Practical bookkeeping articles for business owners.
Written by Jessica Zhao. Common mistakes, monthly close mechanics, and the software workflows we run with clients.
What happens to your books when an MCA merchant defaults
When a funded merchant stops paying, most MCA books show the advance as outstanding indefinitely. Here is what write-offs, reserves, and recoveries should look like.
Why owner draws and contributions don't belong on your Profit and Loss report
When a sole proprietor books personal transfers as revenue and draws as expenses, the P&L overstates profit by thousands. Here is how to fix the chart of accounts.
Why your R&D expense line is hiding the real cost of each program
If all R&D spending sits in one line, you cannot tell your board what each program actually cost. Here is how to fix that with QuickBooks Classes.
How to set up a schedule of values and submit progress billings without errors
Most billing disputes on commercial jobs trace back to a schedule of values that was never built correctly. Here is what to set up before the first draw is submitted.
Why partner draws don't appear as payroll on a law firm's P&L
A firm paid three partners $25,000 a month and found no payroll line for any of it on the P&L. Here is where $900,000 in draws actually went in the books.
Why your equipment purchase doesn't show up as a full expense the year you bought it
You paid $48,000 for a truck in February. Your year-end profit and loss report shows $8,800 in vehicle expense. Here is where the other $39,200 went.
Gross rent vs net operating income on a rental property
The lease says $3,200 a month. The books show $1,820 a month. Here is what operating expenses do to rental income, and why only one of those numbers is useful for decisions.
When your catering and dining room share one P&L, neither number is right
Most restaurants blend catering and dining room revenue into one report. When you separate them, the margin gap between the two operations is usually dramatic.
How ecommerce returns affect your gross revenue and inventory in the books
When you subtract returns from gross sales and call it revenue, your P&L hides a 22 percent return rate and its real cost on margin. Here is what belongs where.
What to record when an MCA position gets bought out or paid off early
A $38,000 buyout wire on a $50,250 position leaves $12,250 on the books unless both sides of the entry are recorded. Here is how to close it correctly.
What each attorney actually costs the firm: overhead allocation per timekeeper
Most law firms price timekeepers on fees collected. The more useful number is what each attorney costs to run and their actual net contribution after overhead.
Why a milestone payment is not always revenue in the books
A $2.5M pharma milestone hits your bank and your bookkeeper records it all as revenue. Here is why that is often wrong and how to split it correctly.
Why prepaid subscriptions are not revenue until the box ships
When a customer pays $180 upfront for a six-month plan, none of it is revenue on day one. Here is what belongs on the balance sheet instead and what gets distorted when it is not there.
Why your payroll expense in QuickBooks doesn't match what leaves your bank
The bank shows three separate debits totaling $19,377. QuickBooks shows payroll expense of $19,602. Neither number is wrong. Here is where the gap comes from.
How to track subcontractor costs against contract amounts in QuickBooks
If your books track subcontractor payments but not committed contract amounts, there is no way to catch an overbilling before the check clears.
Pour cost: the number that reveals whether your bar is actually profitable
Your bar invoices show 23 percent pour cost. Once comps, over-pours, and breakage are counted, the real number can run 10 points higher and change every major bar decision.
How to reconcile your bank account in QuickBooks every month
A bank account that has not been reconciled in months hides duplicate entries, missed transactions, and errors that compound every period they go uncorrected.
Why the deposit in your bank is not your short-term rental income
Airbnb deposits the net payout, not your rental income. Most owners book the difference as revenue and miss a real expense. Here is how to record it correctly.
How to clean up personal and business expenses that got mixed in the same account
When personal and business expenses share the same account, the P&L becomes unreliable. Here is how to find the commingled charges, fix them, and prevent them.
How a missing close-out entry adds phantom receivables to your MCA portfolio every month
When a merchant renews, the old position needs a close-out entry. Without one, phantom receivables accumulate and every portfolio metric becomes wrong.
How to split payroll between your NIH grant and internal R&D in QuickBooks
If your payroll posts to one account with no funding-source split, your quarterly draw request is a guess. Here is how to allocate salary costs between a federal award and internal projects.
