Robert Loe CPA

What Every Small Business Owner Should Know About Quickbooks

Of all small business owners that use accounting software, more of them choose Quickbooks than any other.  Perhaps you already use Quickbooks, or are considering investing in the software.  We have compiled a list of the advantages of using Quickbooks for small business accounting.  Additionally, we have listed the disadvantages of the software, as well as practical solutions for overcoming them.

What are the advantages?

1)      The price is right!  The continued popularity of Quickbooks software is largely due to its relatively low price.  Quickbooks software that will fit the needs of many small businesses is available for between $100 and $300.

2)      Ease of use.  No accounting background is required to begin using Quickbooks, although some knowledge is helpful.  The software’s user-friendly input screens resemble actual documents, making the process very intuitive.  To ensure that the software is used most efficiently and effectively, however, it is recommended that a new user first go through a tutorial with an experienced Quickbooks user or accountant.

3)      Quickbooks is available in several different versions, ranging from simple to complex.  A relatively simple small business may choose a basic version to avoid paying for unnecessary features.  A business requiring more complex accounting may choose a premium version of the software, or an industry-specific version that focuses on unique issues such as manufacturing or construction contracts.

4)      Preparing a tax return using the information from a well-maintained Quickbooks file is frequently easier than dealing with manually prepared reports.  An Excel spreadsheet summarizing all of your business income and expenses for the year can be produced and given to your accountant, who can then prepare your return in a reasonable amount of time.  If it is necessary to delve deeper into your data, your accountant will likely be able to open your company file on his or her own version of Quickbooks.

What are the disadvantages?

1)      It is very easy to make entries in Quickbooks that affect prior years, which creates a problem if the business tax return for that year has already been filed.  Quickbooks allows company files to be closed and password protected as of a certain date, providing an easy solution to this problem.

2)      Quickbooks allows transactions to be deleted or changed after they have been entered.  The software does create a sort of “audit trail” for each transaction, but any mildly tech savvy user would easily be able to manipulate or remove the audit trail from the system.  Business owners must be aware of the ease with which fraudulent activity can be covered up by dishonest employees.  This can be overcome, however, by the implementation of regular procedures to oversee the business’ accounting system, which help to prevent and/or detect such activities.

3)      The maker of Quickbooks only supports each version for about two years, forcing users to frequently upgrade their software.  Additionally, some services, such as payroll and direct deposit, are not included in the price of the software.

4)      A business may reach a size where Quickbooks is no longer suitable for its needs.  At this point, a more advanced software with additional capabilities from another provider may be necessary.

Overall, Quickbooks provides a basic, yet practical solution for maintaining accounting records for small businesses.  If properly implemented and maintained, the software can prove to be a valuable tool for small business owners.

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