July 20, 2018 05:29 PM - edited August 27, 2018 10:43 PM
Do more with QuickBooks by knowing exactly what each feature is and does. The QuickBooks Online Encyclopedia is designed for everyone -- those who are brand new to QuickBooks as well as those needing a quick reference.
In this entry, we cover the essential features and workflows of QuickBooks Online. We also highlight functions that are unique to QuickBooks Online (designated by the [ ] symbol) so you can get the most out of your accounting tools.
To navigate this resource, click one of the alphabetical jump links below or hit Ctrl+F /Control+F in your browser to search for a specific term. For accounting definitions, check out "QuickBooks Encyclopedia – Basic Accounting Definitions."
Connect an Online Bank Account
Simple Definition: If you connect your bank accounts in QuickBooks Online, the program will automatically download the last 90 days of transactions recorded by your bank. This feature ensures your accounts are always up-to-date so you don't have to do double data-entry.
Textbook Definition: Connecting your accounts to QuickBooks Online is a great way to track your income and spending. Only recording sales forms while leaving out expenses gives an incomplete perspective of your business’ overall health, but entering all of your business expenses by hand can be very time-consuming. Let the Online Banking feature automate the work.
You can connect multiple bank accounts (including credit cards and PayPal) to QuickBooks from the Banking Tab. Search for and choose the bank accounts you use for your business from the available list, tell QuickBooks the account type, and you’re ready to go.
Once transactions are downloaded into QuickBooks, they appear in the Bank Feed in the Banking Tab. You’ll still need to categorize them so they're recorded to the correct accounts.
In the Banking Tab, go to the “For Review” sub-tab. You will see all the transactions that are recognized by the system and need to be categorized. The program will initially try to match transactions against existing invoices and expenses in QuickBooks (and use bank rules you’ve created). If you need to recategorize them, simply click the transaction and place it in the correct account.
Entries marked with "Match" mean that QuickBooks has found a transaction (invoice, expense, etc) in the system that matches your bank records.
Entries marked with "Add" indicate that QuickBooks has not found an entry. In these cases, QuickBooks will create a new record and categorize it for you. You may need to recategorize these frequently in the beginning, but the more you use the feature, the better the system will get at predicting the correct category. After you click "Add," check the record (Sales Tab for Invoices and Expense Tab for expenses) and make sure the information is correct.
Term in use: My friend uses two different credit cards to pay for her business expenses. She connected each one in the Banking Tab and now has all her income and expense transactions in one place. This cuts her data entry in half since she can "match" many incoming transactions with existing records in QuickBooks and quickly the "add" remainder.
For the full article, see “ How to Connect Bank Accounts to QuickBooks Online”
Simple Definition: Bank rules automatically categorize transactions from your connected bank accounts based on your specified criteria.
Textbook Definition: For frequently downloaded transactions with the same payee, total, or written description (as written by the bank), bank rules can save you a lot of time.
You can create bank rules based on type, category, payee, class, and location and the system will automatically assign transactions to the appropriate accounts. QuickBooks only applies one rule at a time to transactions in the “For Review” tab in the Banking Feed, but you can prioritize your rules.
To reduce the need for multiple rules, create rules with “or” clauses so transactions are edited once they meet any of the outlined conditions. To enable the “or” function, change the drop-down so that it shows "When a transaction meets ANY of these conditions."
Transactions recognized by QuickBooks using your bank rules are marked with the “Rule” symbol. These are filtered into the "Recognized Tab" in the Bank Feed.
Term in use: I want to add a rule so my team’s fuel costs are always categorized into the same expense account. I go to Banking Tab > Bank Rules > New Rule.
My “Fuel Rule” has a few conditions: it only applies to our company Master Card, the transaction must contain the word “Chin” and equal $20 because I limit drivers to a $20 fill up. The payee is Chin’s Gas (vendor) since our team always fills up at the same station down the road.
Now, each time one of our team members fills up, the transaction is automatically categorized in the Bank Feed.
Simple Definition: After you’ve sent your invoices and received the payments into your Undeposited Funds Account (also see the "Undeposited Funds" entry below), you need to do a bank deposit in QuickBooks.
1. Send Invoice 2. Receive Payment into 3. Bank Deposit
Textbook Definition: There are a few different Bank Deposit features available in QuickBooks Online depending on how you enter transactions.
