How Data Moves From POS to Accounting
There are different levels of data integration – summary, detail, and somewhere in between. There are circumstances where each could be appropriate. Generally speaking, summary is the most common, given that the POS system has a detailed history of activity and can provide retail-oriented reports – the financials should be the financials and not get bogged down with unnecessary and duplicative data.
The following is an attempt to break out the various types of posting – Summary, Detailed, Hybrid, and good old traditional manual entry. It is an endeavor because this can get complicated with the various gradations, but hopefully you’ll get the gist.
This is the most common and desired form of posting as there is usually no need to replicate each transaction in the accounting system. There are different levels of summary postings.
Minimally, a summary of sales activity is sent, which may or may not include a breakout of different types of income, sales tax, gift cards, discounts, A/R, A/P, inventory, COGS, etc.
Some POS systems send each transaction over to the accounting system. And some provide that option. For those that do a lot of A/R, this allows invoices and statements to be sent out of the financials; however, most integrations do not send payments (or any other transaction) from financials to POS, so that can be problematic.
Businesses that do low volume but higher dollar transactions might employ detail so that activity can be viewed out of both systems.
Generally speaking, sending each transaction to the accounting system just adds more data and effort. Imagine being a high volume retailer – would you want every sale in the financials? That would result in a large volume of extraneous data and add a lot more time to the payment reconciliation effort. And what if there were multiple locations? Not pretty.
This is a combination of summary and detail. Sounds odd but this approach incorporates both the summary for those transactions that you want summarized and detail for A/R. The summary has the benefits noted above and the detail is helpful for tracking on-account (A/R) type of transactions.
The only system I know of that does this well is QuickBooks POS Desktop. There might be others, but if so, very few.
Last but not least is manual posting. Many businesses enter sales manually for a variety of reasons: current system doesn’t work with their accounting program; they don’t know how, or are scared, to integrate; the integration does not meet expectations; intentionally want separate systems; were told by their bookkeeper or accountant not to do so; and sometimes it is just easier.
The complexity of the entry is dependent upon the POS system’s reporting ability in conjunction with the needs.
Sampling of How POS Data Is Sent to QuickBooks
Some sample POS integration is noted below. This is not intended to be a comprehensive guide to the integration but rather to provide a sense of the different levels of integration and why it is important to understand capabilities and limitation up front.
The integration sends sales transactions in detail to QuickBooks Online. QuickBooks Desktop can be synced via a 3rd party app – Commerce Sync, Shogo, etc., and could provide more comprehensive integration.
This is a one-way sync — no inventory activity. It is fairly simple – each sale is sent as an invoice along with a payment.
- Each item is listed on its own line. If it can match an existing item in QuickBooks Online it will assign that as the item, e.g., Widget, otherwise it will use an item called Square Item
- The item name in the description field.
- The sales tax amount is forced into the invoice tax field. This causes issues when there are multiple tax rates or if the rate in QuickBooks Online does not match the rate in POS.
- Line item discounts are forced into the order discount.
- A payment entry is created for each invoice.
- A single payment method is assigned in the setup. This makes it a bit challenging to decipher between cash, credit card, checks, etc.
- Customers. No customers are synced. Instead it is booked to a generic Square Customer.
- Multiple locations. Doesn’t work very well.
This integration can work for straightforward sales – single location, simple inventory, simple tax, limited payments. Inventory is not accounted for, and with the standard Square account there is incredibly limited inventory capabilities. The Square for Retail add-on $60/month) provides additional capabilities and reports can be run in this module and then inventory adjustments and COGS can be manually entered into QuickBooks.
The Square-QuickBooks settings are set up and maintained in QuickBooks Online, oddly enough. And this is the extent of the settings:
Here’s a list of resulting Square transactions in QuickBooks Online from a particular date, and an example of a sale and its corresponding payment.
Square can utilize Shogo to send transactions to QuickBooks Online, QuickBooks Desktop, or Xero. This allows for summarizing sales activity rather than individual sales. No inventory, though.