Accounting Software: S1E3

Desktop software or Online software?  This is the first question. If online software, which edition of whatever software you decide on should you get? This episode discusses accounting/bookkeeping software and how to decide what to use.

Transcript

                                                                 Episode 3

                                                                   Software

Now that you have decided on the kind of entity your business will be (or already is), one of the next steps is to figure out how you are going to account for your business behind the scenes financially.  With Startup expenses, you can use a spreadsheet or any kind of organized way of being able to track the money that you either invest into your company or things that you purchase for your company before you either have an entity or make a first sale.  

However, once you have an entity and you are on your way to making your first sale, you should be using accounting software.  These days, online cloud-based software is more popular than the desktop versions, but doing accounting online isn’t for every person or every company. 

The most popular of the accounting software in the US is QuickBooks. QuickBooks Desktop has been around since 1994 using Windows 3.1. It has come out every year with improvements since then.  And until recently, you could use the desktop software year after year after year if you don’t hook the software up to your bank to download bank or credit card transactions or do your own payroll using their own add-on module.  Other than those three things, one can use the desktop software for years for bookkeeping purposes.  I still have clients on QuickBooks 2016 and 2017—versions that are 5 and 6 years old, and they work just fine.  However, starting in2022, QuickBooks Desktop is now a subscription software.  Every year, to be able to continue to be able to get into your own company file, the annual fee has to be paid to Intuit.  Even though it’s a desktop software, they are using the online cloud-based model. 

Since the desktop editions of QuickBooks have been around so long, they’re a more complete software than the cloud-based versions. In short, more reports, more customization (than most online versions), and more features are included with the bottom-line desktop version than even the middle priced online version. 
 

QuickBooks Desktop have 2 main different versions:  

1.  QuickBooks Pro – The basic most common version which allows up to 3 users logged in at the same time doing different things.

2.  QuickBooks Premiere-5 versions

a.  Retail (For small retail operations) Customized mainly in reports

b.  Contractor (Very good for change orders in construction, for example, and specific reports that you can’t get in any other editions of Quickbooks specific to either contracting or construction)

c.   Manufacturing – tracks the raw material that is purchased to be put together to make a finished item that you then sell from your inventory

d.  Professional – Doctors or Attornys, for example. 

e.  Non Profit- For non profit organizations

f.     An Accountant version, which incorporates all of the above.  

3.  All of the desktop editions are very robust pieces of software, that enable forms and reports to be exported to Outlook so that you can easily send them via your own email client, as well as through Gmail, if wanted. They also have lot of customizing of reports and invoice and other forms, as well as (in the accountant edition only) a special Report Maker that lets you 100% completely customize financial reports for banks and/or investors who may want to see the books in a very specific and professionally looking way.  I have been using QuickBooks Desktop since around 1996 and still prefer the desktop vs the cloud-based versions – However, I have dozens of clients who use the Online version and I go into their files daily or weekly online. 

The online (Cloud-based) versions are divided into 5 different editions: 

1.  Self Employed 

2.  Simple Start

3.  Essentials

4.  Plus

5.  Advanced 

The Self employed is designed for a very small one- person operation – it even reminds you of when to pay estimates quarterly—but the reports don’t look (in my humble opinion) very professional. But it’s a way of tracking income and expenses in a very minimal way – enough to file taxes on April 15th.  

Simple Start – One step up – That version includes invoices so that you can bill your clients, a way of tracking sales tax, creating estimates and  reports that are in much more of a business format. 

The Essentials add 2 more users (A total of 3) who can log in at the same time using their own email addresses. You also have the ability to enter Bills from your vendors, as well as time tracking. 

The PLUS adds 2 more users to a total of 5, inventory control, and individual project profit and loss reports.  It also adds more customization to reports, and more filtering of reports. 

The ADVANCED adds analytics using Excel, lots of graphs and reports not available in any other version, and very specific customization for each user login and what their roles are as well as a way of restoring data from a previous time if there is a problem.  

There is a Desktop version of the Advanced Online which has been around for many years called ENTERPRISE and that’s the top of the totem pole still for QuickBooks.  That has advanced inventory features, bar coding, warehouse accounting, and tested up to 30 users logged in at the same time doing different things.

