Create the Perfect Interior Design Invoice for Accounting and Tax

Interior design invoice for Accounting and Tax

welcome designers my name is Marissa McKinney from logistics and I am here today to talk about better bookkeeping for interior design just to give you a little background about where I'm coming from I started working with my first interior design company in 2013 and they stressed me the struggles that interior designers encounter to find an accounting professional that knew their particular industry as a result I quickly learned the business and since then people come to me from all over the United States asking for advice the one thing that I want to stress to designers and what I see is the most important thing from an accounting standpoint is that it's all about their workflow process and I am here today to share that process with you so let's get started today we will talk about the following getting started with QuickBooks and IV the general steps that all designers should be following to ensure the best workflow process how to make the most of your IV and quickbooks online integration sales tax tracking and IV and in QuickBooks and keeping it simple while keeping in touch with your bookkeeper getting started it is so important to work with a bookkeeper who knows your specific industry a lot of people come to me and tell me that they have gone through five bookkeepers in the last year people who were recommended accounting professionals but didn't necessarily know interior design and if you don't know this specific industry you're really not qualified to do their accounting choose a bookkeeper who has experience with the software's that you're using choose a bookkeeper that has the specific industry knowledge and can help you get set up and help you with your day-to-day and doing all of this will minimize your future headache and also minimize your vulnerability to potential audits you know once you land that big job once you start hiring staff you really want to make sure that all of your systems are ready and set up to go just really set up a test account and play with it make sure all of your mapping is good make sure everything's translating from IV over to QuickBooks seamlessly figure out any quark so that when you do start really rolling you don't feel overwhelmed you already know this you already know the process you have this down and you can just move on with a clean clear concise view as to how to move forward with your interior design business as a whole one of the major things that I want to talk about today in the processes is that you really need to make sure that you're getting paid before you order or at least getting signed approval we'll go into more details about all this stuff in just a minute but I just want to make sure that that point is stressed when we're talking about account setup so let's continue so what's the point of the process the point of the process is to ensure that all invoices are final they're closed sealed those items are approved or have been paid for and they're posting and tracking to the financial statements accurately and timely the purchase of or the purpose of creating purchase orders and posting payments on purchase orders is to help assess an accurate liability of your company at any given point in time also closing those purchase orders by posting the payments helps to manage what has been paid and what needs to be paid and pulling accurate project tracking reports etc so you may have a hundred thousand dollars in the bank of that money how much is actually yours to spend how which is the clients to spend perhaps you received $100,000 check from the client and of that amount you are required to pay out $80,000 so really even though your bank balance is a hundred thousand your actual cash balance is really only twenty thousand and you really want to be able to know what those amounts are at any given point in time for obvious reasons and [Music] you may have one job and it may not feel like you need to be tracking this but you get two jobs at once and it gets complicated fast so just make sure that you're following the steps you'll always have financial and accurate data to assess your company's financial standing at any given point in time if we're using this screen grab as an example this is a report you could pull in QuickBooks you could also have this automatically sent to you on a certain day of the week or a certain day of the month or whatever schedule you want to set up and then you can have these reports auto-generated and sent to you to always have accurate and timely information of your liability so for example this company's open purchase order detailed report says that it has nine hundred and fifty nine dollars in open liability so that means that these are the amounts that have not been paid to vendors so going back to the example of a hundred thousand dollars and if you only have a hundred thousand dollars in the bank and you have nine hundred and fifty nine dollars and liability from your open purchase order detail report then it looks like you're in pretty good standing because you really only oh about a thousand dollars which means you have 99 thousand dollars left in the bank so these reports are really great and that's another great thing about the integration between Ivy and QuickBooks is that you can get tons and tons of reports in QuickBooks you can get them customized you can get really good information readily available at your fingertips whenever you want it as long as you follow the steps and you do your part to ensure that the information coming over to QuickBooks is accurate so that kind of sums up the point of the process