Books and record keeping for dummies (Proceedings)

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Accurate and complete financial recordkeeping is important to any hospital owner, but is also important to those who work with the veterinarian. People both inside and outside the hospital all depend on the accurate recording of financial transactions.

Accurate and complete financial recordkeeping is important to any hospital owner, but is also important to those who work with the veterinarian. People both inside and outside the hospital all depend on the accurate recording of financial transactions. The person who handles the job of bookkeeping within the practice must be organized and follow the necessary steps to process the information in order to provide dependable information to make management decisions.

How you process your books and records depends on your accounting method. The two basic methods to choose from are cash basis accounting and accrual accounting. The main difference between these two methods is at what point do you record income and expenses. On a cash basis you are only recording transactions when your money flows in or out of your bank account. On an accrual basis you are recording income and expenses when they are incurred not necessarily when money is received or paid. If you are utilizing QuickBooks software to process your transactions you can determine the method that you are currently using. To do this you would click on edit, then Preferences and select Reports & Graphs. On the Company Preferences tab it will indicate what method is currently being used.

In your recordkeeping system it is called double-entry bookkeeping. For every transaction that is entered there is a debit and a credit. In the accounting world this is opposite from a bank. If a bank debits your bank account they are taking money out and in your accounting system a debit is putting money into your bank account. For asset and expense accounts you will increase their balances with a debit and decrease with a credit. For liability and income accounts you decrease their balances with a debit and increase with a credit.

Before processing any transactions you need to understand your chart of accounts. There are five basic account types in accounting: assets, liabilities, equity, income and expenses. QuickBooks breaks these basic account types into the following:

     • Five types of assets: Bank, Accounts Receivable, Other Current Asset, Fixed Asset, and Other Asset

     • Four types of liabilities: Accounts Payable, Credit Card, Other Current Liability, and Long Term Liability

     • Income and Expense types: Income, Cost of Goods Sold, Expense, Other Income, and Other Expense

To access your chart of accounts in QuickBooks you would click on Lists then select Chart of Accounts. You can print the report from this screen also by clicking the reports box and select Account Listing. In addition to your chart of accounts your accounting preferences in QuickBooks should be reviewed. To do this you would click on edit, then Preferences and select Accounting. On the Company Preferences tab the box for Use account numbers and Require accounts should be checked.

Since most practices use veterinary specific software to keep track of clients, invoicing and collection of money, this information is usually entered in summary format into the QuickBooks file. In QuickBooks you can create customers for cash and checks, MasterCard/Visa, American Express, Discover, and Care Credit. The deposit should be entered daily into QuickBooks only after the Deposit Report from the veterinary software is reconciled with the cash drawer. The cash drawer should be counted and balanced to a daily payment register – by payment type by a staff person independent of the cash collections, to the extent possible. Any discrepancies should be reconciled between the drawer and the report prior to completing any end of day procedures in your veterinary software. The deposit is usually allocated to one specific income account in the chart. For example, all client payments would be deposited and posted to account 5000 Service fees. At the end of a month the total deposits into that particular account should be equal or close to the amount on the Monthly Deposit Report from your veterinary software. You may have some discrepancies due to errors that may have occurred during the month. The date of the deposit in QuickBooks should correspond to the date of the receipts not the day the deposit was taken to the bank. If cash and checks are not taken to the bank on a daily basis a separate deposit slip should be prepared for each day's receipts. At the end of the month a sales allocation journal entry should be entered. The portion of the journal entry representing payments received would be posted to the Service Fees account. As a result, the Service Fees account should be zero or close to it. Discrepancies can relate to miscoding in the veterinary software and/or the proper cutoff of entering deposits.

In regards to the people you owe money to (vendors) there are two different ways to enter that information into QuickBooks. If you are on a cash basis of accounting you will just write a check to the vendor at the time you wish to pay the bill not necessarily when the bill was received. If you are on an accrual basis of accounting you will enter the bill into QuickBooks when received and then pay at a later date. Keeping track of your vendor bills on an accrual basis enables you to better match income and associated expenses and to have a better handle on your cash flow requirements. To enter a bill within QuickBooks select the Vendors Menu and choose Enter Bills. The top half of the window is where you enter the bill and the bottom half is the detail area where you assign the bill amount to different accounts. If the vendor is not in the list, you can do a Quick Add or setup to complete all the appropriate information now instead of later. Click Save & New if you have more bills to enter or Save & Close if this is the last one to process.

When invoices (bills) are received from a vendor for inventory items you need to verify that the invoice quantities agree with the packing slip and the price quoted agrees with the purchase order. Any variances should be investigated and resolved promptly. Once the bill is entered in QuickBooks it should be stamped posted with the date, initials and account number posted to and placed in a bills to be paid file in alphabetical order. An accounts payable aging summary can be printed or viewed in QuickBooks to determine the total bills you have outstanding at any given point in time. To access go to Reports menu, Select Vendors & Payables then A/P Aging Summary. This will provide a list of what is owed as of the current date. Utilizing this report will help manage cash flow. Once you have determined what bills are going to be paid you can use the Pay Bills feature in QuickBooks.

