Master the Closing Process in QuickBooks Online

Yes. Hello everyone and welcome to another great webinar here on CPAC Academy.org. My name is Chris and I will be your webinar moderator for today. Our topic today is streamlining financial reports master the closing process in QuickBooks Online. And our esteemed presenter today is Laura Redmond. Our sponsor is Arrow.

Now, before taking a deep dive into our topic today, folks, if you don't mind, go to the Q&A. Let me know you can hear my voice, see us on your screen, and see Laura's very first slide. Also, in the Q&A, if you don't mind, folks, let me know where on earth you're coming to us today. We love to know where you're chiming in from. And I am seeing folks coming in from all over Canada, Houston, Maryland, Puerto Rico, hey Tampa. All right, fantastic. Welcome one and welcome all.

This Q&A can be used in a couple of ways. If you have any questions regarding content, put them there, folks. And if time doesn't permit, those will be addressed. If you have any tech issues, put them there as well, folks. And I will get to you as soon as I possibly can. Just remember, there is one of me and there are very many of you.

One other area to the house is going to be your CP credit. This class is worth one hour of CP and the way you will earn that is stay logged in for 50, that is 50 minutes allowed time and answer three or four polling questions. Your credit will be in the process today will be available to you within approximately 24 hours. Also, go ahead and download the handouts made available for you.

And now, folks, with no further ado, please welcome Laura Redmond.

Hello everyone. Thank you, Chris. Thank you all for joining me today. As Chris said, the topic of this webinar is streamlining financial reports. And to do that, we're going to look into the process responsible for generating and validating the data on those reports, the month-end close process. If we don't have accurate and timely data, then our management reports, our financial reports are essentially useless. So, we're going to talk about how to close the books properly and on time.

I'm going to start just by introducing myself so you know a little bit about my experience, where I'm coming from. Uh, I run an accounting firm called Redmond Accounting, Inc. We're based outside of San Francisco in Silicon Valley. Uh, we have all US-based staff in multiple states. We all work remotely using web-based accounting apps. This is our 20th year in business. In 2010, 2011, we moved all of our clients to the cloud using apps like QuickBooks Online. Our specialty is paperless web-based accounting environments. Our accounting firm does not do tax and we do not do audit. The accounting services that our firm provides is what our profession calls client accounting services or CAS or CAS. That's where we act as the accounting department for our clients. Invoicing their customers, paying their bills, processing expense reports, running payroll, bookkeeping, and month-end close. We're the accounting department, the bookkeeper, the controller, and sometimes the CFO.

We also provide technology services. We don't fix computers, but we do um any of the work where our client has their own accounting department, their own in-house accounting department, but they want help setting up cloud accounting infrastructures. Then we help them build those cloud accounting infrastructures and help them train their staff and act as their accounting technology support team. So that's number one, I run an accounting firm.

Secondly, the next thing to know about me is that our firm uh our accounting firm is really big on process and workflow management. And in 2010, we built an app to systemize the work that we do. We had all these little Excel spreadsheets and things that we had cobbled together for years um that would sort of break until we just built this app for ourselves to organize all the work that we do, all the services that we provide our clients, most of which are recurring tasks such as bill pay, payroll, bank reconciliations, and it allowed us to assign each task to a client, which client we're doing the work for, and delegate each task to our staff. Um, and it allowed us to schedule that at the appropriate interval for that service for that client's business and that allowed us to have separation of duties hand in hand with collaboration. So that app is called Arrow Workflow and that spun off as a separate company from our accounting firm and Arrow Workflow, thank you very much, is our sponsor today. So thank you Arrow. Um, and that is a separate company from our accounting firm. Uh, Arrow is used by accounting firms around the world and businesses to guide their accounting departments. And Arrow comes with, in addition to a whole structure for how to organize all of the work that you do, it also comes with a library of pre-built checklists and procedure guides on many of the most popular cloud accounting apps.

The third thing to know about me in my experience is um I have spent a lot of time over the years as a member of Intuit's trainer team. So Intuit is a company that makes QuickBooks. I co-authored Intuit's QuickBooks Online certification program, both the core and the advanced certification, and I've taught live QuickBooks Online courses at national conferences and local events for many, many years. So last year I pulled together our 20 years of experience as a client accounting services accounting firm, plus Arrow's library of procedures and checklists, plus my experience as a technical writer and trainer for QuickBooks Online and cloud accounting apps to create Redmond Academy. So Redmond Academy is the new thing I want to tell you about. It offers online courses that you can take at your own pace. These courses assume that you know accounting, debits and credits, and they assume that you know how to navigate and use QuickBooks Online. So these are intermediate and advanced courses.