we'll go into the details of the actual process in just a minute let's just talk about the mapping and the test account so this is my general overview of how I like things mapped I set these accounts up both on the IV side and the QuickBooks side you really kind of no need to know your chart of accounts in QuickBooks in order to get this information set up accurately so you really want to probably solicit some help at this current point in time for getting set up accurately IV has their defaults which are great and they work just fine and you could set them up but you really want to like especially get your payable bank account payable credit card account perhaps your undeposited funds set up those are the main ones and the other ones have to do with tax categories so in california labor repairs and is non-taxable so you want to set up those particular accounts so that you can file your sales tax accurately again they have tons of webinars on how to get set up in QuickBooks so if you are gonna try and attempt to do this yourself really make sure you utilize those webinars and access that information before you get started the last part in the getting started process is I just like I said before I just want to really stress that it's so important to receive payment on proposal and get paid or at least at the very least get written authorization from your client or digital authorization if you're using IV obviously you can get that approved which is what these screen grabs are showing you so um you can submit it two ways you can submit the proposal for approval only or you could submit the proposal to allow payments while on that proposal be sent through IV either way for liability on your part you're just getting started as an interior designer I really can't stress how important it is to just get this written or digital approval or I mean preferably payment on proposal before you do the ordering I know some people that do it backwards and some people that have had really awful terrible experiences by doing this and it's all okay until you have that experience like you are designing for your friends or you are designing for people you think have a lot of money person could have billion dollars and then all of a sudden get a divorce and now you were left with a freeze on their funds and potentially lots and lots and lots of money out of your own pocket having been paid because you didn't receive that payment on proposal so I encourage you all to just really make sure that you're receiving payment on proposal and at the very least if you're not doing that get consent get approval through IV get written consent do something to ensure that you are protected if it ever has to go down that path okay here we go the meeting potatoes to ensure the best working relationship between you and your bookkeeper follow these steps every time on time designers create items and proposals the client pays and the payment is applied to the proposal immediately after the payment is applied to the proposal and invoice is created and immediately after an invoice is created the purchase orders are created once you get to the ordering process you apply the vendor payment to the purchase order at the exact moment that you do ordering and if everything again is done in sequence I'm correctly all financial report should be accurate and in real time so let's run through what this looks like in the process and as we mentioned during the getting started slide I suggest setting up a test account so you can practice these steps in your test account and of course you're gonna practice them for every actual real client that you have but I'll show you in a test account so you guys can set one up in your own IV account and you can play with it that way so test account I set up a project called test and within this project I created a proposal so once we've sent out this proposal and I'll create another one just so you guys can see it I'm just gonna put something in there it could be whatever the cost is gonna be 200 my markup is gonna be 10 let's throw some shipping in there ten dollars and then I'm going to save the proposal or save and send if I'm actually going to send it to a client so I am going to allow the client to put a deposit on this proposal so I'm going to click this which means that the client can pay this proposal once they receive it via email and I however do not want to pay the credit card transaction fees so I will charge the client transaction fee to the client and then I'm going to send it off so if my client sends me a check and they don't pay me through IB and I'm going to record pay payment the check number that the client gave me was number one one zero zero and the amount was for the exact amount of the proposal that I sent so now that I've received the client payment I'm applying the client payment to the proposal once the client payment is applied to the proposal immediately after I go to generating an invoice so we want to recognize this money received from the client as income and if you just post the payment on the proposal it's not going to recognize the money received by the client as income on your financial statements unless you post it to an invoice so we're going to start the invoice which is really simple because all this information is just tracking over including the payment that has been applied to the proposal I'm going to simply save this and you'll see that the balance is zero because we had already applied the payment to the proposal so now if you look at their invoices you'll see that their balance is zero right here then if you go ahead and create the invoice you need to create the purchase order immediately after