Today, I spoke with an electrical contractor who was very worried about his business. He thought his payroll tax returns were not being filed and that large payments were leaving his checking account without reaching the government.
Concerns like these, spread across five different payroll accounts, can feel like eating an elephant—daunting and overwhelming. But just like that elephant, you tackle it one bite (or, in this case, one account) at a time.
In reality, after looking into the situation, only one account had a small issue. It was not about missing returns or payments, but just a rate difference between the payroll processor and the tax agency. This was easy to fix.
By the end of our call, I could hear the relief in his voice. Instead of worrying, he now felt clear and at ease.
This experience shows that bookkeeping is more than just handling numbers. It helps business owners feel clear and relieved, so they can focus on their work.
A good bookkeeper does more than record transactions. They look into issues, keep you informed, and solve problems that might otherwise cause you stress.
The Mystery of the Overstated Income
“I know I didn’t make this much money,” my new client said today, staring at his Profit & Loss (P&L) statement. “This report doesn’t show the bills I haven’t paid yet.”
If you run your business on a cash basis, that statement is spot-on. But if you’re running your P&L on the Accrual Basis—as this client was—unpaid bills should absolutely be factored into your financial picture. An Accrual P&L is designed to show your revenue earned and expenses incurred, regardless of when the cash actually changes hands.
So, why was my client’s income looking inflated? That’s when we went down the rabbit hole.
The Missing Piece: Entering Bills
My first instinct was to check the books. I asked him to give me the name of a vendor he owed money to and then checked the corresponding expense account (in his case, “Subcontractors”). I was looking for Bills—the transactions that record an expense before it’s paid—but I couldn’t find a single one.
Next, we pulled up the Accounts Payable Aging Summary. This report shows all outstanding bills owed to vendors. The result? Zero.
It turns out, he wasn’t entering his bills into QuickBooks at all. He was simply waiting until he paid a vendor and then entering the payment, which only records the expense on a Cash Basis.
The Solution: Using the ‘Bill’ Feature
If you are running your reports on the Accrual Basis, the “Create Bill” feature in your accounting software is essential.
Here’s the breakdown of why this simple step changes everything:
- Correct Expense Timing: When you receive a bill, entering it immediately records the expense on the P&L (debits the expense account) and simultaneously creates a liability on your Balance Sheet (credits Accounts Payable). This instantly provides an accurate, lower, and more realistic view of your current profit.
- Accurate Payables: Your Accounts Payable report now accurately reflects who you owe and by when.
- Better Cash Management: You know exactly how much cash you’ll need for upcoming obligations.
🤯 Next-Level Time Saving: Vendor Email Automation
After showing him how to manually enter a bill (we used a fresh PDF invoice he’d just received), he was already thrilled. But we didn’t stop there.
I showed him the ultimate time-saver: QuickBooks has a unique email address assigned to your account.
- How it works: Give this unique email address to your vendors.
- The Benefit: When they email their invoices to you, the attached PDF automatically uploads the bill into QuickBooks. The software can often use optical character recognition (OCR) to pre-fill most of the details—saving you a significant amount of data entry time.
Final Takeaway
If your P&L seems “too high” on the Accrual basis, the first place to look is your Accounts Payable. Make sure you are using the Bill feature to correctly log expenses the moment you incur them, not just when you pay them. It’s the key to accurate reporting and smarter business decisions!