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A QBO ProAdvisor's Guide to Core Bookkeeping Tasks

By  Rivera Family Bookkeeping  ·  6 minute read

Learn how to manage core bookkeeping tasks! This QBO ProAdvisor guide covers recording transactions, AR/AP, bank reconciliation, payroll, trial balances, and more for small businesses using practical steps and best practices. Get your books in order.

 

Introduction

Mastering core tasks like recording transactions, managing payments, handling payroll, and reconciling accounts is essential for accurate financials and informed decisions. As QBO ProAdvisors, we help businesses streamline these processes every day. This guide breaks down the key tasks step-by-step.

 

How Do I Accurately Record Financial Transactions?

Correctly recording every transaction is the bedrock of reliable bookkeeping. It's more than just data entry; it involves structure and adherence to principles.

  • Start with Source Documents: Every transaction begins with proof – a source document like a receipt, supplier invoice, bank deposit slip, or customer payment confirmation. Diligently gathering these is step one.
  • Accurate Data Entry: The details from the source document (date, amount, vendor/customer, description) must be entered accurately into your accounting system (like QuickBooks Online). Even small errors here can compound later.
  • Categorize Using the Chart of Accounts (COA): Transactions aren't just recorded; they're classified. This uses the Chart of Accounts (COA) – your business's customized list of all accounts (Assets, Liabilities, Equity, Revenue, Expenses). Assigning transactions to the correct account (often using GL codes) is crucial. Misclassification is a common mistake that significantly distorts your financial picture. A well-organized COA is vital.
  • Post to the General Ledger (GL): The General Ledger (GL) is the master file containing all categorized transactions. Information flows from initial entries (like bills or invoices in QBO) to the relevant accounts in the GL. This provides the data for your financial statements.
  • Apply Double-Entry Bookkeeping: Most businesses use the double-entry system. This core principle means every transaction impacts at least two accounts – one gets a debit (Dr), and another gets an equal credit (Cr). This system keeps the accounting equation (Assets = Liabilities + Equity) balanced, acting as a built-in check for accuracy.
    • Rule of Thumb: Debits increase Asset and Expense accounts. Credits increase Liability, Equity, and Revenue accounts.
    • QBO Advantage: Accounting software like QuickBooks Online handles the debit/credit mechanics behind the scenes for many common transactions (like creating an invoice or paying a bill), significantly reducing errors once set up correctly.

Understanding how to properly capture, enter, and categorize transactions using these principles ensures your financial data is trustworthy.

 

How Can I Improve Accounts Receivable (AR) and Get Paid Faster?

Accounts Receivable (AR) is the money customers owe you for goods or services provided on credit. Effectively managing AR is critical for healthy cash flow.

  • The AR Process Explained:
    • Credit Assessment: Before extending credit, especially large amounts, assess customer creditworthiness to minimize risk.
    • Prompt & Clear Invoicing: Send accurate invoices immediately after job completion. Include invoice number, dates, clear descriptions, amount due, and payment terms (e.g., Net 30).
    • Payment Tracking: Monitor incoming payments against outstanding invoices diligently.
    • Accurate Cash Application: Match received payments exactly to the corresponding open invoices in your system. This is vital for knowing true outstanding balances and available customer credit.
    • Systematic Collections: Have a process for following up on overdue invoices – send reminders (automated ones are great!), make calls, and have a clear escalation policy if needed.
    • Dispute Resolution: Address invoice disagreements quickly and professionally.
    • Bad Debt Management: Know when to write off an uncollectible invoice as bad debt expense.
  • Best Practices for Faster Payments:
    • Set clear credit policies and payment terms upfront.
    • Invoice immediately.
    • Offer convenient payment options (ACH, credit cards, online payment links – QBO Payments makes this easy).
    • Use automated invoice reminders (a key feature in QuickBooks Online).
    • Consider offering small early payment discounts (e.g., "2/10, net 30" means a 2% discount if paid in 10 days, otherwise full amount due in 30).
    • Regularly review your AR Aging report to see who owes what and for how long. Track metrics like Days Sales Outstanding (DSO).

