Introduction to QuickBooks Pro For Farms and Agribusinesses

Lara L. Worden Area Agriculture Agent

How Good Is Your Accounting Information?

Why Keep Financial Records?

1. Know the cost of production

2. Know your cash flow position

3. For tax reporting purposes

Record-Keeping Alternative
In most cases, the law does not require any specific kind of records You can choose any record keeping system suited to your business
Should at least show your income for your current tax year Keep a complete and separate set of records for each business/enterprise you are involved in

Record-Keeping Alternative The most important use for a computer on the farm is for:
FINANCIAL RECORD KEEPING and ANALYSIS

Record-Keeping Alternative Computerized Records

Increasingly affordable Especially useful for manipulating data
Cash Flow Statements Profit & Loss Statements Graphs and Charts Budgets

Advantages of Computer Records

Immediate availability of key reports Improved planning and budgeting Improved asset purchase decisions Pinpointing and elimination of unprofitable enterprises

Why QuickBooks???
Cost of QuickBooks Pro - $250
30 day online free trial Available for Macs

Banking
Checking account, checking register Make deposits, write checks Reconcile bank statements

Manage Accounts Payable

Alert you when bills are due

Handle Employees & Payroll Enterprise Accounting

Profit & Loss statements for each enterprise

Why QuickBooks???
Measure profitability
Balance sheet Profit & Loss Statement Cash Flow Statement

Customers & Sales

Record customer transactions Create invoices, record sales Record customer payments and print reports

Why QuickBooks???
Vendors, Purchases, & Inventory
Record vendor transactions Create purchase orders Enter and pay bills Print vendor reports Keep track of inventory

Reports & Graphs

Customized Export reports to Excel spreadsheets

All The Accounting You Need to Know

Cash vs. Accrual Assets Liabilities Equity

Cash vs. Accrual

Cash
Enter expenses when you pay them Enter income when it is received Tax-based Most farmers use this method

Accrual
Enter a bill when it is received, not when paid Enter income when it is sold, not when you receive the money Management orientated

Cash vs. Accrual

Whether you use the cash or accrual method, you enter transactions the same way in QuickBooks QuickBooks is set up to do your reports on an accrual basis You can see any report on a cash basis by changing the reporting preference at any time
From the Edit menu, choose Preferences. In the Preferences window, click Reports & Graphs in the left panel, and then click the Company Preferences tab

Accrual Adjusted Entries

Provides truer picture of current state of business through:
Performance measures Financial measures Financial position evaluation

Remember QuickBooks allows the user to convert data from cash to accrual with a click of a button!

Assets
Current assets cash, converted to cash or used up within one year
Examples include:
Cash Investments Receivables

Capital assets longer lived assets which are intended to last longer than one year
Examples include:
Land Buildings Equipment Livestock

Assets
When setting up your company file in QuickBooks, please note that even though checking, savings, and petty cash are all company assets, youll set them up as BANK type accounts in QuickBooks

Liabilities
Current liabilities - payable within one year from the balance sheet date and noncurrent liabilities are the balance of the liabilities. Examples include:
Accounts Payable Sales Tax Payable Salaries Payable Payroll Deductions Payable

Noncurrent (long term) Liabilities include:

Mortgages Long-term loans

Liabilities
When setting up your company file in QuickBooks, note that even though unpaid bills are liabilities, youll set them up as Accounts Payable type accounts in QuickBooks

Measuring Business Profitability

Balance Sheets

Profit & Loss Statements (Income Statement)

Income minus Expenses

Navigating QuickBooks Pro

Navigating QuickBooks
Main Menu Navigation Bar Icon Bar

Centers

Navigating QuickBooks
Help

The Quick Start Center gives a big picture overview of important concepts and step-by-step instructions for key tasks.

