guidelines when receiving quickbooks file from bookkeeper?

i am new to this field. i see that i am getting quickbooks files from users that are incorrect. whether booking a loan payment incorrectly or paying something personal which should be a distribution . does anyone have any process or guidelines on what to look for when receiving a quickbooks file from a bookkeeper. Thank you

Firstly, make sure you can tie down each item on the balance sheet - get the December bank statements and credit card statements straddling the year-end. Get payroll reports and make sure the liabilities are correctly stated. Reconcile the fixed asset accounts to your depreciation schedule.

Secondly, scrutinize P&L accounts for non-deductible or partly deductible items. Think where a client may put gifts or meals, other than where they should be. I have never found a shortcut for this task. Others may be more imaginative.

does anyone have any process or guidelines on what to look for when receiving a quickbooks file from a bookkeeper.

In addition to the good comments from Sumwunlost, when it comes to process, you should have an agreement about whether/how you are going to make changes, or add journal entries, to the client's company file. Since you say "receive a file", I assume you are talking about the desktop product, not QBO. If you have QB Accountant's version, you can do things like Accountants Copy allowing concurrent file access, with a dividing date for transactions you and your client can continue to access. Or you can send a file of journal entries for upload.

What type of entity? While it's always nice to have an accurate balance sheet, a Schedule C filer does not actually need to include one with the tax return. But for any other type of entity, I want to be sure as the tax preparer that I have a copy of the books that matches what's on the tax return.

Finally, a great feature in QB desktop is "tax line mapping". After a one time setup by account, you can generate a report that automatically sub-totals expenses by the lines on the tax return, so make sure you get that back into the client's production copy of the company file.

Don't forget to charge separately for QB file maintenance and updates.

Agree with the others! Also, get a copy of the December bank reconciliation to make sure that agrees to what is on the books, as well as to confirm that someone is actually doing a bank rec. I also look hard at the repairs and maintenance and supplies accounts to see if there is anything in there that has to be depreciated.

You really need to talk to the client about the scope of what's involved with fixing the books. It took me several months to finally get paid clearing up a client's books. Stupid me continued working after the retainer was used up. The person who keeps the books doesn't like it when someone cleans up his/her mess. These are the worst clients, IMO.

My process, in order:

-Review balance sheet amounts and verify against supporting docs, including reconciling accounts, if needed
-Review income statement account detail to look for items coded incorrectly, or stuffed somewhere in an attempt to hide something that is not deductible or only partially deductible. Unreal what I find, including personal expenses...clients are surprised at what I bring up, because they think I will not find it
-Look for items thrown into income statement that may be a fixed asset
-Adjustments as needed
-Balance using equity if an imbalance exists

My engagement letter indicates accounting may be required and that the tax return will be prepared based on regulations. Therefore, I have the right to make changes, as I see fit, or disengage if client refuses. Typically i have remote access to their live file, so I can make the changes for them. If a lot of changes need to be made, or bulk changes, I might make a copy and import it into my Accountant's edition and then load the modified data file back to client.

In addition to the items above, I have found it helpful to do these two things when working with QuickBooks:

1) I always print out a year end Balance Sheet and P&L BEFORE I make any adjustments/corrections. This is always helpful when the client says "Why did you charge me so much when my bookkeeper does all the work?" You can then show your client the before and after financial statements which in my experience is usually vastly different.

2) Also, I make all of my changes using journal entries. I never change entries that the bookkeeper has made. In this way I always know what I have done to the QB versus what the bookkeeper did in QB.

2) Also, I make all of my changes using journal entries. I never change entries that the bookkeeper has made. In this way I always know what I have done to the QB versus what the bookkeeper did in QB.

It's always a good idea to create an "external accountant" or some other login for your own work. QB has an exhaustive, reliable audit log and this is the primary way to show who did or didn't make which changes.

Sometimes you have to change things that aren't available via JEs, especially if client uses Paypal, Square, etc and doesn't really know what they are doing in terms of collecting total payment and then remitting payment processing fees. Ditto for sales tax, after the fact payroll, etc.

Client also agrees to something else - set the closing date WITH a password, so that once you get the year to agree to the tax return, they can't go back and change something. I usually do this as soon as I start working on a particular year, so that the target doesn't keep moving during my review.

I don't mind letting the client know the password if they are have a savvy bookkeeper, but at least that makes them realize they are affecting a prior year and to ASK ME if we want this done or not. (Some clients I don't give the password - even though we have agreed to put in the password control, because then they have to call me before they can record a change.)

Remember - this password ONLY affects the ability to record an entry to a prior period - NOT anything else.

I don't mind letting the client know the password if they are have a savvy bookkeeper, but at least that makes them realize they are affecting a prior year and to ASK ME if we want this done or not. (Some clients I don't give the password - even though we have agreed to put in the password control, because then they have to call me before they can record a change.)

Remember - this password ONLY affects the ability to record an entry to a prior period - NOT anything else.

I do the closing date password as well. The closing date password to every client file of mine is "callX" where X is my first name. I don't mind telling them the password... the point is to remind them to call me if they need that sort of change!

Ssh, don't tell anyone -- the person with the admin login to the QB company file can change or remove the closing date password.

