Customer, Sales, Revenue, or Accounts Receivable AR Cycle 1.30

QuickBooks Online 2021 customer sales revenue or accounts receivable AR cycle. Let’s get into it with Intuit QuickBooks Online 2021. Here we are in our Google search page, we’re going to be searching for QuickBooks Online at test drive, then we’re going to be clicking on the QuickBooks Online test drive for Intuit, the owner of QuickBooks, verifying that we are not a robot and continue. Here we are in our Craig’s design and landscaping services practice file, we’re going to hit the New button on the left hand side last time or in the prior section, we took a look at the items under the vendor section now we’re going to be taking a look at the items under the customers section. Remember that every business transaction has two sides to it.


But we want to know what side we’re talking about when we’re using the terminology for QuickBooks. So for QuickBooks, when we say customers, we don’t mean us as the customers of other people such as us being the customers of the vendors. Here, we’re talking about the direction being, we are the business selling to customers. So these are going to be our customers. And we’ve got the documentation related to the customers. So we have the same process that we want to think about with regards to the customers cycle, or the sales cycle, or the accounts receivable cycle.



These are different names for the same kind of processes that we will then have, in that we want to be able to visualize what the process will be, we want to be able to visualize the forms that will be in there, that’s going to be the data input forms, and then take each of those forms and think about what the impact of inputting the documentation for those forms will be on our major financial statements. That being the balance sheet and the income statement, otherwise known as QuickBooks calls it the profit loss or p&l report. To do that, I’m going to go to the desktop version, just to look at the flowchart. So we’re the only reason we’re over here is to look at the flowchart.



You don’t need this version or anything, we just want to look at this flowchart, which basically has the same forms and the online version, and just has this pictorial format. In order for us to see it a little bit more clearly, then we just need to take a look at these same forms will that’ll be in that drop down list, and then consider them. So our idea here is in the customer section. And remember, you might visualize this section for or think about it in different terminology. If you look at the homepage, it’s going to be listed under the customer section, because obviously we sell to customers, it also involves the accounts receivable.



So if you work at a larger company, you’re going to spend a lot of time managing the money that is owed to you. And you’ll probably call it the accounts receivable cycle. But you also might call it the sales cycle sales, another word oftentimes used for revenue. And because obviously, this is going to be at the revenue generation cycle as we sell to customers, or you might simply call it the revenue cycle as well. Now, there’s going to be a difference in terms of different types of industries as to what the full cycle will look like.



So if you have a full accrual process, then you’ll typically have the full invoicing process, then receiving payments, and then you’re going to be making the deposit. If however, you make the sale at the same point in time, as the work is done, we might have just the create the sales receipt and then making the deposit. And if we do something that’s very kind of straightforward or basic in terms of like gig work or something like that, where we get the deposit, we’re actually record the deposit and the and the revenue when it clears the bank, maybe, then we’re just going to record basically the deposit and we’re going to court record revenue at that point in time. So let’s go from the easiest process to the more complex process that might take place.



The easiest kind of setup on the revenue side would be something like the gig work if we had gig work, and we work for Say, say Amazon, we sell like books on Amazon or something like that, or audio books, or we have courses that we sell, or we get revenue from YouTube or we get revenue from something like that. And we wait till the thing actually clears the bank until we record it, then we’re not only on a cash basis, but we’re also just basically depending on the bank, in order to populate our information.



And that’s that’s the basis that will be the easiest thing to use on the deposit side for bank feeds as well. And in that system, basically, we would be recording the deposit when it clears the bank. And just recording revenue at that point in time. That would be like the easiest system that you can have. But you can only have that easy system. If you’re in an industry that supports basically, you know, that easy type of system to be setting up. If on the other hand, let’s say you’re in like a restaurant situation, where you collect the money at the same point in time that you provide the goods or services you provide the food and let’s say you basically collect cash or credit card at that point in time, you’re not going to invoice the client, you’re getting paid at that point in time.



In that case, then you’re basically going to have to record the sales receipt you can imagine basically a register being set up a register type of situation where you would record the sale, you would provide the receipt, you know for the sale, and then the money that is collected during that time period. You’re going to have to then deposit it right, you can have to take the money, some of it possibly be in cash, you can have to deposit it to the bank. Now in that system, you’re probably not going to want to wait till it clears the bank in order to record it, because what you want to do is use the bank as a double check. So you can make your sales all day long.



And then you’re going to have the deposits flew through either either cash credit card, or both in some way shape or form to the bank statement, then you will already have something recorded in the system on our books. And we’ll have to tie that out to what gets recorded in the bank statement, meaning we’ll have to do a reconciliation type of process in some way, shape or form. So you’re still kind of on a cash basis in this system. But you can’t really rely so much on something clear in the bank, before you record it, you’d rather probably use that double checking process, so that your sales see that your sales match up to what the deposits are going to be matching up.



When they clear the bank. We’ll talk more about that in the future as we go through our practice problem and go through these forms. And then the full service process would be something that might be used for like a bookkeeper or a lawyer or something like that, where we have to do the work first. So first, we do the work. And then we’re going to get we’re going to get paid at a later point in time we do the work, we build the client, which is called an invoice here. For QuickBooks, the invoice means we’re billing the client, we’re sending an invoice the bill to them.



