Quickbooks Online: Transferring Funds between Entities

[@Incomedigs]

Check out my End-to-End Quickbooks Training. www.incomedigs.com/reab ($50 off w/ code KZbin50)

[@saraly2011]

Thank you for showing this video! I've been trying to figure this out with QuickBooks CCS but no one seems to know.

[@Incomedigs]

Glad I was able to help! FYI...we dive deep into topics like these in our end to end course for REI Accounting: www.incomedigs.com/reab2

[@KevinReck]

Hi Nick. Another great video! I really like how you remove the "Not Specified" through journal entries for the transfers - it keeps everything very clean. My question is: How can I do this with bank feeds? For example, I have the rental income coming in and it is correctly reported on the P&L report under my property class under Rental Income, but the Bank amount is listed as Not Specified on the Balance Sheet Property 1 Property 2 Not Specified Total Bank Accounts BofA - prop 1 1400 1400 BofA - prop 2 2700 2700 Thanks!

[@KevinReck]

I am thinking that I can't have the Balance Sheet Displayed by Class - but rather I need it to be Displayed by Business? Thoughts?

[@Incomedigs]

@@KevinReck Yes! Linking to that other video on "why your balance sheet is off". It all comes down to the two "sides" of each transaction. Class is only auto assigned to one side...the P&L side. Therefore, we see our bank balance "by property" as inaccurate. kzbin.info/www/bejne/eGaqc6mbq8qAp8U

[@LivingDreamscape]

Hey Nick. Thanks for posting your valuable guides and info for multiple entities in QBO which is perfect for our rentals. I noticed in our structure we'd been using transfer to move money between entities and had exactly the issue you identified when attempting our reporting. When we attempt to use your method of creating a journal entry for the transfer between two entities with an intercompany loan account, we are seeing the credits and debits reverse in the output. So for example we create a journal entry a bit like follows to move 1300 from Bus2 to Bus1: Debits Credits Business Class Bus1Chk 1300 Bus1 House1 Bus2Chk 1300 Bus2 General IntercompLoan 1300 Bus1 House1 IntercompLoan 1300 Bus2 General For some reason after the entry we are seeing Bus1Chk is debited 1300 rather than credit, and vice versa for Bus2Chk. Since this is quite consistent I thought I'd post here to see if theres any suggestion on how I've setup wrong in qbo somehow. Thanks.

[@Incomedigs]

Hi! Thanks for watching. Yes, your journal is reversed. If Bus 1 is receiving the funds, you need to Debit the Bus 1 Checking account. You would then Credit the Bus 2 checking...the intercompany would reverse as well. To increase an asset (the bank account)...you need to Debit...not Credit.

[@LivingDreamscape]

Thanks Nick.@@Incomedigs I am moving from Excel Spreadsheets with engineering background so had it backwards in my head vs. Financials :).

[@Incomedigs]

@@LivingDreamscape I'm right there with you! It never made "logical" sense to me...but eventually I just memorized the Debits and Credits. Took some time!

[@lamonteasterjr]

It seems like paying for a higher subscription is the same as having a few separate smaller subscriptions for each business

[@Incomedigs]

Hi Lamont! Thanks for watching! Potentially...yes. However, 1 subscription would allow you to take advantage of a single COA, vendor list, Products/ Services, list. etc.

[@wendyyangbrunk]

Hi Nick! Great video and just what I was looking for. We own a property management company that manages a few rental properties. We created two LLCs for our rental properties. One CPA said that we couldn't use one QB account to do our bookkeeping and because there are 3 LLCs, we needed to create 3 separate QB accounts for tax purposes. Is that true?

[@Incomedigs]

Hi Wendy..thanks for watching. No! It is not true. While most CPAs/ QB pros would prefer you to have separate accounts...this is absolutely not a requirement. Check out this video where I deep dive into my strategy for multiple entities in one QBO account: kzbin.info/www/bejne/q2nQnWSHrduCfJI Also, we get into this in deep detail in our end to end course: Real Estate Accounting Bootcamp. Based on your business setup, I definitely recommend checking it out! bit.ly/reabcourse (Enter Code KZbin50 for $50 off!)

