QuickBooks: Making it Work for

Your Practice

Presented by: Karen Osborne, CPA, MBA

Lacher McDonald & Co., CPA’s

Courtesy of: Live Oak Bank

kosborne@lachercpa.com

1.888.884.1506

Why Should a Practice use

QuickBooks?

• QuickBooks vs. Practice Management

Software

• Importance of up-to-date financial

information

How QuickBooks Should be Used

• Using the Accrual Basis of Accounting

Definition of Accrual Basis:

The accrual basis means recognizing revenue when it is earned (not only when the money is actually

received) and recognizing expenses when they are incurred (not only when they are paid).

Why use the Accrual Basis?

• Matches Revenue to Expenses

• Accurate financial picture

Example: Accrual Basis

Monthly Revenue:

• Practice Management

Report:

– Invoices = $100,000

– Clients paid = $95,000

– Accounts Receivable

increased by $5,000

How much should Revenue be

in QuickBooks under the

Accrual Basis?

Example: Accrual Basis

Reference Lab Expense:

• January Reference Lab Bill:

– Amount = $4,000

– Date of Invoice = 1/31/13

– Invoice Due = 2/20/13

How much should your

Reference Lab Expense be in

QuickBooks under the Accrual

Basis for the month of

January?

Set ALL Reports to Accrual Basis

Set ONE Report to Accrual Basis

How to Set up QuickBooks

• Goal: Meaningful Financial Statements

• Correctly use and set up your Chart of

Accounts

– AAHA Chart of Accounts recommended

To Access the Chart of Accounts

Home screen

Menu access

Chart of Accounts

• Balance Sheet Accounts:– Bank

– Accounts receivable (A/R)

– Other current asset

– Fixed asset

– Other asset

– Accounts payable (A/P)

– Credit card

– Current liability

– Long-term liability

– Equity

Chart of Accounts

• Income and Expense Accounts:

– Income

– Cost of Goods Sold

– Expense

– Other Income

– Other Expense

Revenue Accounts

• Classified by Sources of Revenue– Professional Fees

– Pharmacy Sales

– Laboratory Fees

– Vaccination Fees

– Boarding Fees

– Grooming Fees

– Diagnostic Imaging Fees

– Dental Fees

– Food Sales – Wellness & Rx

– Retail Sales

– Discounts

Revenue

• You will put your revenue into these

categories on a MONTHLY basis not daily

• These categories will summarize the revenue

categories in your Practice Management

Software

Revenue

Cost of Goods Sold

• Cost of Goods Sold Accounts

– Medical Supplies

– Prescriptions

– Lab Expense

– Food – Wellness & Rx

– Retail

– Other Cost of Goods Sold

Revenue & Cost of Goods Sold

Recording Payroll

• Recommended Payroll Accounts:

– Officer Salaries

– Salaries & Wages – Staff

– Salaries & Wages – Associate Veterinarians

• Payroll should be recorded at GROSS amounts

Example Payroll Accounts

Example: Payroll Journal Entry

Payroll Tax expense

(employer portion

of payroll taxes)

Gross pay for each

employee type

Matches amounts

deducted from bank

by payroll company

Expense Accounts

• Appropriate level of detail

• Broad expense categories

Liabilities

• Two parts of a loan payment

– Principal portion

• Balance Sheet item

– Interest portion

• Profit & Loss item

Principal and Interest

Example Loan Statement

Example Amortization Schedule

Example: Check for Loan Payment

Banking Menu

• Make Deposits

Entering Daily Deposit

Deposits

• Your deposits should be deposited in the bank

at the GROSS amount

• Almost all merchant service providers (with

the exception of Care Credit) will make your

deposits at gross and deduct the fee at the

end of each month

Enter Credit Card Charges

Practice Credit Card Charges

• Should be entering credit card charges

• Allows you to track your credit card balances

– Extremely important if you carry a balance each

month

Account Reconciliation

• Should be reconciling both bank and credit

card accounts each month

Account Reconciliation

Vendors Menu

Enter Bills Pay Bills

Enter Bills/Pay Bills

• Allows you to record the expense in the

correct period but pay in another period

• Helps you to match expenses to the

corresponding revenue

Reference Lab Example: Check

• January Reference Lab

Bill:

