Chapter 17

(Slightly More Than) Ten Questions I’m Frequently Asked about Quicken

In This Chapter

What are Quicken’s best features?

Does Quicken work for a corporation?

What happens to stockholders’ equity in Quicken?

Does Quicken work for a partnership?

Can I use Quicken to track more than one business?

What kinds of businesses shouldn’t use Quicken?

Can I use Quicken for my real estate investments?

Can I use Quicken retroactively?

Can I do payroll with Quicken?

Can I prepare invoices with Quicken?

Can I import data from my old accounting system?

What do you think of Quicken?

When people find out that I’ve written a book about Quicken, they always ask a question or two. In this chapter, I list the most common questions and their answers.

What Are Quicken’s Best Features?

Quicken has become more and more complicated over the years, so I think it may be fair to include a few sentences that review its most valuable and least valuable features. As far as what’s best or most valuable, I would say that its checkbook feature is still clearly the most valuable. If you should use one feature in Quicken, it’s the checkbook stuff. (To do so, set up a bank account for your checking account as described in Chapter 1, and then use Quicken to keep track of your balances, income, and expenditures as described in Chapter 4.)

I also have to say that I think that Intuit, the maker of Quicken, provides pretty neat stuff at its Quicken website, so I’d give that feature my vote as the second-best. I don’t talk about the Quicken.com website a whole lot in this book. That’s because you can have more fun and more success with the Quicken website by exploring it on your own.

Just because I’m super-compulsive — not only about my personal finances, but also about yours — let me say that I think that the Quicken financial calculators (I describe them in Chapter 10) are also really valuable. If you’re willing and able to do just a bit of planning right now, you’ll be truly amazed by the positive impact that planning has on your financial affairs a few years down the road.

So this leads rather nicely to another question: What are Quicken’s least valuable features? I think the answer really depends on the person. I used to pooh-pooh the online banking because my bank caused me headaches, and my at-home dial-up Internet connection was unreliable. (For a while, I even suspected that carrier pigeons were involved in one link of the connection.) Now, however, with a fast cable modem connection, I really do like online banking.) The credit card stuff and cash account stuff don’t do much for me. But you know what? Those tools may do wonderful things for you. It depends on the way you organize your finances.

I guess the bottom line, to me, is that the least useful features depend on what you don’t need to do. But what you don’t need to do will probably differ from what I don’t need to do. I’m sorry that I don’t have a more helpful criticism.

Does Quicken Work for a Corporation?

Sure. But let me talk for a minute about what’s unique — at least from an accountant’s perspective — about a corporation. (And just for the record, what I’m going to say here applies to regular corporations, to Subchapter S corporations, and to limited liability companies that have elected to be treated as regular corporations and as S corporations.)

In addition to recording assets (such as bank accounts and receivables) and liabilities (such as mortgages and trade payables), a corporation often needs to track, or keep records for, stockholder equity.

Stockholder equity includes the amount that people originally paid for their stock, any earnings the corporation has retained, cumulative income for the current year, and sometimes other stuff too. With Subchapter S corporations, for example, stockholder equity gets adjusted when the corporation pays distributions (also known as dividends) to shareholders.

“Ugh,” you’re probably saying to yourself. “Ugh” is right. Accounting for stockholder equity of a corporation is mighty complicated at times. It’s so complicated, in fact, that Quicken can’t track a corporation’s stockholder equity.

I’m not saying that you can’t use Quicken if you’re a corporation, and I’m not saying that you shouldn’t. (I do business as a Subchapter S corporation, and I used to use Quicken just for laughs.) Just remember that someone — probably your poor accountant — may periodically need to calculate your stockholders’ equity.

Fortunately, the financial information you collect with Quicken provides, in rough form, much of the information that your poor accountant needs to do things manually.