[@WreckAnEyeZe]

In a [self managed] property management scenario where you have a prop mgmt entity and a holding company entity which owns the property, how do you handle QB when the prop mgmt entity is paying all the bills on behalf of the holding company?

[@Incomedigs]

Hi...thanks for watching! You would want to setup the Owning company as a "Customer" of the Prop Mgmt company. The prop mgmt company receives all funds...records as most of those funds into an "escrow" account (Liability) When disbursed, less the fee, the Escrow account is credited along with "Prom Mgmt Income". We go into this scenario in great detail in our REAB course...definitely check it out! bit.ly/reabcourse

[@abbylovespurses]

Hi Nick - I have multiple companies under the same QB as well. We enter a class for every transaction to track the spending per property, the issue is that when I enter the transaction it goes as follows Dr. Expense - Class Name Cr. Bank Account - Class not available to enter So when I run my balance sheet I have a ton of "Not specified" transactions under this column. Do I need to enter a journal entry for every item for me to be able to track it in the balance sheet?

[@Incomedigs]

Hi Abby, great question. The problem here is that Classes are logged "per line". If you were to change your class tracking to run "per transaction", this would associate the class to both the expense and the bank account. The above hurdle is one reason I suggest using Locations to track multiple entities. By default, location is tracked at the transaction level. You can actually use location and class in unison. I have a few properties under each of my LLCs. I'll use Location to track the LLC and Class to track the property. We go into this in great detail in our end to end course: Real Estate Accounting Bootcamp: www.incomedigs.com/reab2

[@chrisvance3881]

Hi, Great video. Is there any reason why you wouldn't want to use the AP and AR accounts?

[@Incomedigs]

Hi Chris! AP/ AR accounts are intended to be paid to 0 frequently. These accounts are more short term. Also, QBO has automatic logic to add to/ subtract from the balance of A/R & A/P. I do not recommend messing with them much. This can get a bit confusing and messy.

[@Uls77Nin]

Hi Nick, thank you for sharing this video. I was wondering how you would go about and record a intercompany due to/ due from transactions using Locations when there is no cash transaction yet. Do you make a JE using due to/due from accounts with an expense/income account? Or do you use the AP/AR accounts? I have set up each entity with its own accounts for assets, liabilities, & income, but for equity and expenses there are not company specific accounts.

[@Incomedigs]

Hi There! Thanks for watching.... and good question! I think you can utilize A/P and A/R. You would just need two transactions: 1 Invoice and 1 Bill. One annoying aspect would be you need to create a product/ service for the Invoice. Not a big deal...but a bit cumbersome. In each case...the bill and the invoice, the account used would be "Intercompany Loans' (the product/ service would map back to this account). Each transaction (bill/ invoice) would be categorized to the appropriate location. This would allow you to visualize on the balance sheet two facts (Accrual based only...from the perspective of the company owing to): 1. The company owes cash (A/P) 2. The company has an intercompany balance. We go into scenarios like the above in our end to end course, Real Estate Accounting Bootcamp...we'd love to have you! bit.ly/reabcourse

[@stevolopez]

Hi Nick! I'm using Quickbooks Desktop Pro. I have two business entities. I did an invoice from one company to a customer. However, they gave me a check to the other company and I deposited it into that account. Then we transferred the funds from bank to bank. How do I transfer in Quickbooks using a Journal Entry? How do I make sure that the open invoice gets credited on the correct company? Also, some expenses were paid by the other company. How do I transfer expenses from one company to the other at the same time?

[@Incomedigs]

Hi Steve, You should set up an "Intercompany Equity" account on each COA for each business. This will be used to track the ins/ outs from one business to another. Let's work through that invoice example.... Company A Issues the invoice. Company B receives payment for the invoice. When Comp. B receives payment, this should be categorized as "Intracompany Equity - Company A". We also need the customer to know that the invoices has been received. Therefore, we should create a Journal entry to Credit Accounts Receivable (indicate the customer) and Debit "Intercompany Equity - Company B". (You may need to do one extra step and click "receive payment" on the invoices. QB should find the journal entry and apply the customer credit. At this point, the invoice is paid...Company B has the cash...and both Company A and Company B have matching values for Intercompany Equity accounts (one is positive and one is negative). Next, Company B transfers the funds to Company A. From Company B's books, we Credit our Bank Account and Debit Intercompany Equity - Company A. From Company A's books, we debit the bank account and Credit Intercompany Equity - Company B. Now....the cash is in Company A's account and our intercompany equity accounts have gone to 0. Use these intercompany accounts for any funds traveling back/ forth between entities!

