SETTING UP QBO THE RIGHT WAY

So, you started a QuickBooks Online file... now what?  

New business owners, solopreneurs, and individuals interested in tracking their finances, meaningfully, will often turn to accounting software such as QuickBooks Online (QBO) – it's clearly our personal favorite! But once you purchase the subscription, add your information, maybe get a few bank accounts connected... what’s next? Well, we’re here to give you our insight on how to put your best foot forward, because setting up QuickBooks the right way is the only way to start off on the right foot. Just so we’re all on the same page terminology wise... here’s two things to know before we begin:

• When we talk about a QuickBooks “file,” we are referring to a specific company instance of QuickBooks. For example, if the company Bob’s Bakery has a QBO subscription to track its business expenses but owner Bob also has a second QBO subscription to track his personal finances, we’d refer to these as two separate QuickBooksfiles.  
• A “file build” is what would take place upon purchasing a QBO (or any accounting software, for that matter) subscription. This is the process of optimally setting up the file’s chart of accounts, products and services, and internal accounting workflows or modules. 

This is what we’ll be giving you the lowdown on today!  

Let the Planning Begin!  

First and foremost, the planning. Before setting up QBO, there are several things you should iron out to ensure a smooth and efficient setup process. Here are some key factors to think about: 

Business structure: Decide/beware of your business's legal structure (e.g., sole proprietorship, partnership, corporation, etc.) as it will impact how you set up your accounts and financial reporting. 

Accounting method: Decide whether you will use cash-basis or accrual-basis accounting. This choice affects how you record income and expenses. Not sure how to answer this? Ask your accountant, bookkeeper, or tax professional! 

Chart of accounts: The chart of accounts is like your company’s financial table of contents. These are allllll the different buckets your money lives in or goes to. Plan your chart of accounts based on your business's needs. This includes setting up categories and names for income, expenses, assets, liabilities, and equity. Generally, we say “the more the merrier” -- it’s easier to start out with more accounts and later merge them up, if necessary, versus trying to split out your transactions later on. 

Pick a starting date: If you're a newbie to business ownership, start your QBO file as of the date you started your business. If you have had a business for a minute but this is the first time you are using accounting software to track your income and expenses, we typically recommend picking the first day of the current tax year (assuming you have filed taxes for prior years). If you are switching from another accounting software, this is a bit trickier & we’d recommend chatting with an accountant to determine the best start date for your new file.  

Tax requirements: Understand your tax obligations, including which taxes you need to collect and remit (e.g., sales tax, payroll taxes). Set up QBO to track these taxes accurately. 

Bank accounts: Determine which bank accounts you will use for your business and make sure they get added to your chart of accounts! Further, you can sync them to the QBO bank feeds for easy adding and categorizing of your transactions. You will need to have online access to each of these accounts and decide as of what date you want to start importing your transactions. 

Payment methods: Decide how you will accept payments from customers (e.g., cash, check, credit card). Then make sure you understand the proper workflow to track these payments in QBO.  

Inventory/Service Offerings: If you sell products, decide how you will track inventory and set up inventory items in QBO. Things to think about: Do you hold inventory, or do you drop ship it? Do you intend to track your services by time, or by department? Do you purchase your inventory from a vendor, or manufacture from raw goods? Are you required to collect sales tax? All of these questions will help you determine both how to set up your inventory and what QBO subscription you need.  

Customers and vendors: Identify your customers and vendors and gather their contact information for QBO setup. Keep in mind any vendors that you will need to issue a 1099 to at year end and make sure to collect their W9. Fun fact: you can input this info into QBO for easy 1099 filing at yearend!  

Financial goals: Consider your business's financial goals and reporting needs. Customize your QBO settings and reports to help you track progress toward these goals. 

Integration with other tools and apps: If you use other business tools and apps (e.g., CRM, e-commerce platform), think about how QuickBooks will integrate with them to streamline your operations. Be very diligent in selecting an app. You should not only make sure that your app does what you want it to do, but also integrates with QBO in a meaningful way. This can be a bit of a journey, but will save your team, your accountant or bookkeeper, and yourself SO much time every single month. This is a big one, trust us! 

Talk to an Accountant: While business owners can set up QBO properly, there is some heavy lifting involved. If any of these topics are triggering a lump in your throat, think about working with an accounting firm to help you set things up rightfrom the get-go. Take it from us, it’s a lot more cost effective to set it up correctly versus fix a mess down the road. 

All in all, taking the time to think through these factors before setting up QBO can not only save you a boat load of time, but help you customize the software to meet your specific business needs and give you the output of information you are really looking for!  

