Making FreshBooks work with QuickBooks and vice versa – Part 2

Part 1: Dealing with Income – Continued (Part 2)

QuickBooks is an accounting application and FreshBooks is an invoicing application. They are two different things, but in the end to have your data matching in both, there could be a ton of double entry resulting in valuable time consumed and strenuous effort.

You can have your data accurate in both, while not matching in both. Matching and accuracy are two different things. For all of the numbers to match up, it is a matter of accuracy. To have all of the details such as sales items etc. it would be a matter of matching.

In this blog post, I will begin to show you ways to get accurate data from FreshBooks into QuickBooks.

This blog post is Part 2, if you have not read Part 1, I suggest you do so, as it covers Methods 1 & 2.

In methods 1 and 2 we spoke of various ways to get your data into QuickBooks assuring that you have your Accounts Receivable accounted for. Now, we understand those two methods may not be ideal, and not everyone wants (or needs) to track their Accounts Receivable in QuickBooks – after all they track it in FreshBooks. We also understand that Cash Basis companies only have to worry about income after it is received.

So, let’s talk about Method 3, shall we. Method 3 is all about getting your paid income into QuickBooks from FreshBooks.

Method 3: Getting Money Received (Cash Revenue) as a whole into QuickBooks

This method is ideal if:

• You do not need to track accounts receivable in QuickBooks.
• You only want income data in QuickBooks after it is received (when it becomes cash revenue).
• You file taxes on a cash reporting basis (not accrual)

Step by Step Instructions:

1. Log Into your FreshBooks Account

2. Click on the Reports Tab

3. In the second column, click on the Revenue by Client report.

4. Select the year that you want to report on, highlight all clients, select total collected, and then click View Report.

5. Open QuickBooks

6. Set up a generic or general client in your Customer Center. My general client is called ‘FreshBooks Receivables’ (If you don’t know how to do this, visit my blog post on setting up a customer in QuickBooks)

7. Click on Company in the main menu bar and then Make Journal Entries

8. Select the end date of the month you are going to be recording sales, for this example we will be doing January 2010. So I would enter the date of January 31, 2010.

9. From the account drop down pick your Income account (mine is Accounting Services Income).

10. Tab over (or move with your mouse) to the credit column and enter your payments collected total for the month you are entering. You will get this information from the Revenue Report that you previously generated from FreshBooks, it is your total at the bottom for the month in question.

11. Go to the second row and from the account drop down box select your bank account that the funds went into and in the debit column enter the same amount (in most cases QuickBooks will automatically fill in that amount for you).

12. Tab over to the Name column and enter your general client name that you set up in Step 6.

13. Check to make sure that your entry looks similar to this:

14. Press Save and Close

What has happened now is you have your entire month income inside of QuickBooks. The income is sitting in your bank account.

Now, there are some rules about this:

• You must wait until the end of the month.
• If you want to track revenue by ‘client’ rather than just the general revenue, you would do the same thing as above but change Steps 6, 10 and 12.
  1. Step 6 would no longer be necessary.
  2. Step 10 would become: Tab over (or move with your mouse) to the credit column and enter your payments collected by client for the month you are entering. You will get this information from the Revenue Report that you previously generated from FreshBooks, it is next to your clients name, in the month column you are entering.
  3. Step 12 would become: Tab over to the Name column and enter your client name that you set up in Step 6.

Problems you may be thinking:

1. Not all of my income goes into the same bank account.

Answer: That is fine in Step 13 you can have multiple rows, not just two. So let’s assume that my $8,337.40 deposit was split between three bank accounts. I would still have the Row 1 be the credit column, but then Rows 2, 3 and 4 would each have the bank account that the monies went into and the specific amount. See here for an example:

2. Not 100% of my invoice payments go into my bank account, because I accept credit cards or Paypal and they take a percentage of the revenue.

Answer: If you accept credit cards or Paypal you have to understand that your money goes into a ‘different’ bank account before it hits your real bank account. Think of your merchant account as being a bank account or your Paypal account as being a bank account. In the next blog post I will explain how to deal with this in detail.

3. What about sales tax? All of your methods are recording sales tax as general revenue or income and I know it is not.

Answer: You are correct. We must make an entry to appropriately allocate your sales tax. I will cover this in detail in a follow up blog post as well.

Stay tuned, in the next week I will be writing two more blog posts:

• How to handle accounting for credit card processing or Paypal fees in QuickBooks (with a special segment on relating it to the suggested FreshBooks entries)
• How to handle allocating your sales tax in QuickBooks from FreshBooks.