QuickBooks is the most popular small business accounting software businesses use to manage income and expenses and keep track of the financial health of their business. You can use it for invoicing customers, paying bills, generating reports, and preparing taxes. The QuickBooks product line includes several solutions that work great for anyone, from a freelancer to midsized business.
QuickBooks offers several alternatives, but I recommend QuickBooks Online for most new businesses. You can try QuickBooks Online for free with a 30-day trial that does not require a credit card.
9 Ways Small Businesses Use QuickBooks
Small business owners typically use QuickBooks to manage their invoices, pay their bills, and track their cash flows. They also use it to generate month- and year-end financial reports as well as prepare for quarterly or annual business taxes. Some business owners manage QuickBooks themselves while others prefer to use an in-house or outsourced bookkeeper.
1. Create and Track Invoices
You can create invoices easily and either print them or email them to customers. QuickBooks will automatically record the income and track how much each customer owes you. You can view the amount of your outstanding invoices—known as your accounts receivable (A/R)—as well as how many days they are overdue by running an Accounts Receivable Aging Report. Below is a sample Accounts Receivable (A/R) Aging Report from QuickBooks Online:
2. Keep Track of Bills & Expenses
QuickBooks automatically keeps track of your bills and expenses by connecting your bank and credit card accounts to QuickBooks so that all of your expenses are downloaded and categorized. If you need to track a check or cash transaction manually, you can record it directly in QuickBooks in just a few minutes.
You can also enter bills into QuickBooks when you receive them so that QuickBooks will help you track upcoming payments—or accounts payable. You can ensure that you pay your bills on time by creating an Accounts Payable (A/P) report. This report will provide you with the details of your current and past due bills. Below is a sample A/P Aging Report from QuickBooks:
3. Print Financial Statements for Your Business
By managing all of your cash inflow and outflow activities in QuickBooks, you can print financial statements that can provide useful information about how your business is performing.
Lenders often require financial statements when you apply for a small business loan or line of credit.
You can produce these three primary financial statements in QuickBooks with just a few clicks:
- Profit and Loss Report
- Balance Sheet Report
- Statement of Cash Flows
Below is a brief description of each of these reports, along with a snapshot of what they look like in QuickBooks Online.
Profit & Loss Report
The profit and loss report will show you how profitable your business is by summarizing its income minus its expenses. The report shows you the bottom line net income (loss) for a specific time period, such as a week, a month, or a quarter:
Balance Sheet Report
The Balance Sheet Report shows what your business owns (assets), owes (liabilities), and it’s net worth (equity) at a particular point in time:
Statement of Cash Flows
The Statement of Cash Flows in QuickBooks will show you all of the activities that affect the operating, investing, and financing cash inflows and cash outflows for your business.
4. Track Employee Hours and Run Payroll
Payroll is an area that you don’t want to skimp on by trying to do it manually. Mistakes made in calculating paychecks can result in steep penalties and unhappy employees. QuickBooks has its own payroll function that can calculate and run payroll as often as you need it automatically.
QuickBooks can track your employee’s hours. The hours tracked then flow to both your customer invoices (if billable) and your payroll. This ensures that every hour you pay your employees is considered for billing to a customer.
The best part about using QuickBooks payroll is that it is integrated with QuickBooks so that your financial statements are always up to date as of the latest payroll run. The purchase of a QuickBooks payroll subscription is required to run payroll, but you have several levels of service to choose from to fit your needs.
Running your payroll through QuickBooks will allow you to:
- Pay employees with a check or direct deposit
- Calculate federal and state payroll taxes automatically
- Have QuickBooks fill in the payroll tax forms for you
- E-pay your payroll taxes directly from QuickBooks
Here’s a video from QuickBooks on how QuickBooks small businesses use QuickBooks Payroll:
5. Track Inventory
QuickBooks can track the quantity and cost of your inventory. As you sell inventory, QuickBooks will automatically allocate a portion of your inventory to cost of goods sold (COGS), which is an expense account that reduces your income. This allocation is a requirement for calculating taxable income and very cumbersome to do by hand. QuickBooks can also automatically remind you to order inventory when quantities are low.
Below is a sample Inventory Valuation Summary Report from QuickBooks Online. This report shows a list of your inventory products, quantity on hand, average cost, and their total value:
6. Simplify Taxes
Perhaps the most important thing QuickBooks can do for your small business is to simplify tax time. By far, the largest headache in preparing a tax return is compiling your income and expenses. If you use QuickBooks during the year, all you need to do at tax time is print your financial statements. Better yet, with QuickBooks Online you can invite your tax preparer to access your account directly so they can review your numbers and print whatever information they need to prepare your return.