An efficient AR process directly impacts your bank account. Streamlining invoicing and collections is key.

 

What's the Best Way to Manage Accounts Payable (AP) and Pay Bills?

Accounts Payable (AP) is the money your business owes to suppliers for goods or services received on credit. Good AP management helps maintain vendor relationships, avoid late fees, and control cash outflow.

  • The AP Process Explained:
    • Invoice Receipt & Capture: Receive vendor bills (paper or electronic). Tools like QuickBooks Online allow direct email-in or upload, sometimes with Optical Character Recognition (OCR) to pre-fill data.
    • Verification & Matching (Crucial Control): This prevents paying incorrect or fraudulent invoices. Ideally, perform a "three-way match": compare the Vendor Invoice details against your Purchase Order (PO) (what you ordered) and the Receiving Report (what you received). A "two-way match" (Invoice vs. PO) is also common.
    • Invoice Coding: Assign the expense to the correct account(s) in your Chart of Accounts.
    • Approval Routing: Ensure the right person approves the bill for payment (workflows can often be set up in software).
    • Payment Scheduling & Execution: Pay the bill according to vendor terms (e.g., Net 30) using the appropriate method (check, ACH, card – QBO offers various payment options). Don't pay early unless there's a discount, to manage cash flow.
    • Record Payment: Mark the bill as paid in your system, reducing Cash and the AP liability.
  • Best Practices for Efficient AP:
    • Centralize invoice processing.
    • Establish clear approval workflows.
    • Automate where possible (data capture, approvals, payments).
    • Pay accurately and on time (but not too early without benefit).
    • Maintain good vendor communication and keep contact/term info updated.

Efficient AP systems provide control over spending and help build strong supplier partnerships.

 

How Do I Perform a Bank Reconciliation (and Why Is It Vital)?

A bank reconciliation compares your internal cash records (General Ledger) to your bank statement. It's a fundamental check-up for your business's cash.

  • Purpose: Ensure accuracy in both your books and the bank's records, detect errors or potential fraud, identify unauthorized transactions, and determine your true, available cash balance.
  • Frequency: Perform reconciliations monthly at minimum, upon receiving your bank statement. High-volume businesses may do it more often. Regularity prevents discrepancies from snowballing.
  • The Reconciliation Process:
    1. Gather: Bank statement and your company's cash account ledger for the same period.
    2. Compare: Start with ending balances, then systematically match deposits and withdrawals on the statement to your records. QBO Advantage: QuickBooks Online's bank feed feature automates much of this matching.
    3. Identify Reconciling Items: These are timing differences or errors causing the balances to disagree initially:
      • Deposits in Transit: Recorded by you, not yet by the bank. (Adjusts Bank Balance +)
      • Outstanding Checks: Checks you issued, not yet cashed. (Adjusts Bank Balance -)
      • Bank Service Charges/Fees: Deducted by bank, not yet recorded by you. (Adjusts Book Balance -)
      • Interest Earned: Added by bank, not yet recorded by you. (Adjusts Book Balance +)
      • Errors (Bank or Book): Mistakes need correction. (Adjusts appropriate balance +/-)
      • NSF Checks (Non-Sufficient Funds): Bounced customer checks returned by the bank. (Adjusts Book Balance -)
    4. Calculate Adjusted Balances: Adjust the Bank Statement balance for its items (Deposits in Transit, Outstanding Checks). Adjust your Book balance for its items (Fees, Interest, NSF, Errors).
    5. Verify Equality: The Adjusted Bank Balance must equal the Adjusted Book Balance. If not, investigate further.
    6. Record Adjustments: Make journal entries in your books for items affecting the book balance (e.g., record bank fees). Keep your reconciliation report.
  • Why it Matters: Don't neglect this! It's a critical internal control. Even with software automation, human review is needed to understand why differences exist.

