Why QuickBooks® Self-Employed Is Important to Accountants

Practice Management, Workflow tools self employed

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 TurboTax.

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 TurboTax 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).

So, why do I think that this product is important to accounting professionals? That depends on your business model. If you are working with high-volume low-cost tax engagements, this product is aimed at the kind of client you are working with. Wouldn’t you rather have this client come to you with the data already bundled and categorized for you? No more shoe boxes of receipts! Everything has gone through a process that splits expenses into personal and business, using machine learning to auto-categorize each transaction. All you have to do is review the work rather than do all the data entry. You can have access to all of the client data by adding the client’s QuickBooks Self-Employed account in your QuickBooks Online Accountant client list.

Another reason for understanding this product if you are working with this type of client is that Intuit is going to work very hard to connect these users to an accountant. There are several “match-making” mechanisms being put into place, so if you don’t connect to QuickBooks Self-Employed clients, Intuit will direct them to somebody else.

QuickBooks Self-Employed

Where This Product Is Headed

It is clear that Intuit is placing a great deal of focus on this product. This fits a global marketplace that they see as being both huge and under served. Looking forward, my predictions for QuickBooks Self-Employed are:

  • With Intuit’s continued focus on mobile devices, I think that you will start seeing features released on mobile first, before they are released in the browser version. Perhaps some features will only be available on mobile devices?
  • There will be additional self-employed workflows added to the product, going beyond invoicing and mileage.
  • Expect more “attachments,” which is where Intuit generates the most revenue. They already have payments and taxes, I wouldn’t be surprised to see QuickBooks Financing show up here. Short term loans, invoice financing and the like.
  • I expect that it will be introduced to other world markets very soon.
  • At this time, the tax integration for QuickBooks Self-Employed is just with TurboTax. I believe that at some point there will be an integration with Intuit ProConnect™ Tax Online. That product is a part of the QuickBooks ecosystem, and it just makes sense for that to become available.
  • At this time, there is no transition path to easily move someone from QuickBooks Self-Employed up to QuickBooks Online. Intuit says that there really isn’t any demand for this now. However, as the customer base grows and Intuit gets more of these users connected with accountants, I expect to see Intuit creating a transition path to QuickBooks Online (at least in the US market).
  • There will be a major focus on the use of big data and machine learning. I talked about machine learning in my earlier articles. Essentially, Intuit is going to use all user’s data collectively to guide how the program works, as well as the user’s specific data. QuickBooks Self-Employed isn’t an accounting program and it doesn’t work like one, but there are still some “accounting” tasks. Machine learning will push those tasks further into the background so that everything is taken care of for you, rather than your having to perform mundane tasks such as categorizing transactions.

 

Editor’s note: This article was originally published on the Accountex Report by Sleeter Group.

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