Updated on October 14, 2024

Before planning to setup your new accounting system

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Before planning to setup your new accounting system

Before planning to setup your new accounting system, we will discuss what the accounting system is and what accounting is responsible for. You’ll discover that the QuickBooks Setup process makes a lot more sense if you comprehend the big picture from the start.

What accounting is used for?

Consider what accountants do. Most people would agree that accounting does the following four significant items:

  • Calculates profit and loss
  • Describes a company’s financial position (its assets, liabilities, and net worth)
  • Accounts for assets, liabilities, and owner’s equity are recorded in detail.
  • Provides financial data to stakeholders, particularly management

What the accounting system is?

Now consider what accounting systems, or at least accounting systems for small businesses, normally do:

  • Create financial statements, such as income statements, balance sheets, and other accounting reports.
  • Create company forms, such as checks, paychecks, invoices, and customer statements.
  • Keep detailed records of major accounts, such as cash, accounts receivable (amounts that consumers owe a company), accounts payable (amounts that a company owes its vendors), inventory goods, and other assets.
  • Perform specialist handling of information. In the publishing industry, for instance, publishers frequently pay royalties to authors. Consequently, book publishers’ accounting systems must often account for royalties.

How QuickBooks operates

Once you have an understanding of what accounting is and what accounting systems typically do, you can comprehend how QuickBooks performs:

  • Generating financial statements
  • Numerous common business forms, including checks, paychecks, customer invoices, customer statements, credit memos, and purchase orders, are generated by this system.
  • Simple settings for keeping detailed records of cash, accounts receivable, accounts payable, and inventory.


Here’s Quickbooks limit feature

But QuickBooks does three out of the four things that accounting systems do, but it doesn’t do everything. QuickBooks isn’t always a complete solution for accounting. So, be careful about what you think will happen. Most of the time, you also have to find ways around some of your special accounting needs.

Users and businesses have a lot of freedom with QuickBooks. In the same way as the last example, a book publisher can use QuickBooks to do a lot of what it needs to do for accounting royalties. As the business is setting up QuickBooks, this royalty accounting work just needs a bit of tinkering.

But QuickBooks, or at least the most popular versions of it, has a couple of major flaws:

  1. QuickBooks Pro doesn’t have a good way to keep track of how inventory is made. Simple manufacturing accounting is supported by both QuickBooks Premier and QuickBooks Enterprise Solutions. The Advance Inventory feature of QuickBooks Enterprise Solutions adds some extra inventory management features, such as tracking of multiple inventory sites, lot and serial numbers, and FIFO costing. These versions of QuickBooks help you keep track of the process of turning raw materials into finished goods. They also help you deal with some of the real-world problems that come up with inventory.
  2. When you need to store inventory in more than one place, only QuickBooks Enterprise Solutions can help. In other words, QuickBooks Pro and QuickBooks Premier just show, for example, that you have 3,000 widgets. It doesn’t let you keep track of the fact that you have 1,000 widgets in the warehouse, 500 widgets at store A, and 1,500 widgets at store B.

Even though QuickBooks might not be a complete solution and might not handle inventory the way you want or need, it is still a very good one. No, that’s not quite strong enough. What QuickBooks does, it does very well.

Finding the right accounting solution is all about finding the right balance, just like a lot of other things in life. When choosing accounting software, you might think about how easy it is to use, how portable it is, how much it costs, how secure your data is, how good the customer service is, and how well it works with other business tools. I use the desktop version of QuickBooks for my business because it has all the features I need.

The desktop version of QuickBooks is much more powerful than the online version (or other cloud-based systems). Still, working with an outside accountant or bookkeeper is a lot easier with the online version. So, the online version of QuickBooks is a good choice for clients who really need help from a professional but don’t need advanced desktop features like job costing.

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