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 3, if you have not read the previous posts, I suggest that you do:

Part 1: Methods 1 & 2 to getting FreshBooks Income into QuickBooks

Part 2: Method 3 to getting FreshBooks Income into QuickBooks

Also useful, is my post: Handling Credit Card and PayPal Processing Fees in QuickBooks, which has a short segment relating to FreshBooks as well.

On to the good stuff!

So, you have your income or receivables in QuickBooks, you may have even taken out your PayPal or Merchant Processing Fees. However, you don’t have your sales tax anywhere, as a matter of fact, it is showing as an Income and we all know your Sales Tax is NOT an income.

Well let’s correct that, shall we?

Just to recap… if you charge sales tax, your sales tax is included in the numbers that you entered from FreshBooks, so it is very important that you remove your sales tax from your revenue/income accounts and allocate it to your sales tax payable account.

1. Go into your FreshBooks Account

2. Click on the Reports Tab

3. Click on the Tax Summary Report in the first column

4. Select the month in Question that you want to enter.

5. In the Revenue section, you have to pick either Billed (Accrual) or Collected (Cash Based) – the choice you pick will be determined by the income entering method you have elected to use (based on previous posts). If you selected Methods 1 or 2 where you are accounting for your receivables you will select the Billed (Accrual) method. If you selected Method 3 where you are only accounting for your payments received you will select the Collected (Cash Based) method.

6. Once you have the amount/totals from your report (sorry I can’t give you a screen shot, I don’t have sales tax inside of my company) go into QuickBooks, select Company from the file menu and Make Journal Entries.

7. Enter the end date of the month you have pulled your sales tax details for.

8. In the first row from the account drop down box, pick your Income Account (mine is IAC Professionals Service Revenue), tab over to the debit column and enter the total of your sales tax from your sales tax report.

9. In the second row from the account drop down box, pick your Sales Tax Payable account (this should always be Sales Tax Payable) and in the credit column enter the total of your sales tax from your sales tax report. In this row you will also need to enter the name of your Taxing Agency in the Name Column. If it is not yet in your Vendor List, click Add New and create it. For example, mine would be State of Florida Sales Tax Department.

10. Press Save and Close

This has removed the actual sales tax portion of your revenue, out of your revenue and into your sales tax liability account, enabling you to use the ‘Pay Sales Tax’ feature inside of QuickBooks.

Do you have any questions or specific circumstances that I did not help you with? Feel free to comment on the post with your question(s) and I will respond personally!

Many merchant accounts (these are the people that permit you to accept credit cards) just take a monthly debit out of your bank account at the end of the month, these are easy to account for, you simply enter a withdrawal in your account register for the amount debited and categorize it as Merchant Processing Fees, which should be a COGS or an Expense (this varies by where you are located and your industry, check with your accountant if you are unsure).

However, what about those merchant accounts that take the percentage before you even get the money, similar to Paypal? This makes it more difficult to track, however, I do have an answer.

(I want to say that I recommend that the following is done even if your fees get debited as a whole so that you can process the flow of your income.)

1. Open up a new bank account inside of QuickBooks, call it Merchant Account, or PayPal, or Google Checkout (whoever your processor is). Don’t hesitate to set up multiple, as a matter of fact many of my clients have multiple, so I set up an account titled ‘Merchant Accounts’ and then I have sub accounts titled PayPal, Google Checkout, Chase Paymentech under the main ‘Merchant Accounts’ account.

2. When you receive your payment for services (via Invoices or Cash Receipts) don’t deposit directly into your checking account, deposit it into the merchant account it goes into, because let’s be honest, it is not in your checking account yet.

3. As the monies show up in your checking account, transfer the funds from your merchant account to your bank account. This also makes it easier for PayPal when you may accumulate funds in the account and only make random transfers from the PayPal account.

4. Accounting for your fees/costs – can be done in one of three ways:

• If you get lump sum fees at the end of the month debited from your checking account, don’t worry about doing anything differently, just record that transaction once it posts.
• If you are using a service like Google Checkout or PayPal you can ‘see’ how much they take out via their transaction reports, so at the same time you make that transfer from your ‘merchant’ bank account in QuickBooks to your ‘checking’ bank account in QuickBooks – you can make a withdrawal entry from your ‘merchant’ checking account for your merchant processing fees.
• If you are using a more standard merchant services provider, you rarely get daily reports, and rather get monthly reports, at the end of every month when you get your reports, take the cost of the fees they charged you off of the statement and make a lump sum withdrawal from your ‘merchant’ bank account for your merchant processing fees. This is a good way to reconcile too, making sure you received all your monies, because at the end of the month after you enter the fees, the only thing left in your account should be any undeposited recent payments.