so we're gonna go ahead and create the purchase orders this item did not have a vendor attached to it so it was just a random accessory item that I pulled from my default account and but let's just say it's Rebecca Atwood and now we have a purchase order for that so now I am able to ascertain my liability the amount that I owe on the payment received from the client so the payment I received from the client was for two hundred and fifty dollars and ninety cents of that amount two hundred dollars was the purchase cost for the item which is what I need to still pay out of the vendor and then the sales tax liability was twenty dollars and ninety cents so if I go over to my financial statements I can see that let's just do the date that I created you'll see this item plus I think another one making my total income for the money received two hundred and forty-one dollars let's see if this is it okay two hundred twenty dollars and ten dollars two hundred and twenty dollars and ten dollars so my financial reports are now accurate the money I received is now being tracked over to QuickBooks so I can pull financial reports to ascertain my actual income received now if I want to check my liabilities associated with the amount of money that I have in my bank I can simply pull a open purchase order report and view those liabilities so for this Rebecca Atwood item that I entered I owe two hundred dollars to the vendor once I post the payment to this vendor so right now I'm going ahead and I'm about to order something and then I go to look at the vendor invoice I make sure that the vendor invoice is exactly what I'm paying and I paid this with my credit card I'm just gonna put my initials in and the date and this is the exact amount that the vendor charge me and I know that this is the exact amount that the vendor charged me because I'm looking at the vendor receipt right now so then I go to create the payment and now my purchase order report will be last so now my liability is reduced because that item was removed so now I know what my income was I know what my liabilities were and I also have an accurate sales tax report that I can call to for and I'd like to run through each of the steps again and also discuss some common situations that occur and how to handle those while going through the steps so we'll start again with of course creating proposals let's go ahead back to our test account we're gonna create a new proposal and we're going to be selling what are we gonna sell today mid-century art West um item there we go my markup is going to be 30% my shipping is gonna be $25 and the item is taxable I'm going to save this proposal I could save and send it to my client if I'm ready to do that let's just say I sent it to the client and the client has sent me back a check so what I'm going to do is receive payment on this proposal because the client has now approve this they've sent me a check and I'm going to record this client payment and then of course once I record the client payment immediately after I'm going to generate the invoice so I have this invoice the balance is zero because we've already applied the client payment to the proposal and of course immediately after I generate this invoice I'm going to generate the purchase orders to offset any liability associated with the money I received from the client so when I'm creating the purchase order I want to bring the shipping that I entered from the item into the purchase order so I'm going to include the shipping and now I have this purchase order right here that I've created for the mid-century our table and and I have 25 dollars in shipping so now the money that I've received from the client is included on my financial statements as income and I can also pull a report profit or I'm sorry I'm a purchase order report in QuickBooks to show the let's do a purchase order number is this this is purchase or 11 so now here it is it's right here there's the table and here is the shipping for the table so because I haven't posted the payment to the propose to the purchase order I haven't posted the vendor payment to the purchase order it's gonna show up on the open purchase order report so that's my liability right there and so now I want to go ahead and order the actual table to reduce my liability get that off of the open purchase order report and and so I'm going to go ahead and say I'm gonna order this online I'm gonna go to the Westham site and I'm gonna make the purchase online and when I go to receive or when I receive the email confirmation from Westham I'm going to look at that receipt and I'm going to record my payment let's just say I paid with a credit card now I'm looking at the West Elm receipt and I'm looking at the purchase order in Ivy and I'm noticing that Weston didn't charge me $25 for shipping they charged me $30 for shipping so I can't post this amount because that's incorrect and I can't post a different amount because that just won't work so my only solution to this is to change the actual cost of the purchase order so now I have to figure out whether the vendor charged me too much for shipping or whether I'm gonna go back and build a client more for shipping or whether I'm gonna eat that cost my choice in this particular situation is that I don't think the vendor messed up on the shipping cost and I don't want to eat the cost so I'm going to go back and I'm gonna bill the client for the additional cost which means I have to change the purchase order to match exactly what the vendor receipt was so the vendor charge me 399 for the item and $30 for shipping they have my resale license on file so I never had to pay tax to the vendor for this item so now I'm