Write-downs and write-offs in law firm billing: what the difference means for your books
A write-down reduces billed time before the invoice goes out. A write-off clears an uncollected invoice. Recording both the same way breaks your P&L.
What your books miss when a chargeback hits your ecommerce store
Most ecommerce sellers record chargebacks as a revenue reduction. The actual cost per disputed order is almost always higher, and the gap distorts your margin.
How to track materials costs by job in QuickBooks
When all materials invoices go into one QuickBooks account, every job looks equally profitable. Here is how job cost codes change that picture.
When renovation work on a rental property is a capital improvement, not a repair
Your roof, HVAC, and water heater invoices look like repairs. Some of them aren't. Misclassifying them turns a profitable rental into a reported loss.
How prepaid expenses distort your monthly profit, and how to fix it
Expensing an annual insurance or software payment all at once turns your monthly P&L into a guessing game. Here is how prepaid accounting fixes it.
Why your Profit and Loss report can show profit while the bank runs low
Your P&L can show a $48,000 profit in a quarter where the bank balance actually decreased by $34,000. Here is what the P&L is not measuring.
Why client deposits are not revenue until the work is done
Recording a client deposit as income is one of the most common bookkeeping errors. Here is what the books should actually show and why it matters.
What your accounts payable total is hiding from you
The AP total tells you what you owe. The aging report tells you which vendors are about to change your payment terms. Most businesses only look at the total.
Why your food cost percentage looks higher than your recipes predict
Food cost running at 35 percent when your recipes say 28 is rarely a kitchen problem. It is often a bookkeeping problem hiding three cost categories with no expense line.
How to record a business loan in QuickBooks without inflating your P&L
A $100,000 SBA loan deposited into your account is not income. Here is how to record it correctly so your P&L and balance sheet stay accurate.
What your balance sheet tells you that the P&L doesn't
A profitable P&L and a thin balance sheet can coexist. Here is what the balance sheet measures that the P&L doesn't, and why lenders look at both.
What to do when your business credit card balance and QuickBooks don't agree
A credit card account off by $3,400 is almost never a math error. Here is where the difference goes and how to close it in QuickBooks.
Why booking the full face value on day one overstates your MCA income
When you fund at 1.35x, the $35,000 factor cost is not income on day one. It is income as the merchant remits. Here is what your books should show instead.
What your Profit and Loss report is actually telling you
Most service business owners calculate revenue minus direct costs and call the result profit. Here is what the books are counting in between.
Why your retainer deposit is not revenue until you bill against it
Law firms that post retainers directly to income front-load phantom revenue and create refund entries that distort the P&L. Here is the correct entry and why it matters.
Why a cash-out refinance deposit is not income on your rental property books
A $181,320 wire from the title company is not rental income. Here is how to record a cash-out refinance in QuickBooks without distorting your P&L.
Why owned equipment makes construction job margins look better than they are
A paid-off motor grader feels like it costs nothing to run. Here is what happens to job margin when equipment depreciation stays out of the job cost report.
Why gift card sales are not revenue until the customer shops
Selling a gift card puts cash in your bank but not revenue on your books. Here is how the timing mismatch distorts your P&L and the fix that takes 20 minutes a month.
Lab equipment and your books: what to capitalize and what to expense
A $45,000 flow cytometer is an asset, not an expense. Here is how to classify lab purchases correctly and why it matters for your burn rate.
Why your delivery platform payout is less than what customers ordered
DoorDash, Uber Eats, and Grubhub deposit a net figure, not your gross sales. Here is what they deduct and how to record it so your books reflect reality.
How capital partner participation distorts your MCA balance sheet
When capital partner money sits in your MCA receivables without a matching payable, your balance sheet overstates what you own by six figures. Here is how to fix it.
Stock-based compensation expense: what founders miss in the books
Every option grant creates a monthly P&L expense whether or not cash moves. Here is what it is, how to calculate it, and what happens when the books miss it.
What a monthly bookkeeping close actually looks like for a service business
Keeping records current and closing the month are two different things. Here is the six-step sequence that makes the books accurate, and what happens when steps are skipped.
