Transferring Money between Bank Accounts

To use the Transfer Funds Between Accounts window, follow these steps:

1. Use the Date field to identify the transfer date.

   You can enter the date in mm/dd/yyyy format, or you can click the small calendar button that appears to the right of the Date field. When QuickBooks displays the calendar, click the day that corresponds to the date you want to enter into the Date field.

2. Use the Transfer Funds From drop-down list to select the bank account from which you're moving funds.

   You can enter the bank account name into the box or you can click the drop-down arrow at the right end of the box and select a bank account from the list that QuickBooks supplies.

3. Use the Transfer Funds To drop-down list to identify the bank account that receives the transferred funds.

   The Transfer Funds To box works like the Transfer Funds From box.

4. Use the Transfer Amount box to identify the amount of the transfer.

   For example, if you transfer $100 from your checking to your savings account, the transfer amount is $100.

5. (Optional) Provide a memo description for the transfer transaction.

   If you want (and this is no big deal), you can use the Memo box to provide some brief memo description of the funds transfer.

6. Save the transfer transaction.

   To save your transfer transaction, click either the Save & Close or the Save & New button. Alternatively, if you don't want to save the transfer transaction, click the Clear button.

Figure 1: The Transfer Funds Between Accounts window

Setting up QuickBooks

To use QuickBooks, you need to do two things: install the QuickBooks software and run the setup interview, which is called the EasyStep Interview. This post gives a bird's-eye view of both of these tasks. I also spend just a few paragraphs talking about some of the planning that you should do before you set up QuickBooks, and some of the missing setup steps in the EasyStep Interview — things it should do but doesn't.

Planning Your New QuickBooks System

I start with a couple of big picture discussions: what accounting does and what accounting systems do. If you understand this big picture stuff from the very start, you'll find that the QuickBooks setup process makes a whole lot more sense.

What Accounting Does

First you need to know what accounting does. People may argue about the little details, but most would agree that accounting does the following four important things:

• Measures profits and losses

• Reports on a financial condition of a firm (its assets, liabilities, and net worth)

• Provides detailed records of the assets, liabilities, and owner's equity accounts

• Supplies financial information to stakeholders, especially to management

What Accounting Systems Do

Now take a brief look at what accounting systems — or at least at what small business accounting systems — typically do:

• Produce financial statements, including income statements, balance sheets, and other accounting reports.

• Generate business forms, including checks, paychecks, invoices, customer statements, and so forth.

• Keep detailed records of key accounts, including cash, accounts receivable (amounts that customers owe a firm), accounts payable (amounts that a firm owes its vendors), inventory items, fixed assets, and so on.

• Perform specialized information management functions. For example, in the publishing industry, book publishers often pay authors royalties. So royalty accounting is a task that book publisher accounting systems must typically do.

What QuickBooks Does

Okay, after you understand what accounting does and what accounting systems typically do, you can see with some perspective what QuickBooks does:

• Produces financial statements

• Generates many common business forms, including checks, paychecks, customer invoices, customer statements, credit memos, and purchase orders

• Keeps detailed records of a handful of key accounts: cash, accounts receivable, accounts payable, and inventory in simple settings

Allow me to make an important observation here: QuickBooks does three of the four things that you would expect an accounting system to do. Compare the list that I just provided with the previous list ("What accounting systems do"). However, I'll save you the time of finding the fourth thing; QuickBooks doesn't supply the specialized accounting stuff. For example, QuickBooks doesn't do royalty accounting discussed in the earlier example.

And Now for the Bad News

So QuickBooks does three of the four things that accounting systems do, but it doesn't do everything. QuickBooks is often an incomplete accounting solution. Be careful, therefore, about setting your expectations. You also, typically, need to figure out workarounds for some of your special accounting requirements.

QuickBooks gives users and businesses a lot of flexibility. So, returning to the previous example, a book publisher can do much of what it needs to do for royalty accounting in QuickBooks. This royalty accounting work simply requires a certain amount of fiddling as the business is setting up QuickBooks.

However, QuickBooks does suffer from a couple of significant weaknesses:

• QuickBooks Pro doesn't supply a good way to handle the manufacture of inventory. However, QuickBooks Premier and QuickBooks Enterprise Solutions do support simple manufacturing accounting. (These versions of QuickBooks help you account for the process of turning raw materials into finished goods.)

• QuickBooks doesn't handle the situation of storing inventory in multiple locations. It just shows, for example, that you have 3,000 widgets. It doesn't let you keep track of the fact that you have 1,000 widgets at the warehouse, 500 widgets at store A, and 1,500 widgets at store B.

In spite of the fact that QuickBooks may be an incomplete solution and may not handle inventory the way you want or need, QuickBooks is still a very good solution. What QuickBooks does, it does very well. Furthermore, I don't want to suggest that you shouldn't ever use a smaller software company's accounting solution, but consider the fact that QuickBooks will be around for a long, long time.

It's far more likely that an accounting software product with 600 users, for example, will be discontinued rather than a product like QuickBooks, which has 2,000,000 customers.