just going to save this purchase order and now I can accurately post the payment to the proposal I'm sorry I can post the vendor payment to the purchase order to get really descriptive with my herbage and posting the payment create bill and post payment so a lot of people ask me what they're supposed to click here it's create bill and post payment this option will probably change and the near future but for now you want to create the bill and the payment um after I'm gonna record this payment because I don't want to make a payment through IV right now um so I'm just gonna say I paid it with my credit card the amount that the exact amount that's gonna hit my credit card statement is four hundred twenty nine dollars I'm gonna put my initials in here and I'm gonna put the date create the bill and the payment and I'm gonna post the payment done ok so now I'm going to go back to my purchase order report and see it was purchase order one zero zero one one and it should now be removed from my liability because it's essentially saying that I've already paid for this item I posted the payment to the purchase order and that particular purchase order is now off of my liability report so now I've decided I wanted to go back and build a client that extra five dollars for shipping um but I don't really want to send them an invoice for five dollars cuz that just seems ridiculous when you're dealing with a hundred thousand dollar job or something so since the job is kind of ongoing I'm gonna go ahead and I am going to create an additional proposal for like a running reimbursable expense tracking proposal and the reason that I'm not going back and editing the invoice is because I never ever ever ever ever ever ever want to edit an invoice I avoid editing an invoice at all costs once you apply that payment to the invoice it should be final there should be no changes made to that invoice unless you absolutely have to so once you've created that invoice and well first of all if you make one change it may mess up your sync to QuickBooks that's one reason but the other reason is is because you shouldn't edit invoices once you've received payment or once you've received approval on that particular item so if a client if you send a client a proposal they approve the items on the proposal they or they send payment and then you're creating the invoice from that if you alter the invoice you're altering what they've approved or what they've sent payment on so you don't want to do that it's not good practice across many means it's just to avoid it at all costs if you don't have to change the invoice don't change the invoice there are other ways so if I want to add additional shipping costs to a particular item what I would do is I would start a new proposal I think I've already started one here running reimbursable x' right here I have not converted this to an invoice because I have yet to send it to the client so I'm going to add that additional shipping cost and you can edit a proposal as much as you want a proposal is your working document you can put stuff on and take stuff off but when you finally get to the invoice that's when you don't make the changes so feel free to go crazy with the proposals and making changes and doing whatever you need to do for the proposals but once you turn it into the invoice that's where you need to make sure that it's totally final the only particular situation where you should be editing an invoice is if you have to return something to the client or if you ordered something and then the vendor for some reason mm-hmm said it was no longer available those are particular situations where you may need to edit the invoice but again even if you can avoid not editing the invoice and just adding that as a credit item somewhere that's an even better way to do it and there's a few ways to do it but I just want to leave that as being stated do not change an invoice if you don't have to change a proposal as much as you want to don't change an invoice if you can't avoid it so adding the shipping cost what I would do is I would add an item so it looks like we already had to build like some additional shipping for the rug and now I have to build additional shipping for the item we just created the art table so I'm going to add that over here it drags over come on there we go and then I'm going to do the same thing I did here which is just additional shipping let's just say the additional shipping is $5 okay it's not taxable and I'm gonna save that so I have this running reimbursable proposal that I can send to the client at any current point in time to try and get those funds so say our additional shipping cost wasn't $5 or $10 it was $400 and I want to recover those funds right away I can send this this proposal at any any point in time whatever you feel like you want to send this or the job is you know coming to a close and you want to send it then that's fine and this is just one way that you can do it when you have a particular item that you found out that the vendor charged you more for so this is a way to kind of recover costs back from your client for those particular items without having to alter an invoice so now everything's done in sequence it's done correctly all the financial reports should be accurate and in real time we're gonna want through the steps yet again and this time we are going to discuss what to do when a client pays multiple proposals or you have to record multiple payments to a vendor during these steps so we'll cover those two topics in this round of going through the steps so first step again creating the proposal let's go ahead and do that I'm going to create two proposals this time because I