 

What's Involved in Handling Small Business Payroll Correctly?

Payroll is often a major headache due to its complexity, tax implications, and strict compliance rules.

  • Key Payroll Tasks:
    • Calculate Gross Pay: Based on hours (including overtime), salary, commissions, bonuses.
    • Calculate Employee Withholdings:
      • Federal Income Tax (FIT): Based on employee's Form W-4. [Consider linking to IRS W-4 page]
      • FICA Taxes (Employee Share): Social Security (6.2% up to wage base) & Medicare (1.45%, plus potential 0.9% additional for high earners).
      • State/Local Income Taxes (if applicable, e.g., PA state/local).
      • Other Deductions: Health insurance, retirement (e.g., 401k), garnishments.
    • Calculate Employer Payroll Taxes:
      • FICA Taxes (Employer Match): Matching Social Security (6.2%) & Medicare (1.45%).
      • Federal Unemployment Tax (FUTA): Employer paid.
      • State Unemployment Tax (SUTA): Employer paid.
      • Other Costs: Workers' compensation.
    • Issue Payments & Payslips: Net pay via direct deposit/check with detailed stubs.
    • Tax Remittance & Filing: Deposit withheld taxes and employer taxes on time. File forms like Form 941 (quarterly), Form 940 (annual FUTA), W-2s (annual employee wage statement).
  • Critical Record Keeping Requirements: Maintaining detailed payroll records is non-negotiable. Requirements vary by agency:
    • IRS: Keep employment tax records for at least 4 years after the tax is due or paid.
    • FLSA (Labor Dept): Keep basic payroll records for 3 years; wage computation records (timecards) for 2 years. Requires specific data points.
    • EEOC: Personnel records for 1 year (longer for pay differential explanations).
    • ERISA: Benefit plan records for 6 years.
    • State Laws (e.g., Pennsylvania): May have specific or longer retention periods. [Consider linking to PA Labor & Industry site]
  • Recommendation: Due to complexity and penalties for errors, using dedicated payroll software (like QuickBooks Payroll) or outsourcing payroll is highly recommended for most small businesses.

 

Understanding the Trial Balance: What Is It and How Is It Prepared?

The Trial Balance is an internal report acting as a crucial checkpoint in the accounting cycle.

  • Definition & Purpose: It's a list of all General Ledger accounts and their ending debit or credit balances at a specific time. Its main goal is to verify that Total Debits = Total Credits, confirming the mathematical accuracy of your double-entry bookkeeping before creating financial statements.
  • How It's Prepared (Often Automated in Software):
    1. Ensure all transactions are posted to the GL.
    2. List all GL accounts with balances.
    3. Enter each account's ending balance in the appropriate Debit or Credit column.
    4. Sum both columns.
    5. Verify the Debit total equals the Credit total. If not, an error needs correction.
  • Types: Can be unadjusted (before adjustments), adjusted (after adjustments), or post-closing (after closing entries).
  • Limitations: A balanced trial balance doesn't guarantee zero errors. A transaction could be missed entirely, posted to the wrong account, or entered twice, and the trial balance might still balance. It's a check, not a foolproof audit.

 

Conclusion

Managing these core bookkeeping tasks accurately and efficiently is vital for the financial health of your small business. From recording transactions correctly using double-entry principles to managing cash flow through AR and AP, reconciling accounts, handling complex payroll, and verifying data with a trial balance – each step plays a crucial role. While these processes can seem daunting, leveraging tools like QuickBooks Online and understanding the fundamentals makes them manageable.

Need help setting up your Chart of Accounts, improving your AR/AP workflows, or ensuring payroll accuracy in QuickBooks? Reach out to our team. We provide expert QBO support and bookkeeping services to businesses in the Lehigh Valley and beyond.