But all this makes me remember something else. If your corporation enjoys revenue of $250,000 per year or more, or owns assets that total $250,000 or more, you must include a balance sheet with your corporate tax return. (This isn’t something I just made up. It’s actually the law.) Quicken isn’t quite as robust about creating business balance sheets as a program like QuickBooks (Quicken’s big brother). Accordingly, if your corporation grows so that its revenues or assets equal or exceed $250,000, consider retiring Quicken and upgrading to QuickBooks.

What Happens to Stockholders’ Equity in Quicken?

Quicken doesn’t exactly ignore a corporation’s stockholders’ equity. In an Account Balances report, the difference between the total assets and the total liabilities actually represents the total stockholders’ equity. (Quicken labels this total Net Worth.) So to the extent that your total assets and total liabilities figures are correct, you know your total stockholders’ equity.

Does Quicken Work for a Partnership?

Yep, it does. But a partnership that uses Quicken faces the same basic problem as a corporation that uses Quicken. In a partnership, the partners want to track their partnership capital accounts (or at least they should). A partnership capital account simply shows what a partner has put into and taken out of a business.

As noted in the preceding section, Quicken calculates a net worth figure for you by subtracting total liabilities from total assets. So to the extent that your total assets and total liabilities are accurately accounted for in Quicken, you know roughly the total partnership capital.

To solve this problem, you (or someone else) need to track what each partner puts into the business, earns as a partner in the business, and then takes out of the business. You can also just use the Quicken loan accounts for partnership equity accounts (and I’ve helped clients do this). Just don’t freak out when your net worth shows as zero. Remember that the partnership equity accounts aren’t really loans: They’re capital.

One other thing to think about here concerns your partnership tax return. If your partnership books revenue of $250,000 per year or more, or owns assets that total $1,000,000 or more, you need to include a balance sheet with your partnership tax return. As mentioned in my earlier discussion about using Quicken for a corporation’s accounting, Quicken isn’t very good about creating the sort of balance sheet that needs to get included with a tax return. Accordingly, if your partnership grows so that its revenues equal or exceed $250,000 — or so that its assets equal or exceed $1,000,000 — consider upgrading to QuickBooks.

Can I Use Quicken for More Than One Business?

Yeah, but be very careful. Very careful. You must be especially diligent in keeping the two businesses’ financial records separate.

Quicken provides a handy tool for keeping them straight: You can work with more than one file. Each file, in effect, is like a separate set of financial records. You can’t record automatic transfers between accounts in different files; instead, you must record each side of the transaction separately. You can, however, keep truly separate business records.

To create a separate file, choose File⇒New.

If you’ve been using Quicken for a while, you can probably figure out for yourself how the File⇒New command works.

Keeping separate bank accounts is a must. If you keep separate records for two distinct businesses in Quicken, you need to set up separate bank accounts for them. In fact, my attorney tells me that in the case of a corporation, you must set up a separate corporate bank account for the corporation to be truly considered as an independent legal entity. Talk to your attorney if you have questions; attorneys can tell you the specifics that apply to a particular state and situation.

What Kinds of Businesses Shouldn’t Use Quicken?

You’re probably saying to yourself, “Quicken works for corporations (sort of), and it works for partnerships (sort of). Does that mean that it works for just about any kind of business?”

The answer is no. Quicken is a darn good product. In fact, for many small businesses, it’s a great product. Quicken works especially well for service businesses: consultants, contractors, personal-service providers, and so forth. But it doesn’t work in every situation.

The following is a three-part test that you can use to determine whether your business should use Quicken. If you answer yes to two or three of the questions, you should seriously consider moving up to a full-featured small-business accounting system (such as QuickBooks).

