QuickBooks News

• QuickBooks Premier: Healthcare Edition
• QuickBooks Premier: Nonprofit Edition

QuickBooks Features

• QuickBooks Centers
• Company Center
• Customer Center
• Customer Detail Center
• Vendor Detail Center
• Expert Analysis Tool

QuickBooks Common Questions

• How do I measure the profitability of my company?
• How can I measure the financial strength of my company?
• Why should I compare my business debt to my ownership in my company?

QuickBooks Tips

• Improve Your Cash Flow
• Improve Credit Management

QuickBooks Product Updates

• QuickBooks Premier: Healthcare Edition
• QuickBooks Premier: Nonprofit Edition

Accounting Matters

• Using Financial Statements to Analyze Business Performance
• Ratios to Measure Return on Investments
• Ratios to Measure Safety and Liquidity
• Ratios to Measure Operating Efficiency

Prior Issues

QuickBooks Premier: Nonprofit Edition
Intuit released its new QuickBooks Premier: Nonprofit Edition on Monday, May 19. The new Nonprofit Edition has specialized features and reports for the nonprofit industry.

For more detail on these new products, see QuickBooks New Products and Updates below.

• Company Center
• Customer Center
• Customer Detail Center
• Vendor Detail Center

Company Center
In the Company Center, you'll see:

• All of your accounts receivable, accounts payable, bank, credit card, and current liability account balances
• A graph of the income and expense trend for your business
• Customer Center Highlights, which show you the latest summary information about your customers, such as how much your customers owe you, the total overdue balances from your customers, and more. You can click on any headline to see more detailed information about it, either in another center or in a report.

You also have access to Decision Tools.

What Are Decision Tools?
Decision tools provide information to help you manage and make decisions about your business. QuickBooks decision tools help you compare alternatives, analyze your financial position, and set policies. In centers, click on a tool name to perform the analysis and learn how to interpret it. Tool names include:

• Measure profitability
• Analyze financial strength
• Compare debt and ownership
• Depreciate your assets
• Manage your receivables
• Employee, contractor, or temp?
• Improve your cash flow

You can see the complete list of decision tools, with descriptions, in the Decision Tools Directory.

To use a decision tool
From the Company menu, choose Decision Tools, and then choose the tool you want to use.

Customer Center
In the Customer Center, you'll see a list of all customers who have open balances, including the amount each customer owes you and when. You can also customize the two tables at the bottom of the center to show any of the following sets of data:

• Job-related time and cost expenses that you haven't yet billed to your customers (if the time tracking preference is turned on) This data is only available in QuickBooks Pro and Premier.
• Customers with overdue balances
• Ten most profitable customers
• Ten least profitable customers
• Ten most profitable jobs
• Ten least profitable jobs
• Ten most profitable products
• Ten least profitable products
• Ten most profitable services
• Ten least profitable services

Note: QuickBooks doesn't include inventory assembly items when it calculates the ten most profitable and ten least profitable products.

Customer Detail Center
Use the Customer Detail Center to manage your business with individual customers. Use the drop-down list at the top of the window to choose the customer whose information you want to see.

At the top of the center, you'll see the Customer contact information for the selected customer. Click Edit/More Info to see further information about the customer or to edit the information.

You can customize the two tables at the bottom of the center to show any of the following sets of data:

• Open invoices and statement charges
• Payments you've received and credits you've issued
• Outstanding items on order (if inventory tracking is on)

To display the Customer Detail Center
From the Customers menu, choose Customer Detail.

To display information for a different customer
From the Centers drop-down list at the top of the window, choose a different customer name.

Vendor Detail Center
Use the Vendor Detail Center to manage your business with individual vendors. Use the drop-down list at the top of the window to choose the vendor whose information you want to see.

At the top of the center, you'll see the Vendor Contact Information for the selected vendor. Click Edit/More Info to see further information about the vendor or to edit the information.

You can customize the two tables at the bottom of the center to show any of the following sets of data:

• All unpaid bills that you owe to the selected vendor
• All payments that you've already made to the selected vendor
• Outstanding purchase orders (if inventory tracking is on)

To display the Vendor Detail Center
From the Vendors menu, choose Vendor Detail.

To display information for a different vendor
From the Centers drop-down list at the top of the window, choose a different vendor name.

