‘How to Build an Empire with Cloud Accounting’ sets its sights on Intuit’s QuickBooks App, with a Four-Part Series breaking down the functionality of the App into streamlined, repeatable steps to realize the advantages of cloud-based accounting solutions for your business. At Strata-G, we are a Xero firm who also appreciate the opportunity to partner with QBO clients. Stay tuned for helpful guides for Xero Apps.
How to Build an Empire with Cloud Accounting
QuickBooks App: INVOICING – Part 2 of 4
In the second installment of this 4-part series, we dive into the world of Invoicing to explore some essential, time-saving features that Intuit has built into the QuickBooks App, while increasing your company’s cash-flow as a direct result of the streamlined, cloud-based functionality.
Before we get started, this article makes the following assertions:
- You currently have a QuickBooks Online Subscription, making the APP Free!
- The App referenced throughout the article is “QuickBooks Accounting”, but if you are Self-Employed, there is a Self-Employed version you may want to consider instead, with similar functionality
- Each article within the series will discuss many of the prominent features of the App, but if there is a specific feature that is not addressed and you would like additional information, please contact us at Strata-G and we would be happy summarize the capabilities for you, and even write an article about it.
PART II: Invoicing
Query
I have always manually invoiced and typically get paid, why should I consider an online approach?
There are many benefits to invoicing through a cloud-based accounting program such as QBO, the culmination of which is to get you paid faster, while reducing errors. Within this article we provide time-saving steps to invoice accurately, while layering in the following benefits of invoicing through
QBO:
- Integration: You no longer need to keep track of paper invoices and manually enter data. Create invoices at the touch of your mobile and send. QBO will complete the accounting and match with your integrated bank account, reducing bank reconciliation procedures.
- Delivery: Provide an Estimate, Progress invoice, or Final invoice before leaving your Client’s premises. With inventoried, or non-inventory products & services saved in QBO, you can complete invoices in minutes and email to Client.
- Track: Keep track of which Clients have viewed a sent invoice, set auto-reminders, and get notified when the invoice has been paid. In addition, you can monitor overdue invoices, and update inventory levels.
- Get Paid! Add payment options to your invoice emails, allowing the customer to pay by credit card and earn reward points, while completing payments faster with a click of a button. Allowing QBO, or 3rd parties, to collect payments does come with a small cost that you may want to consider whether prices should be adjusted for additional collection costs.1
Faster Delivery & Faster Payments means you realize your profitability more quickly and improve your cash flow. Allow QBO to send auto-reminders after a certain passage of time and include payment options with the emailed invoice/reminder, to reduce the amount of time it takes to be paid for a completed, or progress-billed job. In addition, invoices are automatically recorded to your profit and loss statement once created, and as your bank transactions are uploaded, QBO will search for a match to assist with your bank reconciliation. Accounting made easy, with increased accuracy, while you get paid more efficiently. Put down the manual invoice book, it is time to build an Empire with the Cloud!
Setting up your Invoices for Maximum Effect
Before diving into how easy it is to invoice through your QBO App, there are a few key steps to perform within the computer application of QuickBooks Online, which include:
- Importing your chart of accounts into QBO (Please follow link for steps)
- Setting up your products & services
- Track billable expenses, if applicable to your business.
- Add payment options
Setting up your Products and Services
The following steps will assume that your corporate chart of accounts has been imported, or created, and is ready to go.
To create new products or services:
- Open QBO and select Sales or Invoicing from the left-hand menu
- Select Product and Services from the top menu, then select New (you can also import a list of product & service previously established).
- Determine whether your product is an Inventory item (clothing, lumber, tickets), for which you will track quantities, a Non-Inventory item such as nuts and bolts, a Service (tax prep, labour), or a Bundle
- Follow the prompts to name the product, or service, and select the appropriate account from your chart of accounts. Input opening inventory balances for inventoried products, as well as the corresponding inventory asset and expense account if you purchase the goods. Enter the sales price and assign the appropriate sales tax code. If you track the product or service by a class (location, division), you can also assign the product or service to that class.
- Save and close or add more products and services. Once complete, your products and services can be selected from a drop-down list when invoicing.
Track Billable Expenses
At this point, your chart of accounts has been imported, and your products and/or services have been created. If that is not the case, and you need assistance, we would be happy to help you on your way The next item to set-up is the tracking of billable expenses (if you will pass on the cost of certain expenses/labour to your customers). Please note, adding billable expenses to an invoice is currently not available within the App, but is time-saving function within QBO browser.
To track billable expenses and include on future invoices please follow these steps:
- Sign into QBO, and select gear wheel from upper right-hand corner
- Then select Account and Settings, then Expenses
- Edit Bills and expenses as pictured.
- Track expenses and items by customer - on
- Make expenses and items billable – on
- Select Mark-up and you can input a rate, or leave blank and add on invoice
- Select track billable expenses and items as income and choose whether you will track in a single account or across multiple accounts.
As you generate expenses in QBO (as a result of items purchased by credit card, etc.), or new bills (Supplier Invoices), you can select whether the item purchased should be billable, and whether or not a mark-up may apply. In the illustration, the expense created for a purchase of lumber can be booked in QBO, while selecting as a billable expense, applying a mark-up of 20% and indicating which customer should be billed. Below, we will discuss how to invoice a billable amount in QBO browser. However, with relative ease, you now have a mechanism for allocating expenses for a click-of-a-button addition to customer invoices, increasing your revenue, improving accuracy, and efficiently completing your accounting (with separate mark-up account for easy tracking).