• Do you regularly need to produce business forms other than checks?
  • If you answer no, you’re in good shape with Quicken, which produces checks easily. And if all you need is an occasional invoice, you can create it easily enough on your computer. To produce a handful of invoices per month, for example, you can use your word processor. If you want to, you can also use one of the super-sized versions of Quicken: Quicken Home & Business or Quicken Rental Property Manager. Both of these versions of Quicken not only do invoices, but also monthly customer statements. (I talk about these features in Chapter 15.)
  • If you do produce a lot of forms besides checks and invoices — for example, purchase orders — you should probably consider moving to a small-business accounting system that produces the forms you want. If you’ve been using Quicken, for example, take a look at QuickBooks, another Intuit product. Another more powerful but wonderfully designed product you might try is Peachtree Accounting for Windows from Sage Software. You can probably buy any of these programs at the local office-supplies store. You can certainly buy the QuickBooks and Sage 50 Accounting (formerly known as Peachtree) programs by visiting http://quickbooks.intuit.com or www.sage50accounting.com. For reference, I can recommend these two books: QuickBooks 2014 For Dummies, by yours truly (earlier versions of QuickBooks have their own editions), and Peachtree For Dummies, 3rd Edition, by Elaine Marmel and Diane Koers.
• Do you need to track assets other than cash, accounts receivable, or investments?

  For example, do you buy and resell inventory? Do you have a bunch of fixed assets (furniture, equipment, and stuff like that) that you need to track? An accounting system is usually helpful in tracking these items. Quicken doesn’t do a very good job of tracking these other assets, so you may want to look at one of the other small-business accounting products — QuickBooks, for example.

• Are you having problems measuring your profits with cash-basis accounting?

  I’m not going to get into a big, tangled discussion of cash-basis versus accrual-basis accounting. It wouldn’t be any fun for you. It wouldn’t be any fun for me, either. Nevertheless, you should know that if you can’t accurately measure your business profits by using cash-basis accounting (which is what Quicken uses), you may be able to more accurately measure your business profits by using accrual-basis accounting. To do so, use an accounting system that supports accrual-basis accounting. I should be totally honest with you and tell you that to measure your profits the right way, you (or your accountant) need to use — horror of horrors — double-entry bookkeeping.

If you’re a Quicken user but realize that you’re outgrowing the checkbook-on-a-computer scene, check out QuickBooks. (No, I don’t get a kickback from Intuit.) Here’s the deal: QuickBooks looks and feels a lot like Quicken. Also, it uses the data that you’ve already collected with Quicken, so you’ll find that moving from Quicken to QuickBooks is only slightly more complicated than rolling off a log.

Can I Use Quicken for Real Estate Investing?

Yeah. Absolutely.

In a nutshell, all you need to do is set up an income category to track your rental income and then some expense categories to track your rental expenses. (In Chapter 2, in the section about changing a category list, I describe how to set up income and expense categories.)

To see which rental expense categories you need, either look at the Schedule E tax form that went with last year’s tax return (if you’ve already been investing in real estate) or grab a Schedule E tax form from www.irs.gov (if you’re new to real estate investing).

Now, before you stop reading and rush off to do the bookkeeping for your growing real estate empire, let me tell you one other critical thing: The Schedule E tax form on which you report your real estate income and deductions requires you to segregate your income and deductions by property. For example, if you have two rental properties — a duplex on Winston Street and a single-family cottage on Roosevelt Avenue — you’ll need to break down your income and expenses by property.

To break down income and expenses by property, you use a Quicken feature called tags. Oh, yes, it all sounds complicated. But all you need to do is enter the tag name in the Tag field. For example, rather than just enter rent in the Category field when recording a rent payment from your tenants living in the Winston Street duplex, you enter rent (as the Category) and then also enter Winston (as the Tag).

By appending the tag Winston to the transaction, you can later easily produce a cash flow that shows income and expenses for the Winston duplex.

Just to make sure that you understand this, let me give you another example. Rather than record a check to pay the utilities expenses for the house on Roosevelt as utilities, enter utilities as the category and Roosevelt as the tag.

By appending the tag Roosevelt to the transaction, you can easily produce a cash flow later that shows income and expenses for the Roosevelt cottage.

