Welcome to the Fit Small Business QuickBooks Online training course! In this lesson, we’re going to cover how to set up expenses in QuickBooks Online.
To complete this lesson, you can either watch the video below, read through the step-by-step instructions, or do both. Let’s begin!
Before we get started with the lesson, it’s worth mentioning that there are affordable virtual bookkeepers that can set-up and manage your QuickBooks for you. They will even help you get caught up if you are behind. For example, SmartBooks offers help with cash flow management, monthly financial statements, payroll processing and more starting at $250/month. Get a free consultation to learn more.
Why is it Important to Set Up Expenses?
One of the primary reasons why small businesses want to use QuickBooks is so that they can track their expenses. QuickBooks is designed to keep track of expenses from downloading your banking transactions to writing checks. In this set up, you can customize how QuickBooks will track your expenses by selecting one or more of the following options:
- Track expenses by customer so that you can run profitability reports
- Bill customers back for items that you purchased on their behalf
- Manage bills through Accounts payable
- Create purchase orders to send to your suppliers
If you do not need to customize QuickBooks for any of the options mentioned above, then you can skip this set up.
How Do I Set Up Expenses in QuickBooks Online?
Below are the step-by-step instructions on how to set up Expenses:
Expenses is the 4th tab in Account and Settings. This section will allow you to turn on/off features that affect how you pay bills and track your expenses.
Below you will find a brief description of each feature along with how we would set this up for our fictitious company, Paul’s Plumbing:
- Show items table on expense and purchase forms – this feature adds a Product/Service table on expense and purchase forms so you can itemize products and services that you have purchased.
Example: Paul likes details. He is going to activate this feature because he wants to be able to easily see the details of what he has spent his money on when he looks at his checks and purchase orders in QuickBooks.
- Track expenses and items by customer – if you purchase an item on behalf of a customer and you want to link this item to that customer, then this feature will add a Customer column on expense and purchase forms.
Example: While Paul typically bills his customers a rate that will include any materials and parts he uses for the job, there are occasions when his customers make special requests. For example, a customer wants a specific brand for their kitchen sink. Paul will purchase the item on behalf of the customer and bill them back for the actual cost of that sink. This feature works well for these types of situations so Paul will activate it.
- Make expenses and items billable – this feature will add a billable column on expense and purchase forms so you can add billable expenses and items on sales forms to charge customers for items purchased on their behalf.
Example: This feature complements the track expenses and items by customer feature. It will add a column next to the customer column so that Paul can place a checkmark in it to mark it as a billable item. QuickBooks will keep track of all billable items and when Paul is ready to create an invoice for a customer who has billable items, QuickBooks will provide him with an alert that he has billable items to add to the invoice.
- Set up a default markup rate – this feature is only available if you have turned on the make expenses and items billable feature (above). It allows you to set a default markup rate for items you plan to bill your customers for.
Example: In general, Paul prices his services such that typically he does not need to markup items that he bills back to his customers. However, there are those occasions when he has to go out of his way for specialty items that customers might ask for. In those cases, having the ability to markup items would be great. So he will his default markup at 30%.
- Track billable expenses and items as income – this feature is only available if you have turned on the make expenses and items billable feature (above). You can choose to track this income in one account or in multiple accounts. Refer to the chart of accounts set up lesson to learn how to create new accounts.
Example: Since Paul does markup specialty items, he will go ahead and select Track billable expenses and items as income in a single account.
- Charge sales tax – this feature should be activated if you need to charge your customers sales tax.
- Set up default payment terms – this feature allows you to set default payment terms for all bills that you enter into QuickBooks. If the payment terms vary by vendor, you can adjust them in the vendor profile when you set up your vendors in QuickBooks. By setting up payment terms in QuickBooks, you will receive reminders when a bill is coming due.
Example: Paul has established good rapport with all of his suppliers. As a result, he’s got 30 day terms with all of his suppliers so he will set the default at Net 30 for his payment terms.
- Purchase orders – if you need to send purchase orders to your suppliers, you will need to turn this feature on here.
That wraps up the section on Setting Up Expenses. The next lesson in our QuickBooks Online Training Course will be How to Set Up Advanced Settings in QuickBooks Online. In this course, we will show you how to set up custom settings for your financial reports.
To access this course or any of the others in the series, click here.
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