If you used the workflow above and received invoice payments into your Undeposited Funds account, the payments will show up in the “Select the payments included in this deposit” section of the Bank Deposit screen. Payments will only appear if you’ve chosen Undeposited Funds as the “deposit to” account when receiving payments.
Select the account you want to deposit payments into at the top, double check the information, and submit your deposit to close the loop.
Important - Before you can make a Bank Deposit, you need to process the payment. If you haven't yet received payment for a sale, create and process a new invoice. Make sure you select Undeposited Funds in the “Deposit to” field when you receive the payment. If already received payment at the time of the sale, create a sales receipt.
Using"Add funds to this Deposit": the "Add funds to this deposit" feature is for manually adding funds to an account from sources not processed through sales forms, invoices, or bills. This how you account for items like assets, loans, and equity into your accounts.
If you’ve already started the invoice creation process, finish the workflow by receiving the payment directly into your Checking account or into Undeposited Funds. Do not jump ahead and add an invoice payment using the "Add funds" feature. If you enter it here and later deposit a payment to close the open-invoice, you will double count your income.
If you use QuickBooks Payments: The QuickBooks Payments section only appears if you are using QuickBooks Payments and you are waiting for a customer payment to settle. This section shows pending payments. These will be deposited automatically once the payment is received.
Term in use: I have three paid invoices for coffee wholesale orders. I click the Plus Icon ( ) and select “Receive payment” to deposit these payments to my Undeposited Funds account. I also have one sales receipt for $75 since I was paid by the customer at the time of sale - I don’t have to receive payments for sales receipts.
Now that all the payments are recorded in QuickBooks, I’m ready to make a Bank Deposit. I click the Plus Icon ( ) again and select "Bank Deposit." I see my three invoice payments and the sales receipt (all with the correct payment amounts) already there, ready to be deposited. Actually received payment for two of the invoices as a single check payment, so I will click those two invoices and deposit them as a group payment. I will click and deposit the other two individually.
For the full article, see “ How to Record a Bank Deposit in QuickBooks Online”
Simple Definition: Product Categories (and subcategories) are used to organize and track related products and services you sell.
Textbook Definition: Product Categories are a method of classifying products and services in QuickBooks Online. Categorizing what you sell helps you better understand sales volume and trends. Categories also allow you to quickly analyze your product sales performance with minimal effort.
Additionally, categories save time when completing transaction forms since you can search for items by category. Finally, categories make sales reports easier to understand since items are separated into their respective hierarchies.
Product and service items can only have one categorization. However, products placed in subcategories “live” under the parent category. When you create your structure, think top-level and immediate-level categorizations concurrently - do you only want to separate products by type or type and brand or type and brand and seasonality.
If you remove a category (or subcategory), items within the category will either move up one category level or be reclassified as “Uncategorized.”
If you are migrating from QuickBooks Desktop Pro/Premier, items or sub-items that have child items will be converted into categories (and will maintain the hierarchy).
Term in use: I want to track all my products and services related to landscaping. So, I created a “Landscaping” Product Category and “Sprinklers" sub-category to track items specifically related to installing and selling sprinkler parts. Keeping the top level parent category broad lets me easily add multiple subcategories moving forward.
For the full article, see “ How to use Product Categories in QuickBooks Online ”
Simple Definition: You can use QuickBooks Online to record handwritten checks and even print the ones you enter. Note that check printing is separate from the Pay Bills function. This definition covers checks for [aying expenses, not Payroll checks.
Textbook Definition: Whether or not you use QuickBooks to print and generate checks, whenever you write physical checks to pay for business expenses, you need to enter the financial information into QuickBooks so you have accurate data.
To enter a check you’ve already written, click the Global Create Icon ( ) and select “Check.” Enter the information, reference number and select your checking account.
If you want to create a new paper check from an entry in QuickBooks, follow the same process (Global Create Icon > Check). When you’re ready to print, go to Expenses Tab > Print Checks. This feature is designed to work with Intuit checks. Use the four-step module to choose your layout, update your PDF reader as needed, and make adjustments to the alignment.
For the full article, see“ How to Print Checks in QuickBooks Online”
See – Workers Tab
Simple Definition: Use invoices when you sell a product or service and expect to get paid in the future. Once the invoice is paid, you receive the payment in QuickBooks.
