 QuickBooks Online 2024 bank feeds and your accounting system. Get ready because we're going to Bookkeeping Cloud 9 with QuickBooks Online. Here we are online in our browser searching for QuickBooks Online Test Drive. The primary tool we'll be using for the first part of the course looking for a result that has Intuit.com in the browser. Here we go. We're going to be selecting the United States version and then verify that we're not a robot. We're going to duplicate some tabs like we do every time putting our major financial statement reports in them. Right-clicking on the tab up top and then we're going to duplicate it as that's thinking. I'm going to right-click on the tab again, duplicate again and then as that's thinking back to the tab to the middle. Go to the reports down on the left-hand side and then I'm going to open up the balance sheet report. This is going to be our standard process. Then I'm going to the tab to the right. Go into the reports on the left-hand side and this time opening up the profit and loss. Otherwise known as the income statement sometimes called the P and L. And then I'm going to go back to my first tab. This is going to be what I would think of as my data input tab, then the balance sheet and the income statements on the right side. Last time we went through some navigation and we discussed briefly the bank feeds and the fact that the first part of the course we're actually not going to be using the bank feeds but doing the full accounting cycle, the full accounting process without the bank feeds so we can learn how all the forms work and then we will have an entire section on bank feeds discussed. First a word from our sponsor. Actually, we're sponsoring ourselves on this one because apparently the merchandisers, they don't want to be seen with us. But that's okay whatever because our merchandise is better than their stupid stuff anyways. Like this CPA thinking cap for example. 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If you would like a commercial free experience consider subscribing to our website at accountinginstruction.com or accountinginstruction.thinkific.com seeing how they work, how the rules work, how you can put the bank feeds in place. Now I know that a lot of people probably would think hey I want to get right to the bank feeds because that's the thing I'm most interested in possibly. So and I can totally understand that so I would recommend first watching this and if you think you are in a situation where the bank feeds can be easily implemented or that you have the knowledge to go forward and jump to the bank feeds section then you can go ahead and do that. So that's we go into the transactions here. You'll recall that the bank feeds are housed here. So let me just first lay out some of the complexities with the bank feeds and what you need to know about them and why I would recommend getting a basis understanding of the accounting process before you just upload the bank feeds. The bank feeds are going to be a connection between QuickBooks and of course your bank. Now the bank has the cash flow of your business but that's basically all it has. So if you're pulling in your information from the bank the question is what are you actually getting from the bank that's coming into QuickBooks? Well if we look at this is going to be a mock bank statement you can see that your bank statement basically has simply the beginning balances and then it's got the additions and the subtractions of the cash transactions and the detail down below it will give us the deposits detail and the outflow detail the increases and decreases to the checking account. Now when you look at the deposits oftentimes if you did a deposit like a check like or just cash that you put into the into your bank account then all you're going to have on the deposit side is the amount of the deposit and the date the deposit happened. So that's what would be pulling into QuickBooks that's it right. That's all it would have and that is not enough to actually record the transaction oftentimes because you might want to know for example the customer and you at least want to know if it's revenue or if it's some other account that we need to be adding. Now if you made a deposit from a check then again the check might not pull in and give you more information that would be on the check such as possibly the customer information but it would be information you could find on the bank with the cancel check. If however you're got an online transfer then you're going to have more information because that's usually going to give you the information in the bank description of who the money came from which will help you to populate the information from the bank feeds into your system providing you with the customer name possibly and giving you more information on how you would record the transaction to the proper income account. On the outflow side if you actually write physical checks then when you pull the information in from the bank feeds what you're going to have is the amount that came out of your account the check number and then the date not the date that you wrote the check though the date that it came out of your account because that's when it hit the actual bank account. So if you actually write checks and a lot of people don't write checks as much because they do everything electronically but if you write check there's going to be this timing difference between when you wrote the check and when you are it's going to clear the bank and so that could be a problem for the use of the bank feeds because one of the bookkeeping things you want to do if you write checks is to be tracking the checks that are outstanding the ones that you wrote which have not yet cleared the bank. However if you're in a situation where you do all electronic type transfers then it'll be easier for the bank feeds because you'll typically have a date that's going to be pretty close to when you did the transfer and the transfer will provide you with possibly information in the bank memo that can tell you who the vendor was so that you can add the vendor. So the general idea here is you've got just the increases and decreases to your checking account flowing in from the bank but you're going to have to at least verify some more information in order to help QuickBooks populate it from what I would call Bank Feed Limbo into the actual creation of the financial statement. So in other words if you pulled this information into the actual bank feeds it's not going to be used yet to create your financial statements but rather it's going to be populated down here in what I would call Bank Feed Limbo. So it's in limbo because we don't have enough information. We don't have enough information to pull it in to the promised land to create the financial statements with it. So obviously it has the increases or decreases but the things you're going to need to add or verify is the account that it needs to go to and you're also going to need to give us the vendor or the customer may not be required but that would be useful information to add as well so that we can track the information by customer or vendor. If you don't do that information and you just connect to the bank let's say you just set up your QuickBooks file you connect it to the