Is It Time to Adjust Your Pricing In QuickBooks?

Posted by Bruce Mc on Nov 23, 2010 in Accounting, Bookeeping, Information, QuickBooks | 0 comments

Changing the prices of your company’s services and inventory items can solve one of two problems, depending on why you’re looking for a solution. Say your materials suppliers have upped their prices. You may choose to increase your affected products to maintain your profit margin. Or maybe an item or service has not been moving well. A drop in price might trigger improved sales.

Those examples, of course, are simplifications of what needs to be a thoughtful, studied process. They’re critical business decisions that should be made with the guidance from your trusted ProAdvisor. We’re not experts in just QuickBooks – we also understand the flow of profit and loss, and we can be valuable allies in your battle for continued growth.

We’ll explore the tools that QuickBooks offers to help simplify price changes once your decisions have been made. They’re not overly difficult to use, but we want to ensure your intentions are carried out accurately. And there are related inventory issues that may be impacted by your modifications.

Adjust Your Pricing In QuickBooks

First Steps

First, make sure that QuickBooks is set up to accommodate price levels. Click Edit | Preferences and select Sales & Customers in the left vertical pane. Then click the Company Preferences tab. You’ll see the window shown in Figure 1.

Figure 1: Before attempting price level changes, be sure the Use price levels box is checked. If it’s not already checked, click on the box next to Use price levels. Then click OK.

Multiple Options

QuickBooks offers options related to item price changes. You can simply alter the cost of one item, or you can modify several at once. Your adjustments can be in the form of either percentages or fixed amounts.

There are two ways to get to the price-changing window. You can click the Customers menu, then Change Item Prices. Or you can select the Items & Services icon from the home page. If you do the latter, simply open the Activities menu at the bottom of the screen and select Change Item Prices to see a window similar to the one shown in Figure 2.

Figure 2: The Change Item Prices window displays lists of your products.

By opening the drop-down list below Item Type, you can select the desired type of product: Service, Inventory Part, Inventory Assembly, Non-Inventory Part, or Other Charges.

Targeting Your Changes

Once you’ve selected the right type, click in the column next to the item(s) you want to change. A check mark will appear. If you want to increase or decrease the prices of all of them, click next to Mark All at the bottom of the screen, as pictured in Figure 3.

Figure 3: Click the box next to Mark All if you want to change the prices of all entries.

Based on your discussions with us, you should now know how you want to adjust the selected price(s). You may have just decided on a new price, in which case you can simply enter it in the New Price column.

Here’s an alternative. In the box to the right of Adjust price of marked items by (amount or %), enter either an individual number to increase by that amount, or a number with a % sign after it to up it by that percentage. To decrease the cost, enter a negative number.

The next step is a little trickier. If you simply want to alter the price of an entry based on its current sales price, leave the Current Price option showing in the next box. But if you want to change it based on its Unit Cost, you’ll have to consult us or do some digging to learn what that is.

If you want the resulting numbers to be rounded up, click the arrow next to Round up to nearest. When you’re satisfied with your work, click Adjust to see your changes reflected in the New Price column. Make any desired modifications, then click OK.

One Exception

Of course, no existing transactions will be altered. But if any of your newly priced items or services occur in memorized transactions, you’ll have to edit them. Go to Lists | Memorized Transaction List. Highlight the affected transaction, then right-click and delete it. Enter a new transaction and memorize it again. If you know only that transaction will be affected, you can select Edit Memorized Transaction instead of deleting it.

Don’t know where all of those items occur? Go to Edit | Find to locate them as shown in Figure 4.

Figure 4: You can easily find items in memorized transactions using the Find tool.

Making price changes in QuickBooks – even global ones – isn’t terribly difficult, but it involves a business decision that’s best made in conjunction with us. It can lead to increased profitability no matter which direction you go, as long as you take into account the issues and potential outcomes involved.

Use QuickBooks’s Budgeting Tools

Posted by Bruce Mc on Oct 5, 2010 in Bookeeping, Budgeting, Information, QuickBooks | 0 comments

Having just done this myself I wanted to put this information out from my monthly news letter so everyone can get a look at it. QuickBooks is a very useful tool with very useful tools.

If you took a break from budgeting this summer and are now ready to get back on track, QuickBooks can help. The software’s budgeting tools are easy to use and very powerful when improving your financial profile.

Using a budget, you can determine how your real income and expenses compare to what you anticipated. It can also be a jumping-off point for discussions about long-term planning.

A Good Benchmark

Budgets. Many people make them, but few stay on top of them. QuickBooks simplifies this process, making it easy to track your progress.

Note: Before you take on this task, consult your accounting professional. This greatly increases the odds of creating a successful financial blueprint.

To get started, click on the Company menu. Select Planning & Budgeting, and then Set Up Budgets. If you’ve already set up a budget, that one will appear. You’ll be able to edit it or create a new one. If you haven’t created a budget, the window shown in Figure 1 opens.

Figure 1: You’ll start working on your budget by selecting its year and content.

Select Profit and Loss to include all of the previous year’s activity and click Next.

On the next screen, you’ll also be able to include the criteria Customer:Job or Class so you can budget for individual customers/jobs or classes instead of by account only. Leave this box unchecked for now. Click Next.

