How to Plan Your QuickBooks 2013 System - dummies

How to Plan Your QuickBooks 2013 System

By Stephen L. Nelson

If you understand a couple of big-picture items — what accounting does and what accounting systems do — from the very start, you’ll find that the QuickBooks 2013 Setup process makes a whole lot more sense.

What accounting does

Think about what accounting does. People may argue about the little details, but most would agree that accounting does the following four important things:

  • Measures profits and losses

  • Reports on the financial condition of a firm (its assets, liabilities, and net worth)

  • Provides detailed records of the assets, liabilities, and owner’s equity accounts

  • Supplies financial information to stakeholders, especially to management

What accounting systems do

Now take a brief look at what accounting systems, or at least at what small-business accounting systems — typically do:

  • Produce financial statements, including income statements, balance sheets, and other accounting reports.

  • Generate business forms, including checks, paychecks, invoices, customer statements, and so forth.

  • Keep detailed records of key accounts, including cash, accounts receivable (amounts that customers owe a firm), accounts payable (amounts that a firm owes its vendors), inventory items, fixed assets, and so on.

  • Perform specialized information management functions. For example, in the publishing industry, book publishers often pay authors royalties. So royalty accounting is a task that book publishers’ accounting systems must typically do.

What QuickBooks 2013 does

Okay, after you understand what accounting does and what accounting systems typically do, you can see with some perspective what QuickBooks does:

  • Produces financial statements

  • Generates many common business forms, including checks, paychecks, customer invoices, customer statements, credit memos, and purchase orders

  • Keeps detailed records of a handful of key accounts: cash, accounts receivable, accounts payable, and inventory in simple settings

QuickBooks does three of the four things that you would expect an accounting system to do. QuickBooks doesn’t supply the specialized accounting stuff. For example, QuickBooks doesn’t do royalty accounting.

What QuickBooks 2013 doesn’t do

So QuickBooks does three of the four things that accounting systems do, but it doesn’t do everything. QuickBooks is often an incomplete accounting solution. Be careful, therefore, about setting your expectations. Typically, you also need to figure out workarounds for some of your special accounting requirements.

QuickBooks gives users and businesses a lot of flexibility. So, returning to the previous example, a book publisher can do much of what it needs to do for royalty accounting in QuickBooks. This royalty accounting work simply requires a certain amount of fiddling during QuickBooks setup.

However, QuickBooks (or at least the most popular versions of QuickBooks) does suffer from a couple of significant weaknesses:

  • QuickBooks Pro doesn’t supply a good way to handle the manufacture of inventory. However, QuickBooks Premier and QuickBooks Enterprise Solutions do support simple manufacturing accounting. And QuickBooks Enterprise Solutions provides some additional inventory management capability (multiple inventory sites, lot and serial number tracking, and FIFO costing) as part of its Advance Inventory feature.

    (These versions of QuickBooks help you account for the process of turning raw materials into finished goods and also deal with some real-life inventory complexities.)

  • Only QuickBooks Enterprise Solutions handles the situation of storing inventory in multiple locations. In other words, QuickBooks Pro and QuickBooks Premier simply show, for example, that you have 3,000 widgets. It doesn’t let you keep track of the fact that you have 1,000 widgets at the warehouse, 500 widgets at store A, and 1,500 widgets at store B.

In spite of the fact that QuickBooks may be an incomplete solution and may not handle inventory the way you want or need, QuickBooks is still a very good solution. What QuickBooks does, it does very well. Consider the fact that QuickBooks will be around for a long, long time.

It’s far more likely that an accounting software product with 600 users, for example, will be discontinued rather than a product like QuickBooks, which has 4,000,000 customers.