We hear a lot these days about online accounting options. You know . . . you can do your books with your smart phone while you are crawling under someone’s house looking at their plumbing. Obviously, that’s the best thing ever, right? Ok, that was sarcastic but it is a stupid TV commercial. And besides, I am sarcastic.
Is it a good idea to use an online accounting app for your business? I think a lot of accountants would say no. I’m usually one of them. However, I’d suggest you consider the possibility that there are some cases where it is the right choice. So far, in 2016, I’d say those cases are somewhat narrow, but they exist.
We need to start out with a clear statement. Desktop accounting applications have far, far more features and they are much faster for sustained data entry. But, hey. You can’t haul that desktop and dual monitor system under that house’s crawl space.
There are situations where an online accounting app might be best for your small business.
Criteria for Online Accounting Usage
With that said, these are the situations where online accounting might be better than desktop options:
- You absolutely need remote access and the remote access locations have decent internet access.
- You need multiple people (users) working on your books.
- You do not need high end features.
- You really want free or you are not that concerned about cost as long as it just dribbles out of your account each month.
- And, you are willing or even eager to have your accounting hooked to your checking and credit cards.
If you need to use your phone, tablet or laptop away from home/business then an online accounting is probably the way to go. Not everywhere has cell service nor decent internet access. For some people an online app might be great but it doesn’t matter if they don’t have consistent, fast internet access. Who needs an accounting system that makes it hard to keep your books up to date? No one I’ve met in my 30+ year career.
Cost per user
Let’s use QuickBooks for an example here, since it is the industry leader and offers both well established desktop options and newer online options. I am going to use retail pricing for this comparison, but you should never pay retail for QuickBooks. They always have sales on QuickBooks Online and Amazon has better pricing on desktop versions.
Let’s look at QuickBooks Pro and QuickBooks Online Plus. They are, I think, the most comparable. That said, if you are going to get QuickBooks desktop, the Accountant Edition is way better!
If you are going to buy QuickBooks Pro for one user, the retail price is $300 and you can use it for 3 years. At that point, the company quits supporting it and you should buy a new version. That means $100/year per user. Really, that is reasonable for a small business.
However, if you have say 5 users, you need a license for each one. Now you are paying $500/year. (Also, only three users can be in at one time.)
You should recognize that you are operating with the same version all this time. No new features for you during the three years between purchases. Online apps continuously roll out new features to the apps. However, online apps need more new features and you might not need improvements to your desktop software.
If you have one user on QBO Plus, you are playing $40/month or $480 a year. Ok, I’m cheap. I think that is a lot!
However, if you have five users, you are still paying the same $40/month. And all five can be in the app at once. If you have a lot of users, you might have a financial incentive to consider QBO.
Some accountants are pretty good about being one of those users and just getting in to find what they need for you taxes. Less getting to the accountant’s office with a mysteriously blank jump drive. Yes, that happens to everyone. Not just you.
This is not meant to be a review of QBO. I’ll just warn you that if you are familiar with QB desktop and you want or need higher end features like detailed inventory reporting, you need to carefully evaluate QBO before you assume it can do what you are used to. The features tend to be much lighter weight than the same features in QB desktop. Those checkmarks in feature lists can be misleading to someone that needs the feature the way it works on desktop.
By nature, desktop is faster for data entry. That makes sense, the information isn’t traveling as far. If you are one of those speedy people who can enter things really fast, you will hate data entry on QBO. Of course, they are trying to cut down on the data entry needed. They will tell you that data entry is out of style. Yeah. Right. Still, QBO is slow.
Free or Monthly Charges
Wait a minute!! I’ve been complaining about online, aka QBO, being so expensive. Now I’m saying FREE? What the heck? Well, there are other online accounting options. It’s called WAVE Accounting and it’s pretty interesting. The basic functions are free. There are ads but they are kind of okay ads because they are for products and services for small businesses. Payroll and premium support are available for fees.
I’ve used it. In fact I continue to a little. However, I’ve never used it as a full-featured, double entry system. It is meant to be used that way, I just haven’t so I don’t have the kind of solid understanding I’d like to have to write about it.
Wave’s invoicing features, however, are wonderful. I love them!! You can do an invoice quickly and you can make them recurring. I was losing a lot of money on reimbursable client expenses that I wasn’t charging for because I hadn’t set up a system. Yes. I know. I’m an accountant. The Cobbler’s Kids story rules my life. Once I set it up one time in Wave I started being paid for those expenses and annual charges. When I was sort of forced to move 7 Mile’s books to QBO I did not find the invoicing as useful. Yes, you can still make recurring invoices that are automatically emailed. BUT for example I didn’t realize that when I put in a due date, that on that date QBO would sent my client a PAST DUE notice automatically without sending me one. I’d like to publically apologize to that client!! I do not appreciate software that makes me more rude than I intend to be. I can do rude all on my own when I want.
WAVE is worth keeping an eye on. And it might be for you now.
If you choose QuickBooks Online, it will charge your card or bank account every month for the rest of your life. Actually, longer, I assume. I’m worried about finding someone to cut off all these automatic charges when I die!
Bank Account Connections
The whole point of online accounting is, I think, to turn accounting upside down. I’m a middle aged accountant. I want my world right side up. And only right side up.
I’ve always encouraged QB desktop users to print their checks. That records the checks in the accounting program before they even end up in the mail to the vendor. Awesome! You can then figure out from your QB balance if you need, for example, to transfer money from savings or an operating loan. You can avoid those huge NSF check charges.
You can still print checks from QBO. However, both QBO and WAVE as well as other online apps, specialize in getting your transactions after the fact from your bank and credit card accounts. They hook up to your banks’ computers and pull in the transactions. That works out pretty close to real-time for ATM, credit card, and debit card transactions. In fact, for those type of transactions it is great! They are easy to forget, after all. However, for checks, they do not come into your accounting software until they clear your bank. I guess better late than never is one way to think about it. And of course you can record the checks and then match them to the incoming bank transactions. That would be the best way to do it.
But I know how insanely busy small business owners are. It’s just going to be so much easier to record it when the transaction hits the bank. And that makes my world upside down. I’ll get over it. Maybe.
The bank connections in the online apps make getting their accounting done something some small business owners can live with. Really, it has that much impact for some people. I love seeing that happen! For those who can’t sleep worrying about security concerns related to that connection, you can use online apps without the bank connections and just enter everything. But that is kind of like using your horse to pull your horse trailer. Not the builder’s intent.
You have figured out long before now that I’m not an unrestricted fan of online accounting apps. But they have their uses. And they will continue to improve. They are the future of small business accounting. We will be stuck with them. I hope you now have a better idea of whether or not they are a good choice for your business’ present.