Expert Analysis Tool (Premier and Enterprise Solutions editions only)
Use the Expert Analysis tool to help you better understand your financial data and improve the performance of your business. The Expert Analysis tool assesses performance trends for your business in important areas such as profits, sales, borrowing, liquidity, assets, and employees. It also shows how you are performing compared to others in your industry. Comparisons are available for more than 130 specific industries!

To open the Expert Analysis tool
From the Company menu, choose Planning & Budgeting, then choose Use Expert Analysis Tool.

Net profit margin allows you to compare quarters that have very different results in absolute dollar terms. Income, expense, and profit all vary from quarter to quarter. Since your Profit & Loss report is always different, it can be hard to know whether profitability is improving. You might reasonably assume that an increase in sales or net income means you're doing better - but that's not always the case. An increase in the bottom line may look better, but it's not if expenses are growing even faster.

You can generate, interpret, and improve your company’s net profit margin by accessing the Net Profit Margin decision tool found in the QuickBooks Decision Tool Directory. Use this tool to see whether profitability is improving and track how the relationship between income and expenses changes over time.

How Can I Measure The Financial Strength Of My Company?
You can measure your company’s financial strength by determining your current ratio and working capital. Your current ratio and working capital measure the liquidity of your business, the ability to meet short-term debt with current assets. The current ratio shows whether a company has sufficient access to cash to continue operations after paying off current liabilities. Working capital is the dollar amount by which current assets exceed current liabilities.

It's important to maintain a margin of safety in liquid assets to handle potential emergencies. Inventory shrinkage, uncollectible accounts, or a debt that suddenly comes due may require you to rely more heavily on your current assets. Keeping a cushion helps you weather the inherent uncertainties of running a business. In addition, loans are frequently tied to minimum working capital and current ratio requirements. With a sound liquidity position, your company's chances of obtaining a loan increase.

You can generate, interpret, and improve your company’s current ratio and working capital by accessing the Current Ratio & Working Capital decision tool found in the QuickBooks Decision Tool Directory.

Why Should I Compare My Business Debt To My Ownership In My Company?
Your company can only be funded by three sources: operations, financing, and investors. To maintain financial strength and stability, it’s important that your company have a proper balance of funding from these three sources.

You should compare your company’s business debt to your company ownership to determine how much of your business debt is funded by creditors. The debt to equity ratio reveals how much of your business is funded by creditors. This ratio shows the degree to which the business relies on borrowed money, versus the degree to which it is supported by owners' investments.

Bankers and many other lenders look for a satisfactory debt to equity ratio before making a loan. Some loan contracts stipulate a maximum debt to equity ratio. You may increase your chances of getting a loan by keeping this ratio strong. Knowing your debt to equity ratio can help you keep your debt within reasonable limits, based on industry norms and your level of tolerance for risk and indebtedness.

The amount by which your business can realistically increase the debt to equity ratio is known as "borrowing capacity." Use knowledge about your borrowing capacity to plan for future financing needs. You should preserve some borrowing capacity for unforeseen opportunities or emergencies.

You can generate, interpret, and improve your company’s debt to equity ratio by accessing the Debt to Equity Ratio decision tool found in the QuickBooks Decision Tool Directory.

An example helps illustrate this point. A small clothing boutique places an order for its fall line in May. 25% is due when the order is placed, and the balance is due 30 days following receipt of the order. The store must pay for the entire line before it can sell enough clothing to make up the cost.

When autumn arrives, the store places an order for spring. It also extends special credit terms during its Labor Day sale. This causes a delay of cash inflows, making it difficult to cover current obligations. The store manager should pay special attention to collecting payments quickly in order to cover the gap between cash outflows and cash inflows.

QuickBooks has several features expressly designed to help you improve cash flow.

Manage Your Receivables
If you carry accounts receivable, you can improve cash flow by managing your accounts effectively. Effective A/R management begins with the establishment of a credit policy. A written credit policy helps you clarify when and to whom you are willing to extend credit. It also establishes a credit agreement between you and the customer. You can use the Manage Your Receivables tool to build a credit policy.

Establish an effective credit policy
A uniform credit policy can speed collections, save time, simplify management and improve your chances to win sales. Employees should know the policy and be able to communicate it to customers. However, one person ought to have responsibility for deciding about exceptions in special cases.