Okay. So let's get to the topic at hand. The very important closing process for those of you using QuickBooks Online because you have to close the books in order to run accurate financial reports. Now, if you have any questions in our webinar today, Sarah from Arrow is working the Q&A panel, so you can put them there. Ask her anything over there. Um, and now I'm going to hand it quickly over to Chris for our first poll.

Yes, indeed, folks. My pleasure. Polling question one is live and active on your screens. How would you rate your knowledge of QuickBooks Online? Make your choices now, folks. This poll is active for 60 seconds and your choices are A none. You've never heard of it. B fair, C good, or D excellent. About 20 more seconds on this poll, folks. Continue making your choices. All righty, folks. I'm polling. Question number one is now closed and we have a tie. Is a tie. We have a tie. 37% are saying fair and 37% are saying good.

All right. There you go. Okay. Well, as many of you on this webinar today are probably accounting professionals. You may be the controller. You may be a staff accountant in an accounting department. Or you may be working in an accounting firm. If you are in charge of the accounting or doing the work of the accounting department for a company or organization, or if you're an accounting firm doing accounting work for your clients, you probably realize already how important it is to optimize the month-end close process. Because otherwise, if each month takes a whole month to close, then you're always closing the books and you have no time for anything else. You probably also want to optimize the month-end close process because the leadership team of the organization that you report to doesn't want old news. They want reports based on current, current, accurate data. So, we want to optimize the month-end close process.

Um, I'm just going to throw out five quick ways to optimize the month-end close process, and then we're going to be talking about them all throughout the rest of this hour. First of all, no-brainer, automate as much as possible. There are so many opportunities to automate in today's tech environment. The second way to optimize is to document the knowledge with your team. People take vacations, your staff, people get sick, people leave. So, you want to pull all of this knowledge, all of your knowledge capital from your accounting department. If you're an in-house accounting department or for your accounting firm, pull it all together and document it so that you don't lose it when someone is out of the office. Next is use checklists with steps in the proper sequence to improve consistency and efficiency with the work you're doing and then assign the tasks to other people. Delegate that. And the last way to optimize is to get started on your month-end close right when the month ends. Don't wait around. Get started right away, or else those months back up like a five-car pileup on a freeway. You know what I'm saying?

Um, it's important to have a process, to have a system for doing this, and to have a resource for when you're troubleshooting issues. The system that you use to organize all the work that needs to be done by your accounting department can be used to optimize your workflow. The app that we use in our firm more than any other app, even more than QuickBooks, is Arrow Workflow. So, and they're the sponsor of this webinar today. So, I'm going to use Arrow as my example to talk about streamlining the month-end close process. But if you use a different workflow management system, then picture that one in your head while I talk through this. For us, Arrow streamlines the work we do. So, whatever workflow management system you're using, you want to find ways to let it streamline the work that you do in your accounting department or in your accounting firm. Uh, it delegates our firm's um work, our tasks in the form of interactive checklists. So, that's some functionality you're going to want to have in your workflow management system. And our checklists have step-by-step instructions for our staff on how to do everything assigned to them. And these interactive checklists are pre-written, repeatable processes for all of the many important and detailed tasks of the accounting department. So we don't have to create them from scratch. There are a bunch of them in Arrow's library, and you can go to the library inside of the Arrow app and you can search for them and you can use them as is or you can edit them however you like, and of course, you can create your own checklist from scratch very easily.

Okay. Oh, it's another polling question, Chris.

Yes, indeed, folks. Just in time for polling question number two. And polling question number two is live on your screens. Do you use a workflow system? Make your choices now, folks. And this poll is active for another 60. And remember folks, if you have any questions regarding Laura's content, Sarah is on deck to answer those in the Q&A. I see a lot of people are looking to implement one. Um, I believe Chris is going to pop up a link at the end of this webinar um if you want to go check out Arrow, get a um free trial there. So look for that at the end of the webinar.

Absolutely. All righty, folks, and we'll close down this poll in three, two, and one. Closing out poll in question number two of four. And the majority of the attendees are saying no at 53% followed at 38% saying yes.

So what do you say? Um, I can remember not using a workflow system and I remember thinking it's okay. I it's all in my head. I know how to do it. But that makes it very hard to delegate. So, if you're the only person in your accounting department or the only person in your accounting firm, you can get away with that for a bit. But when you're ready to optimize and streamline things, definitely I would suggest, highly recommend that you look at a workflow system. There are a bunch of great ones out in the world today.

Okay. For purposes of fraud prevention and for purposes of optimizing an accounting department, it is very important to establish clear fiscal policies and procedures. You want to figure out how you want things done in your organization. Picture your bossiest self. Put your hands on your hips. How do you want things done in your organization? and then look for and solve any of the potential vulnerabilities and security. So you want processes, you want to do things in a way that uh guards your organization from fraud and figure out exactly how you're going to handle each of the accounting tasks in your organization and then put it down in writing. I know this is tedious, but you can use some from libraries. There are some already out there in the world. Um, but you really do want to sort of write down the way you're going to do things.