Creating Your Company File

Easy Step Interview Basic info to have ready ahead of time:
1. 2. 3. 4. Tax ID # Fiscal Year Type of Business Type of Tax Forms Filed 5. Cash vs. Accrual 6. Start Date 7. Bank Acct Info

QuickBooks Lists
Most of whats involved when you enter transactions in QuickBooks is making selections from various lists

Lists Youll Use in QuickBooks

The Chart of Accounts The Item List The Customer List The Vendor List The Class List The Other Names List

QuickBooks Lists
A name can be used only once on any list Can get away with modifying the name with a descriptor:
1st National Bank Checking 1st National Bank Savings 1st National Bank Irrigation Loan

If not sure how to classify an entity, use the Other Names list
It can be modified later to vendor, customer, or employee

Chart of Accounts for Ag

Chart of Accounts
Profit & Loss Accounts Balance Sheet Accounts

Income
Sales

Expense
Supplies

Assets
Bank Account Accounts Receivable Equipment Land

Liability
Accounts Payable Credit Cards Sales Tax Payable Loans

Equity
Capital Investments Retained Earnings

Delivery Fees Interest

Rent Utilities Feed Purchased

Fertilizers/Ch Livestock emicals

Adding an Account to the Chart of Accounts

From the:

Button, Select New

Adding an Account to the Chart of Accounts

Adding an Account to the Chart of Accounts

Enter the name of the account
We only recommend this for accountants or tax preparers. You can use QuickBooks without assigning any tax lines.

Check with your accountant.

Centers

The Customer Center

Gives you access to all of your customers and jobs, contact and billing information for each customer, and customer transactions You can quickly find and print customer contact information, what your customers bought in the past, what invoices they've paid, the balance they owe, notes you want to keep about a customer, and more.

The Customer Center

Adding a New Customer

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2 3

1. Enter customer name 2. Enter company details 3. Enter contact information 4. Enter address details 5. Select OK to save

The Vendor Center

Gives you quick access to all of your vendors, their contact and billing information, and vendor transactions Displays information about all of your vendors and their transactions in a single place

The Vendor Center

Adding a New Vendor

TIP: Nows the time to set up 1099 vendors!

The Employee Center

Gathers information for each of your employees, including contact information, social security number, and payroll transactions
May help to sit down with your acccountant and have them help you with this

Here you can add a new employee, add a transaction to an existing employee, or print employee and transaction information You can also edit an employees information or edit a note for the employee

The Employee Center

The Employee Center - Payroll

QuickBooks Payroll Products

Online Payroll Service (unlimited payrolls)
Basic: $25.00 per month (no state tax forms) Plus: $39.00 per month

QuickBooks Payroll Software (No tax forms)

Up to 3 employees: $149 (billed annually) Unlimited employees: $249 (billed annually)

QuickBooks Enhanced Payroll Software

(Fed/State tax forms) Up to 3 employees: $329 (billed annually) Unlimited employees: $429 (billed annually)

Ways to Record Revenue

Ways to Record Revenue

Using an invoice Posting directly to a bank account

Record Revenue Using an Invoice

Record Revenue Using an Invoice

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2

3 4

1. Select a customer 2. Verify date 3. Select terms 4. Select product, service, quantity & amount 5. Choose print or send 6. Select Save & Close

Receiving Payments on Invoices

Direct Deposit to Bank Account

Direct Deposit to Bank Account

Ways to Record Expenses

Ways to Record Expenses

Write Checks

Enter & Pay Bills Direct

Enter & Pay Credit Card Charges

Write Checks

Write Checks

Using Registers
Registers contain a record of all the activity in one account.
Checking, Savings, Credit Cards

The right column of the register gives you a running balance of all your accounts receivable, so you always know how much youre owed

Entering a Bill

Entering Bills
1. 2. 3. 4. Select a vendor Verify the date Enter an amount Enter Ref. # and memo if applicable 5. Terms &/or due date 6. Assign it to an account 7. Select Save & Close

Pay Bills

Write Checks

Enter & Pay Credit Card Charges

Enter & Pay Credit Card Charges

Classes

What Is A Class?
A class is a label you use to represent a profit center or a cost center, or should be a PARENT class for a group of profit or cost centers Only one class can be applied to a single transaction

What Is A Class?
Classes are most often used as enterprise codes, to match transactions with specific farm enterprises rather than the business as a whole
Examples:
Produce Free-range Chicken Grass-fed Beef Dairy Goats

Setting Up Classes
There is no right/wrong way to set up classes, only different ways Class names should not serve more than one informational goal Examples:
Chickens (Parent Acct.)
Broilers (Sub Acct.) Layers (Sub Acct.)