want you to see how a payment is applied to multiple proposals via one check from the client so mark up 500% I guess we all will probably wish that save okay so let's just say we have to open proposals from this client and we want to apply one client payment to multiple proposals so unfortunately if the client sends you a check for two different proposals on one check you can't record the full payment so it's not going to pull through over to QuickBooks in the matching section so what you have to do in order to have a little bit of a workaround is you could put split into the reference box so let's just see client paid with check number one zero zero five but we had to split these payments up so we're gonna let our bookkeeper know that we had to split them up by writing split into the reference number so create the payment on this and then we're gonna create the payment on the other proposal so we're gonna right split again and so this way when you when your bookkeeper goes in to look for that payment they're looking for a particular amount but the amount of $219 at 37 cents isn't gonna show up it's gonna show up as a split but they're booked you will be able to see this information and be able to figure it out because it's the same payment date it's the same check so this will help you correspond to your bookkeeper and relay this information when they're trying to make the deposit so now that we've created the proposals we're going to of course create the invoices immediately after so see start invoice and then we create the purchase orders creating the invoice and then creating the purchase orders and it doesn't matter if you don't get to the purchasing part you know for another month or so that's fine your liability is the same so you want to go ahead and you want to create those purchase orders I just did this one and you want to go ahead and create those purchase orders and as soon as you create the invoice whether or not you're ready to order okay no shipping was associated with those two so now we have purchase orders for all of the invoices that we have created um so we've discussed how to apply a client payment from multiple proposals by entering split into the reference number let's go ahead and talk about how to do that with purchase orders so say you ordered something from a juvenile make something more I'd say you order something xuo and you were only gonna do a partial payment a deposit so you could make a payment you could record a payment say you're paying with your credit card you could write the rate even fifty percent deposit and then you could that was your initial deposit and then you would now still owe that so you still see that on your open purchase order report that your balance is $54 and and then you've made a payment a partial payment for the red we're gonna take a break from the steps although we will come back to them but for now I want to discuss how to make the most of your Ivy and QuickBooks Online integration as we discussed interior design is one of the most complex accounting systems across any industry it's crazy to think that a huge warehouse and a corporation might have a less complex accounting system than an individual interior designer and that's just because you guys deal with so many different vendors and so many different sales tax situations I mean there's a whole in California there's a whole individual publication devoted just for interior designers and I'm sure every other state has their own set of complications as well when dealing with interior design and you guys deal with different types of billing you have hourly and you have fixed rates and you have retainers and I mean there's just so much to it so as you mentioned before it's really important to choose a tax professional that knows interior design but you also have to understand that with the integration of ID and QuickBooks there is gonna be some things that we have to use workarounds in order to make the integration work seamlessly we showed you a few so one of the ones would be that when a client pays with one check and IV doesn't let you record one payment for two proposals there's a workaround it's a simple workaround you just put split in the reference number and if your bookkeeper knows what they're doing it's a simple way to talk to them without ever having to go into QuickBooks um so there are things like that certain situations certain workarounds and I'd like to discuss some of the most common ones um such as refunds and tax paid purchases we before in our tutorials for the steps we discussed not altering an invoice again just don't ever do it so since QuickBooks does have limitations and its functionality such as not being able to create negative purchase orders or multiple payments on a purchase order without closing it out and copying it to a bill you would need to make IV work in a way that again you can talk to your bookkeeper while still having accurate information when you're looking at your overall numbers so let's discuss refunds and how they're handled because if you're trying to put in a refund into IV um that if you're trying to put in a refund into IV multiple amounts will not go over into QuickBooks so you can't purchase something at its full cost and then out of refund and then expect QuickBooks to pick up those two abouts those two different amounts which means it's not gonna match your bank statement which means your bookkeeper might have questions so the way that I have found to be the best way to do a workaround on this would be to actually create a product um I'm sorry not create a product create a service that is a refund in a return and then just add that individual line item to