This is first part in a three part series on using FreshBooks and an Accounting package. You also may want to read the blogpost “Do I really need an Accounting package?” The workflows can be found in Part 2: Workflow #1 – Using General Account Entries and Part 3: Workflow #2 – Entering in Each Transaction.
We all know accounting and reporting can be a headache for any business owner, especially when you’d rather run your business than spend time bookkeeping. If you’re a sole proprietor or a (very) small business owner, you can probably use FreshBooks for all your accounting needs. But if your business requires a balance sheet or more financial reporting (e.g. if you’re incorporated), you might be using or are considering a double-ledger accounting program such as QuickBooks.
If you fall into the later category, you’re likely taking advantage of FreshBooks to manage your billing, yourteam’s timesheets, run your subscription billing, generate invoices, and provide a premium billing experience for your clients, but still need an Accounting package for your backend office needs. This series will help you determine a workflow for getting your invoices or accounts receivable into an Accounting package. As with any workflow, there are a number of different options so there are some general questions and rules that need to be considered.
A few questions to ask:
The first consideration is determining what reporting you need. You likely need information for tax season (profit and sales taxes) and others to help you run your business (forecasting).
This leads to the second question, where do you want your reporting to be? Is it better for you to grab reports from one place, or is it efficient to run certain reports from FreshBooks, while others from your accounting package.
The last thing to consider is time (which ironically is the first thing if you are a small business person!) How can you minimize your administrative workload and increase the time you have to run your business.
When planning to use an accounting package, you’ll need an understanding of double-ledger accounting, for example, knowing what a “chart of accounts” is. It is very easy to mess up your initial setup of your double-ledger bookkeeping application. Do you know what debits and credits are? Depending on your background, you may want professional advice when determining your workflow. At the same time, challenge your accountant – they think first about their needs, which can be different than your needs of running a business. Most service-based businesses, especially if you’re under certain revenue levels, do not require a balance sheet, only a profit and loss statement.
When you do choose a workflow to use, be very disciplined and consistent. For example, balance sheets are a snap shot in time of your business so timing is key. You also do not want to under or overstate your income, important for taxes.
The last thing to sort out is how often do you want to reconcile with your accounting program. It varies for most FreshBooks users depending on their time, needs for reporting, and tax obligations from monthly, to quarterly, and for some, yearly.
Quick overview of the two suggested workflows:
Before covering the details of the workflows (available in the next two posts), it’s good discuss them in a general manner. These workflows are all accrual based (which is likely the way you do your bookkeeping if you are using an accounting package).
The easiest, most effective, and least time consuming is entering in your journal entries as sums. This is good because it saves time, and you can still do your specific accounts receivable reporting from FreshBooks (client time to pay, total receivables, accounts aging).
The other option is to enter in all your invoices/sales transactions from FreshBooks into your accounting program. This is time consuming but gives you very specific reporting in your accounting program so you can run all your reports from your accounting program which may or may not be useful for you.
For any workflow you choose, one excellent rule to follow, is putting all your invoices / income into your accounts receivable account before you put it into cash. But this depends on your business.
The detailed workflows:
The next two posts will cover the workflows in detail as so you know what reports to extract and how to enter the information into your accounting program.