A couple of other notes: The first time you enter a tag name in the Tag field, Quicken asks whether you want to set up a new tag. When you click “Heck, yeah,” Quicken prompts you for a bit of information about the tag. After that, though, you just enter the tag without fanfare or embarrassment.

To produce a report that summarizes income and deduction information by tag, choose Reports⇒Banking⇒Cash Flow by Tag.

I talk a bit about the rental property management features of Quicken in Chapter 16.

Can I Use Quicken Retroactively?

Yeah. And the idea is better than it may seem at first.

Entering one year’s worth of transactions doesn’t take long in Quicken (as long as you have decent records to work with). If you’re a millionaire, the task may take you a couple of days. (Of course, in this case, you can hire someone to do it for you.) If you’re a regular, ordinary person, I bet you can get it done on a rainy Saturday afternoon.

After you enter all the information in a Quicken register, you can easily monitor your spending in various categories, track your income and outgo, and reconcile your bank accounts. I know one professional who uses Quicken records to do these things every year. Hey, it’s not the most efficient way to do things. And it’s not a very good way to manage business or personal financial affairs. But it works. Sort of.

Can I Do Payroll with Quicken?

Yes. See Chapter 15 for more details.

By the way, if you have only one or two salaried employees who always earn the same amount — a nanny, for example — you can rather easily use Quicken for payroll. But if you have a bunch of employees or even a single hourly employee, you’ll probably want to either purchase a full-featured, real-live, small-business accounting program (such as QuickBooks) or use a payroll service (such as Paychex or ADP) to take care of the whole thing for you.

Intuit makes and sells QuickBooks, as you may guess by its name. You can get QuickBooks from the local software store, from one of the mail-order places, or from the Intuit website.

You can look up either payroll service — Paychex or ADP — in the telephone book. You can also look up either payroll service — Paychex or ADP — at www.paychex.com or www.adp.com, respectively.

Can I Prepare Invoices?

Not with Quicken Premier or Quicken Deluxe, but you can (very nicely, thank you) with Quicken Home & Business and with Quicken Rental Property Manager. If you want invoices, at least step up to Quicken Home & Business. This requirement may also be a symptom indicating that you should consider moving up to a full-featured small-business accounting system, such as QuickBooks.

Can I Import Data from an Old Accounting System?

Someone had to ask this question, I guess. (Imagine me taking a deep breath here.) Yes, you can import data from your old accounting system. To do so, export the old system’s data to a file that matches the Quicken Interchange Format (QIF) specification. (A QIF file neatly organizes financial information in a well-documented structure so that other programs — and even people — can read and understand the data.) Then import this file into an empty Quicken file. Keep in mind, however, that this process isn’t for the timid or fainthearted. I would also say that it isn’t for people who have better things to do with their time.

My advice to you? Go to a movie. Mow your lawn. Read a trashy novel. Forget all about this importing business. Or, if you’re really determined, look for a QIF conversion tool on the Internet. These tools do exist.

What Do You Think about Quicken?

I think it’s great. But I bet your question isn’t really whether Quicken is good or not. Heck, the package has something like 10 million happy users, so we both know that the package is pretty good, right? My guess is that what you really want is my opinion about using Quicken in particular business or personal situations.

It’s tough to answer this question in a one-way conversation. Even so, let me give you some of the best reasons for using Quicken:

• You always know your bank account balances, so you won’t ever have to wonder whether you have enough money to pay a bill or charge a purchase.
• Reconciling your account takes about two minutes. (I’m not joking.)
• You get a firm handle on what you’re really making and spending.
• You can budget your spending and then track your spending against your budget.
• If you’re a business, you can measure your profits as often as you want by using cash-basis accounting.
• If you’re an investor, you can monitor your investments and measure their actual returns.

I hope these answers help. My guess is that if you think that a program such as Quicken will help you better manage your financial affairs, it probably will.