Is QuickBooks Online the Right Accounting Software for Your Small Business?

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The search for the right accounting software can be a time consuming process.  A Google search for “small business accounting software” yields over 250 million results.   Trying to get recommendations from other business owners often results in passionate discussions about why a particular program is great while another one is inadequate and lacks functionality.   Your accountant might point you in the right direction, but will sometimes recommend a program that they are comfortable with using, but is not necessarily the best solution for your business.  With so many choices out there, it can be difficult to know what to do.

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If you are starting your own small business and are seriously contemplating purchasing or replacing your accounting software you have undoubtedly heard of QuickBooks.  Intuit (the corporate entity behind QuickBooks) has brilliantly extended their reach to the point where a significant number of small businesses use their program in one form or another.  Some people love it, some tolerate it and some actively seek out alternatives.  This article is meant to provide some insight on whether QuickBooks is the right choice for your small business, If you have decided to go ahead and sign up for QuickBooks Online, you can refer to my article on how to set up QBO for the first time or purchase my comprehensive beginners guide.

COST

One of the most attractive aspects of QuickBooks Online (QBO) is you get a fully functional accounting software at a relatively low cost.  There are several alternative pricing plans, depending on your needs starting at $24 per month for the most basic plan. There are usually discounts for the first 6 months that allow you to test the software and ensure that it is adequate for your needs. While a monthly subscription isn’t free and can add up over time, I usually ask my clients to consider how much their time is worth. If they are able to save one hour per month by using the software along with reducing the frustration of having to do their accounting manually, then it makes sense to use it. If, on the other hand, your business is very simple and you already have a system that works for you, then making the change might not add any value.

SIZE OF YOUR BUSINESS AND COMPLEXITY

QBO is primarily marketed towards small businesses.  There are no hard and fast rules about how big your business is before you need to upgrade to a more robust software, however, if you have thousands of transactions per month you are likely no longer a small business and might experience performance issues. QBO does not impose any limits on file size or number of transactions in Canada. The only notable limits are with respect to character limits in fields, size limits when exporting a report to Excel, and technical issues that can slow your QuickBooks Online experience. A full list of limits can be found here.

Business that have complex requirements might find QBO to be limited in its functionality. For example:

• There are no sales orders in QBO. The alternative is to use “estimates” which is similar but not the same especially if you are used to using sales orders. There are however a number of third party apps that integrate with QBO

• Inventory tracking is limited in QBO. If your inventory needs are complex you can still use QBO along with a third party app or you might have to consider another software

• QBO on its own cannot be used to consolidate more than one company. However, once again there are apps that can help you accomplish this. Additionally, if you have a number of small holding companies you would need to pay a monthly subscription for each, which can become costly.

ONLINE/CLOUD ACCESS

Being able to access your information anytime and anyplace is becoming for essential for small business owners.  QBO, by definition, is accessible online and also has a decent mobile app where many day to day accounting functions can be performed, such as invoicing, reviewing reports, entering expenses, scanning receipts etc and is included with your subscription.

BANKING

One of the most significant time saving features of QBO is its ability to connect with most banks and download your business bank and credit card data on a daily basis. Once you have set up a separate bank account for your business, this can massively reduce the amount of time spent on simple data entry as transactions that are downloaded can be categorized directly from the banking tab. QBO also helps to save time on bank reconciliations and you can, at a glance, know if your accounts are reconciled by comparing the balance per QBO vs the bank balance which is found on the banking tab (assuming all transactions from the banking download are entered). It allows you to create rules for transactions that occur regularly and have them entered automatically or you can just click on a button to “add” them. You can assign sales taxes, classes and locations and customer/supplier names. You can also “split” transactions into more than account and assign separate tax codes to each part of the split transaction.

SALES TAX

QBO handles HST/GST and QST (for Quebec businesses) quite well. When setting up your company file, you would go through the sales tax set up provinces and choose the appropriate codes that apply to your business. Once the set up is complete you are prompted to apply the sales tax codes to each transaction including invoices, expenses, bills and even journal entries. When you are ready to file your sales tax, you can access the report which can be generated by period and breaks down the taxes payable by the line numbers (fields) that are on the CRA GST/HST report and/or the RQ GST/HST and QST report. These can simply be transcribed and filed online using CRA my business account or RQ my business account. The sales tax can also be filed using online banking or they can be mailed along with a cheque.