bank and then you pull in a year's worth of bank transactions then it's all going to happen and populate in here in Bank Feed Limbo and if you don't know how to pull it from here into your financial statements then it's going to be a mess. So that's why you want to have an understanding of your bookkeeping system before you set up the bank feeds process. Now let's think about the bookkeeping systems in terms of what would be the easiest systems to use bank feeds versus the more complex systems to use bank feeds which again we'll talk more about in the bank feeds section but if you want to jump there you can jump there. So this is a flow chart now this is the desktop version of the flow chart but we're just using the flow of the forms to see how normal accounting systems work and how the bank feeds might fit within it. So we can break these out by the way into our cycles, vendor cycle, customer cycle, employee cycle and so when we think about a cash based system versus an accrual based system we can actually think of something on a cash or accrual based system by cycle meaning I could be on a cash based system for my vendors, my outflows I pay everything in cash when it becomes due but on my revenue side maybe I'm on more of a accrual system due to the industry that I'm in requiring me to invoice customers before I receive the payment. So this will really be driven not by just your choice it's not like well I'm just going to be a cash based system well if you're doing a kind of work that you have to invoice people then you're not going to be in a cash based system because you're going to have to do the work first and invoice people so it's going to be driven kind of by industry. So the easiest one to link in to just connect the bank feeds and let it flow the most automated system would be one where on the revenue side of things you're getting paid from like a platform that would be like gig work or something so if you just do work on a platform and the platform just pays you periodically, possibly monthly and you just want to take that money and record it as revenue when you've received it well that will be easy to do with bank feeds although you'll lose some detail because the deposit will hit your account it'll be an electronic transfer you'll be able to see who it came from therefore you can easily add the customer and you can say that all of the money that's coming into your account is income and that's another kind of caveat you have to be aware of all the money that's coming into your account under that system you're going to assume is income and then record it as income although you can kind of check it because if it's an electronic transfer you'll see who it came from so that if you have that kind of system if you're in gig work or something it's going to be pretty easy to do a bank feeds type of setup it's not like a full service bookkeeping system that way because normally what would happen is you would want to record the revenue when you earned the revenue and then double check that the revenue hit the bank you know with a reconciliation process however because and notice that you're also using a deposit form under this system to record revenue which isn't normally the form used to record revenue usually we record revenue with an invoice or a sales receipt these two forms are better designed often times to record to make other reports like sales by customers or sales by items reports so you lose a little bit of detail possibly but that might be well worth it because it could be a very easy system to do so if you're using that system bank feeds might be the best it might be really pretty easy to set up now if you're in a system where you're on an accrual based system then it becomes a little bit more difficult that would be a system like a bookkeeper for example or a landscaper where you have to do the work first and then you have to invoice the client for the work that you did and then you're going to have to receive the payment that means you're going to have to enter an invoice why does that make the bank feeds more complicated because when you enter an invoice you're not getting paid but you're going to record revenue at the point in time you enter the invoice and so now you have to actually track that outstanding balance in accounts receivable and normally you would then receive the payment at a later point in time and then make the deposit so how's a bank feed going to fit in there? because the bank feed is going to hit the deposit in your checking account well normally what would happen is you would still have to do a full service accounting process you would make an invoice, you would receive the payment you would manually make the deposit in QuickBooks and then use bank feeds to tie out or match the deposit the bank feeds now acting as a helper for the bank reconciliation process but not recording anything new now note that you could connect the bank feed deposit to the invoice possibly or possibly to the received payment we'll talk more about that later but whatever system you set up if you have an accrual system your invoicing clients on the revenue side then that's going to add a level of complexity and you have to think about how are the bank feeds going to fit in to that kind of system and you have to first set up your system and then put the bank feeds kind of into it and then if you're at a cash register situation you're collecting money at a store or something like that usually the process is you have a sales receipt recording the revenue and the cash you received at the point in time that you received it normally you don't deposit it directly into the checking account when you receive it because it's in limbo somewhere it's either in your cash register, cash or it's a credit card or something like that and so you're going to then put it into a clearing account and then make the deposit again, although this is a cash based system it's more complex than the cash based system where you just got paid by gig work if I just got paid by gig work then they just paid me directly from the platform into my checking account and I don't have to take the cash or I don't have to deal with a credit card company generally or anything and it's pretty easy to just record the bank feed as revenue but if I'm collecting money from multiple different kinds of payments and whatnot at a cash register then for the internal controls I'm going to want to collect the cash and then account the cash and whatnot and then deposit the cash manually and then most likely use the bank feeds once again not to record the transaction but rather to double check that the transaction has been recorded helping us out with the internal control of the bank reconciliation process you could again connect the bank feed possibly to the sales receipt creation, we'll talk more about that later just note it's a little bit more complex in that kind of system also if you have inventory inventory messes things up oftentimes because inventory by definition will typically throw you off of a cash based system and the system that would be most easy to automate with bank feeds would be a cash based system and even easier than that a cash based system where you get paid from electronic transfers possibly like gig work if you have inventory