36: Easily Transfer Funds Between Accounts In QuickBooks Whether You Are Starting A Business, You A
One of the questions I receive from my clients is how to transfer funds in QuickBooks Desktop and QuickBooks Online. Both have an extremely simple way to do this, but if you are unsure about how to do it, or you do it incorrectly, you could be causing your balance sheet and your income statement to reflect the wrong information. Recording all your transactions is important to make sure your bank reconciliation goes smoothly. Making sure each of these transactions are classified to the correct account will not only ensure your transactions are showing up in the correct accounts, but it will also make sure that your balance sheet and your income statement are accurate. You don’t want to overstate your income by recording a transaction that should have been a simple transfer from one account to another. Today I am going to talk about how easily you can transfer your funds with one simple entry. Listen in to this week’s episode if you are getting ready to start your small business, you’re a solopreneur, entrepreneur, small business owner, virtual online bookkeeper or virtual assistant and you are either looking into or already using QuickBooks Desktop or QuickBooks Online to make sure you are using this simple and effective way to easily transfer funds between accounts…
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Show Notes:
One of the questions I receive from my clients is how to transfer funds in QuickBooks Desktop and QuickBooks Online. Both have an extremely simple way to do this, but if you are unsure about how to do it, or you do it incorrectly, you could be causing your balance sheet and your income statement to reflect the wrong information. Recording all your transactions is important to make sure your bank reconciliation goes smoothly. Making sure each of these transactions are classified to the correct account will not only ensure your transactions are showing up in the correct accounts, but it will also make sure that your balance sheet and your income statement are accurate. You don’t want to overstate your income by recording a transaction that should have been a simple transfer from one account to another. Today I am going to talk about how easily you can transfer your funds with one simple entry. Listen in to this week’s episode if you are getting ready to start your small business, you’re a solopreneur, entrepreneur, small business owner, virtual online bookkeeper or virtual assistant and you are either looking into or already using QuickBooks Desktop or QuickBooks Online to make sure you are using this simple and effective way to easily transfer funds between accounts…
Welcome Back…Transferring funds in QuickBooks Desktop and QuickBooks Online can be done easily, but if not done correctly, your balance sheet and income statement can easily start reflecting incorrect data. Today, I am going to talk about some of the questions I get from my clients about how they should be recording the transfer of funds in QuickBooks.
First, I want to start by clearing one common misunderstanding I see many clients struggle with when it comes to transferring funds in QuickBooks Desktop and QuickBooks Online. With either software solution, I want you to be crystal clear that when you record your transfer in QuickBooks, it is not actually making the bank transfer in your account where you do your banking. Don’t get confused and think that if you make the transfer in your QuickBooks file that this is actually moving your money from your bank accounts you have at your banking institution. You will need to log into your online banking or go to your bank to have any funds moved from one of your bank accounts to another. QuickBooks is ONLY recording the transactions that you are making with your actual bank accounts. If you do a transfer in QuickBooks, you will need to make sure you have contacted your bank directly to have this money moved at your bank as well.
Now that we are clear that you need to move your money at your bank and then record the transaction in QuickBooks, we’ll move on to how this gets recorded in QuickBooks. There are many different ways you can record these transactions in QuickBooks, so I will go over a couple of them and then I’ll talk about the easiest way to record these transactions. I want to talk about the other ways so that if you are currently recording them in these other ways, you can decide if you would like to change how you are recording them in the future.
For this first scenario, let’s say you have a savings account and a checking account. Obviously, you will have each of these accounts set up at your bank, and you will also need to have each of these accounts set up in your chart of accounts in QuickBooks. You should have all of your business bank accounts set up in your QuickBooks file, and you should be reconciling them each month to make sure your balances are reflected correctly and that you have all of your transactions entered. If you don’t have a bank account set up in QuickBooks, you can go to your chart of accounts and add a new account. It should be a bank type, and I normally recommend that my clients name their bank accounts with a description as well as list the last 4 numbers of their account, so they are able to easily know which bank account in QuickBooks they are using. An example would be Checking 1234, or Savings 5678.
Now that you have all of your bank accounts set up, you want to make sure that you are recording all of your transactions so that when you are ready to reconcile these accounts you already have all the transactions entered and reconciling your accounts will go much more quickly. As I mentioned, for our first example, we are going to use the example that we are transferring $1000 from our savings account to our checking account. You would first make the actual bank transaction by going to your bank or using online banking to transfer the $1000 from your savings account to your checking account.
When you are ready to record this transaction in QuickBooks, there are a number of ways to do this, but each will require that you have both accounts set up in your chart of accounts. First, you could go to your checking account and record a deposit of $1000. When you do this, you would use the savings account as the account to show that you deposited the $1000 into the checking account from the savings account. Another option would be to go to your savings account and write a check to your checking account. This again would show that the $1000 is coming out of your savings account and is going directly into your checking account. If you are using either of these methods, it is not wrong, and it is still getting the funds correctly recorded into each of the appropriate accounts.
Today, I want to make sure that you are aware of the Transfer Funds option in both QuickBooks Desktop and QuickBooks Online. If you are using QuickBooks Desktop, you can go to the top menu bar and select Banking and then in the drop-down menu, you can select Transfer Funds. This transfer funds screen will allow you to enter the date that the transfer takes place and simply asks you which account the funds were transferred from and which account the funds were transferred to as well as the transfer amount. You can easily fill in these fields and click the save and close button and your transaction is now entered into both of your bank accounts in QuickBooks. If you are using QuickBooks Online, you can simply click on the + New transaction button, and then select transfer under the Other column. Similar to the QuickBooks Desktop transfer screen, you are able to enter the account that the funds were transferred from and the account the funds were transferred to as well as the date and the transferred amount, and then you can click on the save and close button to record your transfer.
As you can see, this one screen can take the place of doing a deposit or recording a payment from one bank account to another. I like that it is so simple and straight forward so that you can easily tell which account you need to enter to have the transaction reflected correctly. It also eliminates the duplication of the entry. Once you have made the transfer in QuickBooks, there are no other entries needed since you are recording both the account the money is coming from and the account the money is going to. Often people will record two entries to do this and then they have duplicate entries which causes confusion when they are doing their bank reconciliations and their balance sheet and income statements are reflecting the wrong information.
If you are using bank feeds in QuickBooks Desktop or QuickBooks Online, you will see the transaction come through your bank feed. If you already have this transfer recorded, you will be able to simply match the bank feed transaction to this transfer that you have already recorded.
I do want to mention one other thing when it comes to recording transfers of funds. I have seen clients record these transfers from one account to another as income, and you do not want to do this. If you need to record a deposit and the funds are coming from another account, or even from you personally, make sure you are not recording these amounts as income. When you record an item as income, it will increase your income on your income statement or profit and loss report which will increase your taxable income. If the funds are truly from another bank account or from you personally, make sure they are reflected as coming from that bank account or you personally. When you do this, it will not impact your income statement, and you will be able to ensure your income statement is truly reflecting only your taxable income.
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