Home » All Posts » 9 Best Practices for QuickBooks Payments

9 Best Practices for QuickBooks Payments

best-practice-160x160-no borderThey’re not cast in cement, but accounting professionals tend to agree that these best practices for QuickBooks payments can improve the speed and accuracy of your payments – both incoming and outgoing.

Old habits are hard to break. Once you start doing something one way, it can be hard to change course. There has to be a reward, a reason for altering an existing approach to a task.
In the case of best practices for QuickBooks payments, the rewards are clear.

  • Your cash flow will improve.
  • You’ll save time, which saves money.
  • You’ll minimize late fees and poor credit.

Note:  The following picture shows some of the available Company Preferences for incoming payments.  We usually suggest that you unclick the first box (“Automatically apply payments”) so you can decide exactly how you want to match incoming payments against outstanding customer Invoices.  It also prevents QuickBooks from automatically assigning customer credits to Invoices.  Re-assigning either linked payments or credits after-the-fact can be complex and time-consuming.

Best practices for QuickBooks payments
Figure 1: Best practices benefit your business in many ways, but they can also offer your customers convenience, like the option to pay invoices online.

Suggested Best Practices for QuickBooks Incoming and Outgoing Payments

You’ve probably incorporated some best practices into your business already – especially if you’ve had any QuickBooks training. They aren’t hard-and-fast rules: Many are just common sense.
Here are some of the best practices that we recommend you incorporate into your workflow.

1.    Take advantage of the tools available for electronic financial processing.

Some options:
> Get a merchant account so you can accept credit cards and eChecks.
> Scan checks for immediate deposit.
> Let customers pay online by including a link in invoices.
> Get set up for accepting payments when you’re out of the office.

We can help you set up the solutions that make sense for your business.

2.    Even if you’re a sole proprietor, password-protect your QuickBooks file.

You’re out of the office or occupied with something else sometimes, aren’t you? Unless no one else ever comes in, and you shut down your computer, and lock your door every time you leave (really, who does all of those things?), secure your data. Those easily-accessible processes you’ve set up to pay and be paid can be used by an unauthorized individual.

And you don’t want to be responsible (or be held legally accountable!) for treating customer information casually.

It is EXTREMELY important to protect your customer’s payment information as if it was your own!  If you don’t, you could be held legally responsible.  Not a pretty picture…

Best practices for QuickBooks payments
Figure 2: Yes, you must. And set up a reminder to change it every 90 days.

3.    Cross-train your accounting staff, and divide duties so that there are some ‘checks and balances’.

From an overview standpoint, this helps to ensure that critical work always gets done and can (potentially) expose unauthorized payments.  Even if you only have one person handling the books (other than the business owner), there are ways to build in basic cross-checks that help to prevent fraud.

Won’t happen to you?  Remember:
“All fraud is committed by trusted employees.”

4.    Be diligent about billing and collections.

When you have established good relationships with customers, it’s tempting to want to help them out by extending credit or by delaying due dates. Save this generosity for extreme cases.

As a matter of best practice, many companies require up-front ‘earnest money’ deposits.  You’ll especially want to adopt this practice if you incur costs before you begin to receive funds from a customer.

5.    Set up a report schedule.

You probably run some reports as needed, but it’s critical that you customize, create and analyze basic financial reports on a regular basis. Many reports in QuickBooks are self-explanatory, but it takes a trained eye to spot trouble brewing in, for example, your Profit & Loss, Profit & Loss by Job, Aging Summary reports for Accounts Receivable and Accounts Payable, Estimate vs. Actual Job Cost reports, or your Balance Sheet.

We can help you determine which reports you should be looking at yourself on at least a monthly basis (at a minimum, all of the ones listed above).  If you’d like “another set of eyes” to help provide some perspective on a one-time or recurring basis, let us know.  We’ve looked at thousands of reports and can help provide insights…

6.    Use sub-accounts, rather than ‘header accounts’.

When you use a ‘header’ account rather than the sub-accounts below the header, your entry will show up on reports with a “– Other” at the end of the sub-accounts’ results.

When someone reads your financial reports and sees a header (for example, “Marketing) followed by a list of specific accounts and amounts and then sees a final line in the group that says “Marketing – Other”, it can provoke them to wonder “What the heck is that for?”.  Then they’ll come to ask you. It’s just easier to assign the cost to the correct sub-account in the first place, right?

7.    Annotate everything you can

One of the best practices for QuickBooks payments includes annotating everything that you can.  Whether or not the IRS ever audits you, you should include descriptive details wherever you can, unless there’s no reason that you (or anyone following behind you) would ever need a reminder of why you made a specific deposit or created a sales receipt or wrote off an outstanding balance.  (And six months or a year from now who has that kind of memory?)

8.    When it comes to costs: Be smart and frugal

Make sure that any employee who has the ability to write checks, approve expenses or make any kind of payment through QuickBooks has the same mindset.

You also may want to touch base with us when you’d like to spend more than, say, $2,500 on something that’s not a regular, recurring expense. We can help you consider the tax implications, the potential ROI and, in some cases, immediately depreciate the item(s).

9.    Flag potential IRS Form 1099 contractors when you create their records.

It’s critical that you create and dispatch 1099s to everyone who is eligible.  That’s why QuickBooks has a built-in tool for doing this.


Best practices for QuickBooks payments
Figure 3: If there’s any possibility that a vendor may require an IRS Form 1099 at the end of the year, be sure to check this box.

Tip: Require contractors to provide this information to you BEFORE you issue their first payment.  It’s a whole lot easier to obtain their information at that point.  It’s amazing how much more difficult it can be to track it down when it gets to be time to issue those 1099’s!


If you want a more comprehensive understanding of QuickBooks accounting and payment best practices, talk to us. We can provide one-on-one training and/or help you find other helpful resources.
QuickBooks is easy to use, but its advanced features – especially job-cost-related options – may require explanations and practice. And you’ll find it even easier to use if you learn the theory and concepts behind the step-by-step procedures.

Learn more about our construction accounting and manufacturing program classes and discover our job-cost support products!