QuickBooks Online 2021 Bank feeds. Let’s get into it with Intuit QuickBooks Online 2021. Here we are online in our Google search engine. We’re typing in the QuickBooks Online test drive to get to our QuickBooks Online at Test Drive File, we’re going to be clicking on QuickBooks Online at test tribe, verifying that we are not a computer here, and then continue. Here we are in the Craig’s design and landscaping services practice file, we’re going to be touching in on the bank feeds. And the first thing we want to note is that we will be going into bank feeds in more detail, but it will be after the primary practice problem where we will focus specifically on bank feeds.
So if you want to go forward in that directly, you can go down there and that that’s where the bank feeds focus will be at this point, we want to touch in on it however, because it’s such a huge marketing point. And when you combine the fact that the marketing related to bank feeds, which is a really neat system, or a neat feature to the name of the software itself, QuickBooks, it can lead people to kind of think that they’ll purchase QuickBooks and they’ll just connect to the bank and the bank feeds will just flow into QuickBooks.
And then the financial statements will just be completely created automatically in an automated system. And you don’t have to do anything else. And that’s not generally the case, it’s going to be more easy or less easy, a little bit more difficult or less difficult. And that’ll depend on many different factors, including the type of business that we have, and how much we want to rely on the bank versus how much we need to do data input ourselves. So we just want to touch on that briefly here and just give you the rationale as to why we’re basically going to be moving forward without the bank feeds. And then we’ll think about how the bank feeds can fit into the system.
And the main rationale for that have a main reason for that is that if you simply connect to the bank, the bank will then import the information from the the banking system. But that information is somewhat limited when it comes in because all the bank knows is really whether it was an increase or decrease to the checking account, it doesn’t really know where to put it within the system. And you got to basically make sure that you’re adding the correct customers and the correct vendors, if you want to track things by customer and vendor.
And you’re also going to have to basically make sure that you’re assigning to the proper income account, or whatever other account and you’re assigning to the to the correct expense account. And those types of things, you’re gonna have to know a little bit about basically the forms, because even if you’re using bank feeds, even if you’re on a cash basis system, QuickBooks will still be using the primary forms to assign out the documents meaning invoices, sales, receipts, expenses, checks, these things are still going to be the primary forms that will be used.
When we allocate the items from Bank feeds to the system. If you don’t know what these forms do, if you don’t know how the financial statements are created from these forms, then it can be really difficult to enter the to enter the bank feeds. But if you go into the banking system, just to turn on bank feeds is really easy, right just to link your accounts to the bank, pretty straightforward system. And you can you can go into the banking system here. And it’ll basically go into an automated system to link your your system to the bank. And the QuickBooks Online is even easier than the desktop version, generally to do.
So you will need some verification basically with the bank in order to input it. But the connection is not the problem with the bank feed. That’s usually a fairly easy process. Once you have the information connected to the bank feeds, then I call it like bank feed Limbo is what happens the bank feeds come in from the bank to the system. And if you imagine your your system as or your bank statement, as the data that’s going to come into your system, it’s basically the bank statement data. And what the QuickBooks knows for the bank statement data is going to be you know, the increases and the decreases to the checking account.
And it could have guessing or provide some information from the memos, especially if you use electronic transfers, about about the added detail. And that detail can then be used to fill in the blanks in the QuickBooks system in order to add the information. So once this stuff comes in from the bank, it’s really usually in bank feed Limbo, especially if it’s in your first time using the bank feeds. And then you’re going to have to go through here meaning these items here are not yet included in the financial statements. They’re not affecting the primary financials, the balance sheet or the income statement until you go through and assign them out.
Now once to what to assign them out to the proper locations, you have to have some idea of the forms because you’re basically using a variant of these forms in order to do so that’s what we’ll learn when we go through the first half of the course and our primary problem. And then you can set up the bank feeds once a knowing that after you’ve already set this up, then you can kind of tell QuickBooks to memorize transactions, and then it becomes much more automated.
So you have to get through like the first two months or so of data input that’s coming from the bank using bank feeds, properly assigned them out using the information that will learn based on the forms normal accounting processes. And then you can automate the system so that the bank feeds will become more and more automated, and they will become more and more, you know, something that you don’t have to spend as much time with. So to do that, first, we need to know, you know, what kind of accounting system do we have? Are we using a cash or accrual accounting system, and then how can the bank feeds fit into it just to drive this point home a little bit more,
I want to go over to the desktop version, just because I want to look at that flowchart in the desktop version to consider what we mean by how we would fit the bank feeds into our accounting system into the flow of the accounting system. So if I go back over, this is QuickBooks desktop. The only reason I’m over here is because they got this nice flowchart. So that’s the vendor flowchart or the payable chart, and then the customers or receivables, and then the employees down here.
Now note, if you’re turning down the bank feeds, and you have something that is a completely cash basis system, and not only a cash basis system, but one where you want to rely on the bank, the information that clears the bank, in order to construct your financial statements, that would be the easiest system to use in order to turn on bank feeds and be as automated as quickly as possible. And that would be something if you have like gig work or something like that, where you’re getting paid from an from an online application you sell through Amazon, or you have courses that you’re selling or something like that on a different platform and you’re getting income. In that way you have a podcast or that kind of income, then when the money comes in, you just basically wait until it clears the bank and you’re you’re adding it then as income.