Other accounting systems include Sage (cloud-based), Net Suite (Cloud based) Wave, Zoho, Fresh Books, and Xero (which is highly popular in the UK and other countries).  Each software has it pros and cons, which is why they all give you a free trial for you to look at the features and play with it to see if it’s the right system for you. I have clients using Zoho internally to track the invoices and the payments on those invoices that clients make so that they know who owes them and how much they owe.   That’s something that I don’t need in the books that are used for taxes (unless your taxes and bookkeeping is in an Accrual basis) (And that’s the next episode, so stay tuned)!

Many of my clients never want to or have the need to go into their own books.  They know that I will send Balance Sheets and Profit and Loss reports every month when the bookkeeping is done. In those cases, why use the online version which is a monthly subscription price which is some cases can be $800.00 a year if only your bookkeeper is going to log in on a regular basis? 

When I use an online version for a client, generally it’s because the client wants to see their books (, and run their own reports, look at the daily numbers such as in a restaurant or a bar and is computer savvy enough to understand how to accept a customer payment manually so that when the downloaded deposit comes in, it’ll match correctly with what was manually entered. I plead with them not to change anything that I do! If we have meetings with the accountant or CPA and need to collaborate, it’s great that all of us can log in at the same even without a Zoom call where we can share screens. 

In Summary:  Here are 6 pros: 

Desktop

1.  More robust in every way, including reports and customization

2.  You are not relying on how fast or reliable your internet speed or connection are.

3.  Not relying on the software company’s server working or not

4.  You have virtually no limit on the amount of categories  (Accounts on the Chart of Accounts-- and I’m talking Assets, Liabilities, Equity, Income, Cost of Goods and Expenses) it limits you to 9,999 (if you want to call that a limit) in most desktop versions.  Most of the online versions of QB limit you to 250 accounts

5.  You are in total control of your backups locally or on your network 

6.  Some versions have a Report Writer, to customize financials from scratch. 

Online or Cloud Based editions 

1.  They are always on, even if you are logged off which allow you to program customer invoices to be emailed even if you are on vacation

2.  Integration with your POS, Square, Stripe, Amex, and lots of other third party applications if you want to download transactions, and inventory from third part software.  (Not sure if that’s a pro or a con)

3.  Multi users can log in at the same time for no extra cost or computer network setup

4.  Specific entries that accountants might make to adjust the books at the end of the year are a little easier using the online editions than the desktop (Accounts Receivable/Payable entries for one example) 

5.  Downloading of credit card and bank transactions with a very good interface with the online editions of QuickBooks.  Desktop can do that as well, with a different look and interface. 

I decided to go through the QuickBooks software since it’s what I use every day and have been using for 20+ years (a little less for the online editions). But again, take a look at some of the other software that’s available.  Some are free, some are low costing, but there are a lot to choose from. 

Every situation is different and when I start with a new client, we always have a conversation as to which way to go and what would work best for the client. It’s not about what I want, it’s what the client wants and needs. 

And now for the client story of the week – 

I had  a new client who was using QuickBooks online when I started doing their bookkeeping. I noticed that some transactions were in a different format than others.  As it turned out, the client told me that they started with the desktop edition, migrated to the Online edition, didn’t like it after 6 months, went back to the desktop version, and a year later went back to the online version again.  It was a lot of work to clean up the database for a consistent look, even though the numbers and the finances were matching the tax return for every year. It has been 3 years, and we have stuck with the online edition because it’s really working for them after I cleaned it up and am using the online banking feature the proper way. 

I also have had a few clients over the past several years who were using QuickBooks online, and a year later, I wasn’t able to create another Expense account on the Chart of Accounts because we had reached the 250 account limit. It was important for this particular client that we had very specific accounts to track expenses. So, we had to migrate back to the desktop edition since the company was small to medium sized and couldn’t afford or need the QuickBooks Advanced online and the cost that’s attached to that. 

I hope I have helped you in making an informed decision about which way to go with your accounting software.   Online accounting isn’t for everyone.  Desktop isn’t for everyone.  This is why we (still, at this point) have a choice in which way to go with accounting software  

If you have any questions or comments, please email me at  Bookkeepermensch@gmail.com or Numerex@numerexonline.com 

Next week --  ACCRUAL VS CASH based accounting!