What Is QuickBooks & What Does It Do?

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quickbooks is the most popular small business accounting software used by businesses to manage income and expenses and track the financial health of their business. you can use it to bill customers, pay bills, generate reports, and prepare taxes. The QuickBooks product line includes several solutions that work great for anyone from a freelancer to a midsize business.

quickbooks offers several alternatives, but we recommend online quickbooks for most new businesses. You can try QuickBooks online for free with a 30-day trial that doesn’t require a credit card.

You are reading: How does quick books work

9 ways small businesses use quickbooks

Small business owners often use QuickBooks to manage their bills, pay their bills, and track their cash flows. they also use it to generate year-end and month-end financial reports, as well as prepare quarterly or annual business taxes. Some business owners manage quickbooks themselves, while others prefer to use an in-house or outsourced bookkeeper.

1. create and track invoices

you can easily create invoices and print or email them to customers. Quickbooks will record revenue and track how much each customer owes you automatically. You can see the number of your outstanding invoices, known as your accounts receivable (A/R), as well as how many days they are past due by running an A/R aging report. Here is a sample a/r aging report from quickbooks online:

2. keep track of invoices & expenses

quickbooks keeps track of your bills and expenses automatically by connecting your bank and credit card accounts to quickbooks so all your expenses are downloaded and categorized. If you need to manually track a check or cash transaction, you can record it directly in QuickBooks in minutes.

You can also enter invoices into QuickBooks when you receive them so QuickBooks can help you keep track of upcoming payments, or a payment in advance. You can make sure you pay your bills on time by creating an accounts payable report. This report will provide you with the details of your current and past due bills. Here is a sample quickbooks a/p aging report:

3. print financial statements for your business

By managing all your cash-in and cash-out activities in QuickBooks, you can print financial statements that provide useful insights into 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 these three main financial statements in quickbooks with just a few clicks:

profit and loss report
balance sheet report
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.

profit and loss report

The profit and loss report will show you how profitable your business is by summing up your income minus your expenses. The report shows you the bottom line’s net income (loss) for a specific time period, such as a week, month, or quarter.

balance report

The balance sheet report shows what your company owns (assets), what it owes (liabilities), and its net worth (equity) at a given point in time.

statement of cash flows

The statement of cash flows in quickbooks will show you all the activities that affect the operating, investing and financial cash inflows and outflows of your business.

4. track employee time & expenses

employees or subcontractors can enter their own time as the day progresses, or an accountant 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 bill. any expense entered can be marked as billable and assigned to a customer. Like time, these billable expenses will be available to add to the customer’s next bill. you do not need the payroll plugin to track employee time for billing purposes.

5. payroll

Payroll is one area you don’t want to skimp on trying to do it manually. Mistakes made in calculating paychecks can lead to heavy penalties and disgruntled employees. Quickbooks has its own payroll feature that can automatically calculate and run payroll as often as you need. When you enter employee time as mentioned above, the hours not only flow to your invoices but also to the payroll module. this way you can be sure that every hour you pay your employee is also counted towards billing a client.

The best thing about using quickbooks payroll is that it is integrated with quickbooks so your financials are always up to date with the latest payroll run. The purchase of a quickbooks payroll subscription is required to run payroll, but you have several service levels to choose from to suit your needs.

running your payroll through quickbooks will allow you to:

Pay employees by check or direct deposit
Calculate federal and state payroll taxes automatically
Have quickbooks fill out payroll tax forms payroll for you
e-pay your payroll taxes directly from quickbooks

here is a video link from intuit on how quickbooks small businesses use quickbooks payroll:

5. inventory tracking

quickbooks can track the quantity and cost of your inventory. As you sell inventory, QuickBooks will automatically allocate a portion of your inventory to Cost of Goods Sold (Cogs), 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 automatically reorder inventory when quantities are low.

Below is a sample inventory valuation summary report from quickbooks online. This report shows a list of the products in your inventory, the quantity available, the average cost and their total value:

6. simplify taxes

Perhaps the most important thing quickbooks can do for your small business is simplify tax time. By far the biggest headache in preparing a tax return is compiling your income and expenses. If you use QuickBooks throughout 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 they can review your numbers and print any information they need to prepare your return.

7. accept payments online

One of the best ways to improve your cash flow is to offer customers the option to pay their bills online. You can add QuickBooks Payments (formerly known as Intuit Business Services) so customers can pay online directly from their emailed invoice. quickbooks payments is similar to other merchant services. however, because it is fully integrated into quickbooks, the sale, credit card fee, and cash deposit are automatically recorded as they occur.

