The busyness and excitement of the holidays can quickly turn into an overwhelming tax season. If you are a business owner, you are responsible for gathering all the information for both your personal and corporate taxes. If you are an accountant, you have to reconcile your clients’ bank accounts, many times manually.
I am a QuickBooks® Online user now, but prior to 2021, my books were done manually by a bookkeeping firm based on my monthly bank statements.
In 2021 I almost missed the corporate tax filing deadline. One of my credit card statements was sent to me around January 20. My bookkeeping firm took 15 calendar days to do the books for December, and another 20 business days to finalize my end-of-year books. Thankfully, my excellent CPA filed my taxes almost instantly after I sent him the spreadsheets from my bookkeeper. Although I made the filing deadline, I decided to do things differently in 2021.
Reduce manual data entry for QuickBooks Online
First, I purchased QuickBooks Online. I sell online courses, so the simplicity of a web-based accounting tool appealed to me. Second, I set up an automation with Connex to sync Stripe and QuickBooks every day. This automation made it possible to match my online sales and Stripe payouts to ensure no sales were missing from QuickBooks. Unlike in 2020, when I never knew what my P&L was because my bookkeeping was done manually, in 2021 I could get an almost real-time P&L every day when I checked into QuickBooks.
In fact, in fall 2021 when it looked like I was going to have a loss, I was able to quickly launch a new initiative because I knew exactly how much cash I had on hand. My end-of-year initiative led to a healthy profit for 2021. I would not have been able to turn my business around in just two months without QuickBooks Online and the automated sync from Stripe.
Many of our customers at Connex have the same dilemma that I had with my own business: They are too busy with running their own businesses to pay attention to their accounting. There is a silent assumption that you need to stay focused on running your business and hand off your finances to accounting professionals.
What I learned as a business owner is that you must take responsibility for your finances while running your business. Thankfully, automations make it possible to spend less than five minutes a day on your accounting and still be up-to-date. This year, my CPA had everything he needed to file my taxes by January 12. Despite the surge in sales in December, this has been my smoothest tax season since I started my business more than 10 years ago.
Importance of automation if you have inventory
Automations for inventory-based businesses have also come very far in the past few years. As e-commerce happens 24/7, it is impossible to manually keep inventory up to date. Our automations at Connex make it possible to update your inventory in QuickBooks and multiple e-commerce channels as often as every 15 minutes.
In our experience, businesses that rely on manual data entry pay more in taxes than they need to. You can also incur additional expenses if you have to pay your bookkeeper to correct errors manually.
If your QuickBooks accounts are not updated regularly, many expenses, such as lost inventory, shipping costs, and merchant fees, can fall through the cracks. This is especially true if you need to get multiple months’ worth of orders into QuickBooks.
Can you sync your sales historically to QuickBooks Online?
While we do help businesses sync sales historically to QuickBooks, limitations of this practice are that you cannot sync all of the expenses and you cannot get an accurate Cost of Goods Sold (COGS). If you do decide to sync historical orders into QuickBooks Online, here are some best practices:
- Make sure that your products are matched between QuickBooks and your selling channels. Automations such as Connex allow you to set up rules so that you can map products on different selling channels to the same item in QuickBooks.
- Ensure that customers are matched between QuickBooks and selling channels
- Sync 2-4 weeks of orders at a time otherwise you will get sync errors.
- Ensure setting are correct (sync invoices vs. sales receipts)
- Turn off inventory syncing so that your inventory in QuickBooks does not go negative.
- Work with your bookkeeper to reconcile missing orders via journal entries.
Although historical syncing can help you reconcile your books and file your taxes, you will probably not be able to capture and write off all your expenses. We recommend historical syncing if you only have a few weeks worth of orders that you want to get into QuickBooks.
Bottom line: Automation works
The best practice, as I learned from personal experience, is to use automation for syncing your orders into QuickBooks moving forward. Tax time for 2022 may be a year away, but paying estimated taxes for 2022 is just around the corner. When your orders are synced automatically to QuickBooks, you have control over your finances and cash flow and you will be able to make financially informed decisions.
Whether you have an inventory or non-inventory-based business, knowing where your business stands financially every day empowers you to launch initiatives to stay ahead of the competition and delight your customers.
This post originally appeared