In other words, you’re not invoicing or billing the customer, and then having to track the receivable in that situation. And also, you’re paying your expenses, basically, on a cash basis, you’re electronically paying the expenses. In that case, and that basis, the bank feeds work really well, then it’s good, that’s the easiest system to be setting up. Because you will be on a cash basis system.
And not only that, you’ll be reliant on the bank, meaning you’re not going to basically be entering, for example, the checks when you write them under that system, you would be waiting till the checks clear the bank, which means again, it’s not even a cash basis system, it’s a it’s a system where you’re relying on the bank, because even under a cash basis system, normally you would write the check, and then double check that the check had cleared the bank by checking them to the bank feeds.
Okay, and if on the other hand, you’re waiting till the check clears the bank, before you record it in your system at all, you’re not using the bank as a double check to see that that things have been recorded correctly, but rather, you’re relying on the bank in order to get the information to record. And so that’s going to be the The major difference. Now, if you’re paying things with an electronic transfer, you’re paying them right out of your bank account rather than writing checks, then again, that’s that’s probably a system where the bank feeds might be good in that system. Because you’re again, you’ll kind of be relying on the bank on that system.
So that’s going to be the easiest way you can set things up. But many times people have variants where they need to vary away from a cash basis system. And one would be a type of business where you have to invoice clients like a bookkeeper or a lawyer or something like that, where you do work, and then you build a client, and they’re gonna pay you at some point in the future. In that case, you have to track the receivable, you got to track the outstanding receivable. And that’s usually done with an invoice. So in that system,
I can’t just wait till someone pays me and then record the deposit as income at the end of the day. Because I have to track the people that have not yet paid me instead of an accrual account called accounts receivable, and track the people that are going to be paying me then when I received the payment, I’ve got a track that I haven’t received it. And that’s when it’s going to basically hit the bank. So in that case, the bank feeds are a little bit more complicated because on the deposit side of things, I’m going to have to in some way match up basically the invoice and the receive payment to what cleared the bank, meaning at least on the deposit side,
I’m going to have to do more of a traditional bookkeeping thing, which means I’m going to record the deposit or at least the accounts receivable first and then match what happens on the bank feeds to what I already recorded in my system. So if I have to track accounts receivable, if I have to build my customers, because I’m in that type of industry, the bank feeds become a little bit more complex. And so that’s what I mean by we have to understand, you know what kind of accounting system we have so that we can put the bank feeds into it. And that’s usually the biggest deviation that we’re going to have here is that on the on the revenue side of things for small businesses, but you can also have a deviation on the vendor side of things.
And again, if I’m just paying people like straight out of my bank account with electric transfers, then the bank feeds might work quite well. And I might just be reliant on the bank. But if I’m entering bills first, and I want to track the bills through the accounts payable, and then pay them at a future time, once again, I have an accrual component to my process. And then the bank feeds become a little bit more complex, because I’m not relying on them clearing the bank to record the expense, but rather, checking the bill that I have entered to the bank feeds that are going through. So if you’re using accounts payable, then the bank feeds become a little bit more complex as well. The next thing that complex the bank feeds is inventory on both the purchasing side and the sales side.
So if you have inventory, things that you’re selling, and you want to track the inventory in the accounting system, then it becomes more complex as well. Because when you buy the inventory, then then you’re putting something on the books basically as an asset and you’re not expensing it at the point in time that you are purchasing it typically. And that means you’re once again deviating from an accrual basis method. And then you’ve got all kinds of questions about whether or not you’re going to be using a periodic inventory system or a perpetual inventory system.
In other words, are you tracking the inventory every time you make a sale of the inventory, which would be a perpetual inventory system, or are you counting the inventory, and then making a periodic adjustment at the end of the week, day month, which would be like a periodic system. So you got to understand that if you with inventory before you can really fit the bank feeds into it. And then of course, you have payroll, which is another area that muddies up inventory. If you have payroll, then when you when you enter the check, the check that’s going to clear the bank is going to be is going to be net of the withholdings when you pay it when you pay the employees. And so you have all this issue with the payroll process of the withholdings to the payroll taxes and whatnot.
And you have to think about the system that you will be using to record that information. Using the bank feeds when you have to deal with the fact that you have have these other items that will be involved also, are you going to be doing the bank feeds of the payroll within QuickBooks, or you’re gonna have a third party person basically help you process the payroll and then simply enter the checks into QuickBooks. So those are some of the problems with bank feeds that you got to mull over.
And the only way you can really do that if you have a more complex system, meaning you’re on some kind of accrual basis, you use either accounts receivable or accounts payable or you have inventory, or you you have employees is to first know the system know the function of how a normal accounting system works. And then how you can put the bank feeds in there on top of it so that it can integrate within the normal accounting system. If you have a very basic system, like just gig work, then bank feeds might be the way to go.
If you have inventory, accounts receivable accounts payable employees, then then you’re gonna have to put a little bit more thought into it. And the way we will approach this then is think about the normal accounting process without bank feeds. And we’ll think about all these forms that would be done then done in a normal accounting process. And then we’ll add the bank feeds at a later point in time and if you go through it in that format, then once we get to the bank feeds, you’ll have a good understanding of how you can kind of integrate them into your accounting system.
However, if you have a if you have an easy system and and you just want to go right into setting up a new account, and setting up bank feeds, you can go to the second half of the course where we set up a new QuickBooks file and then you could jump right down to the bank feeds system where you could just start adding bank fees and just go go right from there. You got to do a little bit jumping in the course but you can do that and that’s that’s that’s fine.