4 Essential QuickBooks Online Tips for Small Business Owners

Managing your business finances can be a daunting task, especially for small business owners who handle their own bookkeeping. QuickBooks Online (QBO) offers powerful tools designed to simplify financial management and ensure accuracy in your records.

Let’s delve into four critical areas where QBO can transform your bookkeeping practices: Chart of Accounts, Sales Tax Setup, Closing Date, and Bank Reconciliation.

1. Chart of Accounts: Your Foundation for Financial Reporting

Where to go? Left Navigation > Transactions > Chart of Accounts

The chart of accounts is the backbone of your bookkeeping system and helps tell the financial story of your business through reports. QuickBooks Online comes with a standard chart of accounts and allows you to add new accounts and customize your chart of accounts to suit your specific business needs.

You may wish to make irrelevant accounts inactive and find it useful to create new income/expenses accounts that are relevant for your business. For example, you may earn income from multiple sources (services, product sales, interest income) and wish to separate income from each source on your profit and loss reports for greater financial visibility.

This customization enables you to categorize your financial transactions accurately, which is crucial for generating useful financial reports for making informed decisions. Reach out to your accounting professional. There may already be an existing chart of accounts and opening trial balance that your accounting professional wants you to use.

2. Sales Tax Setup: Compliance and Efficiency

Where to go? Left Navigation > Sales Tax

For businesses registered for Harmonized Sales Tax (HST), Goods and Service Tax (GST) or Quebec Sales Tax (QST), setting up sales tax tracking in QuickBooks is an essential next step.

You must manually activate this feature in QuickBooks to account for the sales tax on your sales and purchases. Use your CRA account to find your sales tax filing frequency and consider the scope of your sales. There are various considerations to be aware of that you should discuss with your advisor.

Additionally, setting up a specific tax code such for meals and entertainment is highly recommended since you can only claim 50% of the GST/HST for these expenses in Ontario. Proper configuration of your sales tax settings not only keeps you compliant but also optimizes your opportunity to capture input tax credits.

3. Closing Date: Safeguarding Your Financial Data

Where to go? Gear > Advanced > Close the Books

Setting a closing date in QuickBooks Online is a pivotal step in safeguarding your financial data. This feature locks your data up to a certain date, preventing any alterations to the records of past periods without a password. This ensures that once you have reconciled your transactions and closed your books for a period, they remain unchanged. Implementing this helps in maintaining the integrity of your financial reports over time, an essential practice for accurate historical data analysis and compliance with auditing standards.

4. Bank Reconciliation: Keeping Your Books Accurate

Where to go? Left Navigation > Transactions > Reconcile

QuickBooks Online enhances your financial accuracy by connecting directly to your business bank accounts, automating the entry of transactions. This feature helps small business owners track every dollar efficiently.

If you are connecting your bank for the first time, QBO will record your opening balance from your bank and post an entry to an account named ‘opening balance equity’. It’s advisable to delete this entry.

After you’re done posting your transactions for the month, we suggest navigating to the reconcile screen and entering the ending balance of your bank at the end of the month along with the date. If all transactions are selected and QuickBooks displays a $0 difference then congratulations, you’ve successfully completed your first bank reconciliation! If not, you’ll have to investigate why there is a difference.

Conclusion

For small business owners, mastering these aspects of QuickBooks Online not only streamlines your bookkeeping processes but also enhances your financial oversight and compliance. From setting up your books correctly through to your first bank reconciliation, each step is vital. Don’t hesitate to engage with your accounting professional to help you get there. Effective bookkeeping is a cornerstone of successful business management, and with the right foundation and process in place, you’re equipped to achieve just that. Happy bookkeeping!