 QuickBooks Online 2024. Customer Accounts Receivable or Revenue Cycle. Get ready and clear your mind because we don't overanalyze. We Intuit with Intuits. QuickBooks Online. Okay, sometimes I might overanalyze, but whatever, let's do it. Here we are online in our browser searching for QuickBooks Online Test Drive looking for the result that has Intuit.com and the URL into it being the owner of QuickBooks, selecting the United States version and verifying that we're not a robot. We're going to open our major financial statement reports and new tabs by going to the reports on the left hand side in the favorites section. We're going to right click on the balance sheet and open in a new tab. Right click on the profit and loss open in a new tab. Double check in that going to the tabs to the right and closing up the hamburger. There is our balance sheet tapping to the right closing the hamburger. There is our profit and loss. That's the setup process we do every time data input on the first tab. We're going to see the result of that data input on the financial statements in the balance sheet income statement in the tabs to the right selecting the drop down with the plus button in the prior section. We looked at the vendor cycle. Now we're looking at the customer cycle. So we want to kind of imagine the whole accounting cycle happening possibly in a monthly cyclical process within that cycle. We have other cycles happening. 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 is better than their stupid stuff anyways. Like our trust me I'm an accountant product line. Yeah it's paramount that you let people know that you're an accountant because apparently we're among the only ones equipped with the number crunching skills to answer society's current deep complex and nuanced questions. If you would like a commercial free experience consider subscribing to our website at accountinginstruction.com or accountinginstruction.thinkific.com the vendor cycle money ultimately leaving us typically for the purchase of goods and services and then the customer cycle ultimately money coming into the business for the goods and services that we provide. So just like with the vendor side of things with the customer side of things we have to remember which side of the table that we're on which is usually a little bit easier. It clicks a little bit more in people's mind because we think of our customers that's who's on our mind as business owners all the time the customer but of course we are customers as well when you think of it just in terms of business terms because we are the customers of our vendors but from the accounting side or the bookkeeping side of things for QuickBooks customers of course means that the people that we are doing what we do we provide goods and services to the customer and at the end of the customer cycle we would hope that money would be flowing in for those goods and services that we provide. All the data input forms down below like with the vendor cycle are typically forms that will result in journal entries that will be prepared and we want to make sure that as we do the data input we're doing the proper forms rather than just thinking of it in terms of journal entries because the forms give us that tracking ability from a bookkeeping standpoint so we can track for example who owes us the money and try to collect on it. So let's look at these forms in a flow chart basis first I'm going to go over here to this flow chart it looks more like a desktop flow chart but we're just looking at the forms which are basically the same for any kind of accounting process and this is just a nice flow chart to work with. So we're in the customer cycle now you could call the customer cycle the vendors I mean the accounts receivable cycle which would typically be the case if you deal with accounts receivable that means you're on an accrual basis you could call it the sales cycle sales being revenue or you could call it the revenue or income cycle. Now let's go from the easiest cycle to the most complex cycle noting the easiest cycle is going to be a cashed based system and even easier or even further to the easy side than a cashed based system one in which we can basically record our transactions that are electronic transactions from like a gig work kind of system a platform pays us for example so we can record revenue with simply the deposit form as it comes through the bank feeds that would be the easiest thing to do however you don't just have the choice as to whether you can do the easiest thing because it will depend on the industry you're in if you're in an industry if you're a bookkeeper if you're a lawyer if you're a landscaper or something like that you're probably gonna have to do the work first invoice the client you're gonna have to put in some kind of job cost system you can't just say well i'm just going to do the the easiest thing because it's you just can't do it because it's dependent on the industry that you're in if you're working in a store and you have a cash register then you're probably going to have to collect the cash in whatever format that the customers like so you can get the transactions coming and then you could so you can't just do the easiest thing which would be to wait till something clears the bank and then record something with the bank feeds so it will be dependent on the industry the industry that would be the easiest to do would be something like gig work you do work somebody pays you and when they pay you you just wait till it clears the bank and then when it clears the bank you're going to record the transaction as a deposit form but go into an income account at that point in time now note that when you do that you're not doing a full service accounting system really because normally what would happen is when you do the work you would put the information in if it was a cash based system using a sales receipt and then you would match it to what the bank did the bank then being a double check rather than recording the transaction directly from the bank however uh the easy thing to do if you're able to do that is and you feel secure about the transactions is simply to record the transactions after they clear the bank and because there's not a big timing difference because there's not checks involved and we're feeling more and more confident with these electronic transfers that could be the easiest thing if you're in like a gig work type of situation in a platform is paying you we also lose some information because the invoice and the sales receipt forms are usually the forms used to record revenue not the deposit form so you might lose some information from reports like running a report for sales by customer or sales by item but again that might be well worth it if you're just able to do it nice and easily by recording the deposit form as it clears the bank the second most complex one would still be a cash based system but one in which you have a cash register you're working in a store or something like that in that case you might be getting paid multiple different ways you might be getting cash you might be getting credit card payments and electronic transfers and so on and what you want to do then is be able to record the transactions at the point of sale you're not going to deposit them directly into the bank at that