the problem is when you buy the inventory you can't just expense it right so if I buy inventory on the vendor side of things normally if I buy something and the money goes out of my company I would record it as an expense but with inventory you're supposed to record it as an asset at that point in time now I could do that with the bank feeds I could buy something and record it as an asset but then of course I have to track the inventory and when I sell the inventory then I'm going to sell it usually with a invoice or a sales receipt and if I'm using a perpetual inventory system then the inventory would be decreased and the cost of goods sold would be recorded at the point in time we sell it so the fact that we have to track the inventory and then record the expense when we sell the inventory if we're using a full perpetual inventory system means that inventory is going to kind of mess up our recording of just on a cash based system there are workarounds around that so you might say maybe I don't have a lot of inventory on hand I just buy stuff and I sell it very quickly in which case maybe you could just expense it as cost of goods sold when you buy it or you might be using a periodic inventory system tracking inventory outside on a separate ledger so that could work and help you to stay more in a cash based system we'll talk about those options more when we get to the cash the bank feeds section but just note if you're tracking inventory that will usually be more complex on the cash outflows side if this is usually for small businesses where it might be the easiest to be on a cash basis so you might be able to use your bank feeds very easily on the cash outflows and have more difficulty on the revenue side if on the revenue side you have to invoice you're on a cruel method for revenue you're on a cash method for the expenses because when the expenses come due you're not entering a bill possibly but rather you're just recording the expense when it comes up right if you're paying with an electronic transfer as bills come up you just pay it with an electronic transfer then that would be the easiest thing to record with a bank feed because now the money you don't have this a cruel problem happening the money is paid with a transfer which will give you memo information which will help you to record the vendor and then you can use that to select the proper account that it should be going to also if you pay with credit cards the credit cards can be connected to the bank feeds like the checking accounts it's a little bit more complicated to wrap your mind around it's not really more complicated I don't think of paying some cash going down when something is paid as opposed to a liability going up but you can connect the credit card so that would be fairly easy to do as well but if you're on an accrual system and you're entering bills which is usually happening for small or mid-sized to larger businesses where they are trying to pay as late as possible because possibly if you have many transactions taking place then cash management strategy becomes more crucial and paying the bill as late as possible becomes more important and therefore you're entering your bill you're tracking your accounts payable which means you've added an accrual component when you enter a bill into the system it increases accounts payable and it records the expense or the inventory if you bought inventory and it doesn't have any cash related to it so you can't record the bill just using the bank feeds and then you're going to pay the bill and when you pay the bill it decreases the accounts payable and records the amount to cash so how would bank feeds fit in then? you probably do the whole process enter the bill and then pay the bill and then you would be matching this transaction to the amount that came through the bank feeds which means the bank feeds would once again be helping you with the reconciliation process not with the actual recording you may possibly be able to tie out the bank feed to the bill so that it records the transaction but we'll talk more about that later and then payroll throws a big wrench into everything if you're doing payroll then there's two primary choices you can use for payroll one is that you can run payroll through QuickBooks or which is usually a cost more you have to pay for the QuickBooks to run payroll or two have a third party provider do the payroll such as an ADP or a paychecks no matter what you do it's going to cause a complication to just recording things with bank feeds because with payroll you have to process the payroll and record there's an accrual component to it because you have to deal with at least in the United States payroll taxes which means you have to do with holdings record liabilities and therefore you can't just wait till something clears the banks and record it as employee expense or payroll or wages now there are workarounds to that once again which we'll talk about when we get to the bank feeds section but just note if you're dealing with payroll it's not going to be just as easy generally as just I'm just going to set up the bank feeds and we'll let it fly and we'll just let it roll from there so that's going to add complexity so the bottom line here bank feeds are great they add more it makes things easier in a lot of ways however you first want to think about how your accounting system works and then how the bank feeds will fit into that accounting system the things that will be most easiest for bank feeds if you're on a cashed based system not only that though you're on a cashed based system where you have transfers that are electronic transfers that are coming through possibly something like a gig work things that are going to make things more complex is if you're selling stuff at a cash register and you're trying to use the internal controls there if you have a cruel components on invoices on the sale side or entering bills and of course if you deal with inventory and if you have employee information any of that stuff will add a level of complexity so you want to first understand how the whole cycle is working and then how you can put the bank feeds into your system and there's no like one size fits all approach because everybody's accounting cycle will be a bit different depending on the industry that they're in and how large they are and so on I'll also just realize that when we say that a business is easy or difficult we can break that further down not just into the whole accounting process but by cycle I mean is their revenue cycle easy or difficult are they on a cash based system or do they have to invoice clients do they deal with tracking inventory is the vendor cycle easy or difficult are they just paying stuff with a bill or a credit card I'm sorry with a check or credit card or expense are they doing electronic transfers or are they actually writing physical checks which adds a level of complexity or are they entering bills which will make things more complex and then do they have payroll and then you can get into the levels of difficulty with payroll how difficult is payroll to connect to the bank feeds we'll dive into that later if you feel competent that you want to dive into that straight away then feel free to do that we cover the bank feeds in a future section