External Accounting with QuickBooks

Welcome to Artisan POS QuickBooks Interface

 

Artisan is designed to work in conjunction with QuickBooks or provide reports that you give to your accountant. Artisan does NOT have a full built-in accounting package, but it does handle many accounting functions. Here’s a breakdown.

Artisan POS Internal Accounting Manages

  • Accounts Receivable
  • Customer Store Credits
  • Inventory Purchasing
  • Inventory Value
  • Vendor Invoices
  • Cost of Goods Sold (COGS)
  • Employee Time Sheets
  • More

 

We rely on QuickBooks for 

  • General Expenses for Rent, Utilities, etc.
  • Payroll
  • Owner Equity
  • Loans & Credit Card Debt
  • More

We highly recommend that you use QuickBooks to help you keep track of these types of accounts. Artisan will interface with QuickBooks and send Sales, Money Receipts, COGS, Bills Due, Inventory Assets, etc. over to QuickBooks to assist you with what would otherwise be laborious data entry.

We recommend the desktop version of QuickBooks and not the online version, although the online version will work when you have the Importer Guru add-on.

At the end of a day, Artisan will export out an .iif file that you can import into QuickBooks. This is an easy process and can be done daily, once a week, or any time interval you want. You can get started with QuickBooks as soon as you have your first day end or it can be delayed indefinitely. You are expected to close out your sales daily. Then when you are ready to get the first week’s of data over into QuickBooks you can specify the date range and then Artisan will produce 1 file to import. The file will break your sales into daily transactions summaries based on the accounts you have provided. We don’t send individual transactions into QuickBooks.

It takes about an hour to setup Artisan and your QuickBooks to work together. The process starts by getting a chart of accounts from QuickBooks. We then copy the account information into fields in the Artisan Accounting Package Configuration screens.

Once you have complete those fields (at least for the ones you are using), then you can export out your first day end to QuickBooks.

If you don’t complete all the fields you might see a warning message such as this.

 

Although we are NOT accountants and we may refer you to speak with yours, we can answer basic questions. When it comes to explaining double-entry bookkeeping though, you are best to consult your accountant. For assistance with QuickBooks itself, our offerings are limited and we may direct you to QuickBooks support.

Our experience and decisions are based on extended consultation with CPA’s and bookkeepers. A big thanks to Lisa Lindsey, CPA who consulted on the initial development many years ago. Since then we have consulted with numerous accountants over the years. From the beginning it has been our goal to adopt generally accepted accounting practices and principles. Additionally we have accumulated experience with end users as well. We have also learned more about merchandising accounting with our partners in Retail Consulting and with the Management One group.

Overview: A Simple Example

To get a feel for how it works, here is an example using the a clean slate with some items from our Sample Data.
Later we will get more detailed, but here’s a few transactions so you can see the process.

To SKIP AHEAD. Click here to get started without the overview.

Section 1: Artisan QuickBooks Settings

The red Asterisk indicates a field that is used in most circumstances.

 

General Accounts:

 

Inventory Adjustment Accounts:

 

Section 2: Sample Transactions:

  1. Write a Purchase Order, Receive most of it, and enter a Vendor Invoice. A Vendor Invoice is quick and easy and the best way to cross-check.

 

 

2) Make Inventory Adjustments with various reasons.

 

 

Make some sales.

1st Sale:

 

2nd Sale: Special Order

 

3rd Sale:

 

Day End Summary:

 

 

QuickBooks Reports (After Day 1):

Profit & Loss

Commentary:

  • Notice that the Sales Income is 157.00 which matches the Total Sales which does NOT include sales tax.
  • The Cost of Goods Sold is 16.10 + 49.65 = 65.75 which matches on the P & L.
  • The Gross Profit is 157.00 – 65.75 = 91.25.
    Note that neither the cost nor the sales income are included from the special order. Special Orders are not included until they have been marked delivered to the customer.
  • The Freight In from the Vendor Invoice is 75.00.
  • Inventory Adjustments are broken down 16.00 + 22.00 + 22.25 = 60.25.
    Note: The Return To Vendor of 13.00 reduces the Receiving Total and is not an expense. 