How to record contingency fee revenue when a case settles
When a case settles, the fee goes into trust first. Here is the six-step sequence law firms should follow to record it correctly in QuickBooks.
Why your job cost reports show 24 percent and your year ends at 4 percent
Jobs look profitable. The year-end P&L tells a different story. The gap is overhead never charged to individual jobs, and fixing it starts with one number.
Why your Amazon settlement deposit is not your revenue
Amazon deposits a net figure after deducting fees and returns. If you book that deposit as sales, your P&L understates revenue and your costs are invisible.
How to record property management statements so your rental books are accurate
A property manager deducts their fee and repair charges before the deposit arrives. Booking the net amount as Rental Income leaves those costs invisible in your books.
Recipe costing: how to calculate the real food cost on every dish you sell
Most restaurant owners know their overall food cost percentage but not the food cost per dish. Here is how to build a recipe cost card and what it reveals.
How to track daily ACH collections against individual deal balances in QuickBooks
MCA funders collect hundreds of daily ACH payments from merchants. Without per-deal tracking, delinquencies hide and the P&L reports the wrong numbers. Here is how to fix it.
Why an SBIR grant deposit is a liability before it is revenue
A $275,000 SBIR Phase 1 award is a liability on day one, not income. Here is how grant funds should flow through the books from deposit to earned revenue.
Dead stock on your ecommerce balance sheet: how to take the write-down
When a product stops selling, your books still show it at full cost. Here is how to spot the overstatement and take the write-down before year-end.
When a client doesn't pay: handling unpaid invoices in your books
An outstanding invoice is not cash. After 90 days with no payment, your books should reflect that, and most service business owners never make that correction.
Why client cost advances belong on the balance sheet, not the P&L
A litigation firm recorded $34,000 in client cost advances as operating expenses and reported 12 percent margin. The actual margin was 41 percent. Here is the fix.
Why your labor costs keep coming in higher than the estimate
You estimated $21,000 for the framing crew. The books showed $29,004. The crew was not slow. The estimate missed four cost categories above the hourly wage.
Why a catering deposit is not income until the event is served
Most restaurants book catering deposits as income the day they arrive. That shifts revenue into the wrong month and hides a real liability on the balance sheet.
Why four profitable properties can hide a portfolio that is underperforming
Each LLC has clean books. None of them shows how the portfolio is actually doing. Here is how to build a reliable monthly rollup from per-entity records.
Security deposits are not income: what happens to your books when they get recorded that way
Most landlords book security deposits as rental income. They belong in a liability account. Here is what happens to your books when they are recorded that way.
What 2 CFR 200 requires from your books when you receive a federal research grant
An NIH SBIR award is subject to financial audit. If grant costs are mixed into your general books, the questioned costs can come back as a repayment demand.
How a flat charge-off rate understates the CECL reserve on an MCA portfolio
A flat charge-off rate left an MCA portfolio's reserve $94,500 short. Here is what the incurred-loss method misses and what CECL requires instead.
Which practice areas in your law firm are actually profitable
The firm P&L shows 60 percent margin overall, but two practice areas run at 45 and 51 percent while corporate and real estate carry the firm's profitability.
Cash accounting vs. accrual accounting: which method gives you a true picture
Cash accounting tracks money movement. Accrual accounting tracks money earned. The difference can shift a profitable November into a flat one.
Why manual reconciliation fails ecommerce sellers at higher volumes
Manual Shopify reconciliation works at 50 orders a month. At 300, three failure modes compound and your P&L starts reporting numbers that do not match what the business earned.
Why the labor cost on your restaurant P&L is probably too low
Credit card tips land in the same deposit as your sales. If your books don't separate them, your revenue is overstated and your real labor cost stays invisible.
Why completed change orders often go unbilled on construction jobs
The job was done. The changes were approved. But $7,600 of that work never made it onto the final invoice. Here is how it happens and how to prevent it.
How to reconcile Carta equity records to your general ledger
Your cap table shows 1.4 million options vesting. Your books show zero stock-based compensation expense. Here is what that gap costs at Series A diligence.
