What Is QuickBooks & What Does It Do?

QuickBooks is the most popular small business accounting software businesses use to manage income and expenses and keep track of their financial health. You can invoice customers, pay bills, generate reports, and prepare taxes. The QuickBooks product line includes several solutions to support different business needs, such as QuickBooks Online, QuickBooks Desktop, QuickBooks Payroll, and QuickBooks Time.

While QuickBooks offers several accounting software options, we recommend QuickBooks Online for most new businesses. You can try it for free with a 30-day trial or get a 50% discount for three months with no credit card required.

12 Ways Small Businesses Use QuickBooks

1. Create, Send, and Track Invoices

You can create invoices easily and either print them or email them to customers. QuickBooks will record the income and track how much each customer owes you automatically. You can view the number of your outstanding invoices—known as your accounts receivable (A/R)—and how many days they’re overdue by running an A/R aging report.

You can also create an invoice from scratch or by converting an existing estimate into an invoice. Then, customize the invoice by changing the color and adding your company logo.

2. Keep Track of Bills & Expenses

QuickBooks keeps track of your bills and expenses automatically 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 a few minutes.

You can also enter bills into QuickBooks when you receive them so that QuickBooks can help you track upcoming payments. You can ensure that you pay your bills on time by creating an A/P report. This report will provide you with the details of your current and past-due bills.

3. Pay Bills Online

You can pay bills online in QuickBooks using the online bill payment feature. QuickBooks Online Bill Pay benefits small businesses in many ways, such as the ability to pay bills via bank transfer or check directly from QuickBooks in a few seconds and pay several bills at once. It also allows you to pay any vendor or supplier with a credit card. QuickBooks Online Bill Pay is integrated with QuickBooks Essentials, Plus, and Advanced.

To pay your first bill, you need to enter your bank account information, the payment method you’d like to use, and how your vendor would like to receive their payment. QuickBooks Online will then use this information automatically to process future transactions, reducing data entry. QuickBooks Online will mark your bills paid automatically and will remove them from the list of outstanding bills.

Note that you must first enter your bills in QuickBooks Online and then pay them online by clicking the + New button and then selecting Pay bills online.

4. Print Financial Statements for Your Business

By managing all of your cash inflow and outflow activities in QuickBooks, you can print financial statements that 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 three primary financial statements in QuickBooks: Profit and Loss report, Balance Sheet report, and 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.

5. Track Employee Time & Expenses

Employees or subcontractors can enter their own time as they progress through the day, or a bookkeeper can enter their weekly time if the employee submits a manual timesheet. Time entered and assigned to a customer will be available to add to the customer’s next invoice.

Also, any expense entered can be marked as billable and assigned to a customer. Just like time, these billable expenses will be available to add to the customer’s next invoice. You don’t need the payroll add-on to track employee time for billing purposes.

6. Monitor Project Profitability

You can use QuickBooks Online Plus or Advanced to create and manage projects, assign income and wages to a project, and track expenses associated with labor and materials. QuickBooks Online’s project accounting module also allows you to generate project estimates and include inventories, labor, and sales taxes.

While you can’t compare actual and estimated costs, QuickBooks Online allows you to monitor the profitability of each project you’re working on by creating a project profitability summary report.

7. Manage Payroll

Payroll is an area that you don’t want to skimp on and try to do 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 automatically.

When you enter employee time as discussed above, the hours not only flow to your invoices but also to the payroll module. This way, you can be confident that every hour you pay your employee is also considered for billing to a customer.

The best thing about using QuickBooks Payroll is that it’s integrated with QuickBooks so that your financial statements are always up to date as of the latest payroll run. You have to purchase a QuickBooks Payroll subscription 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 link from Intuit on how small businesses use QuickBooks Payroll:

8. Track Inventory

QuickBooks can track the quantity and cost of your inventory. As you sell inventory, QuickBooks will allocate a portion of your inventory to the cost of goods sold (COGS) automatically, 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 remind you to order inventory automatically 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:

9. 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 that they can review your numbers and print whatever information they need to prepare your return.

10. 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’s integrated completely within QuickBooks, the sale, credit card fee, and cash deposit are all recorded automatically as they occur.

11. 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 devices for free, take a picture of a receipt, and upload it to QuickBooks Online in a few minutes.

QuickBooks allows you to attach a receipt to the corresponding banking transaction. You can upload an unlimited number of receipts to QuickBooks Online as the receipts are stored in the cloud along with your data.