 

 

Balance Sheet

 

Commentary:

  1. Notice that the Bank Balance is our current balance (Our beginning bank balance starts at 0.00 which isn’t realistic) PLUS
    Sales + Sales Tax + Customer Deposits
    0.00 + 157.00 + 10.99 + 150.00 = 317.99
  2. Our Inventory is now the Previous Balance (0.00 in our case) +
    Receiving – Adjustments – Cost of Goods Sold
    0.00 + 1373.60 – 60.25 – 65.75  = 1247.60
    You may have noticed the missing 13.00 Return to Vendor. We’ll explain in more detail later, but since Artisan does not know if the Vendor Invoice has already been adjusted it is necessary to enter the credit memo into QuickBooks manually. Once this is complete our new inventory value is 1234.60.
  3. Our customer Deposits is 150.00 which is what our customer gave us a down payment on their special order. This is a liability until we give them the merchandise.
  4. The Sales Tax is also a liability for 10.99.
  5. Our net income is 1565.59 – 1609.59 = -44.00

 

Now that you have had an overview and have a better understanding of the general process, let’s get this working for your situation.
While you may not know all the answers, please try to move forward and skip steps you are unsure about and then you can review with the support team.

 

Getting Started

Step 1: Turn on QuickBooks Accounting

The first thing you will need to confirm that you have your license key and have turned on the feature in the Optional Features section.
From the Main Menu choose Tools and then Program Options then expand the Optional Features section at the very top by clicking on the name.

You must at least make sure that QuickBooks Account is enabled by being set to Yes.

The Vendor Invoices is optional, but recommended. You can always change your mind if you are unsure. The question is whether or not you are going to manually enter your bills into QuickBooks or if you want Artisan to do that for you after you enter the Vendor Invoice. This process is very easy and can literally take less than one minute. Click here for details. <insert link to Vendor Invoices>

Next: Click on Business & Financial Settings, then External Accounting Package Settings

 

Accounting Program: Choose QuickBooks for the Accounting Program.

QB Class Name: This option allows you to specify a class to append to each account in QuickBooks. This is intended to identify separate entities or stores. Usually this field is left blank. In the mult-store case, you will also need to create a Profile for each different QB Class you use.

Primary Bank Account: This is where your cash and check deposits are made. For most, it is also where your Merchant Account deposits are made.

Deposit Holding Account: This is a required field and it is where all the money is kept. If you use the built-in QuickBooks account called Undeposited Funds, then you can make those deposits manually if you want to. If you want to have Artisan make those deposits for you (see the next option) then you should use a different name that doesn’t attach meaning in QuickBooks. Notice the red message indicator in the image. This was created because QuickBooks thinks that there are two deposits that need to be made. In our case this is in error and we should have used something like “Deposit Holding” instead of Undeposited Funds which is the built-in QuickBooks account. You will need to make a new account that is of the type Other Current Assets.

Make Deposits Immediately? This is a critical decision, but you can always change your mind. If set to Yes, Artisan will add an additional entry to move your deposits from the holding account to your checking account. Most of our users choose this option. However if you don’t make regular deposits, or if you want to manually confirm the deposit first, then you can make those deposits in QuickBooks. In QuickBooks choose Record Deposits. If you have this set to No, then you should use Undeposited Funds for the Deposit Holding Account. Note: Different versions of QuickBooks may deal with this differently and your decision may be based on which version you have. If the process isn’t working for you, then try it the other way.

Include Date in Export Filename? This is if you want to keep a record of all the import files. Normally this is not necessary and can even be risky because you would almost never want to import the same file twice as you will get duplicate entries. Normally this is set to No.

Put Daily Summaries into Primary Bank Account? For most of us novice accountants you should choose this option because it makes the Artisan Entries much more visible. Otherwise Artisan will just make a general journal entries and this is intended for real accountants. All it does is add a zero dollar entry called Daily Sales to help identify the Artisan entries in the check register even when there isn’t a deposit. The split lines are the journal entry portion. We highly recommend you leave this set to Yes.

 

Other Bank Accounts (Optional): This is rarely used. Please call for assistance if have two or more bank accounts that you make Sales Income deposit into. Example if your Merchant Account goes into one bank account and your cash and checks go into a different account, then give us a call for help.

 

General Accounts:

Sales Tax Account & Payee: When you collect Sales Tax you don’t pay it to the state daily so this is the account that accumulates your sales tax due into a Current Liability account. Often overlooked is the Payee name. It is critical that you enter this name correctly.