What to pay yourself: how the books determine a sustainable owner draw
The checking account balance is not a guide to what you can pay yourself. Here is the calculation that shows what the business can actually support.
Why your multi-channel store can look profitable while one channel loses money
A blended P&L can show solid profit while Amazon, Shopify, or wholesale runs at a loss. Here is how to see what each channel actually earns.
Why a $1.2M contingency pipeline and a $340,000 P&L can both be correct
A contingency firm's books record no revenue until cases settle. A WIP schedule is the only way to know what the open caseload is actually worth.
How much to reserve per rental unit for capital replacements
Setting $60 per door per month without a system-by-system calculation is a guess, not a reserve. Here is how to calculate what your buildings actually need.
Why retainage belongs in its own account, not mixed into accounts receivable
Lumping retainage into regular AR makes the aging report wrong, the cash forecast wrong, and the job cost report hard to close. Here is how to fix the setup.
Why your MCA portfolio looks healthy when recent deals are not
Your aggregate collection rate looks healthy. But older, performing deals may be masking serious problems in deals you funded more recently.
Why your actual food cost never matches the number your recipes say it should
Recipe cards say 28 percent food cost. The books close at 34 percent. The gap has four specific causes. Here is how to find where the food is going.
Why your highest-volume ISO may be your least profitable one
Volume rankings tell you which broker sends the most paper. They do not tell you which broker is actually generating return on the capital you deploy.
Two burn rates, one company: why gross burn and net burn both matter
Your monthly burn looks like $340,000. An investor's model shows $640,000. Both are correct. Here is what each measures and why the gap matters at Series A.
Why your agency made $80,000 last year and three clients are why
An average margin tells you nothing about which clients to keep. Profitability by client is the report that decides who you retain, raise, or fire.
Why your rental's '8 percent return' might really be 4 percent
Investors quote returns based on gross rent and purchase price. The number that matters for real decisions is cash-on-cash return. Here is what gets left out.
How over- and under-billings distort your construction P&L
When you bill by milestone and jobs run for months, the P&L can show strong profit while the bank runs thin. A WIP schedule explains the difference.
How a single CRO invoice wrecks your monthly burn picture
A founder's monthly burn looked steady at $480K. Then a $1.4M CRO invoice hit and the board panicked. The work hadn't actually changed. The bookkeeping had.
Why the contract margin you walked away with isn't the margin in the books
He finished the kitchen, banked the final check, and was confident the job cleared 25 percent. The books showed 8 percent. The books were correct.
Why prime cost is the number that tells you whether a busy week was actually profitable
A packed dining room doesn't mean a profitable week. Prime cost, food plus labor as a share of sales, is the number that tells the real story.
Why your Toast says $8,400 but your bank says $7,612
Your POS sales never match your bank deposit, and that's normal. Here's what is actually in the gap, why it matters, and the weekly ritual that keeps your books honest.
How to Track Profit and Loss by Property in QuickBooks Online
Set up class tracking in QuickBooks Online to see a separate profit and loss report for each rental property. Here is exactly how to do it.
Why your bank balance says one thing and your P&L says another
Your P&L says $40,000 in profit. Your bank has $5,200. The money isn't missing. It's hiding in four places nobody told you about.
Why your Centrex deal book and your QuickBooks disagree by six figures
Your CRM says one number. QuickBooks says another. The difference is $187,000 and nobody can explain it. Here's what's actually causing it.
Why your law firm billed $340,000 and collected $218,000
A litigation firm billed $340,000 and collected $218,000 in one quarter. The gap is not one problem. It is two, and each requires a different fix.
Why your bestseller might be losing money once you count landed cost
You sell it for $50. You paid the supplier $20. That's not a 60 percent margin. Here is what your books are leaving out and why your real margin can be half of what you think.
Why your trust account never ties on the first try
Three numbers that should match. They almost never do on the first pass. Here is what causes the drift, and the half hour a month that keeps the firm in compliance.
How to Reconcile Shopify Payouts in QuickBooks Online
A step-by-step guide to reconciling Shopify payouts in QuickBooks Online so your deposits, sales, fees, and refunds actually tie out every month.