Getting Started Using Your Checkbook

Getting Started Using Your Checkbook

I would assume that if you’re reading this document then you started using Lizzy without using the accounting, or you are finishing up a conversion and are now wanting to get started using the checking account. In this document we’ll be going through how to get started using the checking account without having to go through too much work. Before we get started I want to take a minute to explain why it’s important to use everything from the start and not wait until later to get started.

Lizzy is a full double entry accounting system. This basically means that it is impossible to just go in and delete things and start over from scratch, because if you did, nothing would balance ever again. Imagine all those deposits you’ve been doing just disappearing. Lizzy would have to undo the original deposits, then undo the invoices, the inventory and so on. As a result, we have to walk through this fix logically and without deleting information. In fact, you already have quite a bit of data that is gone, so deleting more isn’t going to fix the problem. Kind of like our government thinking that if they spend more money they will somehow buy their way out of debt.

Please note: This method of cleaning up your accounting in Lizzy is only applicable when you are new to Lizzy. Once you have been using the system longer than 3-4 months, it is no longer advisable to “clean” your accounting. Instead, you will need to do a reset of your Lizzy database. Please contact our Accounting support for more details.

 

Step 1: Before we can start trying to fix our problem we need to create a new account to place all of our mistakes until your accountant has time to adjust things out. This will probably happen at the end of the year.

To do this, go to: Accounting → Chart of Accounts. At the top of the page enter the following: Select an Account type of “Equity.” Set the account number to 399.99.999 so that it sits at the very bottom of your equity section on your reports. Name the account: “Correcting Flush Account” so that your CPA will understand what it’s for and what to do with it just by looking at it.

 

Step 2: Now you will need to make sure you have done the following:
1. Paid all sales tax (Reports > Invoicing > Sales Tax)
2. Paid all invalid Accounts Receivable (Accounting > Receivables)
3. Deposited all un-deposited funds remaining (Accounting > Cash Drawer(s) > View Deposits)
4. Paid all outstanding Accounts Payable (Accounting > Payables > Pay Payables)

These steps should be done in the order above and before you reconcile your checking account. You cannot do these later because it will cause further problems that will then have to be corrected and in some cases could get quite complicated.

 

Step 3: In this step we need to have your last month’s bank statement and access to online banking so that we can get an up-to-date list of checks that have cleared your account since your last statement.

Now we’re going to go in and reconcile your checking account as of your last statement. Select Accounting → Checking → Reconcile. Before we start let me explain something that complicates this situation.

You need to be sure that at this point you have paid all of the payables in Accounts Payable section that you paid outside of Lizzy (Step 2) because those hit the checking account and should have been recorded here already. Other problems exist because as you’ve been paying your electric bill, credit cards, phone bill and other items, none of it has been recorded in the system. In order to get an accurate P&L and Balance Sheet we need to eventually get those entries made. There are a number of different ways to account for them, but I’m only going to cover one. This would be to manually create GL hits in Accounting → General Ledger and use your newly created account above as the offset. In this exercise we’re only trying to get your checkbook running, not to enter and balance every respective account.

In order to get our check book in sync, we need to reconcile everything that is in it that has already cleared your bank account. I would assume that since you have not been using the checking account in Lizzy that only deposits and AP payments are there, so this will make it easier to complete this section.

What we want to do in the reconcile section is select the “All” radio button at the top, select the checking account we’re wanting to work with and then select everything in the checkbook that is shown. Again, please make sure that you have already followed ALL of the processes in Step 2 before proceeding.

 

Step 4: Now that we have everything selected, enter the ending balance and the bank fees and date from your statement to the top right section of our reconcile form. What we’re after here is the “Amount Off By” that displays at the bottom of that section. What we are attempting to do is trick the system into giving us the correct balance at last statement so that we can pick up there and start using the account again.

 

Step 5: Now that we have our amount off by, we’re going to do one of two things. If the amount is less than zero we’re going to write a check for that amount. If it is greater than zero then we’re going to create a deposit for that amount. So look at your off by amount and determine which you will be doing. Write this amount down. Now click “Create New Entry” in the Checking menu, select deposit or check and enter the amount. I would suggest that you make a note on the item to tell you it’s for “Correcting misuse of the checking account” so that you can start using it properly and so that you don’t forget what it was for later on. Now select the 399.99.999 account we created as the offset and save it.

 

Step 6: Go back to Reconcile and scroll to the bottom and find the new entry we created and check it as well. Now if you scroll back to top you should see off by = 0.00. If it went the wrong way, then just reverse what you did to either make a deposit or a check. If it is off, you might have to reinsert your bank fees line so be sure the numbers you entered earlier are still there.

 

Step 7: Now that we have our correct bank balance at last statement, our bank fees entered and a date for those fees, we’re going to click the “Finished” button and we’re done. Our checkbook is now ready for use.

 

Step 8: The first thing we want to do now is start entering all those checks that you’ve written since that last statement and usually a good place to find them would be on your on-line bank system or in your checkbook itself. We want to enter those checks into the system and select the proper account numbers for each item so that it shows on our balance and P&L statements properly.

    Remember: If you want accurate accounting you have to enter accurate information.

Lastly: Please visit the Train Me link in Lizzy and watch the Accounting videos for more information on using the different account processes including the checking account. Let us know if you have questions or need assistance during this process, as it is critical that you perform it correctly to minimize problems later on.