Thinking of making the change from QuickBooks Pro, Premier, Enterprise or even Mac to QuickBooks Online? Read this first.
I want to say, if you are considering this switch: YAY! Most of the people in the QuickBooks community know that I’m sort of a fan, so I’m always excited to hear about one of my colleagues considering it – regardless of whether if it’s for their practice or a client file.
As much as I love QuickBooks Online (QBO), as I mentioned in a previous article here, QuickBooks Desktop (QBDT) is still my first love, and I just want everyone to be happy so there are some considerations that should be taken into account before making the change. This might be a long one, but I think it’s important stuff. Ready? Good! Let’s begin.
The first thing we need to take into account is whether QuickBooks Online is a good fit or not. I’ll be the first one to admit that sometimes, QBO really isn’t the best solution (but I do try very hard to see if I can get it to work for anyone). If any of the following are a must have, you’ll either need to look to the Intuit App Center or workarounds (if available, I’ve indicated as such next to each feature) to assist, or you should stick with QBDT:
- Progress Invoicing (I have a work around)
- Receiving Partial Purchase Orders (I have a work around for this, too)
- Job Costing
- Online Bill Pay (Bill.com can manage this as an option)
- Sales Orders
- Inventory Assemblies (SOS Inventory or DucoTrax are both options)
- IIF import (Transaction Pro Importer can do this)
- Price Levels (Products/Services are used for this)
- Using Letters, i.e.: Collection Letters, Credit Letters, etc.
Things to Consider When Converting
Here is a breakdown of some important things in QuickBooks Desktop to consider – things to prepare for, things that may not get converted or may get converted in a specific way that may not be expected from someone new to QBO.
File Size – if your file is over 200MB, you’ll need to condense it or create a period copy before converting, or only import lists.
Editors Update (5/13/2013): If you use the newer conversion method as described in this article, the limitations are different. With QuickBooks 2010 or later the file size is not an issue, the limit is the number of transactions. If you have more than 75,000 transactions then you want to condense your file.
Reporting – while QBO does not have as many “canned”, or default reports as QBDT, generally those that aren’t can be easily created and memorized. What’s really cool is that any of these reports may be added to a group and the scheduled to be emailed to anyone that needs them on a regular basis automatically, and you can choose to have these reports sent as Excel attachment.
Budgets – any budgets set up in QBDT will not convert. If you’re using QBO Plus, you’ll be able to create new budgets.
Closing Date Exceptions – while the closing date and password ARE converted, once you make the change the accumulated exceptions will not show. QBO will begin to track new exceptions.
Custom Fields on Lists – if the QBDT file is using custom fields for customers, vendors, employees or items, these will not convert. QBO does have 3 custom fields that can be added to forms such as Invoices or Sales Receipts.
Inactive Status – if there are inactive elements in ANY list they will be converted as active.
Customer information – Price Levels, Tax Items, Sales Rep, Customer Type, Credit Limits and Job Status are not converted.
Customer Message List – while the original message will still exist, and you can still add a customer message on transactions, there isn’t a drop down menu to choose from. Each message has to be entered manually.
Employees/Payroll – all employee contact information is retained, but payroll is not. No employee payroll information such as filing status, rates, etc. is converted, or payroll items. Paychecks/liability payments are converted as regular checks. The details on these transactions are not converted, and liability refunds, adjustments, opening balance transactions are converted as Journal Entries.
Editors Update (5/13/2013): As of February 2013 QuickBooks now will import SOME payroll information if you have an active payroll subscription. Employees, taxes, and payroll items convert, but prior payroll period info will not.
Reconciliations – any existing reconciliations will be lost – the easy way to fix this is to make sure that the accounts are reconciled to current in QBDT prior to conversion, then do one large reconciliation once you have converted to QBO.
Existing Estimates & Purchase Orders – QBO Plus has the ability to create Estimates and POs, but existing QBDT Purchase Orders will not be converted to QBO.
