You want to convert from QuickBooks Desktop to QuickBooks Online (QBO). You don’t know if you should convert your existing data or start with a new file in QBO. What should you consider before you make the switch?
Since we are familiar with both Quickbooks Desktop and QBO, we have helped many of our clients successfully convert their books between the two platforms. We want to share some tips we have learned along the way with our client conversions that may help you.
Start with accurate numbers
We all know the saying “Garbage in, Garbage out”. Accurate data is key to having good reports. Reports should not only have the information needed for tax reporting purposes but more importantly provide you with good information in order to make effective business decisions.
How do you verify that your numbers are accurate? Compare the numbers from your last filed tax return to your reports and the balances according to the bank, credit card, and loan statements to the balances in your QuickBooks Desktop file. If the balances do not agree, adjustments need to be made.
Should you Convert or Start Over?
If your existing QuickBooks Desktop is a mess, then choosing to convert the file to QBO will not fix your problems. Most likely, it will further complicate things.
In addition to comparing the balances to the last filed tax return, look at the structure of the chart of accounts and the condition of your customer and vendor lists. Run a Balance Sheet and a Profit & Loss report. Do the numbers on these reports make sense? Are things organized in a way that you can easily understand the story behind the numbers?
The first step we do with new clients is to perform an assessment of the existing file. This helps us identify the issues and create recommendations for moving forward. More often than not, we determine that starting over with a new QBO file is a better option than converting the QuickBooks Desktop file to QBO.
Differences in Cash Basis Report Calculations
One of the big differences we noticed is how QuickBooks Desktop calculates cash basis reports compared to QBO. What do we mean by that? Let us give you an example.
In QuickBooks Desktop if you pay a bill before the bill date, you may see a negative balance in your Accounts Payable account on cash basis reports. If you receive a payment on an invoice dated before the invoice date, you may see a negative balance in your Accounts Receivable account on cash basis reports.
QBO treats these types of transactions differently. In QBO you may see these accounts: Unapplied Cash Payment Income and Unapplied Cash Bill Payment Expense. QBO uses these two accounts when there is a mismatch between a bill and bill payment date and between an invoice and customer payment date. These new accounts may seem strange, but the accounting behind these two new accounts is sound.
If you convert your QuickBooks Desktop file to QBO using the tool inside of QuickBooks Desktop, you need to be aware of this difference. If you file your tax return in cash basis, you most likely will need to make some adjustments to the related transactions in QBO after the conversion so that your reports will agree to prior cash basis reports and tax returns.
What’s not imported when you convert?
You are used to many features in QuickBooks Desktop and may expect those features to be in QBO. However, there are certain items that do not come over when you convert from QuickBooks Desktop to QBO.
Here are some key items that will not convert:
- Audit trail
- Bank and credit card account reconciliation reports
- Closing date password
- Custom fields on lists
- Layout customization for invoices
- Memorized reports
- Memorized transactions
- Shortcut list
Both QuickBooks Desktop and QBO are made by Intuit and have some similarities, but they are very different from each other. You may need to keep reminding yourself that QuickBooks Desktop and QBO are not the same. When you move to QBO, you will be learning a new accounting platform.
There is no need to feel overwhelmed with converting or starting a new file. We have helped many clients successfully convert from QuickBooks Desktop to QuickBooks Online. Reach out to us for help with your journey of moving to QBO.