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Quickbooks Cloud Accounting

As a part of my ongoing series of articles on cloud accounting programs for small businesses, lets take a look at QuickBooks Online. It’s been around for awhile, it’s from a company that has a big presence in the small business accounting market, it’s one you are going to run into often. Intuit is making a very strong marketing push, and ProAdvisors have more and more clients coming to them for QuickBooks Online (QBO) support.

We’ve talked about various aspects of QuickBooks Online in this blog already, but I want to look at the product within the framework that I’m using to look at multiple online accounting products. Similar to my review of Wave, I’ll do this in two parts: An overview, with some impressions on how the product works, and then a more detailed look (in an upcoming article) that lists the specific features it provides.

It is important to say one thing (which I’ve said often) right up front. This is a different product than QuickBooks Desktop. Don’t let the “QuickBooks” name guide how you view this product – it is not the same, it doesn’t have the same roots, it works differently. I think that a lot of the complaints you see about it are based just on that – people are used to QuickBooks Desktop and expect this to be exactly the same, just in a browser. It isn’t, and that isn’t necessarily bad. I expect an online accounting product to work differently than a PC desktop product.

Having said that, I do believe that there are a number of things that they can improve on.

QuickBooks Online is a business accounting program – it doesn’t include features for “personal” accounting like Wave (which I reviewed here). In general it is better suited towards smaller “service” oriented businesses – if your business has to manage inventory you probably won’t use this product (although there are good inventory add-on products work with it). There are several versions – Simple Start, Essentials and Plus, each with an increasing palette of options. I won’t be talking about the Simple Start edition as it is very limited and won’t be useful to any but the smallest of businesses.

The intriguing and differentiating features with QuickBooks Online are (when comparing to other online accounting products):

  • Class AND Location tracking – the ability to generate reports not only by department (class) but also by store or territory (location). Note that the Location feature is only found in QuickBooks Online Plus.
  • Invoice Automation – the ability to automatically create invoices on a regular schedule – you can either have a reminder generated or have them emailed automatically.
  • Unlimited number of special users at no charge – “reports only” and “time entry only” users.
  • The Income List and Money Bar, providing you with some basic dashboard functionality and a way to easily work with sales transactions.
  • Downloaded Transactions for easy reconciliation with your bank and credit card accounts.

These are just a few features that stood out for me when I started working with QuickBooks Online. Everyone probably has their own list.

So, let’s take a look. This is the first of two parts – I’ll show you some interesting features (and issues) in this article, and in the next article I’ll get into some of the nitty-gritty details that accounting professionals are interested in.

Class AND Location Tracking

There are many ways that you can use these two features, I’ll just give you some examples. I do like the ability to have these two ways of categorizing transactions.

Class tracking provides you with a way to categorize income and expenses. You have the ability to set the class per detail line in transactions, so you can split one bill (for instance) into different classes. There are a number of reports that relate to classes, such as the Profit and Loss by Class and the Sales by Class Summary (and Detail). Several sales and transaction reports allow you to group lines by class. A Class is just going to be a name, without any additional information.

Quickbooks cloud accounting

Location tracking (only in the Plus version) is another way to separate information. One of the nice features here is that you can rename this feature – instead of calling it “Location” (which I found a bit confusing) you can call it “Business”, “Department”, “Division”, “Property”, “Store” or “Territory”. Another difference from the Class feature is that you can only assign one location to an entire transaction, rather than splitting the lines of a transaction to different locations. Several reports relate to classes, such as the Profit and Loss by Location and Sales by Location Summary (and Detail). Several sales and transaction reports allow you to group lines by location. Some transactions allow you to show just records for a particular location, such as the Deposits screen showing you only customer payments for a particular location. Locations can be assigned for all transactions except transfers.

You have several options for each Location that you set up, which support the concept of using this for separate business locations or stores. This is a very nice feature.

QuickBooks Online Location

If you are using both Location and Class tracking you could use Location tracking to work with transactions and see reports for a functional business unit (such as a store or department) that is a wholly separate unit. Class tracking would then be used for areas of interest across all business units. I could see an income statement for all activity at my Davis store versus my Pleasanton store (locations), I could also see an income statement for my business consulting operations (separate from installation/product sales) across all of my stores.

Invoice Automation

This is a really interesting feature that can save some kinds of businesses a huge amount of work. You can create “template” invoice transactions that can be generated and delivered on a schedule, automatically, without your having to approve each one, or only after approval. If your business uses recurring billing transactions this is a major benefit.