Add Credit Card Payment Options to Invoices
You can add credit card payment options in QuickBooks browser, by opening a new invoice (fastest way to do so is to click + sign, top-left, and select invoice). By doing so, a secure email will be sent to your customer with a Pay Now button, which allows the customer to immediately pay their invoice online with their credit card, earning desirable reward points. In addition, QuickBooks will notify you when invoice is sent, and when it is paid by credit card, with the deposit appearing in QuickBooks, which will then be matched to your banking upload. There is a fee that is collected for QuickBooks to collect on your behalf, so you may want to consider building the collection cost into your pricing. To complete Payment set-up:
- Open a new Invoice
- Select Get set up, at the top of the invoice
- Then select Set up Payments
- Complete information pertaining to your Business, Owner info and, Bank
- Activate Payments
Tax Tip: Tax Deferral Advantage
One advantage for incorporating your business is that revenue derived from your business, especially small business corporations, is taxed significantly lower than top marginal rates applicable to individuals. Creating an opportunity to plan a favourable distribution to owner-managers (to be discussed further in a future Strata-G blog). However, there is a deferral of taxability where profits can be reasonably retained within the corporation or reinvested in the business for additional active business income – versus distributing entirely to owner-manager. Also consider a dividend-salary mix, to meet personal and financial credit needs with your financial institution, and opportunities to distribute to lower taxed individuals within the rules of tax on split income.
Creating an Invoice within the App
These are the steps where you will begin to see how incredibly efficient and easy it is to produce invoices within minutes and email to your Client (Also estimates, just select estimate instead of invoice in the app). You can create an invoice with an iOS or Android mobile phone, both procedures are similar therefore the remainder of the article will focus on an iOS mobile device. For Android procedures, please follow this link. To create an invoice within QBO App:
- Open the App and select the + sign at the bottom of the screen, or select the short cuts menu, and select Invoices.
- Input Customer/Project Name by tapping input box and selecting Customer/Project or select + sign at bottom of client list to create a new contact and enter details (email address is required for sending invoices online).
- Tap Save in upper right-hand corner
- Fill in terms of sales and due dates. Then select + Add product or service to add invoiceable items
- As you select items, tap the arrow to adjust quantity and unit price to be reflected on invoice.
- Tap Add to add product/service to invoice and repeat as desired. Ensure appropriate Tax Code is added.
- Determine if tax is Exclusive (in addition to unit price) or Inclusive (within unit price – if you agreed a max. amount before-hand)
- Tap Save in the upper right-hand corner
- On the invoices tab, you can select the drop-down menu to sort invoices in their relative status life cycle: All, draft, paid, etc.
- Within a draft invoice you can select the 3 dots in upper right-hand corner to Preview, Email, Copy, Export, Print or Delete.
- When ready to send to, select Send Invoice
- Monitor Customer activity: viewed or paid?
- Send a Reminder as necessary
Tax Tip: Registering for GST-HST
If you are a small business and your taxable supplies (revenue that is considered taxable: not charitable or medical as an example) do not exceed $30,000 over 4 consecutive quarters, you do not have to register for GST-HST, or collect GST-HST on your invoices. However, one advantage for voluntarily registering is to claim an input tax credit on the GST-HST you incur on your business expenses. This means that you can receive a 100% refund on most GST-HST that you pay. As a small supplier, you can choose to file GST-HST returns monthly, quarterly, or annually depending on cash-flow needs and your willingness to incur additional tax compliance. Once you register, you must charge GST-HST on your invoices from the date of registration (or up to 30 days prior). If you have significant start-up costs, or material purchases, voluntary GST-HST registration can save you and your business money. Once the $30,000 revenue/taxable supplies threshold has been reached you must register for GST-HST. Taxable Supplies include sales of products or services exported, which may not bear a tax rate, but are considered zero-rated (0%) taxable supplies.
Invoicing Billable Expenses (QBO Browser)
The final invoice topic to discuss is the addition of billable expenses to a Customer invoice. Billable expenses can include actual expenses and bills created from vendors, or time that has been tracked through QuickBooks time-tracking or an another integrated App (T-Sheets for example).
Within your QBO Browser:
- Open a new invoice by selecting Invoice from + New top left-hand side of QBO
- Input the customer that you are invoicing - that you have previously assigned billable expenses to
- Billable expenses will be displayed on the right-hand side, as illustrated
- Select Add on individual expense or Add all to invoice all available billable expenses.
- The expenses will populate the invoice, and you will see mark-up line separately displayed. The mark-up will be accounted for as a separate revenue line. However, the customer will not see the separated mark-up. They will see one invoice line, as illustrated.
Final Word
At first glance, quickly filling out a manual invoice may appear to skip a whole lot of steps written in this blog post. However, the time invested to setup just one invoice will improve the accuracy of your accounting, reduce discrepancies with customers, populate your profit & loss statement, reconcile your bank account and provide your customer with the means of paying with a reward based credit card. In addition, if you have invoicing that is repeatable, you can set recurring transaction rules to invoice the same customer on a pre-defined schedule and copy the invoice to other customers, as necessary.
- Integrate accounting and banking
- increase delivery speed
- reduce potential errors
- track progress
- GET PAID!
Disclaimer: The information contained herein is of general nature and is not intended to address the circumstances of any particular individual or entity. This article expresses the opinion, experience, and expertise of staff at Strata-G Tax Professional Corporation (“Strata-G”) and does not reflect the opinion, nor certification of Intuit, or any of their affiliates.
Although we endeavor to provide accurate, timely and value-add information in all we do, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. At Strata-G we would be pleased to tailor the facts presented in this document to your specific entity needs to ensure the advice received is appropriate to your particular situation