your purchase order and you kind of do it that way so let's just say we order this charm wool rug and it was how to stain on it and you didn't think that anybody would ever notice the difference and you ended up getting it fixed on the side or you had some magic carpet cleaner that got it out but the vendor actually decided to give you a refund so we're not passing this refund on to the client because the clients getting the rug in perfect condition but we still are getting a refund on this order from the vendor um and so the vendors not gonna charge us the full amount the vendor is gonna issue us a refund but we've already paid for the item so let's see let's go so we have this item that we've sorry it's purchase order that we've created from the item and we haven't posted a payment on it but let's just say we purchase the item and then the vendor wanted to give us a refund for this item what do you do you can't just put in that credit because the amount that you paid will have been more than the actual amount of the purchase order so what you have to do is you have to create maybe a refund item so I put this into services and I did it as a service because it can I can map it over to its own account in QuickBooks by doing it this way so I'm just gonna say that because there was a stain on the rug the vendor decided to issue us $100 credit on the order so now if I change this amount and I've already posted payment and won't let me save because the PIO has already been paid and therefore you can't reduce the balance okay so what do I do well I need to go ahead and I need to edit the original cost of the item so I would I would delete this payment and then I would make an edit the purchase order and then I'd add in the refund I'm not gonna get tax on that so it's just a straight refund and plus it any paid on the first place and then you would save the purchase order and then you would repost the payment but you can see the problem now is that the vendor has already charged your card Westham has already charged your card for the original cost of nineteen hundred and forty eight dollars so by deleting that payment and reposting it to this amount eighteen hundred and forty eight dollars it's not gonna translate over to QuickBooks with the exact amounts matching so our workaround for that is to just simply make the payment for the amount with the difference you could put refund in the reference number you could put your initials and the date and then create the payment so these are just kind of like leaving your bookkeeper a little memo the other thing that I would do to help track this stuff is to add it to a Google spreadsheet and just put in this information so the date of the original purchase was on five to eighteen the date of the refund was on five three eighteen the purchase order was yes the vendor was the total exact receipt amount so the original amount was 1948 and the amount of the refund was one hundred and then this will just leave a note for your bookkeeper you could also add in something into the memo box about this so you could say something like that you can leave yourself as many notes as possible it's always good to have it a nice note to reference back about certain things so when you see this coming over this payment you will see and so you'll see this payment pulling through as the 1848 the final amount you won't see that there was a payment posted for a particular amount and then and then a credit was applied so when a bookkeeper is looking at your bank statement and they see nineteen hundred and forty-eight dollars coming through on the bank statement and then the 1848 it's not gonna match up sometimes it's pretty obvious as to what happened because they'll see that hundred dollar credit and they'll be able to figure it out but sometimes if there's a lot of stuff like this going on and it may be a little more difficult to spot and also if the refund occurred in a different month it's gonna be really difficult to spot so do you and your bookkeeper a favor put in a a memo like this and then just to try and minimize the amount of Correspondence or confusion you can also do like a Google spreadsheet of something like this and another good reason to do this Google spreadsheet is because you also want to be reminded of a refund so say the vendor said they were gonna give you a refund of $100 and you you know you've got an email confirmation from West I'm saying yeah well we'll send you $100 you know gift certificate or whatever the case may be or a credit or whatever it may be and then what if they just forget to give you the refund this googledoc will also help kind of remind you that that's the case so if we never see that hundred dollar credit coming through on the account then we'll be alerted to the fact that you know you're still missing some money somebody still owes you some money so that's one particular situation another one is the tax paid purchases so let's just start talking about sales tax and then we can talk about how to account for that it's very similar to how I would do the refunds um but IV actually allows for that setup so let's just dive into it and well you'll see okay moving on to sales tax tracking in IV and QuickBooks unfortunately I can't discuss this as a whole without getting into what accrual-based accounting really is so there's two different types of accounting there's a cache based accounting and accrual-based accounting basically most people report on the cash based accounting but a lot of the reports that you'd want generated most accurately are pulled off of the akule based accounting and interior design so a lot of systems are set up to pull a cool reports meaning if