8. 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 on their mobile device for free, take a photo of a receipt and upload it to QuickBooks Online in just a few minutes. no more lost receipts or manually matching receipts to downloaded bank transactions. quickbooks allows you to attach a receipt to the corresponding bank transaction. You can upload an unlimited number of receipts to quickbooks online, as the receipts are stored in the cloud along with your data.

9. track mileage

Many freelancers and employee/owners use their personal vehicles for business purposes. This provides a generous 58.5 cents per mile tax deduction for 2022. However, to receive the deduction, you must keep a record of the date, miles, and purpose of your trip.

quickbooks online makes it incredibly easy. Your mobile app will use the GPS on your phone to automatically detect whenever you are in a moving vehicle. then you can review your trips, classify them as personal or business, and mark them as billable to a customer. billable mileage expenses will be available to automatically add to the next invoice you create for that customer.

quick book options & prices

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

quickbooks plan upgrades for 2022 desktop versions

quickbooks desktop: Starting in 2022, mac, pro, premier, and enterprise will only be available through an annual subscription. annual subscription includes free updates, data backups and the newest quickbooks features.

quick books online

quickbooks online is a cloud-based product that requires no software installation. This QuickBooks product is available in various subscription levels, including Start Simple, Essential, Plus, and Advanced. it’s ideal for any business that doesn’t have complicated job cost requirements. quickbooks online allows you to access your data from any computer with an internet connection using your secure login.

Visit our online comparison of quick books to learn more about the available versions.

quick book desk

quickbooks desktop comes in six versions: pro, pro plus, premier, premier plus, enterprise, and quickbooks for mac. each requires you to install 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 is in one of these industries: manufacturing, contracting, retail, or not-for-profit. quickbooks enterprise is for large companies. These industry-specific versions of QuickBooks Desktop include a custom chart of accounts and industry-specific reports.

pro plus and premier versions are sold as annual memberships rather than a one-time purchase. your annual membership includes the new edition every year, unlimited customer support and external backup of your company data.

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

Also, you can be more productive with quickbooks desktop if you get a hosting provider. quickbooks hosting allows you to access your desktop software from anywhere through a remote server. Check out our list of the best quickbooks hosting providers.

standalone quickbooks

Self-Employed Quickbooks is the ideal product for freelancers, realtors, and independent contractors like Uber and Lyft drivers. Similar to quickbooks online, it is a cloud-based product that can be accessed with your secure login from any computer with an internet connection. Includes unique features not available in quickbooks online or quickbooks desktop, such as the ability to track business and personal expenses from the same bank account and transfer data to turbotax.

standalone quickbooks will calculate your estimated quarterly tax payments and remind you when they are due. There are three QuickBooks self-employed pricing plans to choose from: Self-Employed, Self-Employed Tax Package, and Self-Employed Live Tax Package. To learn more, read our guide to quickbooks for freelancers.

If you’re a start-up with plans to expand your workforce, Self-Employed QuickBooks is not the right QuickBooks product for you. standalone quickbooks cannot be upgraded to other versions of quickbooks.

quick books for mac

quickbooks for mac is the only quickbooks desktop product available for mac users. This edition is very similar to QuickBooks Pro and works well for most small businesses that don’t manufacture products. See our quickbooks for mac article for more information.

other quick book products

As one of the leading accounting software providers on the market today, QuickBooks offers add-on products to enhance your overall QuickBooks experience. these include:

quickbooks online: keep your books organized in the cloud with quickbooks online, the fast-growing cloud-based version of quickbooks.
quickbooks payroll: manage your payroll easily with quickbooks payroll. Track employee hours and billable time effortlessly with QuickBooks payroll and QuickBooks online.
Quickbooks Live: ¿ need help carrying your books? quickbooks live is an online accounting service where you can get a professional advisor to work with your accounting needs.
quickbooks payments: Integrate payments seamlessly into QuickBooks online through QuickBooks Payments. receive payments easily and process online payments effortlessly.
quickbooks time: Formerly known as tsheets, quickbooks time offers time tracking features so you can employees track client or project billable hours.
quickbooks capital: get additional financing options up to $100,000 with quickbooks capital.

learn more about how the quickbooks suite of products can help businesses in many different ways.

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quickbooks is the most popular small business accounting software. it comes in a variety of editions, both online and installed on your desktop computer. quickbooks includes features that let you track your income and expenses, pay your employees, keep track of your inventory, and simplify your taxes.

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