Use sales receipts when you sell a product or service and are paid at the time of sale. Since you’ve already been paid, you can skip the "receive payment" step.
Textbook Definition: Invoices and Sales Receipts are the two basic sales forms you use in QuickBooks Online. Depending on how you are paid for the sale, there are two ways to record sales transactions.
For deferred payments, use Invoices and once you're paid, receive the payment. Think of each transaction as a two-step process. First, you create the Invoice and thus a record of the sale. When your customer pays, you receive the payment against the invoice. At this point, you either deposit the money into your checking account or the Undeposited Funds account and then make a Bank Deposit.
1. Send Invoice 2. Receive Payment into 3. Bank Deposit
For immediate payments, use Sales Receipts.
1. You’ve been paid 2. Create a Sales Receipt 3. Deposit into an account or use the Bank Deposit feature
Term in use: I sell flowers to a kiosk at a local hospital. Generally, I send Invoices and the owner pays me at the end of the month. Last week, the owner paid me in-full with cash since it was a smaller order. When I got back to my computer, instead of generating an invoice in QuickBooks Online as I normally would, I created a Sales Receipt.
Lists (Customer, Vendor, Products and Services)
Simple Definition: Lists are what QuickBooks uses to organize and structure your data, especially for sales forms.
Textbook Definition: Lists serve both user-facing and behind-the-scenes functions. Lists are comprised of items (customers, vendors, products and services). These items are what populate the data fields on sales forms.
In addition to historical transactions, the dashboards on the Sales and Expense Tabs display your lists for all customers, vendors, products and services. You can access other less commonly used lists, such as the Chart of Account (i.e. the list of your accounts), Payment Methods, and Attachments by clicking the Gear Icon (
) > All lists.
Term in use: There are two primary methods for adding items to lists:
The easiest way to create items from scratch is to navigate to the appropriate tab (customer, vendor, products and services) and click “New” or “Add New” on the respective list page. You can edit items you’ve already created by selecting them on the list.
This "build-lists-all-at-once" method is arguably the better method since you take the time to add the key details all at once. Seeing your items side-by-side on lists also helps with strategizing your organization.
You can always new create new items and add them to lists as you work. Just be sure to go back to add the details later on. Most data fields have an “Add New” option that lets you create individual items (customers, vendors products and services) directly from sales forms. Note that clicking “Add New” from a sales form takes to the same item builder module.
Make it a habit to update your lists on a regular basis, either monthly or quarterly. Consistent upkeep will save time in the long run.
For the full article, see “ Setting up for Success - Adding Products and Services, Customers, and Vendors to Lists”
Simple Definition: the “net” in net payment terms refers to the number of days before a payment is due. Payment terms are as much an agreement as they are a set of expectations established between buyers and sellers. Payment terms should be adjusted based on the pace of your industry and your relationship to your customers.
As the owner of a small business, you not only have to choose and define payment terms for your clients, you must also adhere to the terms outlined by your vendors and suppliers.
Term in use: I initially set my Net payment terms to "Net 30," but decided to switch to Net 15 so I can get paid sooner. I emailed all my customers two weeks before I made the change to provide ample notice.
I can adjust default payment terms for invoices by going to Gear Icon ( ) > Account and Settings > Sales > Sales form content. Once I've made changes, the new settings are automatically applied to all invoices going forward, not retroactively.
You can adjust payment terms for individual invoices directly on the forms – however, this change only affects the specific invoice.
I can even create custom payment terms and even add a discount for early invoice payments by going to Gear Icon ( ) > Account and Settings > Sales > Sales form content and selecting “Add New” from the drop-down. Note, however, that discounts are not automatically applied to qualified invoices. Discounts need to be added manually and should be calculated for the original balance due, not including tax - learn more.
For the full article, see “ How to Adjust Your Invoice Payment Terms in QuickBooks Online”
See - "QuickBooks Payments Home Page"
Simple Definition: Invoices and bills sent to the same customer or vendor with the same transactions can be set up as recurring transactions.
Textbook Definition: To an extent, this feature helps to automate transactions. You can set the time interval, create reminders, and schedule forms to send automatically. This feature is useful for invoicing customers with standing orders or recurring expenses with set amounts, such as rent.
The easiest way to create a recurring transaction is to take an existing form, scroll to the bottom, and select "Make recurring."
