Cloud Accounting with QuickBooks Online–The Details

In our attempt to come up with a standard for comparing online accounting systems, we (Doug Sleeter, MB Raimondi and myself) came up with a list of features that we would like to see in a good business accounting system. It is hard to compare products when they offer such different features, but we have to start someplace. When it comes to managing accounting there are many features that a small business just cannot do without, and we are trying to focus on those.

As we review various online accounting products we will point out things that we like and things that we feel are missing. If a product has a whiz-bang exciting feature but it doesn’t cover the basics, there is a problem. So, we have our list of features that we will be using to compare any cloud (online) based accounting product that we look at.

I certainly don’t consider our list to be all-inclusive, and I’m open to suggestions as to what could be added. One of the dangers of making a list like this is that we tend to think of the features that we have in the product that we are the most familiar with (in my case, QuickBooks for Windows), without recognizing that an online accounting product is different than a desktop accounting product. Another consideration is that every business will have a business process that is critical, but not all businesses will have the same requirements. That makes evaluations complicated!

It is the nature of Online software products that they evolve constantly, so as time goes on some of the feature we say are NOT there may be added. If I miss something, please feel free to point it out.

Product Details/Capacity

OK, let’s start with some basic information.

Number of transactions	No Limit
Number of records in a list	No Limit
Database size limit	No Limit
Maximum number of users	25
Underlying database	Oracle
Web browser support	All major browsers although there are some functions (conversion from QuickBooks Desktop, for example) that might require a specific browser.
Is there an app for mobile devices?	Mobile access w/BlackBerry, iPhone or Android. Features via mobile are limited; currently you can edit, create and view customers, estimates, invoices, sales receipts and payments using QuickBooks Mobile. This list of features here continues to expand.There is a special iPad app also, which has a different set of features. See our review at: http://www.sleeter.com/blog/2013/03/quickbooks-online-for-ipad/
Is there an API that developers can use to create add-on modules?	Yes, although it does not currently support access to all data. The “QuickBooks IPP API” is evolving – some data is accessible, some isn’t yet but will be later.
Can you have more than one company file on one subscription?	No
Multiple companies	Yes, with separate subscriptions.

Access to the data is a bit of a sticky issue for me. For years, QuickBooks Online has been on the sideline as far as allowing third-party developers to have good access to the data. Now with the QuickBooks IPP initiative, there is hope. However, there are some issues with this AT THIS TIME:

“Custom” developers can’t use this interface.
There is no true “report generator” that lets a user gain access to all data elements.
The current set of data that you can access via this interface is limited – it has been several years since they started developing this, they are FAR behind where they should be.

We should see a more complete list of add-on products in the future, I hope.

Essential Features

Everyone has their own list of “essential features”, things that an accounting product MUST do that you can’t live without. Of course, what you have on your list is probably different than what I have on my list. Here’s our list, and how this product stacks up:

General Ledger

Double Entry?	Yes
Are Accounts required?	Yes
Supports different Account Types	Yes – You cannot change the order in the Chart of Accounts, or how they appear on financial statements
Does the product enforce debits = credits?	Yes
Can you easily modify the Chart of Accounts?	Yes
Journal Entries	Yes – under the Banking menu
Are all Equity entity types supported?	Yes - you can identify the form of business in preferences, but it doesn’t set up equity accounts automatically
Is year’s end income automatically closed into the equity accounts?	Yes, to Retained Earnings
Does the user need to allocate net income into proper equity accounts if this is not a corporation?	Yes
GAAP compliant financial statements	Yes
Support both Cash and Accrual	Yes – it appears to do a true cash balance balance sheet
Support for class or departmental tracking	Yes – and you can identify what the terminology is for class. In addition, there is a similar “location” feature. See our QuickBooks Online Overview article for more on these features.

Banking / Cash Management

Support for multiple bank accounts	Yes
Download transactions from bank	Yes – and this feature works great. You can have automatic downloads once a day, or you can click to do a current download. You can sort by fields for easy entry.
Import banking transactions from Excel (etc.)	No (although you can do this with an add-in like the Transaction Pro Importer)
Automatic coding/classification of downloaded bank transactions	Yes – it gives suggested matches based on prior transactions. Easy to group-assign vendor, account, class, location. Done nicely
How do you batch enter a deposit? For example, is there an Undeposited Funds account?	Yes, Undeposited Funds
Is bank reconciliation streamlined?	Yes, easy to use
Can you “unreconcile” a bank account?	No, but an Accountant can do this with QuickBooks Online Accountant
Can you print checks?	Yes
Can you print checks on blank check stock?	No
Can you make ACH payments?	Yes, but only by using the Intuit PaymentNetwork service
Is there an integration with a cash flow management system like Bill.com or Bill & Pay?	Yes – Bill.com currently
Connection to payment gateways	QuickBooks Merchant Services, Intuit PaymentNetwork
Requires a specific merchant service provider?	Yes, Intuit’s services

