Managing Loans in QuickBooks 2015
Managing Loans in QuickBooks 2015

Chances are, your business will have to borrow money at some point or other. You will want to track the loan, along with the asset purchased with the loan, just as you track your income and expenses.  

In QuickBooks, assets that you purchase with loans and the loans themselves are not connected.  If you get a loan to buy an asset, you will track the asset in an asset account.  You will create a liability account to track the balance on the loan.

Tracking the Amortization Schedule for a Loan

Most loans amortize your payoff. This means that with each payment you make you are paying interest and principal. However, the amount of interest and principal is different with each payment.   The payments you make at the beginning of a loan are usually mostly interest with a little toward the principal. As you get closer to the end of your loan, the payments mostly go toward the principal. 

Loan Manager is a separate program that comes with QuickBooks that shares information with your company file.   Loan Manager calculates your loan's amortization schedule for you.  It then posts the principal paid and interest paid for each payment to the correct accounts.  It can also handle fees and escrow. 

Setting up a Loan

As with all of your company's expenses and income, you must have accounts set up in QuickBooks in order to track your loan. This is true whether or not you use Loan Manager. 

Below is a list of the accounts you will need to set up in order to track a loan in QuickBooks.

You will need:

1. A liability account . This will track the borrowed money.   Create a Long Term Liability account for loans that last longer than a year.   If the loan is for less than a year, use an Other Current Liability account. Do not enter an opening balance.   You'll want to record the money you borrow by recording a deposit for the borrowed money into the account where you actually deposited the money. 


2.  A loan interest account .   Since interest is an expense, you will want to create an expense account. You can name it something memorable, such as Paid Interest.




3.  An escrow account .   Sometimes you make escrow payments for things such as property taxes. If you do, you will want to create an account to track the escrow you paid.   Escrow is money paid in advance. For that reason, use the Current Asset Account type.




4.  An expense account for fees and finance charges.  




5.  The lender added to your Vendor list. 

All these accounts need to be created before you begin to use Loan Manager. You will also need to show a deposit into the liability account for the money borrowed. 

Here is how to do that. 

Depositing the Loan Amount

Go to Banking>Make Deposits.


In the Make Deposits window, choose the bank account to deposit the loan to. We chose our escrow account.


Next, go to the table and enter your lender (that you added as a vendor) to the Received From field.

In the From Account field, choose the liability account you created for the loan.


Click Save & Close.

Setting Up a Loan with the Loan Manager

To begin using Loan Manager, go to Banking>Loan Manager.

You may see this dialogue box:


If you see this message, and you want to use Loan Manager, you will have to reboot your computer, then start QuickBooks and Loan Manager again.

When you start Loan Manager for the first time, you will see this window:


Click the Add a Loan button.


You will then see the Add Loan dialogue box.

Want to learn more? Take an online course in QuickBooks.

Go to the Account Name dropdown list.   Select the liability account you created for the loan.


Choose the name of your lender from the Lender dropdown list. 


Go to the Origination Date field and enter the loan origination date. This will be on your loan documents.


The origination date will be used to figure out the number of payments left, as well as how much interest is owed and when the loan will be paid off.

Next, enter the amount you borrowed in the Original Amount box.  


In the Term field, enter the length of the loan. It may be 12 months. 30 years, etc. 


Click the Next button.


Enter the date your next payment is due in the Due Date of Next Payment field.

Then enter the payment amount in the Payment Amount field. This is principal and interest. 

In the Next Payment Number field, enter the number of your payment. If this is a new loan, it is 1. The payment number should be on your loan documents if you're unsure.

Select the payment period in the Payment Period dropdown. This is how often you make payments.


Next, check if the loan has an escrow payment. If it does, enter the escrow payment amount, then the escrow account you created earlier in this article.

Click Next.


Enter your interest rate in the Interest Rate field.

Choose how your lender calculates interest in the Compounding Period box.


Next, choose your accounts.

For Payment Account, choose the banking account you will use to make payments.

For the Interest Expense account, select the account you created earlier in this article.

The same goes for the Fees/Charges Expense account.


Click Finish.


To modify a loan, click the Edit Loan Details button. You can then edit the information you entered in for your loan.

Setting Up Your Loan Payments

To set up your loan's payments, go to Banking>Loan Manager.  

Click the loan you want to pay to select it, then click Set Up Payment.


You will then see the Set Up Payment dialogue box.


Go to the I Want To field. Select if you want to write a check or enter a bill for your loan payment. Loan Manager will give this information to QuickBooks so QuickBooks can record it. Loan Manager handles one payment at a time.   It is not capable of creating recurring payments. This means that when QuickBooks reminds you that you have a loan payment coming due, you will have to run Loan Manager so the payment is created.

We are going to choose Write a Check in the I Want To field.

The Write Checks window then opens.


As you can see under the Expenses tab, QuickBooks has broken down the expenses between accounts.

What-If Scenarios

The What-If Scenarios button is located in the Loan Manager window, as shown below.


You can use this button to figure out what would happen to your loan if certain scenarios existed. 

Let's click the button.


The first thing you do is choose a scenario:

How much will I pay with a new loan?     If you choose this, you can enter information to see payment amounts, number of payments, interest, and final balloon payment.

Evaluate two new loans.  Enter in information for two loans, then compare to discover which will be better.