To manage your recurring transactions, click the Gear Icon ( ) > All Lists > Recurring transactions. This dashboard is also where you can set reminders and create new recurring transaction templates from scratch rather than from an existing form.
Important: Changes to recurring templates are not retroactive. If you make edits to product or service items (adjust the description, rate, taxability or income account) or customers (address, shipping address, taxable status, etc) that appears on a Recurring Template, you'll see the message “The matching Recurring Templates will be updated with your changes.” This applies the changes going forward.
When you edit certain fields in Company Settings, QuickBooks Online updates recurring templates accordingly. Unlike items or customers, you won't see a warning message when making settings changes.
|Also Important: When you turn on your Sales Tax preference, a dialogue box appears to ask if you want to make all items taxable. Even if you say "Yes," QuickBooks Online will not update recurring templates with these new tax settings|
Term in use: Let’s say you have a customer you provide breakfast pastries for every Friday. It’s always the same order on the same day. This is a perfect use for the recurring invoice feature. You want to automatically invoice your customers every Monday for $200 for an indefinite period of time. You create an invoice, make it recurring, and enable the following settings:
As long as the actual items ordered on the invoice don't change, you can maintain this recurring invoice indefinitely.
Simple Definition: This is a special temporary account that QuickBooks uses to hold received payments before they are deposited in the bank (see Bank Deposits).
1. Send Invoice 2. Receive Payment into 3. Bank Deposit
Textbook Definition: Undeposited Funds is an internal “Other Current Asset” account created by QuickBooks to hold funds until you are ready to deposit them. It serves as the default "deposit to" account when you receive invoice payments, use a payment item on an invoice, or enter a Sales Receipt.
You can think of the Undeposited Funds account as an envelope where you keep checks until you're ready to take them to the bank. Essentially, it holds onto payments until you are ready to processes and finish them by recording them to the correct accounts in QuickBooks.
The Undeposited Funds account also allows you to group multiple payments into a single transaction. If your bank (or third party payment processor) recorded payments from multiple payments or invoices as a single record, you'll want to do the same in QuickBooks and combine whatever payments are needed to mirror this process. This will streamline bank reconciliations since you're actively making the records match.
You can change where you want received payment money to go before making a bank deposit by selecting a different "deposit to" account from the drop-down menu -- these payments will not show up on the Bank Deposit page (see "Bank Deposits")
Term in use: When you receive an invoice payment, your default “deposit to” account is Undeposited Funds. If you need to, you can batch deposit multiple payments when you make a bank deposit.
For the full article, see “How to Use the Undeposited Funds Account in QuickBooks Online” and "How to Make a Bank Deposit in QuickBooks Online"
Simple Definition: This is where you manage information for your regular employees and independent contractors.
Textbook Definition: You can update everything from an employees’ hire date to how their name displays on checks from the Workers Tab. This is also where you run Payroll if you have those services enabled.
There are separate tabs for employees and independent contractors (who are categorized as vendors in QuickBooks). It’s important to separate these groups (and separate their expenses). This is due to their working relationship with your business.
While you can add new independent contractors and prepare 1099s from the Workers Tab, you can also designate an existing vendor as an independent contractor by going to Expenses Tab > Vendor, editing their profile, and enabling the tracking option from their profile.
Term in use: I want to enter a new employee and two independent contractors into QuickBooks. One of the contractors already has a vendor profile and the other does not.
To add my employee, I simply go to the Workers Tab and enter their information. Now to add the independent contractors (who are not my employees). I start with the independent contractor who isn’t in my system. I go Workers Tab > Contractors > Add a Contractor and see the following:
If you plan to use this method and request their information via email, make sure you double-check whatever they provide. Since you're filing their 1099-MISCs, you're responsible for this information.
In certain cases, I prefer to add their information myself. So instead of going to the Workers Tab, I go to Expenses > Vendors and add a new Vendor. I fill out their information and check the “Track payments for 1099” box. While I am still in the Expenses Tab, I find the second contractor who already has a vendor profile in my system. I click on their name and “edit” their profile. All I have to do is check the “Track payments for 1099” box.
When I go back to the Contractor Tab, I see all of my independent contractors on the list.
For the two contractors, I also need to make sure their expenses are tied to a special account so I can report my taxes accurately -- be sure to read the full article, “How to Track Contractors for 1099 Payments in QuickBooks Online.”
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