The bill means for QuickBooks, that is someone else a vendor, that sending a bill to us. So an invoice means us doing work for like a law firm, or you can imagine a bookkeeping firm, we did the work, and then we’re issuing the invoice, which is the bill in essence to the client that we are going to be sending it to, then we’ll have to track the accounts receivable and and be collecting on the receivable. And then we’re going to make the deposit once we have collected on it. So the full service cycle is going to be kind of like the most complex cycle and it’s the it’s the one that’s a little bit that you know, the most difficult one to tie into save how the bank feeds are going to work.



Because you cannot rely simply on the bank transaction, you have to tie in the bank transaction to the invoice in some way, shape or form. So that’s going to be basically the full cycle process. So you kind of want to visualize that that flow that’s going to be happening. And then we’ll go into more depth on each of these transactions, each of these forms, which are in essence data input forms, and each one of them will have an impact on on the financial statements. So quick recap here, if you’re going to have to build a client, if you’re like a law firm or a CPA firm, you do the work first.



And then you have to build a client, you’re going to receive payment at some point in the future, because you have to build a timeout or something like that, then you’re going to insert into something like an invoice that’s going to record the accounts receivable, and then the sales at that point in time, then you’re going to receive the payment somehow recording the payment that has been received. And then this one’s a little bit tricky, because we might put it into something called undeposited funds.



And this is something that if you’ve learned traditional kind of bookkeeping, in like a school type setup, we haven’t really you haven’t really seen the undeposited funds, because you don’t deal with when you’re just looking at journal entries, the logistical problem of reconciling the bank statement, and how that kind of can get messed up when when you have the deposits that are going into the bank account that differ in a different format, or they’re deposited in a different grouping on the bank statement as in the books. So this step often kind of confuses people in that if you’re going to be depositing multiple checks or multiple payments to the TD Bank, then we want to basically put this into like a a clearing account, which we’re going to call undeposited funds.



And that will basically be again decreasing the accounts receivable and then going into this cash account, but it’s undeposited funds, not the checking account. And then we’re going to go to the checking account and deposit it our goal in the checking account, then on that added step is to group our deposits together so that they will be shown on the bank statement in the same grouping, as they will be shown on our books so that when we do the bank reconciliation or match it up to the bank feeds possibly, then it’ll be easy to do. And then the second kind of business if we if we collect cash at the same point, you’re thinking about a business with a cash register or something like that, where you’re collecting the money and possibly have cash sales involved in credit card sales at the same time that good or service is being provided.



Then once again, you’re going to collect the money here at that point in time, provide the sales receipt which is going to increase sales, and then it’s going to increase most likely once again, this undeposited funds because it’s not going into the checking account yet, although it’s basically cash. If we have cash sales, we’re gonna gather that cash together then at the end of the day, typically end of the day if possible. We want to do it every day, go to the bank and then make the deposit Put all that cash into the bank, all those sales that are that were individual sales grouped together, basically, when we make the deposit into one grouping and make sure that we make the grouping the same.



So it’ll show up on the bank statement as the same as that there’ll be in our books for the reconciliation. And then there’s kind of the easiest process, whereas gig work or something like that someone pays us, like online, we’ve got YouTube revenue, or, or course revenue from different platforms, or, you know, revenue from audiobooks or something like that. And we just wait till it clears the bank. And you know, and then we go in there and make the deposit when it clears, when it clears the bank, that would be the easiest process.



And again, for the for the revenue side of things, if you’re turning down the bank feeds, and you want it as automated as possible, that kind of system can be easier to to automate. So those are the primary forms that we will be taking a look at. And this is the flowchart that you want to be considering or visualizing. Also, just note that this deposit form over here, you can see it’s in the banking section, even though you got this arrow, so they’re trying to say that hopefully, most of the deposits are coming from customers.



But obviously, you could have deposits for other reasons, we might have a deposit for us, the owner putting money in just investing money into our business or loan, or something like that for the deposit. So that’s why it’s kind of over here. But then if then once we have this visualization in our mind, then you want to go into this drop down and you have the same kind of thing customers, that’s gonna be the revenue cycle sales cycle, we got the invoice that would be increasing the accounts receivable for like a bookkeeper or a law firm, we’ve got the received payment, which would be what happens next, after we have the invoice we would then get paid an estimate is something that would be specialized to particular industries that are going to make an estimate, before they issue kind of the invoice, then we’ve got the credit memo.



Now this is something that if someone basically you have to, you know, they return something or something like that, then you’re going to have the credit memo, which will basically kind of reverse it’s kind of a reversal of the invoice. So we’ll we’ll talk about that as well. But it’s less common, hopefully, then the other items, and then the sales receipt, that’s like the cash register. If you make the sale at the same point of time you receive the payment.



Those are the major forms you want to have kind of a visualization of. And then next time we’ll go into each of these forms and take a look at them and see what the impact of them will be on the financial statements. So then you always want to then be able to visualize the flow, what are the forms that are going to happen in the flow, and then what’s the impact on the financial statements meaning, which accounts there’s going to be at least two every time with every form, which two accounts or more are going to be affected with each of these forms as we do the data input for them.

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