I am going to launch our first video here. Here I'm going to show you um just some images of or video of sample what a procedure guide can look like. It needs to be detailed, crystal clear, no confusion. Write out exactly how you want things done and include lots of screenshots where you can because that helps whoever the person is that needs to follow the procedure uh see what it should look like. And my recommendation to you is to make a lot of small procedures, not one huge procedure. Like you don't want to have some huge binder on the shelf that nobody's going to go to. Like you could make several different individual procedures related to reconciling a bank account, like how to troubleshoot the beginning balance on a reconciliation, how to troubleshoot the open items on a reconciliation, how to attach a statement to a reconciliation. One huge procedure called reconcile might be too big to read when someone is just looking to learn how to attach a document to the reconciliation when they're finished with the reconciliation. So, it's better to break up procedures into bite-sized pieces that your staff can digest as needed. Also, I'll say doing all of this work, documenting your processes is very helpful at audit time when an auditor asks for process documentation. So once a procedure is documented, then you can have it reviewed and approved by the upper echelon and then it goes into practice and you can train your staff on it. It certainly makes training staff, onboarding staff uh very nice when they start learning how to do the work that you have hired them to do and they have it all spelled out for them. Certainly makes training nice.

Now after you have the processes, the procedures spelled out with screenshots, then you want to um create make take the procedures that are usually larger and you know paragraphs and screenshots, those procedure guides and turn them into checklists and um those will be based on your procedures. They're just like a shortened version of the procedure. Um, many of the processes that are performed by the accounting department are transactional. Entering customer invoices, those are transactions. Each invoice is a transaction. Debits and credits the general ledger, right? Entering vendor bills, those are transactions. Entering checks, those are transactions. Entering credit card expense transactions. Running payroll and producing paychecks or direct deposit transactions. So, we do a lot of that transactional type of work.

QBO has a sales dashboard in QuickBooks that tells you lots of information about the organization's customer and what needs to be done next. And if you're familiar with QuickBooks Online, you can kind of picture that sales screen in your head. And it'll show you like how many billable charges are waiting to be invoiced to your customer and how many customer invoices have not yet been paid. It's very helpful. It brings all that information, sort of displays it for you in a helpful way. QuickBooks Online also has an expense dashboard that tells you how many vendors you still owe money to. QuickBooks Online also has a payroll screen, payroll center that tells you when payroll is due and it walks you through the steps of paying your employees like a wizard. But there's no real guidance for the general ledger. Closing the books is different. There's no wizard in QuickBooks Online to walk you through it. There's no checklist in QuickBooks to tell you what to do. How do you know when you're done closing the books? We're just supposed to know what to do and how to do it. So, a checklist for how to close the books in QuickBooks Online is very helpful.