12. Track Mileage

Many self-employed individuals and employees use their personal vehicles for business purposes. This provides a generous tax deduction of 58.5 cents per mile for 2022. However, to receive the deduction, you’re required to keep a record of the date, miles, and purpose of your trip.

QuickBooks Online makes this incredibly easy. Its mobile app will use the GPS in your phone to sense every time you’re in a moving vehicle automatically. Then, you can review your trips, classify them as personal or business, and mark them as billable to a customer. Billable mileage expenses will then be available to add to the next invoice you create for that customer automatically.

QuickBooks Options & Pricing

QuickBooks comes in both a cloud-based online platform and a traditional desktop program. You can read about the pros and cons of each in our QuickBooks Online vs Desktop comparison. Most of the online and desktop versions will perform the tasks discussed above, but they come with an extensive variety of advanced features and a wide range of prices.

QuickBooks Online

QuickBooks Online is a cloud-based product that doesn’t require software installation, allowing you to access your data from any computer with an internet connection by using your secure login. It’s available in four subscription levels, Simple Start, Essentials, Plus, and Advanced, and is ideal for any business without complicated job-costing requirements.

Read our review of QuickBooks Online to learn more about the tool. We compared its four versions in our QuickBooks Online comparison.

QuickBooks Desktop

QuickBooks Desktop comes in four versions: Pro, Premier, Enterprise, and QuickBooks Accountant Desktop. Each requires you to install the software on your computer.

• QuickBooks Pro will work well for most small businesses that don’t manufacture products and prefer a desktop solution.
• QuickBooks Premier is ideal if your business falls into one of these industries: manufacturing, contractors, professional services, retail, or nonprofit.
• QuickBooks Enterprise is for large enterprises with complicated pricing and heavy inventory.
• QuickBooks Accountant Desktop is optimal if you’re a bookkeeper serving a client using QuickBooks.

If you want to learn more about the four QuickBooks Desktop versions, read our QuickBooks Pro review, QuickBooks Premier review, QuickBooks Enterprise review, and QuickBooks Accountant Desktop review.

We break down each of these products to help you understand the various versions in our QuickBooks Desktop comparison article.

You can be more productive with QuickBooks Desktop by getting a hosting provider. QuickBooks hosting lets you access your Desktop software anywhere through a remote server. Check out our list of the best QuickBooks hosting providers.

QuickBooks Self-Employed

QuickBooks Self-Employed is ideal for freelancers, real estate agents, and independent contractors, like Uber and Lyft drivers. Similar to QuickBooks Online, it’s 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 unavailable in QuickBooks Online and QuickBooks Desktop, like the ability to track business and personal expenses from the same bank account and transfer data to TurboTax. It will even calculate your estimated quarterly tax payments and remind you when they’re due.

There are three QuickBooks Self-Employed pricing plans: Self-Employed, Self-Employed Tax Bundle, and Self-Employed Live Tax Bundle. To learn more about it, read our QuickBooks Self-Employed review.

If you’re a startup with plans of expanding your workforce, QuickBooks Self-Employed won’t be the best fit as it cannot be upgraded to other QuickBooks versions.

QuickBooks for Mac

QuickBooks for Mac is the only QuickBooks desktop product available for Mac users. This edition is very similar to QuickBooks Desktop Pro, and it works well for most small businesses that don’t manufacture products. Read our QuickBooks for Mac review to learn more.

Other QuickBooks Products

Being one of the top accounting software providers in the market today, QuickBooks offers supplementary products to augment your overall QuickBooks experience. These include:

• QuickBooks Payroll: Manage your payroll easily with QuickBooks Payroll. Track employee hours and billable time effortlessly with QuickBooks Payroll and QuickBooks Online.
• QuickBooks Payments: Integrate payments seamlessly on QuickBooks Online through QuickBooks Payments. Get paid easily and process online payments effortlessly.
• QuickBooks Time: Formerly known as TSheets, QuickBooks Time offers time-tracking features for employees for tracking client or project billable hours.
• QuickBooks Live: Do you need help with keeping your books? QuickBooks Live is an online bookkeeping service wherein you can get a ProAdvisor to work with your bookkeeping needs.
• QuickBooks Capital: Get additional financing options up to $150,000 with QuickBooks Capital.

Bottom Line

QuickBooks is the most popular small business accounting software. It comes in a variety of editions and has web-based and desktop programs. QuickBooks includes features that allow you to keep track of your income and expenses, pay your employees, track your inventory, and simplify your taxes.