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Guide to Using Reference Numbers in QuickBooks Properly

Our QuickBooks ProAdvisors have been dealing with a couple of clients who had data damage. We sent their file to Intuit as we were not able to fix the damage ourselves. Because these companies couldn’t stop working while Intuit was fixing their file, we ended up having to try and copy the missing data from the damage file that was worked on, into the fixed file that Intuit returned to us a couple of days later. Based on these experiences, our small business accountants have come up with some best practice methods when thinking about your numbering system.

Reference numbers are useful tools as they help identify a unique transaction. This allows QuickBooks advisors to check if there were any changes to a previous transaction and if so, modify it accordingly. One of the biggest areas where you utilize these numbers is on your invoices. The Invoice number is generated automatically by QuickBooks bookkeeping programs when starting a new invoice, but it also allows you to manually change this number. Why would you want to change this number? The most common reason is to match up with the last number they used from a previous system. This allows you to pickup from where you stopped. Allowing us to change the number in QuickBooks accounting business software makes this transition much simpler.

But, with this ability also comes the chance to make things worse. I have seen many clients do this who come from pen and paper systems, and it usually doesn’t show as a problem until much, much later down the road, which makes it harder to correct. A few of our clients want to use the same invoice number when dealing with the same ‘order’ for a client. For example, if someone orders 16 widgets from me, but I only have 4 in stock at the time, I may ship out those four widgets and invoice for just those four. When the other widgets are ready to be sent out, I create an invoice for the remaining 12. Here is where some customers will manually change the invoice number for the new invoice to be the same as the previous shipment. QuickBooks bookkeeping software will warn you about this, but it will let you do this.

“What’s so bad about having the same number?” some clients have asked our QuickBooks accountants. The main problem is you are making it harder on your receivables team when they need to receive the payment. In a perfect world, if I sent an invoice for $ 100 and a second invoice for $ 400. I would either receive a payment for $ 500, or two separate payments for $ 100 and $ 400. In the real world, this doesn’t always happen. What happens if the customer sends a payment for $ 50. Are they paying the $ 100 or $ 400 invoice? If they both have the same invoice number, the customer has no way of informing your which invoice they are paying. This may not seem so bad in this example, but what about where the customer has 20 invoices all for the same amount. If you used the same invoice number, this could quickly become a nightmare to try and reconcile, especially when the customer is disputing an invoice, or states that they paid it.

Another issue comes from trying to import transaction changes into a file, as happened with a previous client. They used the same number for a lot of invoices, so when we tried to import changes to two invoices with the same number, only one would get updated as the import software can’t tell which of the duplicates it should use, so it always used the first one it came across.

While you may not think this will ever happen to you and your business, it’s always a good idea to plan ahead for the future. Using different transaction numbers now can save your weeks worth of work and money in the future.

Presti and Naegele is a full-service accounting company, which offers accounting services and tax services for businesses and individuals. Our Certified QuickBooks accountants also provide QuickBooks assistance for everyone using this business accounting software. Our top accounting firm has 26 small business accountants on staff in offices in Manhattan, Long Island and Philadelphia.

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