[@bentodd6684]

Hi Nick. This is really great stuff and I'm using the same approach you model here. How does a reoccurring invoice or expense work? I had to do two entries one as you model in this video but I am not able to link it to the reoccurring expense or invoice. How would you recommend going about that? Example would be reoccurring rents go to to the management LLC bank account through ACH but I need to be transferred to the apartment LLC bank account.

[@Incomedigs]

Hi Ben. Thanks for watching! When you create a transaction..almost any transaction...you will have the option to "Make Recurring" at the bottom on your dialogue. So, to your question, you will create a new expense or invoice. Once created and saved, click "Make Recurring". You can then set the schedule for QBO to create matching transactions in the future. The key is to indicate and pay attention to "Days in advance to create". The date of your transaction is not the date of creation. For example, if you had a regular, recurring expense paid out on the first of every month, you could indicate on the recurring template to create "10 days in advance". At the end of the month, say on Jan 21, QBO will create a new expense with the date of 1-Feb. This can then be matched to incoming transactions in the bank feed. We discuss this strategy in great detail in our end to end course: Real Estate Accounting Bootcamp: bit.ly/reabcourse We'd love to have you!

[@dunwoodygardners4491]

I appreciate your tutorials! I've created Balance Sheet by Business and am trying to "reconcile" the Not specified. amounts. They are from a couple of transactions Types: Credit Card Payments - From the Bank Feed, I chose it was Matched to the Credit Card Payment. This "automatically" recorded the transfer from DR Checking and CR Credit Card Bill Payment Check. I had 2 Bills that both specified the Business A. The 2 bills were both paid by check on the Bill Payment Check transaction, but there is no way to speicify Business Are there other ways I should be doing these types of transactions easily?

[@Incomedigs]

Hi There! Yes...you have run into a bit of a shortcoming w/i QBO. The following transaction types will not allow for adding a "Business": Transfer, Credit Card Credit. When you see a credit card credit come through the banking feed, instead of selecting "credit card credit", select "Add" or "Categorize" instead. Simply indicate the account from which the payment was made. This will accomplish the same thing as the credit card credit...but it also allows you to indicate the business. On Bill Payments, the business will automatically be assigned to the business indicated in the Bill. One thing to keep in mind, this will not "automatically update". This means that if the bill was originally marked as "Not Specified", then the payment applied.....then later the bill was changed to Business A....the payment will still show as not specified. If you ever change the business on a bill, you will need to delete and re-add the bill payment so that it picks up the correct business.

[@benmalka94]

Can this still only be done on the plus version??

[@Incomedigs]

Hey Ben! You would only be able to track more than 1 entity in a subscription by using QBO Plus. If you are using QBO Essentials or simple start, you would need a separate subscription for each entity.

[@veronicaurraca8854]

Hi Nick, thank you for your video and sharing info. I greatly appreciate it. Quest. I'm doing the same but not using Class, I'm using Locations. Does it matter? Also, I was thinking of recording JE it on account called Loan to comp A (asset acct) and loan payable (liability acct)

[@Incomedigs]

Hey Veronica...thanks for watching! You can use Location...the only limitation is that you are not able to tag Location to each individual line item of non journal entry transactions. I find Class works best for property tracking and Location works best for entity tracking. Your Asset/ Liability approach is also fine. This is how I used to do it. However, I found it easier to "reconcile" the loan account by having them as Equity Lines....I can see the positive and negative balance right away...and confirm that they add up to 0.

[@j.alanrupertus5028]

Hey Nick, I have another question - it's soldered into my brain not to use the Transfer function when transferring between entities but here's my situation - I have a savings account and a checking account owned by the same company. When I transfer money from savings to checking, or vice-a-versa should I be using the transfer function or still use intercompany loans?

