The Ultimate Guide to Setting Up QuickBooks for a Mortgage Broker Branch Model

As a mortgage broker operating under a branch model, you understand the complexities of managing finances across multiple locations. Accurate bookkeeping is essential—not just for compliance sake but also for making informed business decisions.

QuickBooks, a leading accounting software, can streamline your financial management processes, but setting it up correctly is crucial.

In this guide, we'll walk you through the steps to configure QuickBooks specifically for a mortgage broker branch model. Whether you're new to QuickBooks or looking to optimize your existing setup, this comprehensive guide has got you covered.

Understanding the Mortgage Broker Branch Model

Before diving into QuickBooks setup, it's essential to understand the unique aspects of the mortgage broker branch model:

• Multiple Locations: Each branch may operate semi-independently, generating its own income and incurring expenses, allowing you to see which branch is most profitable across the entire organization.
• Commission-Based Income: Revenue primarily comes from commissions, which need to be accurately tracked per branch.
• Compliance Requirements: Mortgage brokers must adhere to strict financial regulations, necessitating detailed and accurate records.

Choosing the Right Version of QuickBooks

QuickBooks Online has several subscription tiers. It's cloud-based, accessible anywhere, and ideal for businesses with remote or multiple locations. For a mortgage broker branch model, QuickBooks Online Plus or Advanced is often recommended due to its multi-branch tracking capabilities and ease of access across locations.

For the purposes of this guide, we'll be using the Class Tracking feature, which is only available in Plus or Advanced. Classes are the most effective way to track multiple locations for a single business entity, allowing detailed reporting of revenue and expenses across each.

Initial Setup: Getting Started with QuickBooks

1. Create Your Company File: Start by setting up a new company in QuickBooks, entering your business name, industry, and other essential details.
2. Customize Settings: Navigate to the Account and Settings menu to configure preferences like accounting methods, fiscal year start date, and invoice templates.
3. Turn on class tracking: As we mentioned before, classes represent important parts of your company, like departments or, in this case, branches. Classes will be the main driver for separating transactions based on the appropriate branch.

Setting Up Branch Tracking

To monitor the financial performance of each branch:

1. Classes vs Locations:
   • Classes: Ideal for tracking income and expenses by departments or profit centers. Using this feature allows you to designate a specific class for each line of every transaction in QuickBooks.
   • Locations: Similar to class tracking, but Locations don't carry as much detail and must be assigned to a whole transaction rather than the individual line items, which can cause a headache when a transaction needs to be assigned to more than one branch.
2. Enable the Feature:
   • Go to Settings > Account and Settings > Advanced.
   • Turn on Track Classes.
3. Create Branches:
   • Navigate to Lists > All Lists > Classes.
   • Click New and add each branch as a separate class.

Configuring the Chart of Accounts

The Chart of Accounts is the backbone of your accounting system. We have a detailed guide for setting up your Chart of Accounts in QuickBooks here. For the purposes of a quick overview, here's how a broker's Chart of Accounts should generally be structured:

Income Accounts:

• Loan Officer Commission Income: For brokerages with multiple loan officers, loan officer commissions and broker-owner commissions should be tracked separately, as the profit margin for each is vastly different. Loan Officer Commission income is where any commissions generated by loan officers can be booked.
• Direct Sales: This account is specifically for broker-owners who are still originating loans. The amount of income generated by the owner should be independently tracked so as to get a clear margin.

Operating Expense Accounts:

From a high-level view, most business expenses can be categorized into five parent categories:

• Cost of Goods Sold
• General and Administrative Expenses
• Payroll Expenses
• Facilities Expenses
• Legal and Professional Expenses

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Within these overarching parent categories, it's helpful to break down your expense accounts further into more explicit categories, such as "Marketing and Advertising," "Office Supplies," "Software and Subscriptions," etc. Customize these accounts to reflect your business's specific needs, or grab our free Chart of Accounts template below!

Recording Transactions

Handling Commission Income

There are two ways to handle commission deposits, both of which are acceptable. When you receive commission payments, you can either create a sales receipt or book the commission deposit directly to the corresponding income account.

Utilizing sales receipts requires setting up products and services within QuickBooks Online. This method is effective if you want to record the gross commission received directly and additional costs, like credit reports, appraisals, reimbursed fees, etc., within the same transaction. Each product you include in your sales receipt must be created with a corresponding income or expense account.

1. Create a Sales Receipt:
   • Click "+ New" on the navigation bar in QBO > Sales Receipt.
   • Enter key information such as the date, the products, and the amounts.
   • Assign the correct Class (branch).
2. Record Payment:
   • Once payment is received, navigate to Receive Payments.
   • Apply the payment to the invoice.

If you'd prefer to record deposits directly to the corresponding income account simply, you can do so within the QuickBooks bank feed:

1. Find the transaction in the bank feed:
   • Sync your transactions from your bank.
   • Identify the transaction you plan to record as income.
   • Assign the correct Class (branch) and book the transaction.

Recording Expenses

Recording expenses incurred by each branch is necessary for a full picture of mortgage origination branch profitability:

1. Record expenses from the bank feed:
   • Go to Transactions.
   • Record the vendor, amount, and expense category.
   • Assign the appropriate Class.
2. Utilize 3rd party tools:
   • 3rd party expense management tools like Divvy (BILL Spend and Expense) or Expensify can help automate the process of class-based expense categorization.
   • Set up each card with a corresponding Class to ensure that transactions are recorded appropriately.

Bank Reconciliation

Reconciling your bank accounts ensures your QuickBooks records match your bank statements:

1. Go to Banking > Reconcile.
2. Select the Account and enter the statement's ending balance and date.
3. Match Transactions: Compare the transactions in QuickBooks with your bank statement.
4. Resolve Discrepancies: Investigate and correct any differences.

Aim to reconcile accounts monthly for accuracy.

Generating Essential Reports

QuickBooks offers a variety of reports crucial for mortgage brokers:

1. Profit and Loss by Class: Shows profitability per branch.
2. Balance Sheet: Provides a snapshot of assets, liabilities, and equity.

Customize and schedule these reports to stay informed about your business's financial health.

Integrations and Add-Ons

Enhance QuickBooks functionality with integrations:

• CRM Systems: Sync client data and streamline workflows by breaking down payroll costs (wages, commissions, payroll taxes) across each class.
• Expense Management: Leverage tools like Expensify and Divvy to ensure that your expense management is automated.
• Document Management: Attach contracts and documents to transactions for easy reference.

Ensure any third-party apps comply with financial regulations and data security standards.

Best Practices and Tips

• User Permissions: Set up user roles to control access to sensitive information.
• Stay Updated: Keep abreast of QuickBooks updates and training resources.
• Consult Professionals: Work with accountants familiar with the mortgage industry for compliance and optimization.

Conclusion

Setting up QuickBooks for a mortgage broker branch model doesn't have to be daunting. With careful configuration and regular maintenance, you can gain valuable insights into each branch's performance and streamline your financial operations. Embrace the power of QuickBooks to support your business's growth and compliance needs.