Note that much of what I’m going to show here can be done for a variety of transactions, OTHER than the automated delivery portion.

First, let’s look at your preferences for Invoice Automation. As you can see, the system can be set to remind you when it is time to issue a recurring invoice, create the invoice and tell you that it was sent, or to just send it without notifying you. You also control when these invoices will be generated each month.

QuickBooks Online Invoice Automation Preferences

Let’s take a look at an invoice template for an invoice that I want to send out every month. Click on the graphic to see a larger view, I have pointed out a number of interesting features that relate to the options you have in creating an invoice in QuickBooks Online.

QuickBooks Online Invoice Template

You can set the schedule for each invoice template. There are a number of nice features here, such as the ability to get an alert when the last invoice in a series is sent out.

Invoice Template Schedule Options I think that Intuit has done a good job for this kind of recurring transaction. It is a very useful feature.

Unlimited Special Users

Different online accounting systems have different ways of charging for access. Some charge by the user, some by the company file (and some don’t charge at all, such as Wave). QuickBooks Online charges per user login – but there is a VERY nice option for two kinds of “special users” that you are NOT charged for – “report only” and “time tracking” users.

Special Users

A Reports only user can only see reports in the system. A Time Tracking only user just has the ability to enter time sheets without having access to other features.

You won’t pay for EITHER of these special user accounts, which is very helpful. If you have a per-user fee system like QuickBooks Online, this is a good feature.

The Income List

I won’t go into all the details of how to work with the income list, as Stacy Kildal covered much of this in her excellent article (The QuickBooks Online Income List). It is a great place to work with your sales and estimate transactions. What’s new since Stacy’s article is the addition of the money bar, a colored dashboard-like graphic at the top that summarizes important information and makes it easy to filter the transactions in the income list.

Simply click one of the colored blocks in the money bar, and the income list shows you the transactions that comprise that category.

QuickBooks Online Money Bar

I really like these kinds of features. Graphic representations of important information make it easier to get an overall understanding of your business status. Integrating the graphics (that is, clicking on the icon or block) with the user interface so that it performs an obvious function is a LOT easier than having to search for options or clicking on dropdown lists. I hope that we see more of this kind of navigation/summarization feature in the future.

Downloaded Transactions

Reconciling your bank account and credit card account with your online accounting system is a crucial function, and Intuit has recently revamped this process with the Download Transactions feature. I won’t go into detail on this here – the function works very smoothly and lets you efficiently add transactions from your online accounts, or match them with existing accounting transactions. The program lets you easily apply an action to a group of records.

QuickBooks Downloaded Transactions

Your transactions are downloaded to your file every night automatically, you don’t have to initiate the process each time you want to get your transaction details. The initial setup is simple. One important feature is that the client can set this up (entering their login info for the bank/card account), then an accountant user can see the downloaded transactions but will NOT need to have the client’s bank/card account login information.


This is one of the areas where QuickBooks Online is showing its age. Navigating (how you get around in the product) is a bit of a chore sometimes. It isn’t always obvious where to find some things, it is hard to get back to where you started, the navigation interface is a bit confused.

Your main navigation aid is the row of tabs across the top. Within each tab there is a sub menu, running horizontally. Many of these menu items have, in turn, a dropdown menu. If I resize the browser window to make it narrower this tab/menu arrangement doesn’t adjust (well, it might a bit, but not very much) so you lose your main navigation aid.

QuickBooks Online navigation

On the right side of the menu is the dreaded “More” option. I would guess that Intuit found that they couldn’t keep adding more tabs, or menu items in a tab, so if additional features are added to an area they get shoved into “More”.

One good feature, you’ll note that there is a “Rearrange Menu” option at the bottom of “More”, this allows you to change the menu to move features that you commonly use off of “More” onto the main menu.

As I was learning the product I often found myself hunting through the menus trying to find a feature. It isn’t always simple.

Another annoyance is that in more complicated views, such as editing templates for recurring invoices, important buttons are at the bottom of the page, often where you can’t see them. Buttons like “Save” should be at the top, in a consistent and obvious location, rather than “below the fold” where you have to scroll down to find them.

Something else that I don’t like – you can’t always go back easily to where you left off. Let me use an example – I’m going to add several “Location” records. I select the Company tab, the More menu, and select Lists. I have a window showing the lists, I click on a link for Location List (wasn’t that a LOT of clicks to get to this place?).  To add a “location” record I click the New button (if I have a lot of locations already, I have to scroll down to the bottom of the list to find this button). Click on New and I get this window to add the location.

