I want to start by saying that QBO is not the only accounting software out there. It is, however, the most popular, so I want to provide a quick guide on how to choose the right plan for you and your business.
So how do you know which is the right plan for you?
Each plan has its benefits and is designed to work for a specific type of business. As with most decisions, choosing the right plan requires some planning and forethought.
What do you need out of your bookkeeping software? What are your plans for your business and how do you want it to grow?
I’m not going to give you a list of the plans and what each offers. You can find that with a quick Google search.
Instead, I want to give you a better idea of which plan works for different kinds of businesses, so you can make the best decision for your specific needs.
QBO Self employed
QuickBooks Self Employed (or QB SE) is the cheapest QB plan and so is the least robust. This software is best suited for fledgling businesses or side hustles that you don't intend to expand or make your main source of income.
QB SE allows a business owner to track their income and expenses easily through the app and an automatic feed from the bank. It will also allow you to track your miles, attach receipts, and estimate your quarterly taxes. The benefits it offers are perfect for Sole Proprietors, Freelancers, and/ or direct sales types of businesses, like home-shopping parties.
Any type of business that is only required to file a Schedule C for their federal taxes may find that this is the right plan for them. These businesses only need a Profit & Loss report (income statement) for taxes, so the reporting abilities in this plan are, accordingly, very limited.
A word of caution:
If you plan to grow your business in any way, then I recommend not using self-employed. It is considered a completely separate entity from the other QBO plans and so you won’t be able to upgrade to another plan in the future. There is no easy way to transfer all your historical data into another program.
The very limited reporting capabilities can also make it difficult to get an accurate gauge of the health of your business. The profit & loss statement is just a small part of the financial reports that I would run monthly for a small business, and you may find that it gives a skewed picture of your financial well-being.
QBO Simple Start
QuickBooks Simple Start (QBO SS) is a much better option for new businesses, in my humble opinion. It offers a lot more financial reporting options to help you gain a full understanding of your finances, which will allow you to make more informed decisions for the future.
For some odd reason, QBO Self Employed is the only plan (currently) that allows you to track your miles within the software itself. So, that option is lost with QBO Simple Start. It’s really not much of a loss as there are many apps that will allow you to track your miles, and some even integrate with QBO. Generally, a spreadsheet is good enough as miles on your car isn’t normally an expense for your business anyway, even though it is a good tax deduction to have handy.
For the rest of the plan, it is generally best for service-based businesses like consultants, fitness trainers, digital marketers, etc. A good benchmark is if your business charges by the hour. If you are a newer business that charges your clients for your time, rather than a product, then QBO SS might be right for you.
You can absolutely still use this plan if you are selling a product, as long as you are using a separate system to track your inventory. Accurate inventory tracking is required for any product based businesses. There are many apps and software options out there to help you track your inventory, then that information can be input into QBO.
QBO Essentials
As you might expect, QBO Essentials (QBO E) offers everything that you get with Simple Start with a few extras added in. This plan is also great for service-based businesses, especially those that are growing. As with QBO SS, you can still use this plan for product-based businesses if you are using another system to track your inventory.
In addition to being able to send estimates and track sales tax, QBO E will also allow you to track your time. This is a huge bonus for entrepreneurs that charge by the hour or for projects. You will be able to accurately track and record the amount of time you spend on a specifics clients products so you can charge accordingly.
Tracking your time is an additional step that you will need to add to your routine, but it also helps you to gain valuable data. You can learn how long each step or process takes you so you can more accurately quote rates in the future. Nobody likes to find out that they have under-quoted a project. The time tracker, for you and your employees, can help you avoid that sad moment
QBO Plus
And finally, the most robust QBO plan is Plus (QBO P). This is the best, and really only, stand-alone plan for any business that has an inventory. If your business sells a physical product, then this is the plan for you.
This also might be the plan to choose if you hire independent contractors instead of employees for your business. For employees, you provide them with a W2 and pay payroll taxes to the government. For independent contractors, you provide a 1099 and they pay the taxes. Being able to track your 1099 contractors in one place is a benefit that can save you a lot of time in the long run.
QBO P also allows you to track the costs related to specific projects. If you have a service-based business with many projects going on at the same time, you will find that tracking these expenses in your bookkeeping software can be a huge time saver. You can record these types of expenses in a spreadsheet, but, as you grow, keeping this information in your bookkeeping software can help to streamline the process. And being more efficient is always a good thing when running your own business.
You may have noticed that I did not include QuickBooks Desktop in this list. I find that QBO DT is an outdated model and most, if not all businesses, will find it more beneficial to utilize the online options. Technology grows at an almost unbelievable rate and the desktop version just doesn’t keep up with that pace.
QuickBooks Online offers a lot of options so that you can find the perfect fit for your business. In addition to the 4 plans they offer, there are also a ton of separate apps that integrate seamlessly with the QBO software. You may find that if the service you want isn’t offered directly through QBO, an outside developer has already created an app with your need in mind.
Bookkeeping is often an afterthought in small businesses. Just something that has to be done for your taxes at the end of the year. With these software options, you can stay up-to-date with your financials and benefit from all the information that it provides you.
Feeling overwhelmed by your bookkeeping? I can help! Contact me for a free, no-obligation consultation.