7. Accept Online Payments
One of the best ways to improve your cash flow is to offer customers the option to pay their invoices online. You can add QuickBooks Payments (formerly known as Intuit Merchant Services) so that customers can pay online directly from their emailed invoice. QuickBooks Payments is similar to other merchant services. However, because it is integrated completely within QuickBooks, the sale, credit card fee, and cash deposit are all recorded automatically as they occur.
8. Scan Receipts
Another key to making tax time a breeze is being able to organize your receipts in QuickBooks. All QuickBooks Online subscribers can download the QuickBooks app to their mobile device for free, take a picture of a receipt, and upload it to QuickBooks Online in just a few minutes.
No more lost receipts or manually matching up receipts with downloaded banking transactions. QuickBooks allows you to attach a receipt to the corresponding banking transaction. You can upload an unlimited number of receipts to QuickBooks Online, which are stored in the cloud along with your data. This can be helpful for companies that track numerous expenses:
9. Track mileage
Many self-employed and employee/owners use their personal vehicles for business purposes. This provides a generous tax deduction of 57.5 cents per mile for 2020. However, to receive the deduction, you are required to keep a record of the date, miles, and purpose of your trip.
QuickBooks Online makes this incredibly easy. Their mobile app will use the GPS in your phone to automatically sense every time you are in a moving vehicle. Then, you can review your trips and add a note with the purpose of each business trip.
QuickBooks Options & Pricing
QuickBooks comes in both a cloud-based online program and a traditional desktop program. You can read about the pros and cons of each platform in our QuickBooks Online vs Desktop comparison. Most of the online and desktop versions will perform the tasks discussed above, but they come with a wide variety of advanced features and in a wide range of prices.
Small to medium-sized businesses that need flexible access to financial data
$25 to $180
Small to medium-sized businesses in any industry
$399.99 one-time fee to $1,213 for the first year
Independent contractors, real estate agents, and Uber/Lyft drivers
$15 per month
Small to medium-sized businesses in any industry that need a Mac solution.
$399.99 one-time fee
QuickBooks Online is a cloud-based product that does not require software installation. This QuickBooks product is available in multiple subscription levels, including Simple Start, Essentials, Plus, and Advanced. It is ideal for any business that does not have complicated job-costing requirements. QuickBooks Online allows you to access your data from any computer with an internet connection using your secure login.
Visit our QuickBooks Online comparison to learn more about the available versions.
QuickBooks Desktop comes in six versions (Pro, Pro Plus, Premier, Premier Plus, Enterprise, and QuickBooks for Mac). Each requires you to install software on your computer. QuickBooks Pro will work well for most small businesses that do not manufacture products and prefer a desktop solution.
QuickBooks Premier is ideal if your business falls into one of these industries: manufacturing, contractors, retail, or nonprofit. QuickBooks Enterprise is for large enterprises. These industry-specific versions of QuickBooks Desktop include a custom chart of accounts and industry-specific reports.
The Plus versions of Pro and Premier are sold as annual memberships instead of a one-time purchase. Your annual membership includes the new edition each year, unlimited customer support, and offsite backup of your company data.
We break down each of these products to help you understand what QuickBooks is in our QuickBooks Desktop comparison article.
QuickBooks Self-Employed is the ideal product for freelancers, real estate agents, and independent contractors like Uber and Lyft drivers. Similar to QuickBooks Online, it is a cloud-based product that can be accessed with your secure login from any computer with an internet connection. It includes unique features that are not available in QuickBooks Online or QuickBooks Desktop like the ability to track business and personal expenses from the same bank account and transfer data to TurboTax.
QuickBooks Self-Employed will calculate your estimated quarterly tax payments and remind you when they are due. There are three QuickBooks Self-Employed pricing plans to choose from (Self-Employed, Self-Employed Tax Bundle, and Self-Employed Live Tax Bundle). To learn more, read our QuickBooks Self-Employed guide.
QuickBooks for Mac
QuickBooks for Mac is the only QuickBooks desktop product available for Mac users. This edition is very similar to QuickBooks Pro, and it works well for most small businesses that do not manufacture products. Check out our article on QuickBooks for Mac to learn more.
QuickBooks is the most popular small business accounting software. It comes in a variety of editions, both online and installed on your desktop computer. QuickBooks includes features that allow you to keep track of your income and expenses, pay your employees, track your inventory, and simplify your taxes.