Accounts Receivable

Can you set up customers and jobs?	Yes
Customer ID	Text
Can you customize how customer names are displayed (such as, last name/first name)?	You can chose to show an individual name or company name
Can you track A/R by customer?	Yes
Are there sub-ledger reports such as open invoices and aging?	Yes
Can you customize forms templates?	Yes
Support for batch invoicing	Yes – this feature is VERY useful and flexible

Accounts Payable

Can you track A/P by vendor?	Yes
Are there sub-ledger reports such as open bills and aging?	Yes
Support for Purchase Orders	Yes
Can you assign a customer to an expense?	Yes
Can you mark an expense as billable?	Yes
Can you print a bill payment stub?	No

Credit Cards

Support for credit card (purchasing) transactions	Yes, you can enter directly or download. The feature works very efficiently, same mechanism as the banking download feature mentioned above.
Can you download credit card transactions?	Yes
Can you import credit card transactions from Excel/CSV?	Only with a third party add-on
Is there automatic coding/classification of downloaded transactions?	Yes
Is there a streamlined way of recording and reconciling credit card batch deposits?	Yes

Sales Tax

For US customers, management of sales tax is a key feature. It is also an area that many newer accounting systems don’t handle adequately for many businesses. Sales tax tracking has been an area that wasn’t fully developed in QuickBooks Online in the past, but they have put a lot of effort into this in the last year or so. There is still a ways to go to make this a complete solution in my mind, however.

Is there sales tax tracking?	Yes. Combined tax rates can have 5 components. You can add multiple single tax rates as well
Can you get a report showing taxable and non-taxable sales?	Yes, but there is room for improvement. Sales tax reports are scattered about, sometimes it is hard to determine what info you need for your tax agency reports.
Can you drill into reports to see taxability status of each sale and each item on the sale?	Yes
Is the sales tax liability report handled properly on the Balance Sheet?	Yes
Is the sales tax report available in both Cash and Accrual basis?	Yes, but the reporting isn’t very good
Is customer taxable status set based on the ship-to address automatically?	No

Reporting

There isn’t a lot of flexibility here. You have a number of set reports with almost no customization features. There could be a LOT of improvement here. I would really like to see a third party report generator that works with QBO, but until Intuit fully develops their third-party programming interface this won’t be available.

Customizable reports	Yes, reports have many options for customization. But there is no “custom report”
Report filtering and subtotaling	Reports can be filtered, you cannot set subtotals.
Export reports	You can export reports to Excel
Formulas, formatting, outlining	Critical reports allow formulas, but not all reports do. Formatting is supported, outlining is not

Accountant Features

Accountant features are available, but you need to be using QuickBooks Online Accountant. I reviewed this a few years ago, the product continues to be expanded.

Accountant Dashboard to support multiple clients	Yes, using QuickBooks Online for Accountants
Mass re-categorization of transactions	Yes
Mark journal entry as “adjusting”	Yes
Working Trial Balance	Yes
Lock transactions (with separate password)	Yes (in Essentials, Plus and Accountant)
Audit Trail	Yes – the activity log, which provides excellent detail.
Other special Accountant features	Write off invoices, voided/deleted transactions, Unreconcile, additional reports.

In summary, QuickBooks Online Accountant provides you with:

A “master list” of QBO client that lets you easily log in to the client file, if the client has “invited” you to be an accountant user. Your access to their file doesn’t require an additional “user account” for the client, so it doesn’t increase their cost.
A number of “accountant tools” that are only available to the QBOA user. These include things like a reclassify transactions function, the ability to mark journal entries as “adjusting” and to get a report of just those JE’s, a write off invoices function, prior year financial statement comparisons, and more.

Other Important Features

These are features that are important for SOME businesses, but not all. From our viewpoint we put these as “important” but not “essential” – but of course, if YOUR business NEEDS one of these features, that could be essential to YOU. It is important to consider your type of business.

Features Not Supported

Here are some general categories of features that this product does NOT support. We won’t list the details of the specific criteria we have in each of these areas. Note that you MAY be able to find an add-on product that can provide some of these features in the Intuit App Center.

Fixed Assets
Fund Accounting
Point of Sale
eCommerce: Several good add-on products for this, such as Agiliron and Pinnacle Cart.
Job Costing: Note that you can create “sub customers” which are similar to “jobs”, you can create budgets by customer (and sub-customer), you can add columns in some reports for customers, you can assign a customer to an expense, but this is NOT a true job costing system.