you generate an invoice it's counting that invoice as income under the Akula based accounting and it's pulling through on your IV sales tax report and it's pulling through on your quickbooks sales tax report and there's potential for your P&L to have unapplied income etc etc basically an accrual accounting anytime you create an invoice that invoice is being counted as as if the money had been received whether or not you've actually received the money from the client since most people file on the cash basis it's really important to make sure that those reports are are almost always the same your and you're cool reports should pretty much always be the same and the way that you make that work is by always following the steps if you always follow the steps your cash based reports and your accrual-based reports in accounting are gonna be are gonna be almost exactly the same which is which is good when you're dealing with sales tax and you're dealing with income tax and things like that you want those reports to be to have as little difference as possible so if that's too complicated of an idea just remember follow the steps and you don't have to worry about the difference between cash based accounting in a CRO based accounting those steps were developed in order to make those numbers match and to avoid you from having to think too much about this the next thing I want to talk about is just knowing your state sales tax laws what's taxable what's not taxable is services some service some states have taxable services and some states have taxable shipping some states don't have any tax just know your laws and if you're ever in doubt you can always give them a call I'm sure they'd be more than willing to give you advice or direct you on how best to to calculate that but definitely know your laws because at the end of the day if you don't collect sales tax on something that's due and you try and I mean try and go back and bill a client for some sales tax that wasn't billed on an invoice a year ago it's highly likely that they're gonna pay that but it is highly likely that you will be liable to pay that so know your state laws contact someone that does if you're unsure and just make sure when you're generating your items you know those particular nuances that are embedded in your your state laws so now let's go into tax paid purchases and how to account for those in IV first of all as we've discussed tax paid purchases you should never pay tax to the vendor ever ever in the event that you don't have a choice and you are forced to pay tax to a vendor there are a couple ways that you can record this tax paid purchase in IV so we'll go into how to go about very much sorry so IV has a way of tracking sales tax paid to vendor but it only works if you're buying and selling items in the same tax location ib is able to track taxable sales wonderfully but if you need to calculate the total sales with exact deductions you should probably keep a separate spreadsheet of these tax paid purchases like we have here so we have a lot of our designers on top of the refunds that they record also to always be sure to record any tax paid purchases so that nothing gets missed and that we're always triple checking that there is no double sales tax paid right you don't want to pay sales tax to a vendor and then have to pay it back to the state because it wasn't added as a deduction on your reports because something was missed so in order to just be extra safe and careful we've developed this spreadsheet that I suggest you use in order to track any tax paid purchases so let's talk about sales tax tracking an IV and its capabilities now and what they're working on in the future so as we just discussed IV he does have the capability to mark an item that you're purchasing is taxable as long as it's within the same tax location that you're buying and selling so if we open up let's just open up this order right ER and let's just say we purchased this west accessory in the store and we ended up paying tax on it what we do is we could mark this item is taxable so we're in the purchase order right now this is the purchase side things and you're going to mark the item is taxable which means that you are paying this particular tax to the vendor now this is great because it's going to calculate it's gonna calculate the taxes that you paid so you can just simply post the payment on the purchase order you can play if you wanted to and now that's going to come across beautifully when you are trying to match transactions coming from your bank statement in QuickBooks however the only limitation to this is that it's not going to show up as an offset to your tax liability account in QuickBooks so one feature that I prefer even though they have this capability right now is to go ahead and set up a product like you did for the refunds I'm sorry I keep saying products I mean you want to set this up as a so you can map it to the other category right here so set this up as a service right tax paid and then you want to save it and then if you're going to we'll just pull up another purchase order and do this again a different way so you want to UM look at this purchase order and act as if you zip the vendor charge you tax you're paying tax then you could add in that particular service as an item so when you're entering this tax paid purchase as an additional line item let's just say the tax was nine point then you can post the payment with the correct amount and now this amount is the exact amount that's calling through on your credit card statement and you're going to record this we're in q2 now aren't we we're adding the tax paid purchase as a separate line item instead of just