How to Set Up QuickBooks Online for Mortgage Brokers: A Step-By-Step Guide

How to Set Up QuickBooks Online for Mortgage Brokers: A Step-by-Step Guide

For mortgage brokers, managing finances can quickly become overwhelming. Commission wires are coming in, checks are going out, and numerous other transactions are constantly flowing through your bank account.

Fortunately, QuickBooks Online (QBO) provides a robust solution that can streamline your bookkeeping and help you stay on top of your financial health.

To fully leverage QBO, it's essential to tailor the system specifically for your mortgage business. You're not going to have the proper accounting categories for VOEs, appraisal reimbursements, tolerance cures, and other costs associated with origination.

This guide will walk you through how to set up QBO for mortgage brokers, including building a custom chart of accounts, connecting bank feeds, and creating rules to automate your bookkeeping.

Step 1: Setting Up a Custom Chart of Accounts for Mortgage Brokers

The first and most important task when setting up QBO is to build a custom chart of accounts. The chart of accounts serves as the backbone of your bookkeeping system by categorizing all financial transactions, making it easier to track income, expenses, liabilities, and assets.

Why a Custom Chart of Accounts is Crucial

For mortgage brokers, the standard chart of accounts provided by QuickBooks will not capture the unique aspects of your business.

Brokers deal with specific revenue streams like broker-owner direct sales or loan officer originations, along with various expenses like VOEs, credit reports, appraisals, tolerance cures, reimbursed fees, marketing costs, regulatory fees, and commissions paid to other agents.

A custom chart of accounts ensures that every financial transaction is properly categorized, giving you a clearer understanding of your business's financial health.

Key Accounts to Include in Your Chart of Accounts

Here are some important accounts you should consider when setting up your QBO chart of accounts as a mortgage broker. This is not an exhaustive list, but can be an excellent starting point!

• Income Accounts:
  • Direct Sales: Tracks income originated specifically by the broker-owner; does not include any other loan officer commissions.
  • Commission Income: Tracks income earned from loan officer origination and closing commissions not including broker-owner commissions.
• Cost of Goods Sold Accounts:
  • Commissions Paid: For commissions paid out to loan officers.
  • Credit Reports: For borrower credit checks as well as any reimbursed credit reports from closings.
  • Appraisals: For lender-paid appraisals and reimbursed appraisals from closings.
  • Tolerance Cure: To account for differences on estimated vs. actual closing costs to ensure compliance with regulations like TRID.
  • Reimbursed Fees: Various origination-related reimbursements paid.
  • Early Payoff Penalties: EPOs are a fact of life! They're an important cost to account for when originating loans.
• Expense Accounts:
  • Marketing and Advertising Expenses: Includes promotional material costs, online ads, and broker events.
  • Software and Subscriptions: Includes fees paid for Loan Origination Systems, CRMs, and other software.
  • Regulatory and Compliance Costs: Tracks costs related to licenses, continuing education, and regulatory compliance.

Once you've outlined the accounts that are most relevant to your brokerage, you can begin entering them into QuickBooks. Start by navigating to the "Accounting" section in QBO, then click "Chart of Accounts" and add new accounts for each category you need.

Step 2: Connecting Bank Feeds to QuickBooks

One of the best features of QuickBooks Online is its ability to connect directly to your bank and credit card accounts. This automated process saves mortgage brokers considerable time by pulling in all transactions, reducing the need for manual data entry.

Why Connecting Bank Feeds is Beneficial

• Real-Time Data: As mortgage brokers, you're often dealing with high volumes of transactions. Bank feeds provide real-time updates to your QBO dashboard, ensuring you always have the most current view of your finances.
• Error Reduction: Manual data entry can lead to mistakes. Automating this process by connecting your accounts ensures accuracy and saves time.
• Improved Cash Flow Tracking: Monitoring cash flow is crucial in the mortgage industry, especially when managing multiple clients, deal pipelines, and net worth requirements in some states. Bank feeds provide up-to-date information on your cash balances and help you track both incoming and outgoing funds more effectively.

How to Connect Bank Feeds in QuickBooks Online

1. Log into QuickBooks Online.
2. Go to the “Transactions” tab on the left-hand sidebar and select "Bank Transactions."
3. Click “Connect Account” and search for your financial institution.
4. Enter your login credentials for your bank, then select which accounts (business checking, savings, credit cards) you’d like to connect.
5. Once connected, QuickBooks will automatically import recent transactions, which you can begin categorizing immediately.

Step 3: Creating Rules for Automation

Another powerful feature in QBO is the ability to create rules that automatically categorize transactions as they are imported from your bank feed. For mortgage brokers, where there are often recurring expenses like software, marketing campaigns, payroll, or office supplies, creating rules can save a lot of time.

Why You Need Rules in QuickBooks Online

• Consistency: Rules ensure that similar transactions are always categorized the same way, which keeps your bookkeeping clean and organized.
• Efficiency: When you automate frequent transactions, you can focus on higher-level financial tasks, like analyzing cash flow or preparing for tax filings.
• Improved Reporting: Accurate and consistent categorization improves your financial reporting, which is crucial for making informed decisions about your business.

How to Set Up Rules in QuickBooks Online

1. Go to the “Transactions” tab > "Bank Transactions" and select the account where your transactions are imported.
2. Select a transaction and click “Create Rule” from the menu.
3. Assign conditions to the rule. For example, if you frequently buy office supplies from a particular vendor, you can create a rule to automatically categorize that transaction under “Office Expenses.”
4. Define whether the rule should apply to “Money In” (income) or “Money Out” (expenses).
5. Choose the account category where this transaction should be categorized.
6. Click “Save” to finalize the rule.

Note: while automation like this is useful, it's important to review transactions as they come through your bank account. For this reason, most people should leave the "Automatically confirm transactions this rule applies to," or, "Auto-add" rules off.

Whenever that type of transaction appears in your bank feed, QBO will automatically categorize it based on your rule, significantly reducing the amount of manual input you have to perform.

Step 4: Generating Financial Reports

Once you've set up your chart of accounts, bank feeds, and rules, QBO's real value starts to shine in its reporting capabilities. Mortgage brokers need accurate reports to assess performance, calculate commission splits, and determine profitability. QBO makes it easy to generate custom reports such as:

• Profit and Loss Report: To see a breakdown of income and expenses over a specific time period.
• Cash Flow Statement: To understand how money is moving in and out of your business.
• Balance Sheet: To provide an overview of your assets, liabilities, and equity.

How to Generate a Report in QuickBooks Online

1. Navigate to the “Reports” tab on the left-hand menu.
2. Choose the type of report you want (e.g., Profit and Loss).
3. Customize the report by selecting the date range and filtering for specific accounts if needed.
4. Click “Run Report” to view the financial data.
5. You can also export reports to Excel or PDF for further analysis or sharing with stakeholders.

Conclusion

Setting up QuickBooks Online properly for your mortgage brokerage is an investment in the long-term financial health of your business.

A custom chart of accounts ensures that all income and expenses are categorized correctly, while connecting bank feeds and creating rules will streamline your bookkeeping process, reducing the time you spend on manual data entry. Once everything is set up, QBO’s powerful reporting capabilities will give you the insights you need to make informed decisions about your business.

By optimizing your bookkeeping through QBO, you’ll have more time to focus on what matters most—growing your brokerage!