Inventory

The ability to track the quantity on hand of items, “Inventory”, is only found in QuickBooks Online Plus, the more expensive version. Inventory features are very minimal – in fact, disappointing. You have a “products and services” list and you can mark some items to track quantity. There is one report, the Products and Services List that shows the quantity on hand and the cost of the item – but this is the edited cost, which has no relation to anything, really. No valuation reports, no stock status reports.

If you have an inventory-centric business, I would NOT consider QuickBooks Online, unless you use an add-on product. The list of available add-ons for inventory control is very limited, although there are some good products there.

Support for perpetual inventory tracking	Yes, in Online Plus only
What inventory costing methods supported	FIFO only, no good way to audit this
Can you make inventory adjustments?	Yes, by editing the item itself. Very simplistic, simple.
Track multiple locations	No
Lot Tracking	No
Serial Number tracking	No
Assemblies and sub-assemblies	No
Track quantity on hand of in-process assemblies	No
Support for outsourced assemblies	No
Separate item receipts from bills received	No

Purchasing

Support for purchasing	Yes
Describe purchasing	You can enter a purchase order. When you enter a bill, the PO shows up and you can add it.

Payroll

There is only ONE payroll system that works with QuickBooks Online, that is (no surprise here) QuickBooks Online Payroll, from Intuit. Note that this is NOT included in the base price of the program, you have to pay an additional fee.

Integrated payroll	Yes: QuickBooks Online Payroll for an additional fee
Outside payroll services	No
Full Payroll Reporting	Yes: 18 payroll reports
States supported	All 50 states and D.C.
Payroll includes automated job costing	No. You can enter customer info on a timesheet, but when you pay the employees the job costing info does not flow through to the P&L by Job.
e-pay taxes, e-file forms	Yes
Track worker’s comp	Limited. It will track Worker’s Comp for WA as it is required by the state. There is an add-on service to track Worker’s Comp. You can also assign a Worker’s Comp code to the employee. Without the add-on, you can assign a Worker’s Comp Class to an employee record and then look at a report that gives you some info

1099s

Track payments to vendors for 1099’s	Yes
Prepare/Submit forms 1099 & 1096	You can print 1099’s. You can extract the info needed for a 1096. To efile you need to use a separate service and re-enter the info
Additional Fee to print or submit forms	Yes for printing. Submitting is through a separate service

Budgets

Budget Tracking	Yes – by department, class or customer
What-if scenarios	You can create multiple budgets for the same time period
Budget reports	Budget Overview and Budget vs Actual

Time Tracking

One of the nice features in QBO is that you can have “time entry only” login accounts that do NOT cost you anything. Very useful!

Time tracking of employees, partners and vendors	Yes, in Plus only
Can time be marked as billable?	Yes
Enter time with mobile device	No
Time tracking integrate with Payroll	Yes, but not on the customer side of the time entry

International Support

There are international versions of QuickBooks Online available, but they are separate from the US version described here. The international versions have a different feature set than QBO US, but they do support multiple currencies. The US version does NOT support multiple currencies, which is unfortunate. So, I guess we should say that QBO doesn’t have international support, because a US user doesn’t have access to these kinds of features?

Accounting Professional Support

Intuit has an excellent product for accounting professionals supporting clients with QuickBooks Online – appropriately called QuickBooks Online Accountant. I reviewed this product in a prior article and I discussed the features earlier in this article.

If you are a member of the Intuit ProAdvisor program, you get QuickBooks Online Accountant (QBOA) for free. If you are not a member of that program then I believe that if you have your own subscription to QBO, and you are an accounting professional, you can “move up” to QBOA for no additional charge.

Intuit also provides a “certification” for QuickBooks Online as a part of the ProAdvisor program.

What Do We Think?

QuickBooks Online is an excellent general-purpose accounting program with great support from a well established company. Intuit has is focusing a very large amount of resources to supporting and enhancing this product, so we expect that it will be around for a long, long time. This is an important consideration when you look at an online accounting product – how stable is the company, and will they be here for the long term? Intuit certainly fits that profile.

As with any online accounting program, one size doesn’t fit all, so you need to look at the features that this product provides vis-à-vis the needs of the client. As it stands now, QuickBooks Online is a better fit for a service oriented business. If you need job costing or inventory control, this isn’t the product you would look at. However, looking forward, when the Intuit Partner Platform finally settles down, I believe that you will find a very rich “ecosystem” of add-on products that will move QBO into other kinds of businesses.

