Part 4: Making FreshBooks work with an Accounting package (like QuickBooks)- Workflow #3 – Cash based entries

An addition to the original series on FreshBooks and an accounting package.

If you’re using FreshBooks to manage your staff’s time sheets and your billing, but use an accounting package (QuickBooks) to run your more complicated back-end bookkeeping, and if you use the cash basis to record your transactions, here are some helpful hints to make the process easier.

The cash basis is a simple way to do your accounting, especially for serviced-based businesses that have little or no inventory or large assets. However, check with your accountant to see if it’s a fit for your business and if you have any questions. You might be using the accrual method of accounting, which requires this workflow. You also may not need an accounting package in addition to FreshBooks. This post will help when deciding: Do I really need an Accounting Package.

This workflow is a monthly journal entry reconciliation to your QuickBooks account (file) based on the cash coming into your business. So you only base your journal entry on the total payments collected. You use FreshBooks to provide any invoice details or analytics, and QuickBooks for your other bookkeeping needs. Please read the overview and rules of the workflows before starting.

Reports you need from FreshBooks – Payments Collected and Sales Tax Payable

Workflow Details of Suggested Workflow 3 (Total Journal Entry Based):
QuickBooks 2008 will be used as an example of an Accounting package throughout the workflow.

1. In QuickBooks, set up a FreshBooks Income “Client” – where all your FreshBooks related income is to be attributed to.
2. In FreshBooks, pull your payments collected report.

• Select the date range of your time period your reconciling for
• Select ALL CLIENTS
• Click View Report

3. Scroll to the bottom of the report and record the number from “Total Payment Received:”

4. In QuickBooks, select make Journal Entry (usually under “Company”)
5. Select Cash under Account – Enter in Total Payments Received for the time period under Debit = attribute to “FreshBooks Income Client”
6. Select Income under Account – Enter in Total Payments Received for the time period under Credit – attribute to “FreshBooks Income Client”

Your income is now recorded. However, you need account for Sales Taxes (yes, the government is involved) for a future date.

Sales Taxes:

This workflow essentially removes the sales taxes from your top line which needs to be reconciled with your accounting program.

1. In FreshBooks, pull your “Tax Summary” report based on the time period you are entering it for and as “Collected (Cash based)”

2. Select make Journal Entry
3. Debit your revenue by the total for the time period
4. Credit your “sales tax payable” and attribute the appropriate vendor to it (the Government)

5. And you’re done!

Just repeat these two steps every month, and all your FreshBooks income will properly recorded in your accounting package.

Summarized entries:

Invoice/Total Income (Payments Collected) = Revenue/Income (credit, right) – Cash (debit, left)

Sales Taxes collected = Sales tax payable (credit, right) – Income (debit, left)

This is the simplest of the workflows and should likely take you ten minutes a month depending how fast you can navigate QuickBooks. Remember to consult with an accountant if you’re unsure.