QuickBooks Self-Employed is aimed at the smallest of businesses, the one-person business that doesn’t have any employees. Businesses that don’t have inventory, that in the past would have just held all their receipts in a shoe box but who now probably do all their business transactions through a mobile device. I’ve found that most accounting professionals aren’t really familiar with this product, but it could be very important to them. Certainly, it is an important product to Intuit.
Let’s talk about how this product fits within Intuit’s long-term vision, and why I think this product could be important to accountants.
This article is part of my series on Intuit and the future of QuickBooks. The articles are:
- Intuit’s Long-Term Vision
- QuickBooks Online Is the Future for Intuit
- QuickBooks Online Accountant Connects Them All
- Why QuickBooks Self-Employed Is Important to Accountants (this article)
- Is QuickBooks Desktop Dead?
I wrote about QuickBooks Self-Employed back in 2015, shortly after it was released. The product has been updated quite a bit since that time, so I should probably write an updated article. This article is not a review of the product, instead I’m going to explain why Intuit believes that this is a very important product in the QuickBooks ecosystem, and why accountant professionals should be paying attention to it.
QuickBooks Self-Employed is not a full accounting system. Basically it is just a bank feed that funnels information into some tax documents – a description that is pretty severe and that the folks at Intuit will not be happy with. QuickBooks Self-Employed is aimed at the smallest of businesses, ones that don’t have employees, and at individuals who may be part timers or contract workers. People who we used to think of as keeping their receipts in a shoebox, although now people handle all that stuff in their smart phone instead. It doesn’t work like an accounting program – it doesn’t have a “chart of accounts,” it can’t track inventory. It does have some nice features, such as online invoicing and a very interesting mileage tracking feature.
When I talk to accounting professionals about this product the reactions are universally the same – they don’t see that there is any value to this product, they wonder why anyone would use this kind of product, they would never recommend this product.
However, Intuit is putting a lot of resources into developing and expanding QuickBooks Self-Employed, and for certain kinds of accounting firms you need to understand how this may fit into your business plan.
Here’s an interesting graphic that Intuit has been using to explain why this product exists:
Intuit estimates that there are at least 800 million businesses in the world when you consider firms with between 0 and 250 employees. This is the “SMB” space, small and midsize businesses. Of this group they figure that at least 750 million businesses can be lumped into the “self-employed” group, businesses that have no employees. That is a very large market, and Intuit wants to own it on a worldwide basis.
Many of those businesses are going to be suitable for a product like QuickBooks Online. They are a full-fledged business, they need to generate financial statements and do normal accounting processes. However, on a worldwide basis, Intuit believes that there is a significant number of people who are not ready to use that kind of product for one reason or another.
Remember those five “core principles” I talked about at the start of this article series? QuickBooks Self-Employed fits all of those criteria.
- Working in the Cloud: QuickBooks Self-Employed is a cloud-based product. Note that this is not a cut-down version of QuickBooks Online, it is a totally different product.
- Mobile technology: QuickBooks Self-Employed is designed to work entirely on a mobile device, although you can also use it in a web browser. In some countries, you will find that many small businesses only have access to the Internet through mobile devices, not having a laptop or desktop computer available.
- Data collection:
Similar to what I talked about with QuickBooks Online – Intuit has access to all of the user’s data and can use that to alter how the program works.
- One-person businesses and contract workers: This product is specifically aimed at the one-person business, and it is particularly suited for part time or contract workers – 1099 workers rather than W-2 employees.
- Globalization is key: Intuit is looking at a worldwide market for this product. Currently it is available in the US, United Kingdom and Australia. I’m sure that once they solidify these markets they intend to bring this to the rest of the world.
In a nutshell, the product is centered on your credit card (or bank) account. Intuit thinks it is likely that the user will be using a co-mingled account, mixing personal and business expenses. Looking at the two mobile device screen shots below, the user classifies each new transaction as being “business” or “personal” by swiping right or left. It is just like a dating app!
As I discussed in my article on QuickBooks Online, Intuit is applying “machine learning” to these transactions so that they are auto-categorized into your Schedule C classifications. The user can alter the decisions that the system makes, but the goal here is to have every transaction categorized accurately and without human intervention.
This all funnels into a Schedule C tax report. The data can also be exported to Turbo Tax.
Intuit believes that this will be a significant product for them, even though accounting professionals tend to discount it. The customer base at this time is very small, but many of the interesting features (such as invoicing and mileage tracking) have only been available for a short time and it has only been available in the US since 2015.
As I noted in my overview of Xero last September, Xero TaxTouch is a similar product. However, Xero admitted that they see this market as one that is hard to make money from. The target market just doesn’t want to pay a significant monthly fee for something like this. Xero is focusing on moving up to larger firms, so why does Intuit feel that QuickBooks Self-Employed will generate revenue for them?
Recall the chart in my article on QuickBooks Online, where I compared the revenue generated by QuickBooks Online subscriptions alone to the revenue that comes from QuickBooks Online and attachments, those additional services that Intuit can provide. Intuit can afford to keep the subscription price low for QuickBooks Self-Employed because they aim to generate revenue from attachments, such as Turbo Tax and QuickBooks Payments. This is a key difference between Intuit and Xero in this marketplace, as Xero doesn’t own their own tax and payment processing products (at least not in the US).