The Nitty Gritty: Setting up the QBO File 

Setting up QBO correctly involves several steps to make sure that your financial data is accurate and organized. Here's our general guide to help you get started: 

1. Sign up for QuickBooks Online: 
• Go to the QBO website and sign up for an account – actually, we take that back! Use our custom link to get a discounted subscription! Click here!  
• Next, choose the subscription that works best for you (if you need help with this, remember to outreach to your trusted accountant – if you don’t have one, may we suggest ourselves!). Remember you can always downgrade your account if it’s more than youend up needing!  
2. Complete the initial setup: 
• Once you've signed up, QBO will guide you through the initial setup process. Answer all the questions you can to the best of your ability. 
• Enter your business information, such as name, industry, and address. 
• Customize your settings, including your fiscal year start date and tax information. Read through the settings carefully, including the sales, expenses, and advanced tabs. Make sure to turn off any “auto-apply” or “auto-send” options until you have a better understanding of what these are!
• (If you make any mistakes they can always be changed, so do not let these questions trip you up.)
3. Set up your chart of accounts: 
• Go to the "Transaction" menu and select "Chart of Accounts." 
• Add, edit, or delete accounts as needed to match your business's financial structure. Our best practice is to edit the names of accounts to match the language you are already using in your business and maybe even add the lastfour digits of your account numbers to your bank and credit card accounts. For example, instead of the default account name “Checking” use a name like “Chase Operating account – 1234.”
4. Connect your bank accounts: 
• Go to the "Banking” Center by selecting “Transactions” and then” “Banking Transactions” and select "Link Account." 
• Follow the prompts to link each of your bank and credit cards accounts to QBO for easy transaction entry and reconciliation. Check your planning notes to determine what your start date will be for importing your transactions. 
5. Add your products and services: 
• Go to the "Sales" menu and select "Products and Services." 
• Add your products and services, including prices and descriptions, to streamline invoicing and sales tracking. Go back to your planning notes and make sure your products are set up in a way that you can track your products and/or services in a way that is meaningful and works for your type of business. If you have inventory, you should make sure your products are posting to inventory when you are purchasing and posting to the correct cost of goods sold and income account when selling that inventory. 
6. Set up customers and vendors: 
• Go to the "Sales" menu and select "Customers" to add your customers. 
• Your customer list should includecompanynames,addresses andcontact name. This will make your invoices clearer and your team more knowledgeable when communicating with your customers. 
• Go to the "Expenses" menu and select "Vendors" to add your vendors. 
• Your vendor list should include addresses and tax ID numbers for any vendors that you would be sending 1099’s to.  
7. Customize your invoices and forms: 
• Go to the "Sales" menu and select "Customize" to customize your invoices, estimates, and other forms to match your branding and business needs. 
• These forms are the face of your company. Be sure to brand them to the best of your ability! You'll have the option to upload a logo, pick a template that represents your vibe and customize it with your company colors.
8. Set up sales tax (if needed): 
• Go to the "Taxes" menu and select "Sales Tax" to set up sales tax for your company. 
• The automated sales tax option is a great way to track your sales tax. This automation can be based on billing address or if you ship product, it can be based on shipping address. This makes collecting and filing sales tax much, much easier. 
9. Review and reconcile transactions regularly: 
• Determine what your schedule will be for not only sending out invoices to customers and paying your bills, but also when you will add your banking activity from the banking center and reconcile the corresponding accounts. Best practice is to regularly review your transactions and reconcile your accounts to ensure accuracy, which in turn helps you to keep your fingers on the pulse of the business. 
10. Invite your accountant: 
• Go to the "Settings" menu and select "Manage Users." Make sure to toggle over to the“Accountant tab!” 
• Invite your accountant to collaborate on your QBO account for easier financial management and reporting. 
• Don’t have an accountant? May we suggest... ourselves! 🙋‍♀️ Schedule a Meet & Greet here!  
11. Explore additional features & connect your apps: 
• QuickBooks Online offers various features to help you manage your business finances, such as reports, payroll, and inventory management. Explore these features to see how they can benefit your business. 
• If you’re using a CRM or ERP app that connects to QBO, now’s the time to sync it and determine how it interacts with the software. Make sure you outline a workflow and systems and processes to manage the sync and ensure accurate data is coming in!  

We hope this gives you a good foundation on how to set up your QBO file! While QBO is user-friendly, there is still a lot of planning, set-up, and ongoing maintenance required to ensure you are getting good, accurate financial information! We’ve been doing this long enough to tell you that “winging it” is not the optimal plan and can result in a financial mess down the road (forbothyour QBO file, and for your wallet!)  

If you run into any hurdles or need some help with this process, give us a call or schedule a Meet & Greet! Our services include basic support to full QuickBooks file builds to training to ongoing accounting services... basically anything but annual tax filings, but don’t worry, we’ve got referrals for that!  

And for a final, closing thought... Businesses with a solid plan & accounting foundation grow 30% faster than those without those resources... so make sure you set up your QBO file right the first time so you can hop aboard that growth train asap!  

Until next time!