[@Incomedigs]

Hi J. Do not use the transfer function. You will not be able to categorize by business. I suggest a journal entry wherein you Debit the account receiving the funds, Credit the account distributing the funds and two more lines for intercompany loans to offset the transaction. We dive into this strategy in great detail in our end to end course: www.incomedigs.com/reab2 We hit on this in Module 6!

[@djmillen2010]

If it is from the same company I don't see why you couldn't use transfer seeing that it is not going to a different company

[@MaCrisandraAquino]

How can we avoid the Intercompany accounts? My client asked me if we can eliminate such account or book in other way without showing it as Intercompanies because the banks do not usually want to see those in the balance sheet. Is the other option to book it is as Owner's Withdrawal from other entiry and Owner's contribution to the other entity?

[@Incomedigs]

Yes...you could do this. In reality, the way to really 'get rid of intercompany" would be to exchange the cash. "Pay back" the equity.

[@MaCrisandraAquino]

@@Incomedigs Thank you! I'm also thinking, since we are removing the intercompanies, and book it thru Equity, if Entity A (Rental Business) sends funds to Entity B(Development Business) , purpose of which is to have Entity B develop more properties for Entity A, how would Entity B "move" the developed property to Entity A? Would it be thru Equity account as well? 🤔Or is there other way around for this? We just want to really remove the "Intercompany" in the bookings.

[@Incomedigs]

@@MaCrisandraAquino Yes! This would be an equity transaction as well.

[@j.alanrupertus5028]

How about when Company #1 pays the expenses for Company #3 and Company #3 needs to reimburse Company #1 for those expenses? For instance, there are many years worth of credits/income (let's say +$53,000) and expenses (let's say they total -$75,000) all held/ paid for by C1. In this case, C3 has a debt of $22,000 to C1. C3 just refinanced and now has $8k in cash to pay back SOME of that debt... Would I set up an asset account for the $22,000?

[@Incomedigs]

Hi J...thanks for watching! You can set up an account to track all the ins/ outs over time between these businesses. This can be a Liability account of Equity Account. As Company 1 pays for expenses that are meant for Company 3, you could Credit this account for Company 1, Debit it for Company 3. As Company 3 pays back Company 1, you simply reverse this transaction.

[@TheTrustedHomeBuyerRealEstate]

Great content as always Nick! I do have a question. We are using multiple entities (6 right now). Do you recommend a separate liability "intercompany loan" account for each possible relationship (which would be 15) or is there a way to accomplish the necessary distinction using a single intercompany loan account?

[@Incomedigs]

Hey! Great question! My recommendation here, although a bit tedious, is to pick one of your entities as the main "pass through". Usually you would have one "umbrella" company. Maybe the company that carries the branding for your business. In your case, you would have this umbrella + 5 other entities. So would setup this "Intercompany Loan" account for 5 separate scenarios: 1. Intercompany Loan - Company 1/ Company 2 2. Intercompany Loan - Company 1/ Company 3 3. Intercompany Loan - Company 1/ Company 4 4. Intercompany Loan - Company 1/ Company 5 5. Intercompany Loan - Company 1/ Company 6 I would suggest making all of the above as sub-accounts to a main account: "Intercompany Loans". As a practical matter, try to reduce transactions between companies 2-6. However, when they happen....we can use a passthrough. Let's say you transfer $10,000 from Company 2 to Company 3. We assume that, first, company 2 transferred to company 1...and then company 1 transferred to company 3. The journal entry would be: Company 2 Checking - 10,000 (CR) - Business: Company 2 Company 3 Checking - 10,000 (DR) - Business: Company 3 Intercompany Loan - Company 1/ Company 2 -10,000 (DR) Business - Company 2 Intercompany Loan - Company 1/ Company 2 - 10,000 (CR) Business - Company 1 Intercompany Loan - Company 1/ Company 3 -10,000 (DR) Business - Company 1 Intercompany Loan - Company 1/ Company 3 - 10,000 (CR) Business - Company 3