Here on screen, I'm showing a video of what Arrow's live interactive checklists look like. And again, these are based on procedures behind it. If you can see over to the right, there are little icons of a book. That's the procedure guide. If you click on each of those little icons, it'll take you to different procedure guides. Um, and the procedure guides have all the screenshots and there will be little procedure guides to support each one of these rows. So, imagine how many steps there are in all of the various procedures in an accounting department. And imagine how easy it would be to forget a single step if you didn't have a checklist. So when you're creating your checklists, include all the details. The steps are not you don't go into a checklist and have one step that says process payroll and that's it. No, no, no, no. You have to add all the steps related to processing payroll, such as logging into the payroll app, confirming that the time sheets have been approved by managers, and then maybe you want to have the next step be a reminder to look up whether there were any holidays during that pay period. and then calculating the draft paychecks and getting approval for the draft paychecks and then submitting the payroll and then syncing it to QuickBooks Online or whatever all the steps are involved in the process for how you do how you run payroll in your accounting department or in your accounting firm as a service for your clients and have your staff who actually perform this work. Have them help you create these checklists and then you can test it. you can give the checklist to someone else in the accounting department to see if they can successfully complete the checklist. Um, a checklist is often performed by that experienced staff person who does the task over and over and knows what to do, but it still serves as a reminder for them so that the work is consistent. And it certainly helps when people are sick and go on vacation because it helps someone else come in and do it for them. Think of pilots. They have to follow a checklist before takeoff. And I'm sure they've done these steps many, many times. And I'm sure they know them by heart, but I'm a passenger on that plane. I want the pilot to use the checklist. I don't want them to say, "Oh, I know it all. I won't forget anything." So, think about the mistakes that can happen if you forget a step and think about the fraud implications of a simple accounting mistake. Um, and keep in mind that again, people can quit or get sick or go on vacation and imagine if the person who's covering for them while they're out if they can just follow these steps. So, when you're building your checklists, make sure there are enough details that the person who is covering for someone else that generally never performs this task, make sure that the checklists are detailed enough to help them know what to do. Um, and it makes training staff so much easier. Um, and then for these checklists, think about splitting the work into multiple checklists so that the work, I don't mean hundreds of checklists, but when you come up with a checklist for a procedure, if you split it into two, three, four checklists, however many, at least two, do this so that the work is performed by different people. That will allow you to provide separation of duties. And that's a standard accounting control that is often hard to manage. So when you're creating these checklists, make them detailed. Make them so that whether it's the person doing it all the time or somebody new can follow each of the steps. Put the steps in order. Include checkboxes. Here you see us checking off each step as we go. Because then if you stop in the middle of this task and have to come back and do it after lunch or tomorrow, you know exactly where you left off. You can include a link. We have that in Arrow on every particular step that will take you to the procedure guide for that very step with screenshots. So, if the checklist is for working the bank feed and the step is to verify that the beginning balance in QuickBooks matches the beginning balance on the bank statement or to confirm the bank connection, then include a link on that step to your procedure for how to troubleshoot a connection error. Don't send them to an entire procedure guide on how to work the bank feed. That's too much to read. Give them what they need when they need it. These checklists will ensure that your processes are followed as you intended them to be. If the person who is doing the work forgets how something should be done and needs more information, or if you're training a new hire, or if somebody's out sick, it really helps other people step in. And when your processes are spelled out on an interactive and scheduled checklist, now you don't have to micromanage staff. Now you don't have to be a bottleneck where everyone's waiting on you to in order to complete their work because now you've empowered your staff to perform their work in a streamlined efficient manner. And now you have thoughtfully and intentionally defined the way you do things. This is your secret sauce for your accounting department or your accounting firm. This is the way you do things. And now you're in business. Imagine how powerful it is to have trained expert staff show up to work each day and know exactly what to do. Once you've created your procedures and you've created your checklist based on those procedures and pointing to those procedures, every day your staff simply log in and they land on the screen showing them what work has been assigned to them. And when they click on a task, they end up here on an interactive checklist for that task and they follow the step-by-step instructions on how to do everything assigned to them, which keeps their work consistent and efficient and precise. And it allows the accounting department or the accounting firm to delegate the work and to cover for each other. And the checklists, as you see here, have lots of resources like the link here to the procedure guide that has the screenshots of exactly how to do it because sometimes you're doing the work and you know how to do it and you just need your reminder of your checklist step by step. But sometimes somebody's covering for someone, you need to click and go read the procedure guide with the screenshots. We also have links here on the checklist to the URL where you might need to go perform the work. Like you might have a step, you might be running payroll and you might have a step where you have to go out to some 401k provider and upload the amount of the 401k contributions. And so you can include a step there that says to go do that and give them the link to that 401k provider because sometimes those are URLs that we don't use all that frequently and we don't have them memorized. Um, and then you can also build into your checklist. We have a vault here that gives you quick secure access right at your fingertips to passwords and other sensitive information like tax ID number, capitalization threshold, things like that that you need when you're performing a task. So back to our slides. So we use live checklists for entering bills, paying bills, voiding checks, reimbursing employee expense reports, processing company credit card purchases, onboarding new employees, validating time tracking or paid time off, uh setting up a new vendor, sending the welcome vendor email, um validating that when a new vendor has requested an address change. I mean, some of these are great risks for fraud. So, you want to have processes for those. Um, reconciling balance sheet accounts. These tasks all sound somewhat simple for many of us because we know how to do them, but they actually have a ton of steps behind them and and they often can represent complex work that can cause major issues if they're not performed correctly or susceptibility to fraud if they're not performed correctly. And when you document your procedures and your checklists, that helps the organization retain control and therefore are not as much at the mercy of an employee who contains all the organization's procedures in their memory and they can leave with that and then the rest of you in the accounting department are left like, oh, how do we do any of this? Um, it also means that the organization is not so much at the mercy of fraudsters out there and sometimes the fraud cases seem legitimate and um can sometimes look authorized, but if you're following your steps, you can build in those fraud controls as best you can. So once your procedures are documented, train your employees that this is how things are going to be done in the organization. Make sure that all your staff know that all processes should be followed by all staff and you can discuss the purposes of your procedures. Train your employees how to spot and prevent fraud. Um, and then you're off and running in a really streamlined, very intentional way. Back to you, Chris.

