Excel vs QBO

Why should I switch from Excel to Quickbooks?

Why should I switch from Excel to Quickbooks?

It’s a common story I hear from clients:

I keep track of my income and expenses in Excel.

I have all my expenses in Excel and I use Stripe to record my income.

While Excel is a powerful tool (I use it everyday), it isn’t ideal for bookkeeping.

Small business owners should switch from Microsoft Excel to QuickBooks Online for a number of reasons:

1. QuickBooks saves time and money:

Excel requires you to manually record each of your expenses into a spreadsheet. This process is time-consuming, not to mention the time spent setting up your spreadsheet and categorizing anything you have questions on. (You should always categorize your expenses, not just record them).

In addition, not pulling your information into a profit and loss record and balance sheet is going to prompt your tax accountant to ask for more data. This requires them to spend additional time on your taxes and increases your tax prep fees. While QuickBooks costs a monthly fee, the decrease in time spent on your books more than makes up for the nominal expense.

2. Increased accuracy and reporting

QuickBooks is designed as an accounting system and records transactions through double-entry accounting. This means the software records the expense and the decrease in your bank account.

QuickBooks also provides a manner for you to generate a variety of reports. These reports aid you in making business decisions instead of depending only on your bank balance for insight.

With QuickBooks, you can look at your business on a monthly, quarterly, or yearly basis. We recommend clients pull these reports each month to determine and understand any business cycles they might have.

3. Sharing data with your tax professional

Through a simple email invite, you can grant your tax professional access to your QuickBooks. This helps you work with your professional and saves you time pulling specific data they request. With interactive data at their fingertips, a tax professional should be able to find tax savings, provide advice, and discuss planning opportunities with you.

TL;DR: We recommend QuickBooks Online for almost every small business owner once they begin to generate income.

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I made some money, now what?

Alright – so you are a freelancer, maybe working on the side, or a small business owner making some money, which is awesome. The downside is you need to pay taxes on that income, and you need to figure out what you owe.

Do you need to make estimated tax payments?

If you fall into both of the following categories you had better pay up:

  • You are expecting to owe at least $1,000 or
  • Your withholding will be less than: the smaller of 90% of your 2015 taxes or 100% of your 2014 taxes.

I am not going to cover the guidelines if you are a farmer or a fisherman. The important part is that you can usually pay in 100% of your 2015 taxes and be safe unless you hit $150,000 in income. Then it is 110% of your 2015 taxes. Now, if your income moves around a lot, and you have time to calculate it, you can take the option of paying in 90% of your 2016 taxes.

You have 2 choices of when to pay your taxes:, either 100% on April 15, 2016 or in equal payments on:

  • April 15, 2016
  • June 15, 2016
  • Sep. 15th 2016
  • Jan. 15, 2017

If you want to pay in 100% of your 2015 taxes, you are done with your estimate calculation and you can pay online: www.irs.gov/payments

That wasn’t too hard, was it?

Uh, wait. What if it is my first year in business?

Well, then we have to do a bit of math or use a friendly app. Each quarter you will need to pull your net profit from your accounting software(if you don’t have an accounting software, please talk to an accountant), and you will need to calculate your tax on that net profit.

You can either do the math yourself, or there are various apps out there that will do it for you:

  • Tax Calculator by TaxSlayer – Apple App Store, Google play or Web App
  • Total Tax Insights by AICPA – Web App

I suggest using one of the apps if you don’t want to learn the details. If you do want to learn the details check out 2016 Form 1040-ES.

As always, please consult your tax advisor.

TL;DR: Pay in 100%(110%) of your 2015 taxes, or use an app to calculate your taxes for you. Better yet, get a tax advisor.