Converting your accounting system that you depended on for so many years can be scary.
Here we address four of the most common questions we receive from concerned companies like yours. Feel free to post your question in the comments section below and we will answer it ASAP!
Is there any chance that I lose my data when converting to Quickbooks Online? None! It is basically impossible. You may notice a couple of discrepancies post-conversion (which can easily be fixed) but you can always go back to your desktop version if you decide QBO is not right for you. You can take comfort in knowing that nothing is set in stone if you decide to try out QBO. Intuit is constantly running free trials – so just give it a shot. If you don’t like it, just let your trial expire and nothing will be erased in your desktop file.
Is there anything that will not convert over to Quickbooks Online? Unfortunately, yes but they can easily be added back in after the conversion. If you have estimates in your desktop version, they will not flow through into QBO and must be added in manually. If you only have a couple open estimates, then you can just manually add them into QBO. However, if you have numerous estimates that are critical to your operation, you may want to consider using an importing tool such as Transaction Pro Importer. Another issue you should be aware of is your sales tax setup. You will need to verify the configuration of your Sales Tax Center within QBO. The liabilities will be completely accurate if you check the register or balance sheet, but they will not be displayed in the sales tax center. Every invoice that you have created in the past will convert over into QBO with sales tax displayed as a separate line item that links to your sales tax liability account (as opposed to being displayed as a calculation at the bottom of the invoice). We recommend fixing each invoice for the current year by deleting the new sales tax line item and have each invoice recalculate the sales tax. Doing this will rebuild your sales tax center!
Will I need to set up payroll again when converting to Quickbooks Online? Absolutely. If you administer payroll through Quickbooks and convert to Quickbooks Online, you will need to activate payroll and will have to rebuild it from scratch. You will need to reference your old payroll detail reports from your desktop version in order to successfully setup and run payroll with your new Quickbooks Online account. You will also need to re-enter your federal and state tax identification numbers and rates and enter in all historical federal and state payroll tax payments. Intuit’s Payroll system does an excellent job of helping you verifying everything is set up properly before you run your first payroll through QBO, so no need to panic!
If I convert to Quickbooks Online, is my data secure in the cloud? We have serviced hundreds of QBO accounts and have never once encountered a situation where data has been lost or compromised. Intuit is a multi-billion dollar global powerhouse with over 8,000 employees. Their servers are a lot more reliable than yours. There is a 0% chance that you will ever experience a problem with losing data. However, you ARE definitely at risk of losing your data from your desktop version.
Calculating, paying and filing state sales tax can be extremely confusing for many businesses. The concept is quite simple, however.
For starters, sales tax is a liability and not an actual expense. When it is finally time to file and pay your sales tax to the state, don’t get angry – it was never really your money to begin with. You are simply required by law to apply your state’s sales tax rate to your invoices for services rendered. Your customers are ultimately footing the bill. The problem with many companies, especially those operating on a tight cash flow schedule, is that the money gets deposited into their account and most like co-mingled with regular business expenses. This is why it is absolutely crucial to keep track of your sales tax liabilities on a regular basis so you can properly budget for it and have no surprises when it is time to pay up and file. At any given moment, you should be able to peek at your balance sheet and see exactly the running amount that you owe to the state.
“As a business obligated to pay sales tax, you essentially serve as an intermediary between your customers and the state. Proper bookkeeping ensures that you will ultimately pay to the state the exact amount you collected from your customers during the filing period.”
Below is a checklist of four critical items to review each quarter (or month) to ensure you are calculating sales tax correctly and not pulling money out of your business by misreporting sales and deductions on your return. As a business obligated to pay sales tax, you essentially serve as an intermediary between your customers and the state. Proper bookkeeping ensures that you will ultimately pay to the state the exact amount you collected from your customers during the filing period.
Do you file on a cash or accrual basis? More than likely, the answer is cash. If so, just make sure that your sales reports are not generated on an accrual basis. You need to specify total gross sales on your return. If you have a bunch of invoices created during the filing quarter that have not been paid by your customers, they will not show up as sales on a cash basis, but WILL factor into your gross sales on an accrual basis. Additionally, do not just guess this number. The state will compare your total gross sales amounts reported each filing period with your year-end income tax return. These must match!
Is your Accounts Receivable Correct? Every month, you should run an A/R Aging Report (after your bank rec’s of course – see #4) to verify that everything looks correct. If you see payments within this report, chances are you either never applied that payment to an open invoice or never created an invoice to begin with. This is OK if you have not actually provided the service as of the last day of the filing period but – if the job is, in fact, closed – go back and create an invoice so you can apply that payment. Otherwise, you will be under-reporting sales and will get penalized in the event of an audit.
Are you recording refunds to customers correctly? If you owe money back to a customer, chances are you’re simply writing them a check and recording the expense to an income account. Don’t forget about the sales tax though!! If a customer initially pays you $100 plus $7 for sales tax, $100 should go towards sales and $7 should be applied to your sales tax liability account on your balance sheet. If you refund $107 back to the customer and apply it directly to an income account, you are miscalculating sales and may end up still paying the $7. Also, never retroactively create a refund in your bookkeeping system. The refund should always be entered on the date you actually refunded the customer. Always check your sales tax liability register to verify that your payments to the state match the liability amounts accrued during the filing period.
Are your accounts reconciled? This is the bible for proper bookkeeping. Every single penny going in and out of your business should be accounted for with 100% accuracy. Otherwise, you may wind up accidentally inflating sales and paying more in sales tax (and income tax) than you should. You may discover payments recorded that never actually hit the bank account (or invoices that were actually paid but never recorded in your system). Also, if you receive a loan or make a personal contribution to the company, make sure none of this activity hits your P&L whatsoever – they should only be impacting assets, liabilities or equity on the balance sheet. Also check to see if any refunds from your vendors were classified to the actual expense account and not recorded as income.
Utilize the Sales Tax Center in Quickbooks Online to diligently keep track of your sales tax liabilities and ALWAYS record your actual sales tax payments here and not directly to the liability account. There should not be any expense accounts associated with sales tax. If you think you may have misreported, overpaid or underpaid sales tax in the past, feel free to ask us questions in the comments section below or chat with us by clicking on the icon towards the bottom right of your screen.