Yes, indeed. Thank you so much, folks. Polling question 304 is on your screen. Do you struggle with closing the books? Make your choice now for 60 seconds. 30 more seconds, folks. I'm polling question three. Wow. Are you seeing another tie? Because that's what I'm seeing. Another tie, Chris. Okay. So, we have another tie here. Folks coming in with 39% at no as well as 39% at sometimes.

So, what do you say about that? I love to hear the no. But some people do struggle. I certainly struggled um as an accounting professional and as an accounting firm with the process of closing the books because the firm we're closing the books for multiple organizations and there's so many things that can stop the close process and then it just can linger on and then it's already time to close the next month. So really building out over the past 20 years, building out that process was really important to us. So, um, that's why I like to talk about it a lot because, as I was saying before, there's not really as much guidance on closing the books as there is for all the transactional work that we do as accounting professionals. So for the second half of today's webinar, let's apply the methodology that we just went through about optimizing and streamlining our processes and let's apply that to closing the books.

Closing the books means making sure that all of the account balances are correct and that financial activity is recorded properly so that your financial reports are accurate. And we start with a balance sheet because it drives the P&L. The asset, liability, and equity accounts of the balance sheet are usually the source of financial activity from which the income and expenses recorded. And we substantiate balance sheet account balances in two ways. First, we reconcile account balances to an external source of truth like a bank statement or something that's issued by a financial institution. And if we have other balance sheet accounts where we don't have a bank statement or something like that, then we can validate account balances with detailed reports of the exact assets or liabilities responsible for the balance. And then we can substantiate whether those assets or liabilities are valid or not. And this helps us identify incorrect, missing, and duplicate transactions.

Let's zoom in. Let me back up one and let's zoom in on um one part of the close process and let's do that together on this webinar. Let's close accounts receivable. How exciting. Okay, I'm going to pull up another video for you. These are my videos here are just basically like slides, but they're moving because sometimes it helps to see more than just staring at a plain slide. So, here's our checklist for this is a checklist for closing the month end. It's kind of here. It starts where the month-end work has already been going on and they've checked off some steps above it and they've gotten down to the part of the checklist where they're going to close the accounts receivable or they're going to validate the accounts receivable account. So, as you can see on the checklist, we've already checked off some of the steps and the next step here is to close the AR and AP accounts. and and we're just going to talk about the AR accounts. So, these are our two default accrual accounts provided by QuickBooks Online. Accrual, of course, means that you're recording the income because the service has happened or the product has been received. Of course, in the case of AP, you're recording the expense because the service has happened or the product has been received in either case, but the payment hasn't happened yet. So, that's accrual. Accrual is action first, payment later, right? The opposite of deferral. So, accounts receivable is the account is the name of the account used by QuickBooks Online and used by most chart of accounts when we create invoices to charge our customers for amounts that they haven't paid to us yet, but the work's been done on this step from that close the month checklist that we were looking at a minute ago. On this step, there was a note reminding the user what actions to take. It said to run the open invoices report and confirm that all the customer invoices for the period have been posted to the general ledger and to review all the open invoices and make any adjustments needed to keep the reports clean and accurate and then to finally print the report to a PDF and attach it to the closed period worksheet. So on that checklist, there was also a link to the procedure guide which showed how to do all of this work. So that from that checklist, we're just going to go through some of this and close accounts receivable together.

