Managing loans isn’t easy at the best of times. Many aspects contribute to recording loans. The same goes for measuring them.
You would need to record several details when managing loans. You would also need to recalculate several figures to ensure you record the loans. It would be more than a little challenging to use staff to manage all these tasks.
Quickbooks can help you with the same. You can manage various tasks using Quickbooks. But, you would need enough Quickbooks training to do so.
Not all companies believe that using Quickbooks can help them. If you’re one of them, you may want to read on. We’ll discuss how loan management is more efficient with Quickbooks.
What Is Quickbooks?
Before we start, let’s explore what Quickbooks is all about. Quickbooks is accounting software that’s useful for small businesses. You can use it to organize various areas of your accounting data.
Quickbooks has three types of accounting applications: online, desktop, and cloud-based. It’s perfect for companies wanting to improve their financial reporting. It also has tools to help you manage loans.
Its loan management and payroll outsourcing functions are popular among small and medium businesses. These tools allow you to keep your accounting information secure as well.
It Helps you Calculate Loan Terms
Financial institutions in the US grant loans worth billions of dollars each year. It’s not hard to imagine that calculating loan terms is a mammoth task for those applying for them.
The main terms attached to a loan are interest and repayment dates. It takes time and other resources to calculate these. You can manage loans with Quickbooks for the same. But, you don’t need to use this software to calculate future estimates alone.
You can even use it to keep track of your existing loans and applications. After all, it can be pretty difficult for large companies to track individual loans. It’s a good thing, then, that Quickbooks automates the calculation of loan terms.
You can also use it to calculate repayment schedules if you’re applying for extended credit. You would need to set up three accounts to manage loans using Quickbooks.
These accounts are expense, liability, and vendor accounts. These accounts let you record the various loan-related amounts. For instance, you can record any interest accrued on your loans in the expense account.
You would use the liability account to record the total loan amount owed to a lender. There are two types of liability accounts available on Quickbooks. One is the short-term liability account for loans repayable within one year.
The other is the long-term liability account for loans repayable over more than a year. Then there’s the vendor account. The vendor account helps you keep track of those you owe loan payments to.
You can set up new vendor accounts for every lender you need to repay. This feature makes it easier to record the exact terms associated with each loan. IT also helps you save basic vendor details.
These details include their telephone number and email address.
It Lets You Use A What If Scenarios Tool
Quickbooks also lets you run ‘what-if’ scenarios. This tool is helpful for those wanting to compare loan options from more than one lender. Comparing loan options will help you choose one that will meet your needs.
Different lenders offer different interest rates and repayment schedules. It’s unlikely that you’ll find all these loan terms acceptable. It’s wiser to check the terms and conditions attached to each loan.
But, evaluating these options is often time-consuming and takes effort. This is especially true for small companies looking for short-term loans. You could use your staff to perform complex tasks rather than compare small loans.
But, you could save money on interest payments if you compare loans from vendors. In the long run, the money saved on small loans would be significant. So, it makes sense to use software to compare loans.
You can use the What If Scenarios tool in Quickbooks loan manager. The tool gives you a dropdown list of various loan scenarios. These scenarios include facing different interest rate options from vendors.
After you select a scenario, you would need to fill out a few fields. Filling out these fields shouldn’t take you more than a few minutes.
The tool then calculates all the relevant figures for you. Comparing different repayment schedules and interest rates can help you save money. It can also let you plan out how you’re going to pay the vendor back. This would lead to more efficient resource management in your organization.
The tool also gives you information on alternative uses for your loan. So, it doesn’t help you save money on interest alone. It also lets you learn better uses for your loan money. This would help you divide your resources better.
It’s Useful for Granting Loans
Sometimes, non-financial companies choose to grant loans as well. They do this for several reasons that benefit them. For instance, they use loans to net off invoices in the normal course of business.
You could even choose to grant loans to earn interest. After all, it makes more sense than leaving your money idle in a bank account. Over time, such money will fall prey to inflation. In the long run, inflation will reduce the buying power of the money you save in various accounts.
So, it makes sense to loan out any excess cash you may have. But, if you don’t have a large body of staff, it can be difficult to manage such loans. After all, running your day-to-day operations may be challenging enough.
You can create a new account in the Chart of Accounts on Quickbooks for the same. It allows you to record long and short-term loans. You can use the Other Current Assets account if you grant a loan for one year.
You can create a Current Assets account for loan periods longer than a year. You can record the loan amounts due to you from different borrowers. In this way, you can use one tool to track various borrower details.
But, it can be a little challenging to record loans granted if you have no prior experience in this area. You would need some Quickbooks training to help you record the loans you grant others.
A little training will help you make the most out of the various tools available to you on Quickbooks.
Quickbooks is one of those loan managing software that looks like it’s here to stay. The accounting tools this company offers have various benefits. Efficient loan management is the tip of the iceberg here.
But, remember that it helps to receive proper QuickBooks training before you start. After all, it makes sense to hone your skills before you start using premium accounting tools.