checking this box right here and we're doing this so on our profit and loss report will see this broken out as another line item so you can make the payment and the payment is going to be exactly what you paid the vendor you can add the purchase order you can add the purchase order details to here I'm not gonna go ahead and add all those details right now and then you'll see when you pull a sales tax report so this is your sales tax liability report you'll see that this particular West Elm invoice for the item that we just posted the payment for so here we go we have purchase orders we just posted the payment with taxes paid on this tax paid purchase it's linked to this invoice one zero zero zero five you'll see that pulling through on the sales tax liability report so that's the amount that we're charging to the client the the full sales tax there's no offset for the amount of taxes you actually paid to the vendor so that's why it's good to keep a separate log here about the taxes you paid to the vendor in order to get accurate deductions when you're filing your taxes so if we go to the reports and we pull a profit and loss for all dates we'll see that in other purchases there's this tax paid purchase right here and so by adding that separate line item as we just did in the purchase orders we're able to see this amount broken out on the profit and loss statement which you wouldn't necessarily see if you were to just check the taxable box so if we were to just check this taxable box you wouldn't necessarily see it on the QuickBooks side of the profit and loss mm-hmm so that's why I like adding the additional line item as a tax paid purchase instead of just using this but you know lots of people like this because if it's a smaller amount and they're not charging tax to their client then they can just do this and call it a day me being more detailed oriented and and somewhat OCD about these things I prefer this way of just tracking it as a different line item so that I can see it clearly broken out under the other cost of goods sold account on your profit and loss statement if you guys all want to just take a screen grab of this right here this is kind of how you would set up your tax paid purchase um items in QuickBooks and as Laura I'm sorry an IV and then as long as it set up correctly from the start with your mapping over to QuickBooks it'll come up in your QuickBooks profit and loss report as a nice clean separate account so the other exciting thing that Ivy's working on is like I said right now you can only check this little box for the item to mark as vendor paid tax but in the near future you'll be able to choose the different options for the taxes paid which is going to be coming out really soon and it's gonna be a great tool for everybody and make it a little bit easier and you know Ivy's getting better every day their development team keeps working on things and I just think that IV is the way of the future and it's very exciting to see all of their technologies coming out so we just kind of went over this report so basically the sales tax liability report in QuickBooks this is the sales tax liability report in QuickBooks and it's going to have accurate information if you follow the steps so just make sure that you follow the steps every time and your sales tax reports are gonna be accurate your profit and loss reports are gonna be accurate everything's gonna translate beautifully just get setup from the start get to a good place and keep in touch with your bookkeeper that's the last topic that I want to bring up so we've developed a plan where you have weekly calls with your bookkeeper and we feel that that works really well so you have a dedicated bookkeeper and any questions that any of our IV clients have every week about those little obscure transactions that don't fit inside the quote unquote step so that we've just discussed you know we can we can always discuss how to address that in these weekly calls or we can train your staff in order to help them be better about understanding liabilities and posting payments on purchase orders and whatever whatever the designer needs is what your bookkeeper should be helping out with so you should really have a great relationship with your bookkeeper and you should really keep in touch with them and make sure you guys are working side by side because like I said interior design is a complicated accounting process and you want to make sure that you are working with somebody that is going to give you the help that you need and the correct help that you need and not just the way that they know how to do it which sometimes happens and then you can work with your bookkeeper to just be like hey I need this report because I'm feeling like this area of my business is lacking and then your bookkeeper can send you those reports or you can send automatic weekly you know sales tax liability reports in order to get an accurate sales tax balance at any given point in time so you know again you're talking about all that money in your bank what's actually yours those are important things to know and when your business grows those numbers become a little bit less clear unless you're working closely with your bookkeeper to understand those reports and get those numbers thank you for attending the webinar it has been my pleasure to share this information with you and all the things that I have learned in my time and accounting and interior design please know we are always here to help you with any questions you have the setup process or train you on the steps just reach out to us you can visit us on our website or give us a call have a great afternoon and thanks again for listening