So um in the case of when we're validating balance sheet accounts and we're not like reconciling a cash account or reconciling a credit card account to a statement. When we're validating other accounts, we don't use QuickBooks Online's reconcile tool. In the case of AR and AP, um, we don't need to use that tool because the payment screens already do this work for us. The payment screens apply payments to invoices or bills and they update the payment status. So instead of using reconciliation status, we can keep track of which customer and vendor balances are open or closed based on their payment status. When you record a customer payment, you check the box on screen to apply the payment to the proper invoice. So then at the end of the period, your supporting documentation is QuickBooks Online's open invoice report, which is what we're looking at here on screen. And this is a detailed report that substantiates the AR balances on the balance sheet. This report shows only the open activity that is responsible for the AR accounts balance on the balance sheet. And you want to run these reports. I'm going to stop that for a second. That's gotten ahead of me. You want to run these reports um as of the ending date of the period you're closing. For example, if you're closing March, you want to run the report as of March 31st. That should be the report period date. And then change the aging method from current date to report date. You don't want to use QBO's current date aging method. That is just going to show you all of the invoices that are dated before March 31st, but that are currently still due. So, if you're closing March and it's mid-April and you're closing March and a customer paid off an invoice, a March invoice on April 1st or 2nd or 3rd, the current balance due if you run this report using the current date, the current balance due as of today, mid-April, is zero. So, your report's going to show zero. and that invoice would not show up here on this report because it's was paid in April. And that's not what you're trying to do. You want to change the aging method of the report to report date, not current date. So now you're looking at what was due. And that's what you're seeing on screen here is the um open invoices report. That's using the report date. Now you're looking at what was due if you took a time machine back to March 31st before that payment was made on April 1st or 2nd. And since we're closing March 31st and we're substantiating the balance on the balance sheet as of March 31st, we want to see what made up that balance of what was due on March 31st. So that's the way you want to run this report. This report is showing us all the invoices that are dated March 31st or earlier and that had open balances due on March 31st. So once you have the report properly configured like that and if you want to, it does default to current date. So you do have to make that change every time. So if you want to, you could save this report as a custom saved report so that you can just go run it and then change the date each month when you close. Um, the next thing you're going to do is look for the open balance column, which you can see on the far right there. And you follow that all the way down to the bottom of the report. And the total of the open balance column should exactly match the balance sheet on the AR account as of this date that you're running the report. And that report is your supporting documentation. And that substantiates the balance on your balance sheet. So that's telling you what your open items are, but you you aren't done yet. That was the easy part. Running this report was the easy part. There's usually more work to be done. And this next work is very important. This is the part of the work that people don't do regularly and it can cause a lot of problems down the road. It's not enough to run the report that supports the balance sheet number um because the details of the report need to be validated. If you just run the report and say, "Yeah, it matches the balance sheet number, but I'm not going to look at what it is." You're just saying the number on the balance sheet is correct, right? Just because you have a piece of paper that has the same number. You actually have to substantiate that. So you or someone in the sales department, you know, whoever knows how to validate this information in your organization needs to be able to review this. Um, and you want to make sure that this the detail in this report is correct in order for the balance and the account to be correct. So the people that you're reporting to at the end of the month are counting on these numbers to be correct. So that's why we're closing the period to substantiate those balances. So the numbers on the report that you are validating are correct.

So let's dive into the details of some of the work you can do as an accounting professional um to substantiate the details of the open balances here. And these are some common things that will help you see if there are any adjustments that need to be made. So let's walk through just a few common scenarios. Um, the first one here is what's highlighted in orange is um a really common scenario and that is scan the report looking for payment transactions. You see this one here in orange highlighted in orange. You can identify um the payment transactions by looking for this column called transaction type and just with your eyes scan down that report and look if you see any rows that say payment because normally you shouldn't see any payments showing on the report because a payment is what pays off the invoice. When you apply a payment to an invoice, the invoice balance changes to zero and the payment status changes from open to closed and therefore the invoice and the payment should not be showing on the report at all. Even if the payment is a partial payment and it doesn't pay the entire invoice balance, when you apply a partial payment to an invoice, the invoice balance due, remember this far right column, the open balance, the invoice balance open balance is reduced. The payment status is not changed because the invoice is still in an open status. There's still more due on it. And so therefore, the invoice will still show on this report with a lower amount under the open balance column, but the payment still should not be showing on the report. So if you see a payment showing on the report, like we do here, this row is a payment, then you need to figure out why. And so you can look for um any documentation on how the payment was supposed to be applied. Maybe the payment simply needs to be applied to an invoice. If a customer sent a paper check and the scanned copy of their check is attached to the payment screen, then you could go in and view the image and see if the paper check has some remittance advice on it. telling you the invoice number that they wanted to pay off when they sent you this check or maybe the customer sent an EFT payment and maybe they've attached that to this payment screen in QuickBooks and you can investigate whether the email remittance advice was sent to your company and showing what invoice number they meant to pay off by this check. If there's no information on how to apply the payment, some companies will just have a policy that they apply any unapplied payments to the oldest open invoice for that customer. Other companies will just leave the payment unapplied and reach out to the customer for advice. So, to apply the payment, you go to the payment transaction and check the box next to the invoice that you want to apply the payment to. Um, in some cases, some companies will receive a prepayment before they have sent an invoice. And in this case, your company policy may be to allow payment transactions for prepayment to show on that open invoices report. So, if that's your policy, then fine. Maybe it's fine for you to have payment on your open invoices report. But um it is a common scenario for that mistake to happen where you didn't want payments to show on your report and it's just because it needs to be applied. So do that kind of cleanup work we just went through.

