Cloud Accounting QuickBooks

Why QuickBooks Self-Employed Is Important to Accountants

Written by Charlie Russell

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:

QuickBooks Self-Employed

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:

QuickBooks Self-Employed

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.

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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!

Categorizing transactions in QuickBooks Self-Employed

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.

QuickBooks Self-Employed

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).

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About the author

Charlie Russell

Charlie Russell has been involved with the small business software industry since the mid 70's, and remembers releasing his first commercial accounting software product when you had an 8-bit microcomputer with one 8 inch floppy disk drive. He has a special interest in inventory and manufacturing software for small businesses. Charlie is a Certified Advanced QuickBooks ProAdvisor with additional certifications for QuickBooks Online and QuickBooks Enterprise, as well as being a Xero Certified Partner. Charlie started blogging about QuickBooks in 2008 (Practical QuickBooks) and has been writing for the Accountex Report (formerly the Sleeter Report) since 2011.

Visit his CCRSoftware web site for information about his QuickBooks add-on products. He is also the author of the California Wildflower Hikes blog.


      • I enjoy your articles. keep writing.
        In IT myself and having designed accounting systems (inventory, GL, Payroll), I can see the need and business justification.
        If the bank and cc data can be synced via self employed, why will a client pay to third party. I have many self employed clients who are not computer literate. if data can be synced, I will sign for the client and pay to get the data feed. Intuit is giving away the client sin the name of bank feeds to third party apps.

        That is why I say that the intuit never listens

        • My point is that Intuit has no interest in trying to connect any of their online accounting products with the desktop product. As I said in my earlier article, the future for them is in the online product (QuickBooks Online). The desktop product isn’t where they are placing much emphasis. So I don’t see them connecting their online product (such as QBSE) with their desktop product. I could see them providing a migration path from QBSE up to QBO at some point.

          • Hi Charlie: This is a great article even for you. I will study it for weeks, but I believe the QBO Accountant client manager now links QB Desktop products. This is the reverse of what @Nasir wants, but we fully agree that what he wants will not happen. Meanwhile, even Desktop users can really benefit from this free client manager, while learning about QBO. Please do not post about this for a week, unless I am wrong. I should be first to post.

          • I know that Intuit was going to make the connection – I haven’t looked at it. As I’m not an accountant, I never had a client that worked with QB Self-Employed.

  • I had a client come to me with her QB Self Employed app and want me to use it to do her 2016 taxes. It turned out to be a terrible headache and I ended up just importing all her data into QB desktop and sorting it out there. I found the web interface impossible to work with. I found it impossible to check my work, see what had been done, had not been done, etc. I spent a longtime chatting with QB SE support people and they only had things to say like “This is a new product. We admit that’s a problem, but our developers haven’t figured that one out yet.” Ugh. This may be great for a numbers savvy SE person, who makes sure they keep up to date with the app and make sure everything is classed right; but it doesn’t work for the SE person who wants help from a third party. I encouraged my client to drop QB SE. She opened a business checking account an is committed to not mingling her business and personal expenses. And I just go in and upload her bank transactions to QB desktop and send her a few quick reports each month. It would have been nice if SE worked for us, but I just don’t think it’s ready yet. But then again, I’m a pretty die hard fan of QB desktop and am not comfortable yet with QBO either.

    • As it stands now, QBSE is really aimed at that person that just isn’t working with an accountant, who is using a comingled account, who wants the system to do most of the work for them. It really isn’t set up, as you found, to work with an accountant that well. The ability to have an “accountant user” is relatively new. And, it doesn’t integrate with ProConnect Tax Online, which is where the accountant features would work better in my opinion. The idea is that they just dump the Schedule C stuff over to you to finish up.

      I think that most accountants are going to want to do something like what you are talking about – advise them about proper procedures, move them into a true accounting product. Because QBSE is not a full accounting product at all.

      Hopefully Intuit will work to improve this kind of interaction and support.

      My point, as far as accountants and tax preparers, is that Intuit is pushing this product strongly, AND they are building in features to connect the users to some accountant, so if this is the type of client you want then you have to be aware of this. Don’t let Intuit push that prospective client off to someone else.

    • Hi Rachel: Please look at QBO Accountant again. Intuit made big changes in October 2018. Run QBO, from QBOA, for a client-server app. That makes it much faster and more secure. It reportedly even stays up if the internet goes down. QBOA also runs Reclassify Transactions and other Accountant Toolbox apps (which I love) on client data (messes).

      • If your Internet connection is down, you aren’t going to be able to do too much. The program doesn’t store a copy of your data locally. It might buffer some for speed, but there isn’t a local data store.

  • I think why most ProAdvisors discount QBES is the comingling of funds. They do not want to advocate that practice. I do see the benefit for this app for the smallest of SE persons and their high volume tax preparers. The question becomes what opportunity is there for ProAdvisors for this market given the nature of QBSE and no upgrade path?