For my FreshBooks followers:

I promised you a follow up to my recent ‘making FreshBooks and QuickBooks play nicely posts’ – if you have not read them yet, check them out:

Making FreshBooks work with QuickBooks and vice versa Part 1

Making FreshBooks work with QuickBooks and vice versa Part 2

My suggestion for you all in regards to credit card processing fees is to do the same thing that I suggest above – create additional accounts for your merchant processing accounts and rather than depositing the payments received directly to your bank account, place them in their appropriate merchant account as the ‘middle man’ before it hits your bank account, and follow one of the three options above for recording the appropriate fees.

Do you have any questions or specific circumstances that I did not help you with? Feel free to comment on the post with your question(s) and I will respond personally!

Stay tuned, in the upcoming week I am going to talk about allocating Sales Tax in QuickBooks for FreshBooks users, incorporating it into my previously suggested methods for recording receivables and revenue.

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.

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.

Method 1: Getting Receivables as a whole into QuickBooks

This method is ideal if:

• You do not need to track the accounts receivable balance by client inside of QuickBooks, but want to track your accounts receivable as a whole.
• Have no issues with documenting your invoicing on a monthly basis inside of QuickBooks.
• Are okay with entering your payments received on invoices, once the payments are actually received from your customers.

Note: I offer this as an option, because maintaining who owes you what in QuickBooks is not that big of a deal, because you track that same data inside of FreshBooks. However, tracking your accounts receivable total is necessary for some companies, such as accrual based entities.

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 billed, 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 sales 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 accounts receivable account 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. You should be able to see that the balance exists for your general client, and see the revenue reported in your Profit & Loss Statement.

You are not done yet! When you receive payments from your customers on these open invoices, you have to record this in QuickBooks. This is easy though:

15. Get a notification from FreshBooks that you have received a payment.

16. Open up QuickBooks

17. Click on Customers & then Receive Payments from the main menu.

18. Pick your general customer name in the Received From field, enter the amount received, the payment method, the date it was received, and then in the Memo line, I like to personally leave the real clients name and invoice number.

19. Click Save and Close.

20. Don’t forget to deposit your money in the Banking -> Make Deposits menu, all customer payments are automatically stored in Undeposited funds in recent versions of QuickBooks (in some older versions, you could pick the account you want it deposited to at the received payments screen).

Method 2: Getting Receivables on a per client basis into QuickBooks

This method is ideal if:

• You want track the accounts receivable balance by client inside of QuickBooks.
• Have no issues with documenting your invoicing on a monthly basis inside of QuickBooks.
• Are okay with entering your payments received on invoices, once the payments are actually received from your customers.

It is the same process as outlined above in method 1, with the following changes:

1. In Step 6 you will either want to skip this step or set up your actual clients name if they are not already in QuickBooks.

2. In Steps 10 and 11 you will only enter the amount for the specific client in that month, rather than the total revenue.

3. In Step 12, rather than entering the ‘general clients’ name, you would enter the specific name of the client.

4. In Step 18, rather than picking the ‘general clients’ name, you would select the specific name of client from whom you received payment.

It should be noted that with this method you will have to do an individual entry for each client, as QuickBooks does not permit combined General Journal Entries involving accounts receivable and multiple customer/client names.

In my opinion: It is not necessary to record things as in method 2, because you are already maintaining client specific accounts receivable information in FreshBooks. Entering your data as outlined in method 1 will assure your data is accurate, just not identical as it relates to client specific invoices and balances.

Before you pick one method over the other, I want to state that there are more ways than just these and I will be outlining them in upcoming blog posts.

Some of you may not want to have to enter your accounts receivable (the invoicing) and the payments received (the money received), this is especially applicable to cash based reporting companies, whose income is only income once the payment is actually received. So, rather than having to enter all the invoicing totals and then payment receipts, you can enter just payment totals. There are several ways that this can be done. Stay tuned and I will outline them in an upcoming blog post.