Invoices – all of the invoices will be converted (unless they’re pending) but some information will not convert as you might expect. PO Number will be Custom Field 1, Sales Rep will be Custom Field 2, subtotals won’t calculate, Sales Tax will be a line in the invoice and progress invoice columns won’t convert.
Statement Charges are available in QBO, but existing QBDT Statement Charges will transfer to QBO as Invoices.
Group Items – QBO doesn’t have Group Items, but all of the components of the Group Items will transfer and the existing transactions that use them will show each item as a line in the transaction. The top and bottom lines are zero amount lines – the top shows the group name and the bottom line will show the description. What does this mean? That if you need to resend an invoice with a group item, the customer will see all of the components included.
Items – these are called Products & Services in QBO and you don’t have different types. If you’re using QBO Plus, you can turn inventory on, and you can also tell QBO that you purchase the product or service from a Vendor, making it double sided (or two sided, as some people call it).
Audit Trail – the QBDT Audit Trail does not get converted. You’ll still have this in your original QBDT file if it ever comes up, and I think QBO has a more useful way of tracking what goes on with it’s Activity Log. It shows user login/logout, list changes, transaction edits, even when add-ons access or when the Downloaded Transactions function pulls in bank info.
Memorized Transactions – these will not convert. Fortunately, QBO has something I think is better – Recurring Transactions. You can set these up to be created automatically and even have Invoices or Sales Receipts (great with Intuit Merchant Services for recurring billing!) sent to the client every month automatically. This is what I do for my clients that pay a flat fee every month for services and OH MY GOSH I LOVE IT.
Online Banking – The connections set up in QBDT won’t transfer, but it’s easy to reconnect with QBO’s Downloaded Transactions (DTX). I know I’m not alone in this when I say DTX is superior to the QBDT Online Banking. The ability to see all connected accounts at once and deal with 100 transactions at a time makes this process so much more efficient. The fact that you can simply click a tab to see already accepted transactions – and easily fix client mis-postings – is icing on the cake!
Users/Permissions – Existing QBDT user logins won’t convert. Once you import into QBO, you’ll need to invite each user. Another feature that QBO has and QBDT doesn’t is the ability to have as many Time Tracking and/or Report Only users as you need, and these don’t count towards the subscription defined user limit. Great for entities with Board Members that may only need to view reports!
While QBO does do basic inventory tracking, you should be aware of how existing inventory transactions are handled in conversion from QBDT. This surprises MANY people.
When you convert, new lines are created to show the effect the transaction made on the inventory asset account or the cost of goods sold account. On invoices, sales receipts credit memos, bills, credit card transactions that contain inventory items, QBO will create two lines after each inventory line that will show the asset and COG amounts that use 2 new Sub Items: “COGS” and “Inventory Asset”, which have the same description as the parent inventory item.
This is going to cause Cash Basis reports with Cost of Goods amount to be different for any unpaid or partially paid inventory items on them, but the amount for paid in full inventory transactions (or non-inventory) transactions will be the same. Any accrual reports won’t be affected.
What I do for clients with inventory is start QBO fresh from the beginning of the most recent period. I can enter opening balances, open invoices, bills, estimates and purchase orders and set up the inventory directly into QBO so we have clean data right from the start.
Note that when you convert you have the option of importing lists only or importing your QBDT file. Even if you do decide to convert, you can still import list information into QBO after the conversion:
It is also important to note that once you create a QBO company you have 60 days to import QBDT data; and you can do it over and over again during those 60 days. Any existing data will be overwritten, so if you don’t like the way that your import worked the first time, you can tweak your QBDT data and try again.
What I have always recommended when making the change is to run QBDT and QBO parallel for the first 30 days (which are free for QBO), to make sure it’s a good fit. Yes, the time it takes to do the double entry is a bit of a pain, but it’s much less so than just jumping in and finding out a few weeks later that QBO really isn’t going work. And converting from QBO to QBDT is an entirely different article!
For a step by step walk through of the new conversion process, check out my latest post on AccoutingWEB.com.