The QBO Champ Tip

The Phoenix Project

Last year, I read The Phoenix Project, a novel on IT DevOps. The book completely changed my life and how I manage clients. I use many principles and concepts to manage my daily workflows[1], one of which is The Three Ways.


The Three Ways describe the ideal workflow for any business.

1. One Direction. Work should always flow forward with no exceptions. Something is wrong with the process if any work gets pushed back to a previous station/step.

2. Amplify Feedback loops. Work goes in one direction; results flow in the opposite direction. If work is submitted to the next stage, then a confirmation or error message should follow ASAP, and all parties within the process should get notified when there is an error.

3. Continual Experimentation & Learning. No system is perfect, but that should not stop anyone from getting as close to perfection as possible. With work going in one direction along with quick feedback loops, individuals and teams have the freedom to test new methods and immediately see results. If the new method pushes work faster while maintaining the quick feedback loops, the new method should be adopted by all parties.


Figure 1- The Three Ways Illustrated


The Receipt Problem

Before I started with him, one of my Property Manager clients constantly complained that his maintenance guys did not submit receipts to him in a timely fashion. This problem held up his billing process, which slowed down his cash cycle and extended his monthly close time. My first goal was to eliminate the receipt problem by using Dext (formerly Receipt Bank) and QuickBooks Online (QBO)’s bank feed.


The First Way

The QBO credit card receipt workflow follows this path:

1. The client submits a receipt with key details (billable status, expense category, customer/project, etc.) into Dext[2].

2. I review the receipt in Dext to spot errors or fill in blank information, then publish the expense to QBO.

3. I go into the client’s QBO file, go to the Banking Center, then hit the refresh button to import all recent bank transaction data.

4. Each expense from the QBO bank feed should match a created transaction from Dext.

5. At the end of the month, my client and I review all billable transactions created from Dext and build a client invoice for the month’s billable expenses.

6. When the monthly credit card statement is published, I reconcile the credit card account in QBO. If a transaction was created or matched within the bank feed center, it should be automatically checked. Since we run the bank feed every business day, all transactions should be checked off, making the reconciliation a breeze.


The Second Way

Each step has a feedback loop that informs the current user if something is wrong or missing.

· Dext has a built-in validator that tells a submitter if the receipt image is too blurry.

· Dext will not allow someone to submit a receipt to QBO if it is a duplicate.

· If there is a bank transaction that does not have an automatic match, I know whose credit card has the outstanding charge and who I need to remind to submit paperwork.

· My client tells me which charges should and should not be billable when I give him the billable charges report.

· If there is a reconciliation difference, I investigate the bank feed to see if there is a duplicate, ignored transaction, or an incorrect date.


With these feedback loops, we inform the previous user[3] about the error message constructively to encourage improvement. If these error feedback messages are not passed along, The Third Way is impossible.


The Third Way

One holdup in our receipt workflow happened at a gas station. Sometimes a gas pump would not generate a receipt, and our guys were in a rush and could not obtain a receipt promptly. We discovered this problem by bringing the “no automatic match” error to the credit cardholder. He was comfortable explaining the situation without getting defensive. After a few moments, I told every credit card holder, “if you cannot get a receipt from a gas pump, take a picture of the gas pump with the final amount instead.” After that, the gas pump problem went away.


The Bill Problem

After a month of using the receipt workflow, my client and I noticed that we were still getting unmatched transactions in our bank feed. This time, it was related to bill payments that hit our bank account instead of a credit card. My client independently experimented with submitting bills to Dext (The Third Way). Still, I had no clue if my client paid the bill before submitting the bill. If he did pay the bill, I need to know where the payment came from, and if he did not, I need to know when the bill will be paid (The First Way).


After reviewing the features from Dext & QBO, there was a two-prong solution to the Bill Problem.

1. For bills paid immediately, my client writes three things down on the bill itself:

a. “PAID”

b. Pay Date

c. Pay Method

2. For unpaid bills, we schedule payments inside QBO through Melio, which is a free service built right inside QBO[4].


At the onset, the billing workflow had a bug; my client wanted to review bills before they were scheduled for payment (The Second Way). Thankfully, we discovered that Melio has a payment approval process, which allows my client to approve or reject payments that I schedule.


The Champ Tip

In September 2021, I held a QBO seminar at UMass-Amherst[5]. I shared many Pro Tips[6] such as “Thou shall not touch a closed year” and “Thou shall not delete a transaction,” but I only had one “Champ Tip” which could work for anyone:


Figure 2- Dext feeds QBO, which feeds Melio


1. All paperwork must go through Dext for processing, with no exceptions.

2. All bank transactions in the QBO bank feed must have a matching transaction[7].

3. All bills must be scheduled through Melio[8]. Ideally, bill payments should be a weekly event.

4. All Melio payments report back to the QBO bank center to get matched up with bank data.


If any one of these four steps produces an error message, the previous step must be investigated thoroughly by all parties to smooth out the workflow.


Conclusion

The Champ Tip has saved my client and my firm many hours and headaches. The framework follows The Three Ways described in The Phoenix Project. If you apply The Three Ways to any operation, rapid innovation is guaranteed.

[1] A few are the Four Types of Work, the Five Ideals, and Three Horizons; all of which deserve their own future blog posts. [2] If my clients do not know where to classify an expense there is an “ASK ALEC!!!” category. [3] And yes, there have been plenty of times where my client informed me about receipt errors, which allowed for better internal system design. [4] Melio is free to use if you are paying bills via Bank ACH or debit card. For schedule payments with a credit card, the fee is 2.9%. [5] If you would like a copy of my slides, please leave a comment in this blog post [6] Another future blog post [7] Sometimes you’ll have a subscription-based vendor that does not produce and an invoice for their monthly charge. In this situation, create a recurring transaction inside QBO. [8] The previously mentioned client occasionally uses Venmo, or his bank’s bill pay feature to pay his vendors if the vendor wants immediate payment and will not accept a credit card. This is why the bill payment notes are a requirement for him.

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