Um, another common scenario is if you see an open balance on an invoice on the report, but you know that invoice was paid. You know that customer paid. So, why is it showing up on your open invoices report? Well, it could be that someone recorded the funds received from the customer as a deposit transaction and instead of a payment transaction. The deposit screen in QuickBooks doesn't have a field where you can select a customer's name and it shows you all the customer's open invoices. So, you can apply the payment to an invoice. That's what happens on the payment screen. So, if someone entered the customer's payment directly, I'm going to scooch it back here to that screen again. If someone entered the customer's payment directly on the deposit screen without first going and recording the payment, then it's very common that the payment was probably not applied to the invoice correctly and that the invoice is still showing as due and that is wrong. In addition to that mistake where the invoice is not showing paid off even though the customer paid it when someone enters the payment on the deposit screen instead of the payment screen, there's a good chance that there's another mistake here, too. Chances are that the customer's payment that someone mistakenly entered on the deposit screen is coded to revenue. And that is wrong, too. Why? I know you know why. Because now you're overstating revenue because the original invoice transaction booked the revenue and now someone has entered the deposit also booked to revenue. It's a very common error made when people do not understand this proper workflow that I'm showing on screen here. So there should be three separate transactions when invoices are involved. The invoice, the payment, and the deposit. So to fix this, you'll create a payment transaction as should have been done when the check was received from the customer. And you want to select undeposited funds as the deposit to account. And then because you're entering the payment for this customer, you will see the invoice that they're trying to pay off. Check the box to select that invoice to apply the payment to it. and then go to the deposit screen and find that payment that you just entered and check that box. And now you're saying, "I'm depositing that payment. You're not recording revenue again." And then you may, if they did record revenue down there on the lower half of the deposit screen, you'll want to go find that line and delete that line because we don't want to record that revenue again. This corrects the AR balance and the overstated revenue without affecting the bank account reconciliation status. You can do this without having to undo your reconciliation.

Okay. The third scenario when you're closing the books and cleaning up your open invoices report is um a zero balance. So, another thing to scan for is look for any customers that have a zero balance, like this one here on screen. You shouldn't see a customer with a zero balance generally on this report because a zero balance means that the customer does not owe any money, that all the customer's invoices have been paid and those invoices are in a closed status and therefore they should not be showing on the report because we're looking for invoices with an open balance that make up our AR balance on our balance sheet. So if you see a zero balance for a customer, try to figure out why transactions that net to zero are showing on the report. If a customer with a zero balance shows up, it probably means that the offsetting transactions aren't applied to each other correctly. They're netting to zero. They're posted to the AR account, debit and credit, but they're not checked boxes applied to each other. Um, the problem could be that the payment was received before the invoice was created, like a prepayment, and then after the invoice was created, no one went looking for that payment to click the box and apply it to the invoice. So, to correct that, you just go to the payment and check the box next to the invoice, save and close. You're done. Or maybe the problem was that the funds were received from the customer and recorded as a bank deposit transaction instead of a payment. We just talked about that. And um, but instead of duplicating revenue, because they're received as a prepayment, someone might have recorded this as a bank deposit and coded it to accounts receivable with the customer's name. That's going to show up as a credit on that open invoices account. Or or people can do a journal entry screen. You can go and do a journal entry and post something to accounts receivable and put the customer's name and that will show up on the open invoices report. Um, or someone could issue a credit memo to zero out the invoice. Those will show up on the open invoices report and they may net to zero, but you've got to check the box to apply them to each other. So, if you had any of those scenarios where like you have an invoice and a credit memo nets to zero on this report, but you want them all just go away because the customer has no balance due. So, to fix that, you can record a zero payment. Just go to the payment screen and create a new receive payment transaction. Enter the customer's name, check off the invoice, and then find the journal entry or credit memo or whatever else and check that off, too. And make sure that your total on that payment that you're recording is zero. So, it's not going to affect cash. Um, you're not going to debit credit anything, but it will apply one to the other. And when you save and close and go back to your report, those amounts that were netting to zero, those lines are just gone now.

Okay. Another thing you want to look for at month-end close is uh any um open customer balances that you think should be written off. So it could be that you see a customer and again, let me just state, sometimes the accounting department knows this. Sometimes this report needs to be given to like the sales department or whoever is in charge of knowing whether these balances are accurate or not. Um, and so if you see a customer balance that will never be paid, is not collectible and needs to be written off, or you see some small, small amounts that need to be written off, it's not going to be collected, then you want to write it off. And you generally should not edit the invoice and void it. And you generally should not edit the invoice and put in a new line item that zeros it out or or put in a new line item that writes it off because that's going to change the original invoice, which is not usually recommended, and that also is going to update that invoice's period. Like if it's oftentimes the invoice is dated in an earlier period that's already been closed and you don't want to change that.

period. Generally locked and closed. So instead, a best practice is to write something off. Is create a credit memo for that customer. And you can use an item code like "bad debt" that may be mapped to the bad debt account. Um, and you can, if you have a bunch of these to do, you could actually use a journal entry even and just make sure you hit accounts receivable for that customer's name.