Your policy should reflect the standard in your industry and the nature of your business. Try also to minimize the administrative cost of tracking payments and making collections. The simpler your system, the easier it is to manage.

Establishing a credit policy involves decisions about credit terms and managing receivables. QuickBooks makes it easy for you by using the Manage Your Receivables decision tool. Click “Establish a credit Policy” and answer nine questions to create a standardized policy for your business. QuickBooks will save your choices and allow you to make revisions to the policy. When you're done, you can print the policy for easy reference by employees or customers.

Manage Your Receivables also provides tips on how to best use, analyze, and act on the information in Accounts Receivable reports. With the Average Collections Period calculator, you can determine whether slow collections are adversely affecting your cash flow. If they are, you'll learn what you need to do to make your billing and collections efforts more effective.

Sometimes, difficult customers can thwart even your best efforts at receivables management. Manage Your Receivables also advises you on when to use a collections agency and how to select one.

Bill and Get Paid Online
One way to improve cash flow is to bill more quickly. By faxing or e-mailing invoices and statements, you can bill customers right after the sale. They receive the invoice or statement within seconds rather than days, and you save time you'd otherwise spend printing them and sending them through the mail.

People often respond more quickly to e-mail and fax than to paper mail, increasing the likelihood that you'll be paid promptly. Sending invoices and statements online also gives you an opportunity to raise and resolve questions or problems quickly.

You can e-mail invoices, statements, and estimates without charge from within QuickBooks. QuickBooks also offers a service that enables you to fax your business forms as you create them. QuickBooks now has a way for your customers to pay you online. Once you register for QuickBooks Online Billing, the invoices and statements that you e-mail can include a link to the online payment service. This link takes your customers to a secure Web site that enables them to pay you online.

Accept Credit Cards
Accepting credit cards does more than just provide your customers with a convenient way to pay. It can also reduce or eliminate billing hassles and costs, and save you several trips to the bank.

With the QuickBooks Merchant Account Service you can enter credit card payments directly in QuickBooks and have the credit card authorized online. The payment is then automatically deposited into your bank account and recorded in QuickBooks, making duplicate data entry a thing of the past. You can also store customer's credit card information in QuickBooks in a secure, encrypted format, saving you the hassle of re-entering the same data repeatedly.

The QuickBooks Merchant Account Service can be used with QuickBooks Online Billing. Use QBOB to send invoices, statements, and estimates to your customer electronically. Then, when they pay you online, use the QuickBooks Merchant Account Service to collect and process their payment.

Learn More
Used together, the features just described represent a powerful way to improve cash flow. They make it easy for customers to pay you and even easier for you to manage. Here's how the tools and services can be used in conjunction with one another for maximum benefit.

Improve Credit Management
Extending credit to your customers can be risky, but often it would be impractical not to offer credit. If customer expectations or the nature of your business compel you to sell on credit, you need to manage the risks.

Customers who pay late (or not at all) cost you money by crimping your cash flow and directing your time towards collections rather than making more sales. Ideally, the cost of uncollectible bills should not be a significant cost of doing business.

According to the American Collectors Association, bad debt should amount to no more than 5% of your gross profit—sometimes even less, depending on your type of business. To keep your losses to a minimum and speed up the collection process, you need to take the following actions:

• extend credit sensibly
• keep an eye on your accounts receivable
• collect overdue bills promptly

Increases in the availability of credit are making it easier and easier for many people to get into debt over their heads. In 1998, one in twelve Americans filed for bankruptcy, and consumer debt is still on the rise. In some industries, small business debt is as high as 70% of net worth. Now more than ever it is important to protect your business from the costs of late and unpaid bills.

How can a credit policy help?
The only surefire way to avoid collection hassles is to collect in full at the time of sale. If you would like to extend credit, you can prevent many potential delinquencies by establishing an effective credit policy. A good credit policy spells out the agreement between your company and the customer. It is your job to make sure the customer understands and agrees to your policy at the time of the sale.

An important part of any credit policy is to identify the risk level of a customer - both good and bad credit risk levels. Identifying bad credit risk prospects or customers allows you to limit or avoid potential accounts receivable problems and bad debt. Identifying good credit risk prospects and customers could identify opportunities where you can afford to offer better pricing or terms - enabling you to win business which you otherwise may have lost to competitors.