    • It really is aimed at the people who have the smallest of needs – Uber drivers and such, who just aren’t going to set up a separate account. I don’t endorse the product necessarily, I don’t know that accountants are going to accept it, BUT my point is that Intuit is pushing the product AND they are going to be connecting the users with accounting professionals. Most people I talk to are accepting these leads and then moving them up to a “real” accounting product. You have to be aware of this, or Intuit will be giving those leads to someone else…

          • Hi Charlie and Jeff, QBSE had 490,000 users on 2/28/18, up from 180,000 a year ago! It links to the QBO Accountant client manager. It also easily imports into QBO – QBOA for extensive work. This makes it the opportunity of a lifetime. That is why I created a new LinkedIn group for QuickBooks Self Employed, but there is nothing there so far… Charlie, can I repost your material there, with attribution of course?

          • Sure, Mike.

            Number of users is a tricky issue. The question is, how many ACTIVE users, and how many continue using it after a year? Those would be statistics I’m interested in, but we won’t see that. People might try it, but do they continue using it?

  • According to my view, no interest in trying to connect any of their online accounting products with the desktop product.
    If the bank and cc data will be synced via self used, why will a shopper pay to third party. I have many self used shoppers UN agency aren’t laptop literate. if data will be synced, I will sign for the shopper and pay to urge the information feed. Intuit is giving away the shopper sin the name of bank feeds to 3rd party apps.

    That is why I say that the intuit ne’er listens

  • There is always risk with machine learning that any small business owner may assume the machine gets it right – which it often won’t.

    Just because a business bought 5 reams of paper from the supermarket on 10 January then doesn’t mean that they will buy paper every time they visit from now on and that’s where the system needs human review.

    My experience is that most clients who try to do things themselves get it wrong, very wrong, and it often takes us longer to try to fix what they did than it would if we had worked from scratch.

    We’re big supporters of QBO and client collaboration but we stress to them that they should only do what they are comfortable with and the risks that it will take us longer, and cost them more, should they try and fail. That normally means clients manage sales invoicing and customer payments via the system and leave the rest to us.

    Our mission statement is that we will do what we do best so that the client can do what they do best. Using the services of a good accountant is surely a good investment and using QBO is also a good investment as, when used correctly, it is a great system that helps businesses succeed.

    • Hi Chris White: I most respecfully submit that you have it only slightly wrong. Yes, clients and QBO machine learning will make many mistakes. However, each time we correct these, machine learning creates a rule for the correct account. That does not mean that clients will not need professional accountant review, but there should be very few mistakes in later similar entries. — Even more important is something that only I seem to be talking about in the QuickBooks area. QBO can export machine learning rules to Excel. Quick Excel sorts of machine learning payees, accounts or other fields can show countless errors, duplications and places where generic rules are better than individual rules. This means we do not need rules for restaurant ABC, restaurant DEF or restaurant GHI. One rule can put any payee CONTAINING restaurant, bar, cafeteria, diner, grill, pizza and much more in Entertainment. A second can put any payee containing electric, utilities, and water, in Utilities. A third can cover any payee containing cell, phone or telephone in Telephone. — Even that is only the beginning. We can COMBINE all the rules from our clients into one or a few Excel sheets. An Excel review will then let us pick out those that are exclusive to one client or only construction (or other) companies. We can then easily import some variation of these master rule sets into each client, especially new clients, saving clients from countless errors and saving us ridiculous amounts of time.

      • By the way, editing Rules in Excel is far faster, easier and more accurate than doing so in QuickBooks or Xero. QBO can then delete superseded entries and import corrected entries from Excel.

      • As you say, Machine Learning protocols will improve as more data is entered, and as the user makes corrections. The point here is that the system is going to handle the bulk data entry, and if you are working with an accountant then the accountant reviews the info rather than having to do the data entry.

        • Absolutely true Charlie. Thank you, but we should soon see much more.

          An Australian Tesla driver drove by a Kangeroo, which was unknown to its automated programming. However, the program quickly created a new variation of a big, high-jumping cat. All Teslas have WiFi for updating programs. In a few days, every Tesla knew how to anticipate and avoid such big cats.

          Most professional accountants may soon correct each payee error only once. They also should not have to correct create most errors, as other professionals should correct them first. A QuickBooks Online service should automate uploads of new rules and CPA programmer review. It will then download updated rules as it updates programs, with some rules locked in any QuickBooks Online copy.

          This will mean spending most of our time reviewing reports for possible changes, subject to program frequency and variance analysis (based on industry and size). Client horror stories may even become a dim memory.

          Of course, similar programs will revolutionize many professions, while ending others. Our lives have been far better than the lives of our ancestors. The lives of our children and grandchildren should repeat this cycle.

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