Sales Income Account: This is where money from net sales (before sales tax and costs) is kept. This account is used for all sales or any remaining portion after category and consignment portions have been deducted.

Allow Category Overrides? If you want to further breakdown your accounts based on the Artisan Categories then you can allow it here. Any categories that are left blank will use the primary account. This option is repeated for various accounts below. Since you can run breakdown reports from Artisan, this is normally not necessary and can create considerable more work. It does make using Vendor Invoices almost a requirement.

Consignment Sales Account: This is if you want to separate out your consignment sales. If you leave this field blank then the Sales Income account will be combined with the Consignment Sales.

Sales Discount Account: Sometimes if you have a lot of discounts, you may want to see this total on its own in QuickBooks. If so, specify it here, otherwise they will be included in the Sales Income Account.

Non-Sales Income Account: This is a necessary account if you consider Outbound Shipping, Alterations, or any other service to be not part of your normal sales income. If you have any non-sales categories in Artisan and you have activity on those, then you must specify and account here. We generally assume it is best to set this up to make your ongoing exports more reliable.

Cost of Goods Account: Cost of Goods Sold or COGS is an accounting term and it is the amount that raw cost of normal and consignment sales, normally excluding transportation costs. Transportation costs may be included if Artisan has been configured to do so, but most businesses need to immediately expense the transportation costs. QuickBooks often creates this account for you and they even have a Cost of Goods account type. Understanding how Cost of Goods works is integral to accounting for sales of inventory.

It is critical to understand that when you purchase inventory it goes into an Inventory Asset account. It is never considered an expense until the merchandise is sold. Artisan will move the cost amount from the Inventory Asset to Cost of Goods Sold as sales are marked delivered. Most sales are automatically marked delivered except special orders and deferred shipping.
Another way to calculate Cost of Goods Sold = Beginning Inventory + Purchases – Adjustments – Ending Inventory
Artisan calculates COGS by adding up all the cost of items sold. The cost is recorded based on FIFO and is recorded at the time of the sale and then updated during the day-end process. It is critical that you have your correct RECEIVING cost during the day end. The standard cost in the Item Record is for the NEXT time it is purchased. You must research into the receiving log if you want to see the real costs. 

Consignment Cost Account: Consignment Cost is the same as COGS except that the inventory has not been paid for and is owed after the sale. If you handle a significant amount of consignment inventory, we highly recommend separating out your consignment sales in QuickBooks. When you don’t specify an account here, consignment cost will be included in the Cost of Goods Sold.

Inventory Asset Account: This is a required account if you have any owned inventory. Artisan adds and subtracts from your inventory value as items are invoiced, sold, or adjusted. Note that just receiving inventory will NOT increase this value. You must either use Vendor Invoices or manually enter your invoices into QuickBooks. It works this way so you don’t double enter your inventory. Ultimately you have to pay for that inventory and when you do, it becomes an Inventory Asset in QuickBooks. See Also Cost of Goods and Accounts Payable.

Short / Long Account: Often we have cash and checks (or manual payment/credit cards) that are over or under what we are expecting. During the Day End process you can make adjustments and this the account where that goes. It can be considered an expense.

Gift Certificate Account: Gift Certificates or Gift Cards are often confused with sales. Gift Certificate that are sold are not actually sales. There is no sales tax due and nothing to report as sales until they are redeemed. Until then they are just a Other Current Liability in QuickBooks. This is the liability account that holds the funds until a sale is completed. On the Sales Summary report this total can go up or down depending on the activity. Eventually this account should zero out but invetibalty some will never get redeemed.

GC Discount Account: Sometimes you might want to discount a Gift Certificate. This account makes this activity more visible when those discounts are not combined with the face value of the card.

Check-Pay-Out Account: If you use the Buy From Customer feature or if you would ever write a check to your customer for a refund, this is where that money goes when you use this payment type in a sale.

Customer Deposits Account: Anytime you enter a special order or deferred shipping (manually mark shipped orders delivered) then it isn’t a sale until it is delivered. Sales tax is not due and the sale will not be reported. This is very similar to the Gift Certificate account and this money is also considered an Other Current Liability in QuickBooks. When the sale is marked delivered then the money from this account is used to pay for the merchandise.