And then once you enter this credit memo, or if you do it in batch using a journal entry, then do what I just said before. You don't want to end it with a zero balance. You don't want to end up with their invoice for that amount you want to write off and then end up with a credit memo right under it giving you a net zero. You want to get these rows off of your report. So come in and do the payment. Check off the invoice you want to write off. Check off your new credit memo or journal entry that you wanted to write off to offset the invoice and save and close. And then those amounts that you wanted to write off will now be no longer on your open invoices report.

Um, once you've written off bad debt and other uncollectible amounts, now look around for what's missing. And this may require again talking to the sales or operations teams or others in your organization. Make sure that you've captured the revenue and the customer activity that occurred in that period. Make sure all the revenue has been accrued for the period. Uh, that all the invoices, all the customers have been invoiced. Um, make sure, and you'll want to have processes for how you do this. Make sure any recurring invoices or sales receipts um have been recorded. And to go to your recurring transaction screen, go to the gear icon, recurring transaction screen, and look and see if there are any there that are waiting for you to enter. Um, you can go to the sales center, make sure there isn't any billable time or billable expense that needs to be invoiced. Um, so once you're sure that all the revenue, all the invoices have been entered because those affect your accounts receivable account, and once you have no more adjustments to make to your AR account, then your open invoices report is ready to use to substantiate your balance on your balance sheet. And um, so that's your supporting documentation. You can print your open invoices report to PDF.

So that was a sample of closing the books. And we really drilled in there to just one component. As you know, accounts receivable is just one of the many lines on a balance sheet. And those of you with experience in closing the books know that there are many other components to closing the books. We're just talking about one account on the balance sheet. And we know there's a whole P&L also. So, I'm going to hand it to you, Chris, to do our last poll and then we'll close it up.

Oh, yes indeed, Laura. Thank you so much, folks. Polling question number four is live on your screen. What QuickBooks topics would interest you in the future? To make those choices now, folks. This poll, of course, is active for 60 seconds. 30 more seconds, folks. I do think we have a clear winner this time, though. Yes, we do. There will not be a tie this time, folks. Alrighty, folks. We're winding down question number four. 52% of the attendees are saying general ledger deep dive, Laura. So, we can't wait for that one. We accountants love our GL.

Um, I wanted to acknowledge that um organizations are unique and they can have different balance sheet accounts for assets, liabilities, equity accounts from one organization as compared to another. And for that reason, you know, when you're building out your processes and your interactive checklists, you can do that. You can easily customize them for your company. And if you're using the one and arrow library, you can just grab the one standard one and then make changes to it. Or if you're building them from scratch for yourself, um, you know, you can find standard templates out on the internet and then you can just customize it. So many from one organization to the next. There are so many unique things about different companies. Um, so you'll want to really customize that for your particular situation. And then once your period is closed, then you can run your financial reports and feel confident about your numbers so that you can provide that information to the leadership team and they can make better decisions and be empowered with the most recent state of the company and feel like they have their finger on the pulse of how their company is performing. And so that closed process really drives that and that's the end goal.

Um, so um to summarize what we discussed today, the standard ways to optimize the month-end close process really help you streamline it. And as as you do this, I want you to picture your organization and think about how prepared you are now to do this. Um, and I'm just going to call out some things. Use a checklist. Don't wait to close. Get started right away. Assign tasks to people. Uh, reconcile and validate your balance sheet accounts. Organize your checklist with steps um that are in proper sequence. Um, do a hard close, lock the books, notify everyone when it's closed. Automate things as much as possible. Document your combined knowledge. I'm just calling out some of the highlights today of what we talked about.

Um, and you know, we just went through the second half of this webinar where we did a deep dive into closing um, some common scenarios with closing accounts receivable. And I was showing you on screen how to get around QuickBooks. But remember right there at the start of working on the accounts receivable together, you saw me starting from a checklist and and you saw me show you enough of how these interactive checklist, how this whole methodology works that you can imagine like everything we went through, we're looking at the QuickBooks screen, but you know, if you looked back at your checklist, all that guidance was there and it's right there in the that one step in the middle of that checklist. and you know there's a procedure guide right there if you didn't know how to do it to launch and you can remind yourself how to do it. So I hope that today helped you sort of put together the idea of having your processes so that your work is streamlined and consistent and then um we saw putting it to work together on the AR account. So thank you so much for joining me today and a big thank you to Aerrow Workflow for sponsoring this webinar today.

Alrighty folks and we here at CPA Academy going to wrap things up as well. Your credit will be indeed processed today will be available to you within approximately 24 hours. Check your inbox right now folks. There's a full webinar evaluation waiting for you. There will be a recording of this in your account as well as all course materials. Thanks again to our presenter Laura Redmond of course and to ERA for coming in and sponsoring this today. And of course, thanking you as attendees for spending your time with us earning your CPE. We look forward to seeing everybody on future webinars. And please have a wonderful rest of your day. Take care, folks.