Quicken Tutorial: Fixing an Overinflated P&L

Quicken is a personal finance software with a lot of bells and whistles.  I, being a numbers gal, have fallen in love with the software for my personal finances.  It also has a Home and Business package, which may be a good solution for a business with a fairly simple setup.  You can customize it to fit a lot of needs, but at a certain complexity point you may prefer the ease of a standard accounting software.  I always recommend speaking with a qualified bookkeeper regarding what your recordkeeping goals are prior to purchasing and setting up a bookkeeping system.

If you are working with Quicken and see a confusingly overinflated Net Profit in your business P&L (Profit and Loss), you are far from alone.  Quicken works with personal and business transactions, and the two can very easily overlap if you are not diligent in your reconciliations or have a tendency to mix personal and business.  Quicken imports transactions through bank feeds or web connect, and will recommend or guess what some transactions should be categorized as.  Therefore, it may assign a business transaction a personal category.  When it does that, it means your P&L is not including that expense and your net profit becomes overstated.  Luckily, you can set up a report to help you pinpoint any stray categories, easily get them back in line, and help you fix your profit and loss.

I set up the following Quicken file to help show how to repair this error.  Yours will likely look very different.

 

Quicken Profit and Loss (Before)

 

The Quicken Profit & Loss statement consists of all transactions in categories that have a Schedule C tax line type.   You can see if an item is assigned a Tax Line Item by looking at the category list (under Tools).

 

Quicken Tax Line

 

To create the report needed to locate miscategorized transactions, you will need to click on the dropdown for Reports.

 

Quicken Find Reports

 

Set the range to the year and change to a year interval.  Hide the graph if you find it distracting, but it can be a nice addition if you like to see how your spending was split up.

 

Quicken Report Settings

 

Next, click on Customize and make the following changes:

 

Quicken Report Customize Unclear

 

Quicken Report Customize Select Business

 

Quicken Report Customize Advance

 

This will give you a new customized report that shows all transactions that hit your business accounts.  Review these and look for any that may need to be reviewed and possibly recategorized.  Hint:  They usually are missing the (Business), unless you had set up business categories outside the default.

 

Quicken Customized Report (End Result)

 

Double Click any of the lines to drill into the category and find out what the total consists of.

 

Quicken Report Drill Down Expense

 

When find one or more items that need to be recategorized, like my Coraltree transactions above, you can select multiple transactions by selecting the top transaction, then holding down ctrl + shift + the last transaction.  Then you can right click to select Recategorize to fix all at once.

 

Quicken Report Recategorize

 

Once you go through everything, your report will show the same totals, but you will like see more categories assigned as (Business).

 

Quicken Report Fixed

 

Next go back to the report tab, go to business, and select Profit and Loss.  You should now see a number closer to the Net Profit that you actually made.

 

Quicken Profit and Loss (After)


About the AuthorChristina Young, Author & Owner of Lighthouse Ledgers

Christina Young is a professional bookkeeper based out of Seattle, WA.  Her business, Lighthouse Ledgers, is focused on helping small business owners spend less time on bookkeeping so they can spend more time on the things that matter in their lives.

Lighthouse Ledgers – Balanced Books, Balanced Life

Disclaimer: Articles are educational only and based on opinion, experience, and research.  This is not to be interpreted as legal, tax, or financial advice.  Please consult with the services of a professional tax advisor, financial advisor, or legal advisor before making important business decisions.