Determining the Content

Next, you’ll indicate whether you want to start from scratch with your own figures or let QuickBooks pre-populate your budget with last year’s numbers. Select Create budget from scratch. Click Finish. A window similar to the one shown in Figure 2 opens.

Figure 2: Budgets in QuickBooks are account-based, so yours will be set up that way.

As an example – click on Rent Expense and enter 3,500 in the January column. Hit Tab. You’ll notice that the Annual Total column changes to reflect that entry. If you expect that number to fluctuate over the year, continue to enter those figures in the month columns. If it will remain the same, click Copy Across in the lower left corner. Every column (except for Annual Total) now displays 3,500.

When you’re satisfied with your budget, click Save. You can easily access and edit it anytime from the Company menu.

More Budgeting Tools

QuickBooks’s budget flexibility doesn’t end there. Let’s say that your major office supply vendor has just lowered its bulk prices by 5%, halfway through the year. It’s easy to make this change to your existing budget. Click the Office Supplies row, and then click on Adjust Row Amounts at the bottom of the screen. The window shown in Figure 3 opens.

Figure 3: Need to make a global dollar amount or percentage change to a row? QuickBooks makes this easy.

At the top of the window, you can choose to have the change begin at the first month of your budget or at the currently selected month. Check one of the two buttons below that to indicate whether you want an increase or decrease, and then enter the numerical value in the box.

Tip: Want to start over? Click on the Clear button in the lower right corner. This deletes all of the data in the current page of the budget.

To switch back and forth among budgets, click the arrow under Budget in the upper left corner of the window. A list of your budgets drops down. To build a new one, click on the Create New Budget button in the upper right corner.

Seeing the Fruits of Your Labor

Keep in mind that you can only create one budget per fiscal year for each combination of accounts, customers and jobs, and classes, as shown in Figure 4. This still gives you a lot of budgeting power. You can create budgets for individual customers, for example, and use some of the same accounts found in your overall company budget.

Figure 4: You can create one budget per fiscal year for each unique combination of accounts, customers and jobs, and classes.

Of course, the real power of QuickBooks budgets lies in its budget reports. Using these, you can get an instant, insightful look at how your income and expenses are performing. Go to Reports | Budgets and Forecasts to find them. They include Budget Overview, Budget vs. Actual, and Profit & Loss Budget Performance.

These reports tell you precisely what you may be doing wrong – and right.

If you’re doing more of the former than the latter, share a copy of your budgets and corresponding reports with me. I’ll evaluate your history and offer advice for strengthening your financial health where possible.

If you have any other QB questions please give me a call.

The Income Statement (Profit & Loss) Part 1

Posted by Bruce Mc on Jul 13, 2010 in Accounting, Bookeeping, Income Statement, Information | 0 comments

The Income Statement is one of the three main financial statements. (The other two being the Balance Sheet and Cash Flow Statement.) The important thing to remember about an income statement is that it represents a period of time. As opposed to the balance sheet, which represents a single moment in time.

The income statement is sometimes referred to as the profit and loss statement (P&L), statement of operations, or statement of income. In QuickBooks it is the P & L.

This financial statement indicates changes in the financial position of the business for a particular period of time, i.e. month, quarter or year. The portion of the income statement that deals with operating items is interesting to investors and analysts alike because this section discloses information about revenues and expenses that are a direct result of the regular business operations. The non-operating items section discloses revenue and expense information about activities that are not tied directly to a company’s regular operations. For example, if the sport equipment company sold a factory and some old plant equipment, then this information would be in the non-operating items section.

An Income Statement is related with the Balance Sheet in the terms of net result for the period, i.e. profit or loss for the period from this financial statement goes to the Balance Sheet as an increase or decrease in Retained Earnings (result not distributed to the shareholders as dividends).

The Items Included in

Considering the structure of Income Statement, it is important that this statement indicates not only net result for the period, but also fundamental parts, which make this result. So this statement will include the following:

Revenue:

amounts earned for the goods sold or services provided

Cost of Sales:

cost of goods sold or services provided. In case only goods are being sold, this items will be called Cost of Goods Sold. Here all the cost which are directly related to the revenues earned are included

Gross Profit:

difference between two mentioned items, which indicate how much business earns from the main operations

Operating Expenses:

this items consists of the expenses which cannot be directly related to the cost of goods sold or services provided. Examples can be salaries of accountants, administrative office space rent and other

Operating Profit:

difference between Gross Profit and Operating Expenses

Interest Expenses:

these expenses are shown separately to indicate financial costs the business incurs and whether it earns sufficient profit to be able to pay interest on time

Net Profit (Loss):

this is the net result for the period. If it is positive, we have a profit. If it is negative, we have a loss.

Important to notice, that the Income Statement is usually prepared on the accrual basis, i.e. income and related expenses are recognized despite the fact that cash was not yet paid or received, but based on the obligation from customers to pay for goods sold or services provided and based on the obligation of the business to pay its liabilities.

It is very important to format an income statement so that it is appropriate to the business being conducted.

Income statements, along with balance sheets, are the most basic elements required by potential lenders, such as banks, investors, and vendors. They will use the financial reporting contained therein to determine credit limits

It may look like this: