and dearest to my heart. We have a “Harry” who comes and does a lot of work around our house for us; as a matter of fact a couple of years ago he was here installing some new windows, putting vinyl siding on our house, and replacing our existing deck with a bigger one. Harry is a great person, we think the world of him, he is very good at doing what he does, and he loves what he does; but I have to wonder just how much money “Harry” is really making. Here is why.
When Harry came to talk to us about this “project” of ours he arrives with his tape measure and sets out to “measuring” how much vinyl we’ll need for our house, window sizes, and deck dimensions while he leaves me with some color samples to look at.
He says “this is a pretty big project so I’ll get a buddy of mine to come work with me, it’ll take us 2 maybe 3 weeks to get the windows in, the insulation up, and the siding on and another couple of days to do the deck. I “figure” it’ll take us roughly X number of hours to do this, and this is what I’ll charge you to do the work” and away he goes.
A couple of days later he calls us with prices, we give him the go ahead, and a couple weeks later Harry shows up with his dump truck and trailer loaded to bear with the vinyl and the windows, he’ll have the decking for us in a couple of weeks.
Now we like to pay Harry right away, so we say, “How much do we owe you” and Harry kind of grumbles about “ah, you don’t need to pay me right now” but finally hands us his receipt and says ok, here you go. We ask “what about pick-up and delivery?” and Harry replies, “Ah I had to do down there anyway.” Now “down there” is a 100-mile round-trip in a 1-ton dump truck that “maybe” gets 10 miles to the gallon (going downhill with a good wind behind it).
Harry is a prime example of “Cost Plus” in its simplest form – cost of materials plus a fee for his labor. His Chart of Accounts and Item List would be very simple; in fact, he would probably consider his Materials a “Reimbursed Expense”. Oh, I almost forgot to mention – Harry’s idea of an invoice is one of those little 3 x 5” handwritten ones that comes from one of those “carbon Receipt books” that you can pick up in the grocery store for a couple of bucks.
Now let’s look at some of Harry’s costs that you as his bookkeeper, ProAdvisor, CPA should help him identify for estimating, job costing, and tax return purposes.
|
As a bookkeeper, ProAdvisor, or CPA with a client like Harry, you are going to have a hard time. Harry is “set in his ways” and probably is not going to want to change the way that he does business. Do the best you can for Harry, realize that you probably won’t be able to “change” him, but do talk to him about changing his ways for his own good – even if you know that it will do no good – because Harry will probably never do any sort of “formal” estimating. However, people cannot make informed decisions without being presented with good facts.
Harry would be a good candidate for QuickBooks Simple Start, just to get him automated and away from pen and paper.
Tomorrow’s installment will discuss the needs of Sam the Subcontractor.