– Amount = $4,000

– Date of Invoice = 1/31/13

– Invoice Due = 2/20/13

Date the expense is recorded

in the ‘Lab Expense’ account

Reference Lab Example: Bill

Date the expense is recorded

in the ‘Lab Expense’ account

Cost of Goods Sold

• Entering invoices properly helps monitor this

expense

• Invoices vs. Statements

– You should be entering each individual invoice into

QuickBooks (Enter Bills function)

– Using your monthly statement to check off each

individual invoice (Pay Bills Function)

Enter Bills/Pay Bills

• What does entering the invoices accomplish:

– Allows you to check the statements you receive

– Makes sure the expenses are captured in the

correct period

• Statement may span more than one month

• Statement may contain delayed billing

Example Bill

• Invoice Total = $1,011.14

• 10 items received

– 70% Prescriptions

– 20% Medical Supplies

– 10% Lab related

Estimated amounts

from invoice

When Not to Use Enter/Pay Bills

• When you are sitting down to pay an

individual or company immediately

Pay Bills – Hint #1When the bill is selected the Amt. To Pay

field is auto-filled with the Amt. Due

Change Amt. To Pay field to whatever

amount you actually plan to pay

Highlight the Amt. To Pay to edit the field

Pay Bills – Hint #2

Choose corresponding Bank

or Credit Card account

Choose Method

of Payment

(Check or Credit

Card)

Practice Management Software

Reports for entry into QuickBooks

1. Accounts Receivable (AR) Report

A. Shows amount owed by clients

B. Want the report as of the last day of the month

2. Inventory Report

A. Shows total cost of all inventory items in Practice

B. Want the report as of the last day of the month

3. Sources of Revenue Report

A. List revenue generated by revenue category

B. Want the report for a one month period (i.e. 12/1/2012 to 12/31/2012)

Make General Journal Entries

Accounts Receivable

• Updating will help the income (revenue) in

QuickBooks be accurate

• Decrease in Accounts Receivable from

payments received on prior months services

• Increase in Accounts Receivable for clients not

paying for current services

Accounts Receivable Entry

Beginning

Accounts

Receivable

Total

New Accounts Receivable Total from

Practice Management Report

Step #3

Step #2Step #1

Enter Journal Entry to increase

Accounts Receivable Total

Verify new Accounts Receivable

total matches Practice

Management Report

Step #4

Inventory

• Adjusting your Inventory total in QuickBooks

each month helps your Cost of Goods Sold

total to be accurate

• Your Cost of Goods Sold is supposed to

represent the cost of materials used and

products sold during the period

Inventory Entry

• Very similar to Accounts Receivable journal

entry we went through

– Different accounts will be debited and credited in

the journal entry

• You will want help with these entries the first

time

Revenue

• Allows you to:

– See very easily where your revenue is coming

from

– Easily compare to industry benchmarks and your

Practice

– Compare it to your Cost of Goods Sold accounts

Revenue EntrySample Revenue Report

Journal Entry

Total Lab

Categories

(blue)

Caution ☺

If you have not been tracking Accounts

Receivable or Inventory in QuickBooks

previously you will want to get assistance from

your CPA!

Useful Reports: Profit & Loss Standard

• Also known as an

Income Statement

– Summarizes income and

expense accounts

– Tells you if you are

operating at a profit or a

loss

Useful Reports: Profit & Loss Prev Year

Comparison

• Summarizes income

and expense accounts

for the chosen period

and previous period

• Can compare

performance against

same period last year

Useful Reports: Balance Sheet

Standard

• Summarizes a Practices

financial position

• Shows the value of the

Practice’s assets (what

it owns) and liabilities

(what it owes)

Useful Reports: A/P Aging Summary

• Summarizes the status of

unpaid bills in Accounts

Payable

• Shows:

– What you owe

– Who you owe it to

– And how much is overdue

Other Useful Items: Find Feature

Advanced tabSimple tab

Other Useful Items: Set up Users

• Allows users access to

only certain areas of

QuickBooks

Other Useful Items: Additional Detail

Mouse pointer turns into

a magnifying glass

Drop-down Sorting

options on top of report

Other Useful Items: Additional Detail

(cont’d)Report Totaled by ‘Payee’

Payee

Total for specific Payee

QuickBooks: Making it Work for

Your Practice

Presented by: Karen Osborne, CPA, MBA

Lacher McDonald & Co., CPA’s

Courtesy of: Live Oak Bank

kosborne@lachercpa.com

1.888.884.1506