From the Vendors menu, choose Pay Bills. The Pay Bills window will show all your unpaid bills as of any date you enter and you can filter by all vendors or specific ones and sort either by vendor, due date, discount date or amount due. Choose the option that best suits your current need. Make sure you check "to be printed" option if you are planning on printing the checks later (batch printing). Select the bills you would like to pay by clicking in the column left of the bill. Once you select, a checkmark is displayed next to the bill and it changes the amount in the Ending Balance to reflect the payment amount. You should set credits for any of the vendors you are paying if they are available. QuickBooks will indicate if credits are available for that vendor when you have selected them for payment. Click Pay Selected Bills. You can print the checks now or you can print them later from Print Forms on the File menu. The printed checks should be clipped to the appropriate invoice including an envelope for mailing. The invoice should be stamped paid and include the date and check number. The owner or authorized personnel should review the invoice before signing the check. Once the check is signed it should be placed in the envelope, sealed and then mailed. The paid invoice can then be returned to the bookkeeper for filing. You should not return the signed check back to the individual who prepared the checks. You should never allow the person who prepares the check to review the bills to be paid and sign the checks, unless that person is the hospital owner.

In addition to paying bills by checks you can pay the bills by credit card. In the Pay Bills window you will select the appropriate credit card as the payment method and select the bills to be paid in the same way as if paying by check. Once you click on Pay Selected Bills it will remove the bill from your accounts payable list and now include the amounts in your credit card payable account. You can also enter credit card charges at the time an item is charged. To enter a credit card charge, choose Enter Credit Card Charges from the banking menu. In the Credit Card field, select the proper credit card. In the Purchased From field, select the vendor name the items were purchased from. Click in the Amount Field, and double-click to select the entire amount. Type in the dollar amount and then press Tab. Click the Expense tab. In the detail area, click the Account column and assign the charge to the proper chart of account. Click Save & Close to record the transaction and close the window.

The credit card should be reconciled on a monthly basis once the statement is received. To reconcile a credit card statement, from the Banking menu choose Reconcile. Select the proper credit card account in the Account Box. In the Statement Date field, enter the period end date of the statement. In the Ending Balance field, enter the ending balance on the statement. To mark the transactions as cleared: In the Charges and Cash Advances section of the window, select charges that cleared and in the Payments and Credits section of the window, select the payments that cleared and then Click Reconcile Now. You can select write a check for payment now or enter a bill for payment later. Select your option and click OK. If selecting a bill for payment later you should only enter the bill for the amount you will send to the credit card company. In the Select Reconciliation Report window, select Detail and then click Display. Review the report, click Print to have a hard copy and then close it.

Many of the bills, checks, or journal entries you make in your business are ones you repeat again and again. For example, you may have a monthly depreciation entry, monthly rent check or bill to a vendor. QuickBooks lets you memorize these so that you don't have to retype the information.

To memorize a bill enter the transaction as you'd like it memorized. If the content of certain fields will change each time you recall the transaction, leave those fields blank. For example, you might want to leave the Amount field blank on your monthly utility bill. That way, you can fill in the amount each time the bill is recalled. From the Edit menu, choose Memorize Bill. In the Name field, type a description that helps you recognize the memorized item, or keep the default description QuickBooks has provided. Click OK and close the open windows.

When you memorize a bill, QuickBooks adds it to the Memorized Transaction list. To recall a memorized bill, from the Lists menu, choose Memorized Transaction List. Double-click the transaction you just added and fill in the amount. Click Save & Close to record the bill and press the ESC key to close the Memorized Transaction List.

If there are questions or you need information on a particular transaction using the Find feature in QuickBooks can be very helpful. Under the Edit menu the Find feature offers two options. One is a simple Find which allows you to do a quick search using the most common transaction types. The search results are displayed in the lower portion of the window. You can view an individual transaction by highlighting it clicking Go To, or you can view a report by clicking Report. The Advanced Find lets you do a more detailed search for transactions than you can do using the Simple Find. Advanced Find allows you to apply filters to your search criteria. When you apply a filter, you choose how you want QuickBooks to restrict the search results-to certain vendors, for example. QuickBooks then excludes from results any transactions that don't meet your criteria. You can apply filters either one at a time or in combination with each other. Each additional filter you apply further restricts the content of the search.

If you found that you made errors in a prior period, you do not want to change transactions dated in a closed accounting period because doing so would change net income in a period for which you have already issued financial statements and/or file the tax returns.

If you entered the wrong amount on a bank transaction (e.g., check or deposit) and the transaction is dated in a closed accounting period (i.e. completed bank reconciliation), do not void, delete or edit! Instead enter a reversing entry in QuickBooks. A reversing entry is a deposit (if the error transaction is a check) or a check (if the error transaction is a deposit). Date the transaction in the current accounting period (i.e. the current date) and use the same account that you used for the original transaction so that the two transactions cancel each other out. Both the original transaction and the reversing transaction will show on the Reconcile screen. Clear both transactions.

Next, enter the correct amount in a new transaction dated in the current accounting period. Clear this transaction through the Bank Reconciliation screen when it clears the bank. The net effect on the Profit & Loss report in the current period is the difference between the reversing entry and the new transaction.

If you need to void a check use the "GO TO" button to find the check in the register and note the account or accounts to which the check is posted. Do not use the Void option of QuickBooks since it will void the check in the period based upon its original date. The only time you would use the void option is if the current date is the same month that the check was written in. Add a deposit transaction in the current accounting period that "reverses" the check that will never clear. On the next bank reconciliation for this account, clear both the check and the deposit (reversal). These two transactions effectively cancel each other out.

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