Crops
Spring Summer Fall

Farm
Farm stand CSA Farmers Market

Reconciling Bank Accounts

Reconciling Bank Accounts

Reconciling Bank Accounts

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1. Select account type 2. Enter statement date 3. Enter ending balance 4. Enter finance charges &/or interest earned (if applicable), date, and account 5. Select Continue

Reconciling Bank Accounts

Budgets & Reports

QuickBooks Budgets
You can set up a budget in QuickBooks that can be used to track how your finances look throughout the year

QuickBooks Budgets

QuickBooks Snapshots

QuickBooks Reports
Profit & Loss (Income Statement) Balance Sheet Accounts Receivable/Payables Income Tax

QuickBooks Reports
Standard Reports
Show a summary of transactions over a specified period of time (Profit & Loss Standard)

Detailed Reports
Show a list of all transactions that led to each account summary (Profit & Loss Detailed)

QuickBooks Reports
Can modify reports Cash vs. accrual Use report filters Can export to Excel

Profit & Loss Standard

Summarizes the revenues and expenses of a business over a period of time Also called the Income Statement

Balance Sheet Standard

Shows the assets, liabilities & equity at a given moment in time Also referred to as Owners Equity or Retained Equity

Vendors & Payables Reporting

Find out how much your business owes and how much of it may be overdue
Unpaid Bills Detail Vendor Balance Detail

Unpaid Bills Detail

Vendor Balance Detail

Preparing Income Tax Reports

At least two reports are usually necessary for tax preparation:
Income Tax report List of fixed asset purchases, sales, etc.

QuickBooks sets up the correct tax forms during the set-up process
Sole proprietor LLC Corporation

Verifying Tax Line Assignments

QuickBooks has an Income Tax Preparation report that you can use for verifying Tax-Line Mapping assignment (get assistance from you tax preparer)

Preparing an Income Tax Report

Open the desired income tax report
Summary or Detail

Check for income or expenses which are not assigned to any tax line and assign tax lines to them
May need the assistance of your accountant

Print the Income Tax report to have a copy for your tax preparer

Income Tax Report

Misc. QuickBooks Features

Backing up company data Consolidating End of Year data Depreciation adjustment Clean up company data Memorize transactions Exporting reports to Excel Loan Manager Accountants Copy Verify, rebuild or condense data

Common Agricultural QuickBooks Question

Problems with QuickBooks

Poor agricultural/manufacturing-type inventories
Works better for wholesale/retail businesses

No value for livestock born on farm until sold

Recording Sales from Farmers Markets

1. Create a Customer for each day of each farmers market you sell at
Sunday Mountain View Market Sunday Campbell Market

2. In Items List, create Other Charge Items for the fees and expenses you incur when you sell at the markets
Use Expense accounts for these items (gas money, booth rental, etc.)

3. Still in Items List, create an item called Total FM Sales

Recording Sales from Farmers Markets

4. After the market day, a Sales Receipt for each type of payment cash, credit card is made. It includes:

Total FM Sales item with amount you took in listed as the rate Other Charges items for expenses incurred

5. Record the deposit for each Sales Receipt

Community Supported Agriculture Accounting

Simple membership with full and half shares:
1. Create a customer profile for each customer in the Customer Center 2. Create Items called CSA Full Share and CSA Half Share in the Items List 3. When a member joins/renews, add a job for the customer in the Customer Center with a title like: 2012 CSA Membership 4. Then create an estimate for that job with the date of the registration that includes two lines:
The Share Item The deposit item with their payment

Community Supported Agriculture Accounting Cont.

Simple membership with full and half shares:
4. Create a Sales Receipt dated the same day with the deposit item showing the amount of their payment. The funds can then be deposited like any other sale. 5. At the end of the season (maybe Monthly), create an invoice from the estimate, and because it had the deposit line on it - the invoice shows paid.

QuickBooks Reference Material

The QuickBooks Farm Accounting CookBook by Mark Wilsdorf
www.goflagship.com For older versions of QuickBooks, but still full of relevant information

Using Computers to Manage The Modern Landscaping Business QuickBooks Pro 2001
Agriculture Extension University of Tennessee

QuickBooks Reference Material

QuickBooks for Agricultural Financial Records
http://agecon.okstate.edu/faculty/publications/3 819.pdf Oklahoma State University Extension

Advanced Management Accounting Using QuickBooks Pro

http://agrisk.tamu.edu/economicresources/advance-management-accountingusing-quickbooks-pro/ Texas A&M Extension

Intuit
www.intuit.com

Any Questions???

Contact Information: Lara L. Worden Area Agriculture Agent Gaston Cooperative Extension (704) 922-2112