QBP - How best to track Personal payment to cover Business transactions?

Flopbot

I'm looking for advice on how to structure this.  I am not an accountant.

Prior to QBP: I didn't have any business accounts in Simplifi. I had a manual (not a real-world) Owners Equity Account that personal money would get transferred into. Money would go into it and never come out so I generally knew how much personal money had been invested into the business over the years…so we could have a good cry.  I looked like this:

• Personal CHK > Owners Equity Account  (in Simplifi)
• > Business CHK   (not in Simplifi)

Post using QBP: All my business accounts are in Simplifi so both sides of the transfer are available. It now looks something like this:

• In Simplifi Personal CHK > ???? > Business CHK

What do I do for the ???? step?

Do I…

1. Use the category of “Transfer” in Simplifi even though both sides of the transaction are available?  If so, what do I do for the category on the other side?
2. Link the two transactions?  If so, they’d become a transfer transaction so how do I know how much personal money we’ve invested in the business over the years?  Tag?
3. Continue to use the Owners Equity account which seems overly complex.
4. Something else?

Thank you for any advice?

Coach Kristina

Hello @Flopbot,

Thank you for reaching out to the Community with this question. What method you use to track the transactions depends on what information you want to see and how you want it to appear in Quicken Simplifi.

1. If you choose to use a category named Transfer, and have it reflect as an expense on one side and income on the other side, then I'd recommend using a category that allows you to recognize where the money came from, and if there are any tax implications, make sure to assign the correct tax line item to that category.
2. If you link the two transactions as a transfer, then the transactions will not reflect as expenses or income. Since you are able to filter transactions by tag, a tag should be an effective way to identify when personal funds were injected into the business. If you want to be able to see these transactions on Spending or Income reports, I do not recommend turning these transactions into transfers.
3. Whether you continue to use the Owners Equity account is a matter of personal preference. The advantage of using the account is that as long as you keep it up to date, you can see the total amount of personal money you've put into your business at a glance. The disadvantage is the extra complexity (transactions from personal to business going through the extra "shell" account).

What information do you want to be able to access the fastest/easiest? Are there any tax implications, and if so, do you want to be able to track them in Quicken Simplifi? Do you want the transactions to reflect as expense/income or simply as money moving from one account to another?

I look forward to your reply!

Flopbot

@Coach Kristina ,

Thanks for the feedback! Reading over your post helps me narrow down what I want. While I love the simplicity of just transferring money from the Personal CHK to the Business CHK, you're right that it won't reflect as expenses or income. Therefore, #2 is off the table.

It's probably going to look closer to this with two completely separate sides.

• In Simplifi:
  • Personal CHK > Manual Owners Equity Account
  • Create an "Owners Contribution" income category for transaction in Business CHK.

What are your thoughts about this with what you know about Simplifi QBP? Is there a more elegant way? Smoother way?

Any other advice from the community?

DryHeat

@Flopbot

I will be facing this issue soon with a small non-profit we are starting, so I'm interested in your solution. I haven't yet figured out what I am going to do.

I want to make sure I understand the transaction flow in your latest design. I think it's like this:

You create a transaction in Personal CHK (a transfer?) that moves money to a Manual Owners Equity Account.

You create a transaction in Business CHK (a deposit?) with an "Owners Contribution" category.

In the real world, these represent a direct transfer from one real checking account to the other.

Is that right?

You're right that an account to account transfer won't show up as expense or income. But should it? When you transfer money to your business, on your side that seems more like you are making an investment (which is a usually a transfer). And on the business side it seems more like a capital contribution (which is usually not considered income).

Anyway, it sounds like the "Owners Equity Account" is really a record of contributions, not the value of the equity in the business at any given time. Your equity could be less than (or hopefully more than) your contributions to date. And actual equity would be hard to track without a much more complicated accounting system.

If it's really just tracking contributions, what is the advantage of this system over just creating a "Owner Contribution to XYZ Corp" tag, tagging the account-to-account transfer, and running reports on that tag? That seems simpler, but maybe it doesn't do everything you want.

Coach Kristina

Thank you for your reply,

To clarify, does Personal CHK > Manual Owners Equity Account mean that you transfer the funds from personal checking to the manual owners equity account? Or, does it mean that you download the transaction in your personal checking (and use a category to show it as an expense), then create a transaction in the manual account to track the total personal contributions to the business?

As @DryHeat pointed out, if the purpose of the Owners Equity Account is just to track contributions, you should be able to do the same thing with tags. It comes down to whether the convenience of being able to see your total contributions at a glance is worth the extra work to document in that shell account, or whether the extra clicks to run a report filtered by tag would save more time in the long run. If you do choose to get rid of the shell account, but still want the transaction to show as an expense on the personal side, you can create an expense category & tag to reflect the capital investment coming out of your personal checking.

Based on your initial post, it doesn't sound like you're loaning the money to your business. If it is money you expect the business to pay back someday, then it may make sense to use a Loan account, so that it shows up on reports as a liability.

I hope this helps!