PAYROLL

If your business has employees, QBO has basic payroll functionality where you can set up employees and salaries and they will calculate your deductions at source as well as prepare and file your T4s (and RL1s if in Quebec) at year end. It should be noted that the DAS reporting and payments as well as the T4s have to be submitted by the business owner/administrator rather than being submitted automatically. If you are in Quebec, you also have to submit the Rl1 summary either online or by mail. While QBO does an adequate job of doing the payroll, it is not their strongest feature especially where payroll is a bit more complex. It might make sense to consider other ways of doing your payroll.

INVOICING/CUSTOMERS/EXPENSES/VENDORS

There is some customization of invoices in QBO, however there are limitations on this. If the design of your invoices is important to your business, you might want to consider a third party software. Adding and customizing customers is straightforward and you can organize customers into sub-customers which can be very useful when you have one main customer but several different branches or shipping locations. There are also a variety of reports available for your customer receivables and sales that can help you analyze your business and are easily customizable.

Entering expenses and vendors/suppliers is fairly standard and straightforward. You can create the vendors and enter the expenses in several different ways. Vendor reports provide you with various details from accounts payable to purchases by vendors.

FOREIGN EXCHANGE

Having to deal with multiple currencies can be a frustrating experience. QBO has made significant strides in how foreign currency is applied and greatly simplified the process. Once activated, you can invoice customers and enter expenses in almost any currency you choose. It calculates the rates on the date of the transaction and creates a gain or loss for the difference in exchange rates between the invoice/bill date and the payment date. You can also fairly easily calculate your unrealized gains and losses at the end of the period. It should be noted that once activated, you cannot turn it off.

CREDIT CARD PAYMENTS FROM CUSTOMERS

While there are a number of services such as Stripe and Paypal that allow you to accept credit card payments from customers., you can also sign up to receive credit card payments with QBO at comparable rates. The advantage of doing so is that you can integrate a payment link directly onto your invoice which makes it very easy for the customer to pay. Additionally, QBO handles the recording of payments (as long as it is set up correctly) so that no additional data entry is required.

EASE OF USE

While any accounting software has a learning curve, Quickbooks right from inception has been specifically designed for non accountants.  For many business owners using accounting software for the first time there are a handful of aspects that might not seem intuitive, however, it becomes easier over time. If you plan to use QuickBooks, you should definitely invest some time in their training resources which are numerous (you can also check out my YouTube channel.) There is also a large eco-system of third party QBO resources including blog post and videos that can help you with almost any problem.

ADDONS/APPS

The advantage of being the most popular small business accounting software is that it has spawned an entire industry around it.  There are hundreds of add-ons for QuickBooks that help manage inventory, invoicing, point of sale systems, reporting, web stores and almost every other aspect of the accounting function.  Some of these help save time such as OCR software that can read your bills and receipts and then import it directly into QBO . There are customer management systems and others that handle complex accounting functions such as consolidation software.

IMPORT/EXPORT TO EXCEL

Most reports can be exported to excel, which is great for manipulating data, creating reports and reviewing all types of transactions. QBO has a number of fields that can be exported which can be very useful when QBO reports are not sufficient.  Importing data into excel is not as flexible as files have to be formatted very specifically and there are limitations on what can be imported although QBO has expanded what can be imported from simply lists in the past to transactions such as invoices, journal entries and bills.   There are also third party apps that have significantly better integration functionality. but at a cost.

SECURITY:

QuickBooks allows you to set security levels and user permissions so that only certain users can access certain modules. There are limitations on what data can be limited and it is quite easy to delete transactions and manipulate data compared with more sophisticated accounting software.  However, QBO does have an audit trail report that reports on every transaction that is entered, modified or deleted. As with any accounting software, it is important to ensure that you have good controls and process in place particularly if someone other than the business owner is using the system.

 Having used QuickBooks extensively, I am often quite impressed with its functionality.  It continues to improve every year, and has some great features and flexibility that more sophisticated accounting software is often lacking.  And while it is not for everyone, it is definitely worth looking into as an option for your business. 

Do you have questions relating to setting up and/or working with QuickBooks? Check out my QuickBooks page for more information about my articles, tutorials, products and services .