Here’s a sampling of things we like:

You can choose your terminology for customers and locations, to customize this to your situation.
You can have your home page alerts (Critical Alerts, Things To Do or Messages emailed to you.
You can set a schedule for memorized reports to be emailed automatically. You can create report “groups” and specify that the group be sent, such as to an owner or supervisor.
Delayed Charges: You can enter a charge for a customer and have in put on the next invoice.
There is a special Deposits preference that puts a field on the bottom of invoices to subtract deposits made.
Estimates preference: You can choose if you you want “accepted” estimates to go on invoice or both “pending” and “accepted”.
If you have a billable “expense” (rather than item) you can set a preference to make it sales taxable.
You can set preference to not show billing rate to employees and subcontractors who are Time Tracking Only users, or users that don’t have Customer & Sales access.
When you access an area of QBO that you have not been in before, a little interview window opens up asking you relevant questions related to that area, to set preferences.
You can just look at one department (class) on Pay Bills.
The new Downloaded Transactions feature is really easy to use.
You can add time tracking only and report only users, at no additional charge.
You can add an “account summary” section to invoices, which can serve as a mini-statement. Very useful in some cases.
Recurring transactions and “invoice automation” is a very powerful feature.
Having both a class and location feature, to break down your reports by either method, is very powerful.

Things that are a bit odd:

Automatically apply credits is on as a default and when it’s on, it not only applies a credit to the next invoice you create, but automatically applies payments to the old invoice.
Journal entry is under Banking rather than some place like Company or Accountant.
I doesn’t allow you to assign class and location on the 1st screen of the bank reconciliation for service charges and interest earned.
There is no “subtotal” item for invoices, something that is sorely missed.
You can enter time for a vendor and invoice the customer for that time – but it doesn’t flow to paying the vendor.
Too many functions get pushed into the “More” menu. Navigation is not simple, mechanisms for moving around are not uniform. Too often the buttons you need to save a transaction (etc.) are at the bottom of a page where you have to scroll down to find them.
Inventory (tracking quantity on hand) is very limited and almost useless without appropriate reports and auditing capability.

QuickBooks Online was the winner of an Sleeter Group Awesome Application award for 2013, awarded at The Sleeter Group’s 2012 Accounting Solutions Conference.

In my article about Cloud vs. Desktop Accounting I listed some points of concern about cloud accounting products. Here are a few of the issues that I list there, and how QuickBooks Online addresses them:

Familiarity: Each of the Cloud Accounting programs have their own look and feel, and they differ from what we see in our desktop versions. Some people expect that since this is “QuickBooks Online” that it will be similar to QuickBooks Desktop, and it isn’t. This is a different product, with a different database organization. Just because it says “QuickBooks” don’t expect it to work the same as the desktop product.
Feature Rich: It isn’t too bad, but there is a lot of room to grow. For example, it is very weak in inventory, as I have mentioned often. In other areas, such as recurring transactions and various types of “automation”, the product has a good set of features. I expect to see the options improving in the future since Intuit has a heavy focus on this product.
Extensibility: Yes, it is extensible, but things are not as far along at this time as I would like. QuickBooks had an “SDK” that allowed developers to work with this product, but it was limited and it was “frozen” several years ago. A few years ago Intuit introduced the “IPP” interface (now referred to as the “QuickBooks IPP API”), but that has been undergoing many changes and it isn’t fully implemented. This situation is a bit limiting, but it should work out in the long run.
Security/Privacy: Intuit has invested heavily in their data centers and they are highly secure. The data centers are Tier-4, the highest level possible. See this article on QuickBooks Online Security for more details. Privacy is a trickier issue. Intuit’s user agreement says that they may use your data “in aggregate” for research purposes. That is, your specific data won’t be used separately, but some of it will be combined with other users’ data so that they can make projections, etc. Many major corporations do this – your individual data won’t show up in some report or be sold to someone. Your individual data is held private, but sometimes this bothers me a bit…
Backups: Intuit does about the same that the other online accounting products, which I personally don’t think is enough. You rely on their data center to make backups of your data. If their server fails, or the data center has a problem, they’ll be able to restore your data to something very current. But, if you want to roll back to an older date for some reason, or see an archival copy, you don’t have good options. You CAN extract your data in several ways, but there isn’t a good way to easily import it back in. See this article on QuickBooks Online Backups for more details.
Data Ownership: As with most online accounting products, it is hard to move your data away from this product in a useful format. You can get a data dump, but it is a raw collection of data that is going to be hard to use. You can also extract your data into QuickBooks Desktop, but since the databases are different you may find that the extracted data isn’t a perfect match. See Stacy Kildal’s excellent article on converting from QuickBooks Online to Desktop.

This post was written by Charlie Russell. Thanks to MB Raimondi for her significant contributions to this article. Additional help was provided by Peter Cullen.