point in time but you typically want to have a record of the transactions and therefore you're not typically going to wait till those transactions clear the bank and then record them instead you're going to take the cash transactions at the end of the day and go deposit them into the bank you're going to take the credit card transactions and they're going to be adjusted by the credit card company grouped in some way shape or form and deposited into the bank therefore usually you can have to enter this transaction in and then it's going to go into an undeposited funds or a clearing account of some kind instead of going directly into the bank account so that then you can you can take them out of the clearing account and deposit them internally on our side rather than wait until they clear the bank we deposit them on our side in the same grouping as we expect them to clear the bank that's what often messes people up when you have a credit card company for example the credit card company usually takes your deposits groups them together and then puts them into your bank account not one by one sale if i sold widgets that cost five dollars the credit card company is not going to take each five dollar sale and deposit it into your bank account five dollars at a time they're going to group it together and then give you one lump sum deposit and that's why we need the clearing account so that we can group it on our side in the same format as being grouped by the bank and that's going to add a level of complexity we'll talk about that when we get into the the the forms here and then if you're on an accrual based method you're going to enter an invoice and you possibly could have a step before that as well if you have a job cost system for example you might have an estimate so someone might call in they give you an estimate and you say this is how much it's going to cost based on what we're what we think is in our our billing and the estimate doesn't actually record anything it's just an internal transaction but if you make an estimate and then they accept the next estimate then you can create the invoice from the estimate the invoice is then the form that's going to record the revenue so revenue will been recorded at the invoice but no cash will be received at that time instead it's going to go into accounts receivable therefore accounts receivable is an accrual account if you're using accounts receivable if you bill someone and they're going to pay you later then you have to track the accounts receivable there's no getting around it and that's going to be a major part of the accounting process because you want to make sure that you're getting paid for the work that's being done so you're going to be increasing the accounts receivable with the invoice that would be for businesses again like bookkeeping law firm landscaping many businesses that's just the way it works you're gonna have to do the work and then build a client often for the work then they're going to pay you and we're going to receive the payment they might pay you by check they might pay you by electronic transfer they might pay you by credit card if you have those set up when you receive the payment then oftentimes we might put it once again into a clearing account instead of to the checking account of undeposited funds and the reason is similar to what we talked about before if it was a credit card for example i might get multiple payments that then the credit card company groups together batches and then puts them into my bank account as one deposit and therefore i'm going to have to do that on my end as well i'll put it into a clearing account undeposited funds or funds to be deposited and then i'll use my deposit form on my side to deposit it in the proper grouping so it shows up on the income statement as one deposit instead of three separate deposits the format that hopefully will be shown on the bank feeds or bank reconciliation making the bank reconciliation easy now that it might be the case that you get paid by check or you get paid one at a time one invoice by a time usually that would be the case if you have higher dollar amount items if they're just sending you a check or they're sending you an electronic transfer for the amount you charge them $200 they pay you $200 then you can just deposit it directly into the bank account possibly with the receive payment forms and you don't have to deal with that whole clearing account issue and so that's going to be the general the general process so you can see here there's actually a lot of variation with the different kind of accounting cycles you might go through and if you have inventory that's going to complicate things a bit more because the inventory is something that you're going to have to use an invoice or sales receipt for if using a perpetual inventory system because you might not be able to track the inventory by just using the deposit form so so you want to make sure that you you have your see how complex your system is and make sure that you have your your flow down correctly you can't just pick the easiest thing yeah it's going to be dependent on the industry that you're in so if i select this drop down here in future presentations will go over each of these forms looking at the data input and the impact of them on the financial statements at least most of these forms if not all of them so the invoice is going to be the accrual form that's the one that increases accounts receivable this so an accounts receivable is an accrual account the receive payment is the form after we enter enter an invoice and then the customer pays us lower in the accounts receivable and then recording the deposit either into a clearing account undeposited funds are directly into the checking account an estimate form will only be there in certain types of industries so if you have to do an estimate first and then uh and then you make the invoice such as a job cost system or someone calls in and they want to know how much something will cost you might run an estimate instead of an invoice and then you can use the estimate to create the invoice the credit memo is a form that could reverse uh say an invoice and so that can be a little bit complex to think about the transaction for it so we'll talk about that in future presentations the sales receipt is the form that you would use generally if you're at a cash register cashed-based system but one which you can't wait till the deposits clear the bank instead having to enter the deposits as they happen at the point of sale like a cash register and then most likely put those into a clearing account undeposited funds or funds to be deposited so that you can then group them properly as they go into the checking account if you're doing your bank feeds or you're doing your bank reconciliations and you find that you have to add multiple deposits together in your bookkeeping system to tie out to what the bank says then you probably could make a accounting system that's more efficient so that you can match the bank reconciliation and the bank feed matching should be really easy automatic if your system set up properly so and then we'll get into the refund receipt delayed credit delayed charge other forms that could come up and the uses where those might be necessary we'll talk about them in future presentations