Store Credit Account: Again, almost the same thing as Gift Certificates and Customer Deposits. This is the holding account for Store Credits and this money is used as a payment for a sale. This another Other Current Liability account in QuickBooks. This isn’t considered a sale and no sales tax is due.

Tips (Gratuity) Account: Here we have yet another type of holding account. This one holds the money collected for tips for your employees (which you could be considered one of). When you write payroll checks or disperse these funds to your staff, then this Other Current Liability account should be deducted in QuickBooks. It is your responsibility to make sure you use this account in QuickBooks when you disperse those funds.

Inventory Adjustment Accounts: This is a big account and we suggest you split this one up into the 5 sub-accounts shown below. Basically any time you change your inventory value that isn’t part of receiving or selling, then it is an adjustment. Adjustments are very importing because they are expenses and each of these should be Expense Accounts in QuickBooks. Often these adjustments are associated with adjustment types in Artisan.
To specify the sub-accounts in Artisan use a colon, “:”. So Inventory Adjustments:Shrinkage for example.

Shrinkage Account: Technically this is inventory that has been lost or stolen, but during a physical inventory any shortages are classified in this category. If you know that you failed to enter in a Donation for example, you should enter this transaction in before performing a physical inventory.

Destroyed Inventory Account: Anytime something is broken or damaged beyond the ability to sell it at a discount, then it is an expense if the damage is not the responsibility of the vendor. If you are returning defective merchandise, use Return to Vendor instead.

Internal Use Account: If you consume some of your product in the process of selling them, then that is considered Internal Use. For example if you sell candles and you actually burn some of them as demonstration. That is considered Internal Use. The same is true if sell paper towels and you use those to clean your counter. You can’t just go pull them off the shelf as needed. You should enter them as an Internal Use adjustment. Internal Use may also have tax implications and you may actually owe the sales tax on them just like you would if you sold them.

Donated Inventory Account: You may want to give away merchandise to a charity or participate in a charitable promotion. This is how you keep these separate and whether they are tax deductible or not is a question for your accountant.

Other Inventory Adjustment Account: This is the account for everything else that isn’t categorized above.

Accounts Receivable: If you use the House Accounts or full-on A/R, then this group of accounts handles that.

Accounts Receivable Account: All A/R funds go through this account. This accounts holds the balance of your open accounts and individual transactions may increase or decrease this balance as sales are charged and paid off. This is a Other Current Asset in QuickBooks.

Finance Charge Income Account: Finance charges are an Income account in QuickBooks.

Late Fee Income Account: Late fees are an Income account in QuickBooks.

Manual A/R Adjustment Account: When it is necessary to edit the A/R balance field directly rather then through a sale or a return. This could be one way to write off bad debt and therefor this account is an Expense in QuickBooks.

Create Individual A/R Transactions: If you plan on sending out statements generated by QuickBooks, this is how you would do it. Since Artisan has complete statement generating capabilities this option is normally not used.

Accounts Payable & Vendors:

A/P Export Mode: This is a very critical setting and most actually need to change it from the default, but it depends on how you are entering your invoices for inventory into QuickBooks. If you are manually entering your bills yourself or if you are doing that through Artisan. It partially depends on if you are writing Purchase Orders, because if you are then the Vendor Invoice is just a quick step. If you are not using Purchase Orders then maybe it is easier to just enter the bill in QuickBooks.

We would recommend that you do use Purchase Orders and then Vendor Invoices and then Export Vendor Invoices to QuickBooks.

Accounts Payable Account: Another holding account for bills that need to be paid. This account is deducted when you write the check. In QuickBooks this should be a Other Current Liability.

Allow Vendor Overrides? The general Accounts Payable Account on this screen can optionally be overriden by more specific accounts in individual Vendor Records, if this setting is set to “Y”. This allows you to get a more detailed breakdown of accounts in your accounting program, but is not usually necessary for most accounting tasks. Many Artisan reports can be broken down by Vendor without using this setting. This setting is usually set to No.

Shipping Cost Account: This is a critical Expense account in QuickBooks for your inbound freight expenses.

 

Conclusion:

Of course there are always going to be accounting questions. Please let us know how we can assist you. Some requests and questions may be outside of our scope and will either have a fee or get referred to your accountant. We look forward to assisting you with this process. Thanks for reading this first.