A Note from Monique
Hanging out with my fabulous new client, natural-light portrait photographer Lani Harmon of LaniHarmon.com at our Gold Mastermind in Asheville, NC last week. It doesn’t get any better than this!
Monique
Featured Article: How to Choose Between Quicken and QuickBooks
After I recently launched my services package for budding entrepreneurs in December, a friend of mine sent me this query, “You mention Quicken – if I use it for my personal finances, do you recommend a separate “installation” for business? Or can one version handle both?”
Here’s the short answer: No. Quicken is for personal, and only personal, finances. QuickBooks is for business. Trying to do business bookkeeping on Quicken is like going into a Chinese restaurant looking for Mexican food. Apples and oranges. OK, enough with the food metaphors.
Quicken is great for recording checks your write, deposits you make, and for tracking your investments; in other words, it’s for your household expenses and investments. It’s great for that. However, when you’re in business, you need QuickBooks. Quicken works only on a “cash” basis, QuickBooks gives you a choice between “cash” and “accrual.”
What’s the difference? Cash basis accounting records transactions as they occur when cash or checks or credit cards change hands. For example, when a client pays you on January 15 for work that you did for them during the previous December, the date you record the transaction is the date you receive the money: January 15th.
Accrual basis accounting, on the other hand, records income and expenses in the month that they were incurred, not the month they were paid. So, using the aforementioned example, accrual accounting would make an entry into the December books to record the income.
How to choose between doing business on a cash basis or an accrual basis? The IRS requires certain types of business, manufacturing for example, to keep track using accrual basis. Those companies that have a choice have the following to consider. If they want to keep their bookkeeping as simple as possible, cash basis is the way to go. This way works best when they perform a service or sell a product and get paid for it right away. If they offer payment terms to the customers, or get payment terms from their vendors, they need a way to keep track of who owes them how much and how much they owe. This is where accrual basis steps in.
The good news in answer to my friend’s question is that one version can handle both: any QuickBooks software also works to record personal finances.
Wow, thanks Monique! It’s so nice to have all this big scary financial stuff broken down into simple, easy to understand terms — especially for those of us “quick start” types with little attention span for things that aren’t in our realm of expertise 🙂
Oh, and as a follow up question – what is FreshBooks? Is that only used for invoicing, or is it used for accounting too? Can you do invoicing with QB? So in other words, would you need both?
Damian from Quicken Canada here. Thank you for the very clear, descriptive and helpful post. This is a common question and we could not have explained it better. I wanted to let your Canadian readers know that we also have Canadian versions of both Quicken and Quickbooks. Same features but tailored to Canada. Cheers.