Your credit policy should be easy for your customers to understand and simple for you to manage. It should help you identify good and bad credit risks up front and protect both you and your customers from miscommunications. Used consistently, a well-conceived credit policy helps you win good customers and avoid the time, cost and frustration of handling late paying customers.

Track what you're owed
In accounting terms, invoices that have been sent but not yet paid are known as accounts receivable (A/R). Actively managing your accounts receivable can help you get paid faster. Good accounts receivable management starts at or before the time of the sale by the establishment and communication of your credit policy, and lasts until you collect the money you're owed.

Collect overdue bills
Acting promptly and decisively is the key to successfully collecting overdue bills. In general, the longer a bill has been outstanding, the harder it is to collect.

A strategy for dealing with past due accounts can simplify collections and help you get paid sooner, and it’s easier and less time-consuming than dealing with past due accounts on a case-by-case basis. Refer to your policy and act on it when reviewing your A/R Aging Report.

It’s a good idea to keep a record of accounts receivable history, including the actions you’ve taken to collect on a bill. Note when you took the action and the result or customer response. Such a record can support your claims in the event of a lawsuit. But more importantly, it aids your memory and helps you communicate with your customer about the details of their case. If you have more than one overdue account at once, this can be essential to avoid confusion.

Actions to take first
Your policy might have a longer time scale or fewer steps, depending on what's common in your industry, your relationship with your customers, and the amount of time you want to devote to collections. Whatever your plan, you should follow up with late paying customers quickly and repeatedly. In general, the sooner you contact a delinquent customer, the more likely you are to get paid. Use an escalating scale; begin with a friendly attitude and become gradually more insistent and formal in communicating that the customer pay their overdue bills.

Avoid high-cost, low-return collections. Consider the likelihood of recovering the money owed to you, the total amount due, and how much it will cost in payroll and materials to make the money materialize. The best way to reduce these costs is preventative: be proactive by setting up a clear credit policy and using it consistently.

If you've tried everything and you still can't collect on a bill, it may be advantageous to hand the account over to a professional collections agency. When and how you do this will affect your chances of recovering the amount due.

When to use a collections agency
Collections become increasingly difficult, expensive, and unlikely the longer a bill has been outstanding. Getting help from an agency early in the process for appropriate cases can make the difference between successful collection and a bad debt write off. Remember, sending an account to collections without good reason may alienate your customer. Do all you can to make it easy for the customer to pay prior to handing over the account.

The recalcitrant, argumentative, or non-communicative debtor is an ideal candidate for timely use of a collections agency. You should also consider using an agency when:

• a customer is unresponsive to reminder notices
• the customer makes repetitious, unfounded complaints
• the customer denies responsibility for the obligation
• account delinquency coincides with serious marital difficulty
• the customer has multiple delinquencies and frequent job or address changes
• obvious financial irresponsibility is evident
• the debtor has moved to a new location
• the debtor fails to keep in contact
• your company has many bad debts or delinquent A/R

Professionals trained to deal with difficult debtors track down overdue payments, allowing you to concentrate on running your business. Most agencies make collections via letters and phone calls, like you would. But third party intervention sends a powerful message that you are serious about getting paid.

Debt collectors have special resources to help them locate customers that have moved. Agencies can also affect the credit standing of the debtor, giving your customer another good reason to pay. By law, debt collectors must adhere to strict standards that limit the methods they can use to collect on a debt.

Last resorts
When all else fails, it may be time to consider collecting your debt through a lawsuit. If the amount is under a certain limit—about $1500 in most states—you can file suit in a small claims court without the assistance of a lawyer.

If the debt is uncollectible and you don’t want to pursue it further, it’s usually possible to take a tax write off for the loss you incurred. Eligibility for this write off depends on your accounting method: if you use accrual basis, you can write off bad debt. Businesses that use cash basis cannot.

Ideally, you will never get to the point where you need to take either of these actions. But it’s impossible to forestall every instance of uncollectible debt. If you find yourself in need of help, you may wish to check with your lawyer.

Healthcare-specific Reports
QuickBooks Premier: Healthcare Edition makes it easy to get a handle on your costs and revenue with 11 customized reports designed specifically for the healthcare industry. With one click in the Healthcare Report Center, you get instant insight into your costs. You'll see how they break down by doctor, location or procedure, so you can proactively address cost drains and increase profitability. Healthcare reports include:

• Practice profitability by doctor, location or procedure
• Practice profitability graph by doctor, location or procedure
• Expenses by doctor, location or procedure
• Checks written
• Past-due invoices
• Summary of charges by service, procedure or product
• Summary of receipts by service, procedure or product
• Collections
• Balance sheet
• Sales graph
• Employee Time Tracking

Improved Budgeting
Click a button and Healthcare Edition creates a complete, realistic budget or forecast based on your previous year's actual QuickBooks data. Editing your budget is easier, too – you can adjust an entire row by a given percentage all at once. You can set up and track budgets by doctor, location or procedure. Later, you can instantly compare your actual spending against your goals and make changes as needed.

Easier Time Tracking
Now it's easier to track employee hours by week with easier timesheet access and a new report that organizes information the way you need to see it.

More Flexible Password Protection
With Healthcare Edition, you can set up password access to key areas, including accounts payable, time tracking & payroll, financial reports, transaction modification, and more. You can allow or deny access by employee and area. You can also review and edit permissions for the entire staff from a single screen, making it easy to maintain control in response to changing circumstances.

Healthcare Navigator, Menu And Icon Bars
Launch Healthcare Edition and the Healthcare Navigator displays a flowchart of your daily tasks represented as icons. One click on an icon gives you instant access to the functions you use most, like entering bills; making deposits; paying employees; issuing patient refunds; and more. Click the "Enter Bills" icon to record practice expenses. Click "Pay Employees" to do your payroll. You get step-by-step guidance for each function. In addition, you get one-click desktop access to your memorized healthcare reports and to healthcare-specific Help Topics. The healthcare-specific functions are also listed in a single pull-down menu available from anywhere in QuickBooks.

Customizes Itself To Your Type Of Practice
If you're new to QuickBooks, or if you want to "start fresh" to take advantage of all the healthcare-specific features instead of importing your existing data, let Healthcare Edition customize itself for you. During setup, just select your specialty: medical doctor, dentist, chiropractor, veterinarian, optometrist, or mental health provider. The software automatically sets up your file with an appropriate chart of accounts, class lists, reports and preferences. It even includes a customized statement in case you plan to use QuickBooks to bill your patients.

Healthcare-specific Help Topics and Sample File
A Healthcare Help button gives instant access to over 30 healthcare-specific topics. Written by Lynette Benton, healthcare business consultant and author of the book, "QuickBooks for Medical Offices," topics include customizing QuickBooks for specific types of healthcare practices, integrating QuickBooks with patient billing systems, tracking services and procedures, handling patient refunds, and more. A sample file with two years of fictional data shows the ideas in action and lets you freely experiment without worry. Healthcare Help is provided in addition to the standard QuickBooks help and is available from the Healthcare Navigator, the Healthcare Menu, or through the standard QuickBooks Help command.

New Chart of Accounts
Find out exactly where you're making or losing money by assigning revenue and expenses to accounts that are precisely relevant to your practice. Minimize the need to pay consultants to set up QuickBooks for your practice. Healthcare Edition does it for you! Just choose your type of practice during setup, and Healthcare Edition installs the specific chart of accounts appropriate for your specialty. The Healthcare Edition even includes chart of accounts developed by the Medical Group Management Association (MGMA) and American Animal Hospital Association (AAHA). Just assign each transaction to the relevant account and class – such as X-ray, Elm St. Office – and your financial reports will give you a more detailed picture than ever before so you can manage your practice more effectively.

QuickBooks Premier: Nonprofit Edition

Nonprofit-specific Reports Show Where You Stand
Nonprofit Edition comes with five new reports designed and organized specifically for nonprofits. With one mouse click, you get the information you need, just the way you need to see it. Nonprofit reports include:

• Budget by Programs – instantly see where you stand across all programs
• Statement of Functional Income & Expense – Form 990 – automatically summarizes figures from appropriate accounts into categories that match IRS Form 990 line for line. Just transfer the totals, in order, to the form. A real timesaver!
• Donors/Grants – A quick-hit contact list of your contributors, with their grants and donations listed, all in one easy-to-review report
• Biggest Donors – A detailed report on your biggest contributors
• Statement of Financial Position – Lets you easily monitor where you stand financially and take corrective action before small problems become big ones

Nonprofit Chart of Accounts
Premier: Nonprofit Edition includes the UCOA (Unified Chart of Accounts), developed by nonprofit accounting professionals. When used in conjunction with the Statement of Functional Income & Expense, it can save you hours in filling out IRS Form 990 and other standard nonprofit reports. It also helps ensure more accurate reporting.

Nonprofit Customizable Letters And Forms Speed Up Communications
Custom-designed donation, pledge and Thank You note templates let you dispatch professional-looking communications and follow-up with a mouse click. Just merge the templates with your previously entered contact data. No retyping. No embarrassing errors. And you can customize and personalize the templates any way you like.

Nonprofit Navigator And Menu Keep You Organized
The new Nonprofit Navigator greets you with a clear, icon-based flowchart of your daily activities. Just click an icon to track pledges. Another to track donations or check your budget. The new Nonprofit Menu gives you access to the same features from anywhere in the program.

Create A Budget Or Forecast Instantly Based On Your Actual Data
One click of the mouse, and Nonprofit Edition builds a budget or forecast based on your previous year's actual grant, donation and expense data. You can edit the figures individually or adjust them all at once by applying a percentage increase or decrease across a line item. Built-in budget reports compare your projections to actuals so you can check how you're doing to keep on track.

Transfers Your Existing QuickBooks Data Automatically
All of your QuickBooks data will be imported to Premier: Nonprofit Edition. Nonprofit Edition automatically transfers data from any edition of QuickBooks 5.0, 6.0, 99, 2000, 2001, 2002 and 2003 for Windows.

Nonprofit Navigator, Menu and New Reports
The Nonprofit Navigator, Nonprofit Menu and the new reports and templates use nonprofit terms you use every day, and everything is where you expect it to be. So you'll be comfortable with it immediately.

The nature of the analysis depends on the perspective of the reader. For example, the short-term note holder would be primarily concerned with the company’s ability to pay its current obligations. The holder of long-term debt might look to both historical and projected earnings and cash flows. The stockholders, current and future, would share a viewpoint similar to that of the long-term debt holder, with perhaps more concern for earnings (vis-à-vis cash flows) than the creditors might exhibit.

The management of a company is concerned with all the above factors and, in additions, needs financial information that is useful on a daily basis.

A selection of the financial relations that are most often computed to analyze the business is shows in the following sections.

Ratios to Measure Return on Investments

1. Return on equity

Measures the return on the investment made by the owners.

2. Return on assets

Measure return on the gross investment in the business, including the financed by the owners as well as that financed by creditors. The relationship between the returns on assets and on equity is indicative of the effect of the business’s financial leverage – if the leverage is positive, the return on equity will be greater than the return on assets.

Ratios to Measure Safety and Liquidity

1. Net working capital

Indicates the ability to meet short-term obligations, reporting the excess of current assets over current liabilities.

2. Current ratio

Also indicates the ability to pay current liabilities as they mature, providing the ratio of current assets to current liabilities. A ratio of 1:1 or greater corresponds to positive net working capital.

3. Long-term debt ratio

Indicates the balance between total equity ownership (common and preferred stockholders) and long-term debt. The greater the percentage, the “more leveraged” is the company.

4. Times interest earned

Measure the ability of a company to cover the payment of interest to borrowers.

5. Debt service ratio

This ratio is an indicator of the company’s ability to pay both the interest and the current principal installments on its outstanding debt and suggest the degree of safety for creditors concerning currently due debt service obligations.

Ratios to Measure Operating Efficiency

1. Collection period

Measure the number of days’ scales that are uncollected in average accounts receivable, providing an idea of how successful the firm is in collecting its customer debt.

2. Receivable turnover ratio

An alternative, but equivalent, measures of the efficiency of the company’s receivable collection efforts. If the company also makes sales for cash, “total credit sales” should be substituted for “total sales.”

3. Number of days' sales in inventory

An indicator of the amount of inventory maintained relative to the company’s sales (as measured by cost of goods sold).

4. Inventory turnover ratio

An alternative measure of how quickly inventory is sold.