Time-saving Tips for Record Keeping With QuickBooks™

In 2021, 50 percent of internet-connected farms utilized a broadband connection, while 70 percent of internet-connected farms had access through a cellular data plan. Additionally, 67 percent of farms had a desktop or laptop computer, while 77 percent had a smartphone, according to the latest USDA National Ag Statistics Service "Farm Computer and Ownership Report" (USDA, 2021). Computer use for farm business is down versus the 2017 report, while many farms are utilizing smartphones more. This means one of every two agricultural operations uses the computer for business purposes, such as managing financial records. A popular financial software package used in and out of agriculture is QuickBooks™. Maintaining quality financial data does not have to be cumbersome and time-consuming. Several concepts and methods (even if you don't use QuickBooks™) can make bookkeeping easy and more efficient.

Different uses of the data

A business's financial records have two essential purposes: provide the data to report on taxes and provide financial insight into the success and management of the company: same data but different interpretations. One difference is in the accounting method applied. Most agricultural businesses report taxes on a cash-based method (as money enters or leaves the business). Therefore, the financial records are set up for that method. To gain better financial insights into the operation, accrual accounting is recommended. This method tracks transactions as they happen, even the exchange of money. When done correctly, financial records using the accrual method will also generate the necessary data for cash-based tax reporting. A simple way to get started with the accrual method is to track bills as they are received from vendors or record invoices when they are sent to customers. This will provide insights into current accounts payable and receivable and cash flow management.

QuickBooks™ tips for simplifying data use

Download data

This seems like a logical first step. Today's businesses are doing more electronically to save time and costs. Transaction downloads from the Bank are possible in QuickBooks™, either as Bank Feeds or using web connect files. The biggest challenge is correctly categorizing the transactions and matching them to existing entries. Though QuickBooks™ will auto-detect transactions that are always the same such as a utility bill payment, the details still need to be reviewed and adjusted, especially for vendors or customers that interact with different expenses or products.

Recurring memorized transactions

QuickBooks™ users typically learn about memorizing transactions (invoices, sales receipts, bills, etc.). This speeds up routine entries by automating the process. Editing a memorized transaction, such as a cell phone bill, allows QuickBooks™ to process the transaction automatically and regularly.

Use the find feature.

Most software has a search feature, and QuickBooks™ has two: search and find. Though similar, they have slightly different options and purposes. Search is designed to be a general search, looking for keywords or terms of interest. It will examine throughout the company files (items, transactions, customers, etc.) and bring up relevant items. For greater accuracy with the search, run the updated information before starting a search. The "find" feature doesn't require updating and focuses on transactions, not examining other areas like customers, vendors, or items. Only one type of transaction can be selected at a time, which can be time-consuming if the transaction type is unknown. There is an advanced find to further limit the results by account, customer, item, memo, or others.

Review and streamline the Chart of Accounts

The chart of accounts is the backbone or infrastructure of any financial system (paper or electronic). It is essentially the filing system that stores and relates the transactions of the business, whether it is income and expenses or assets and loans. Too often, the number of accounts a company has can quickly become cumbersome and hard to navigate. Consider reviewing these accounts occasionally, ensuring they are relevant to the business. If an account is no longer needed, don't delete it (as it may have historic transactions related to it) but inactivate or hide the account to prevent it from further use.

Another issue that can plague the chart of accounts is its use to categorize or class the data. Classes are a labeling system for enterprises (i.e., corn grain, soybeans, hay) to help identify related transactions (i.e., seed, fertilizer, chemical). Implementing a category/class system to label transactions will help filter the data when needed. Classes may even help streamline the chart of accounts for even greater efficiencies. The Penn State Extension Dairy Team has been working with producers on their cash flow plans over the past several years. The one commonality on pulling all the data together is how good the accounting system is and the set-up on the chart of accounts. Farms that are very organized and have a good set-up means more time can be spent on results and discussing business/production strategies. Otherwise, most of the time is spent trying to organize the data and check for mistakes, which leaves little time for interpretation.

QuickBooks™ tips for efficient Chart of Accounts and beyond

Use the undeposited funds account wisely

Undeposited funds is an asset account (typically other current asset) where QuickBooks™ stores recorded transactions before depositing the money into a bank account. This feature is helpful if the business has regular bank deposits with multiple customer payments throughout the day combined into one bank deposit. If the business typically records individual customer payments, an undeposited funds account may be inefficient.

Group reports to process multiple reports at once

The memorize reports feature allows quick access to regular and routine reports, even custom ones. Group these memorized reports, so they are easily found, and generate them all at once. In newer versions of QuickBooks™, schedule reports to generate automatically.

Use classes

Classes are labeling systems for enterprises (i.e., areas or divisions within the business) to help identify related transactions (i.e., direct crop expenses related to corn). Add them when entering the data, then when it's time to evaluate the data (generate reports, filter the data, etc.), invoke the classes to generate enterprise-specific information. Keep classes general enough to be relevant on multiple transactions but with enough detail to be informative. Classes may even help streamline your chart of accounts for even greater efficiencies.

Time is the one resource that is continually in short demand, especially when it comes to managing financial records. Try adopting some time-saving tips to start reaping the rewards from these robust computer systems. Saving time on the data stream's front end allows more time to interpret the data and integrate that information into smarter management decisions.

References

USDA, N. A. S. S. (2021). Farm Computer Usage and Ownership, (August).