What if I change my payment amount?  You will only see this if you've already created a loan in Loan Manager.   You can see how a different payment amount will affect your loan.

What if I change my interest rate?    If you have an adjustable rate loan, you can use this to see the changes in your loan with a different rate.

What if I refinance my loan?    If you've already created a loan in Loan Manager, you can use this scenario.   You will be allowed to enter a new term, payment, interest rate, and payment date.  

None of these scenarios affect any actual loans you have created with Loan Manager.

There's no doubt that payroll is one of your biggest headaches, especially if you are doing it yourself. Just messing with withholdings, writing the checks, and trying to decipher payroll taxes can take up so much time -- and all of your patience.   

Because it is so complicated, you may want to hire an outside source to take care of your payroll.  That way, you don't have to worry about Uncle Sam coming back on you later.    However, if you don't want to pay for payroll services, and you insist on doing it yourself, we'll show you how to use QuickBooks to do your payroll.

Before we begin, it should be noted that payroll through QuickBooks does not come with the software that you purchased. It is an addition and, yes, you are going to be asked to pay for it. How much it costs will depend on what you need. You can buy a basic payroll package for a few hundred bucks per year.   If you want everything that you will need to do your payroll with QuickBooks, it is going to be more.  

Plus, it will be critical (no matter what payroll package you buy) that you update your QuickBooks software all the time and, when a new version comes out -- pay to upgrade.   If all this is something you are willing to do, let's get started.

What You Need

If this is your first time doing payroll – and not just your first time with QuickBooks – there are some things you're going to need to get started.   We have listed these things below.

1. An Employer Identification Number (EIN) .   If you are a sole proprietor, you can use your Social Security number when you file your tax return. Otherwise, you will need an EIN.   You can apply for one through the IRS. 

2.  An Electronic Federal Tax Payment System (EFTPS) account . All federal taxes must be paid via EFTPS. You can sign up for an account online by going  

3.  A state payroll account . You will need to check to see what IDs and forms your state requires. 

In addition, you will need these forms for your employees:

  • W4.

  • I9

  • State withholding forms

Once you have all your forms ready to go, you are ready to start doing payroll through QuickBooks.

Intuit Payroll Services

Intuit, the makers of QuickBooks, offers three different levels of service that you can use to fulfill your payroll needs with QuickBooks.

Basic Payroll is if you want to do it yourself. You set up everything on your own from the very start.  For each payroll, you enter hours or payroll amounts.  It will also be your job to print paychecks, make tax deposits, and file your payroll tax forms.  QuickBooks will calculate payroll taxes and deductions for you, however.  It will also give you reports that contain the information you need for tax forms. 

Enhanced Payroll is the most popular option. With this service, the preparing of federal and state payroll forms are handled for you.   Enhanced Payroll also gives you up-to-date tax forms. It fills in most of the tax-form info for you, and it lets you make tax deposits and file tax forms within QuickBooks. You will receive emails that will remind you when payroll forms and taxes are due. In addition, it will let you know when payroll is direct deposited, taxes have been paid, and your tax forms have been accepted. 

Full Service Payroll does everything for you. It even sets up your payroll for you. If you've used another payroll service up until this point, it will transfer the data from that service into Intuit payroll. Again, Full Service Payroll handles all tasks for you. It even guarantees your payroll and payroll tax deposits and filings will be on time – and correct. 

Payroll with QuickBooks

To get started with QuickBooks payroll services, we need to use QuickBooks to get online. To do this, go to Employees>Payroll Service>Order Payroll Service.   QuickBooks connects to the Internet for you. You will see a web form pop up that will ask you to sign in and start setting up the service. Just follow the onscreen instructions. However, you will need your year-to-date payroll information for employees. You will also need state withholding rates. 

Once you are signed up, it is time to schedule your payroll.   We'll learn how to do all of it in this section.

Recording Transactions from a Payroll Service

If you use an outside payroll service, such as ADP, you will still want to record payroll costs into QuickBooks so that your bookkeeping stays up-to-date. 

The first thing you will need to do is create a vendor for all payroll transactions.    You don't have to fill out all the fields. Just enter a vendor name, such as payroll services.

Next, go to Banking>Write Checks.   In the Bank Account dropdown list, select the account used for your payroll.   In the No. field, type EFT. This stands for electronic funds transfer.   Most payroll services transfer the funds out of your account electronically.

Go to the Pay To The Order Of field. Enter the name of the vendor that you just created.

Under the Expense tab, you can enter data into the Account and Amount fields for each payroll expense.

Click Save & Close when you are finished.

Paying Yourself

It goes without saying that you can add yourself to the payroll and pay yourself a salary. However, if it's your company, you can also take other money out for personal use if you need to. However, the type of withdraw you take varies based on what type of company you have. If you're a sole proprietor, you can take money out of the company for personal use by taking a draw.   If you're a Subchapter S corporation, the money you take out is called a shareholders' distribution. On the other hand, if your company is a partnership, the money you take out is called a partners' draw.

To pay yourself, go to Banking>Write Checks.

If you're a sole proprietor, use the Owners Draw account under the Expense tab.

Use Partners Contribution/Draw if you're a partnership.

Use Shareholders Distribution if you're a Subchapter S corporation.

Print the check if you want by using the Print button in the toolbar at the top of the Write Checks window.

Click Save & Close when are are finished.

Popular Courses
Learn More! Take an Online Course...