1) I always print out a year end Balance Sheet and P&L BEFORE I make any adjustments/corrections.

Good idea. I also always print them out AFTER I make changes, to archive with my tax return workpapers.

WOW, this is all great stuff. OMG thank you. What a forum !!

Firstly, make sure you can tie down each item on the balance sheet - get the December bank statements and credit card statements straddling the year-end. Get payroll reports and make sure the liabilities are correctly stated. Reconcile the fixed asset accounts to your depreciation schedule.

Secondly, scrutinize P&L accounts for non-deductible or partly deductible items. Think where a client may put gifts or meals, other than where they should be. I have never found a shortcut for this task. Others may be more imaginative.

yes, it doesnt seem like there is a shortcut. i would think after a while you get a good feel where the errors might be instead of looking at every single account. but these are great steps. thanks

does anyone have any process or guidelines on what to look for when receiving a quickbooks file from a bookkeeper.

In addition to the good comments from Sumwunlost, when it comes to process, you should have an agreement about whether/how you are going to make changes, or add journal entries, to the client's company file. Since you say "receive a file", I assume you are talking about the desktop product, not QBO. If you have QB Accountant's version, you can do things like Accountants Copy allowing concurrent file access, with a dividing date for transactions you and your client can continue to access. Or you can send a file of journal entries for upload.

What type of entity? While it's always nice to have an accurate balance sheet, a Schedule C filer does not actually need to include one with the tax return. But for any other type of entity, I want to be sure as the tax preparer that I have a copy of the books that matches what's on the tax return.

Finally, a great feature in QB desktop is "tax line mapping". After a one time setup by account, you can generate a report that automatically sub-totals expenses by the lines on the tax return, so make sure you get that back into the client's production copy of the company file.

Don't forget to charge separately for QB file maintenance and updates.

yes i am talking about the desktop product but recently i have come across a client with QBO. Can you elaborate on the tax mapping. i would love to do that going forward

2) Also, I make all of my changes using journal entries. I never change entries that the bookkeeper has made. In this way I always know what I have done to the QB versus what the bookkeeper did in QB.

It's always a good idea to create an "external accountant" or some other login for your own work. QB has an exhaustive, reliable audit log and this is the primary way to show who did or didn't make which changes.

Sometimes you have to change things that aren't available via JEs, especially if client uses Paypal, Square, etc and doesn't really know what they are doing in terms of collecting total payment and then remitting payment processing fees. Ditto for sales tax, after the fact payroll, etc.

hmm, good points. Can you elaborate a little more on this i.e. sales tax, payroll

hmm, good points. Can you elaborate a little more on this i.e. sales tax, payroll

Quickbooks uses modules that track sales tax and payroll. While technically the financial statements can be modified by journal entries, it can screw up the tracking that Quickbooks does within the modules. For example, paying a payroll tax liability by writing a check or journal entry will adjust the balance sheet, but it will remain as an outstanding liability in the payroll module. If payroll liabilities are not paid from within the payroll module, the quarterly reports will also report incorrect amounts. Same with sales tax, though payroll is far more critical in my experience and sales tax CAN be safely adjusted through JEs. Best practice, though? No.

Problem with a lot of the merchant processors is when they settle net funds instead of gross with separate account debits for the merchant fees. PayPal certainly does, and I believe Square does as well--take their fees off the top, and settle the net amount. This causes income to be understated, expenses understated. A wash you say? Not if the IRS takes a look at your 1099-K and you're a company that takes predominately, if not entirely, electronic payments.

Problem with a lot of the merchant processors is when they settle net funds instead of gross with separate account debits for the merchant fees. PayPal certainly does, and I believe Square does as well--take their fees off the top, and settle the net amount. This causes income to be understated, expenses understated.

At least with Paypal, it can be set up as bank, with a balance and regular monthly statements to reconcile. The general problem can be, clients try to show invoice payments at the full amount but only get the net after payment processing fee deposited to the "real" bank account, either the deposit or the invoice end up wrong. Or they try to add their best guess as to the payment processing fee to the invoice as a billable item, which can be even more confusing.

Related to all this, another area that is only partially addressed by JEs is Undeposited Funds. Many clients don't understand how this is supposed to work.

QB Proadvisors can get a lot of training materials from Intuit that help address these common types of problems.

yes i am talking about the desktop product but recently i have come across a client with QBO. Can you elaborate on the tax mapping. i would love to do that going forward

It's an attribute of the account. Go to chart of accounts, and edit an account, you can choose tax line mapping, which is specific to the type of entity your said your company was. For example, S-corp mapping for an S-corp, Schedule C/E mapping for a sole proprietor, etc. If you chose type "other" for your entity, I don't believe it will be available, but you can change the entity type at any time. You can also customize the display columns in Chart of Accounts to show this attribute.

It was not available in the past in QBO, I'm not sure if they've added it yet.

One thing I have always done with journal entries is that I number them with my initials and encourage the in house bookkeeper to do the same. That way when you print out the journal entry report it's easy to tell who created the journal entry. So my JE"s are, for 2018 18 pw je 01. QB will continue to automatically increase the journal entry to the next number so if the bookkeeper does the next one it becomes 18 bk je 02. I always enter a brief explanation but bookkeepers don't always do that, if questions arise, you know who to ask.