QuickBooks Online navigation confusion

OK, great, I enter the info and click Save. The screen refreshes and shows me the same info as above – did my record get added? I don’t see any confirmation. I don’t see the list. I’m left guessing. OK, I’ll assume that it was added – if I want to add another I can from here (that is convenient). But if I want to see this list again, I don’t have an easy way to navigate back to where I was at just a moment ago. If I’ve added several locations, to see the location list I have to again select “More” and “Lists” and click the proper link on the List page. I don’t like this.

In some cases I ran into situations where I wasn’t sure WHAT button to click to accomplish something. I will admit that there is context-sensitive help throughout the system (which is good), but it shouldn’t be necessary to click on Help to figure these things out. For example, I’m in the Manage Users screen and I want to add a “time tracking only” user. Which button do I click?

Navigation Confusion

There is certainly room for improvement here.

Inventory is Terrible

In the past, one of the knocks against QuickBooks Online was the lack of inventory control. A year or two ago (I don’t recall exactly when, they still list it as “new” on the sales website) Intuit added this as a feature in the Plus edition.

I know that I tend to be an “inventory snob”, because that is an area that I’ve specialized in for a long time. But, even so, the current QuickBooks Online inventory feature is terrible. I will point out that there are add-on products for inventory, such as SOS Inventory, that you can use to manage inventory in QuickBooks Online.

Enable inventory tracking if you want to track the quantity on hand for items in the item list. QuickBooks Online tracks cost using the FIFO method.

Enable QuickBooks Online Inventory Tracking

Once you enable this feature, any item in your Products and Services List can be turned into an inventory item where QuickBooks Online will track the quantity on hand. Note that once you turn this on, you can’t turn it off. If you later decide that you don’t want to track the quantity on hand for this item then you need to delete the item (which makes it inactive, not truly deleting it) and create a new item to take its place.

QuickBooks Online inventory tracking

You can change the quantity on hand in three ways – receiving a quantity in a bill, editing the initial quantity on hand when you enable inventory tracking for an item, or clicking the update button when editing the item at a later date.

Why don’t I like this feature?

  • If you are enabling inventory tracking for an item you can enter the initial quantity on hand at that time. I know that this is convenient (and QuickBooks Desktop works the same way), but I really don’t like this. You are creating a phantom adjustment transaction that is posting the value to Opening Balance Equity, and all to often people don’t realize that there is a value being posted to this account that you have to adjust out later. The “cost” of this transaction is based on the Cost field in the record at this time, and all to often people won’t have the correct value there at the time they are enabling this feature for an item.
  • There is almost NO reporting on inventory items. The only report I’ve found is the Products and Services List, which shows the quantity on hand and the cost of the item. Unfortunately, this “cost” value is just the cost that you enter manually in the item record – it has nothing to do with the FIFO cost, average cost, last purchase cost – it is a minimally useful value. There is no inventory valuation or stock status report, FIFO audit report, nothing. Some reports can be edited to add a “Qty” column, but often that isn’t available in a report where I want it.
    QuickBooks Online Product/Service List for Inventory Tracking
  • Although QBO tells you how many you have on hand when you are selling an item in an invoice or sales receipt, there is no form of “reorder point” or warning when you are running low on an item. You also can sell more than you have without any trouble. Selling to a negative quantity seems to be a bit better behaved than QuickBooks Desktop (I only spent a few moments looking at this), as it will adjust inventory assets by the last cost used on a FIFO basis.
  • Other than in the simplest of situations there is no way to predict what the cost of a sales transaction will be. There is no way to see your FIFO cost lots, so if you see a COGS value from a sales transaction that looks wrong, you have no way of tracing that back.

In general, you want to track inventory items to be able to track availability of items, audit for problems like theft or loss, manage your costs in relation to selling prices, and so forth; all while accurately updating your financial statements. The inventory feature in QuickBooks Online doesn’t really provide any real assistance with this.

Looking Forward

QuickBooks Online has some very good features, and for the right kind of business situation it is an excellent product. Intuit certainly is emphasizing this now, and I’m certain that we’ll see improvements and new capabilities in the future.

This has been a quick look at QuickBooks Online to give you a feeling for how the product works, and what type of business it can work for. In my next article on QuickBooks Online we’ll take a look at the details of what the product offers.

This post was written by Charlie RussellThanks to MB Raimondi for her significant contributions to this article.