The vast majority of freelancers and independent contractors don’t need fancy accounting software. And that’s exactly who QuickBooks Self-Employed is designed for.
Lots of people get QuickBooks Online and QuickBooks Self-Employed confused. That’s a real shame because, despite their similar names and the fact that they’re both made by Intuit, QuickBooks Self-Employed is a separate product with completely different capabilities.
To help you understand the differences, here’s a quick overview of what each program does and who it’s designed for:
QuickBooks Online (QBO)
In a nutshell, QBO is an all-purpose general ledger accounting system for small businesses.
What this means is that QBO is powerful and versatile enough to handle the full range of accounting functions that most small businesses need. This includes basic tasks like bookkeeping, banking, and invoicing to more complex tasks like A/P and A/R management, inventory and COGS accounting, and advanced financial reporting.
In addition, QBO integrates with a wide variety of other products — like payroll services, POS systems, and third-party apps — and is therefore very scalable. It also has specific features that accountants and CPAs need such as the ability to customize the chart of accounts, review and reclassify transactions, and make journal entries.
Last but not least, QBO comes in four different versions: Simple Start, Essentials, Plus, and Advanced. As a result, small businesses can choose whichever version of QBO suits their needs now, and then upgrade later if they want.
To learn more about the QBO lineup, click here: QuickBooks Online.
QuickBooks Self-Employed (QBSE)
In contrast, QBSE is a lighter, simpler, lower-priced accounting app that’s designed specifically for self-employed individuals. This includes freelancers, independent contractors, sole proprietors, and just about anybody who files a Schedule C with their personal tax return.
While QBO aims to be an all-purpose accounting program for small businesses, QBSE has limited capabilities and avoids complicated accounting features on purpose. It allows you to set up bank feeds, categorize business vs. personal expenses, track mileage, and generate a basic P&L.
QBSE also integrates with Turbotax and was clearly created with non-accountants and DIYers in mind. On the downside, it comes with no support from Intuit — so if you decide to use QBSE, you’re basically on your own.
To learn more about QBSE, click here: QuickBooks Self-Employed.
Which one is right for me?
That depends. If you’re self-employed or a one-person business/sole proprietor with basic needs, QBSE might be enough. It will help you keep your business income and expenses organized and calculate your quarterly estimated tax payments (something no other program does). It also lets you do most things straight from your phone or iPad, which makes it extremely easy to use.
However, if you have a small business with conventional accounting needs (like A/P and A/R management, payroll, inventory, and financial reporting), then QBO will be a better choice right from the start. QBO is also the better option if you’re planning to grow your business or you need to use third-party apps, because it comes in multiple versions and is very scalable.
In either case, keep in mind that QBSE and QBO are completely different products that don’t integrate. You cannot transfer data or convert from one program to the other, so it’s important to choose correctly right at the start.
If you want to read more about the differences between QBSE and QBO, here’s a nice review from CarefulCents.