We have a tennis business in one city and use QB's software and operate on an accrual basis. We are about to enter into an agreement to operate another facility for the local parks and rec department whereby they get a percentage of the revenue. Can I operate the two locations from the one QB file even though I need to be able to provide information on just the second location to the city? And can that location work on a cash basis instead of on an accrual basis within the same QB file?
2 Locations and Using QB
Answers
Yes, and here's how it works:
(1) Make sure they are both part of one legal entity. You do NOT want to combine multiple legal entities into one
(2) Enable Class Tracking (Edit > Preferences >
(3) Always run accrual basis reports (Profit & Loss by Class) but for your new endeavor, don't enter any noncash transactions (A/R, A/P, for example). So even though the report says "Accrual" for your new endeavor it will really be cash.
As far as revenue is concerned, I see no problem (as Jaime points out). However, as the owner, you would also like to see the cost side of the equation in order to see if the endeavor is profitable or not. And the problem I am expecting is on the SHARED costs of the two locations. An example is the cost of bookeeping for the two locations. Or if you purchase (not yet paid) an equipment that you use for both locations. How can you recognize the expense on the accrual side and NOT the other (cash). It is not impossible but may require some creativity. An additional step .....cost transfers after payment?
While this may work (see Jaime's and Emerson's comments) I see issues down the road, many issues. Essentially your using divisional accounting with a twist (cash & accrual).
Based on the quality of your bookkeeping staff, errors will enter the system, whereas an item for the tennis business will be coded to the parks dept and visa-versa.
For example I'm currently doing a due diligence on a company ($80M) who used divisional accounting in their books for a subsidiary ($10M). Each month they have an error rate ranging from -$800K to $900K for items billed to the parent but belonging to the child or reversed. It definitely is an issue about the quality of the books and records. For the parent company, takes a lot of time to identify and correct the issues and in their own words "we should have done it as a separate entity from the get-go".
It would be easier, yes more costly on the front end and much cheaper on the back-end, to use two instances of what ever software you choose. Then you can do a consolidation and only have the usual issues that all companies have with their accounting systems (items missed, miss-classified, etc.).
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