In the world of small business, getting accurate and timely financial information is paramount to success. Among the various components of financial information, labor costs stand as a critical pillar. In today’s digital age, integrating your small business’s payroll system with your financial systems, particularly QuickBooks Online, can significantly streamline operations and bring forth a myriad of benefits – but they come at a cost!
The small business landscape and payroll
Small businesses are the lifeblood of the global economy, contributing to job creation, innovation, and economic growth. According to the Small Business Administration (SBA), there were approximately 31.7 million small businesses in the United States alone in 2020. These businesses vary widely in terms of size, industry, and structure, but they share a common need for efficient financial management.
One of the most crucial aspects of financial management for small businesses is payroll. When most people think about payroll, what comes to mind mostly revolves around calculating and distributing employee salaries, taxes, benefits, and other compensation-related matters. And those things are important as payroll is not just about keeping employees happy; it’s also essential for compliance with tax laws and labor regulations and mistakes in payroll can lead to costly penalties and damage a company’s reputation. But one of the areas of payroll that is often overlooked is how that information can get back into your financial records in a way that drives greater insight and clarity on a company’s financial performance.
The Role of QuickBooks Online (QBO)
QuickBooks Online, developed by Intuit, is a cloud-based accounting software designed to simplify financial management for small businesses. It has become one of the most popular accounting solutions worldwide due to its user-friendly interface, powerful features, and scalability. Small business owners use QuickBooks Online for various financial tasks, such as tracking income and expenses, managing invoices and payments, and generating financial reports.
With the vast popularity of QBO, we are often asked about integrating QBO with third-party payroll systems. After all, there are quite a few benefits that this type of connection can provide!
The Benefits of Integration
1. Streamlined Data Entry
Imagine having to enter the same payroll data into multiple systems. It’s a tedious and error-prone task that can lead to discrepancies and confusion. Integrating your small business’s payroll system with QuickBooks Online eliminates this redundancy. When you enter payroll information into your integrated system, it automatically updates your financial records, ensuring consistency and accuracy.
2. Enhanced Accuracy
Payroll and financial data accuracy is paramount for small businesses. Integrating your payroll system with QuickBooks Online helps minimize these risks.
3. Time Savings
Small business owners wear many hats, and time is a precious resource. Manually managing payroll processes and entering data into multiple systems can consume a significant amount of time that could be better spent on strategic business activities.
4. Real-time Financial Insights
Access to real-time financial data is crucial for making informed business decisions. When your payroll system is integrated with QuickBooks Online, you can gain immediate insights into your labor costs, payroll liabilities, and overall financial health. For instance, if you need to assess the impact of a recent hiring spree on your expenses, you can easily generate reports that provide a clear picture of your payroll costs. This allows for better financial planning and helps you make timely adjustments to your budget.
How to Integrate QuickBooks Online when working with Whirks
As a client of Whirks, we are always looking to help you find the best and most efficient solutions to run your business. If you’ve determined that integrating QuickBooks Online with our systems is the right call for your business, there are a few ways to go about this. Let’s explore each of these options below.
Connect to QBO
How well do you know QuickBooks Online? That is always my starting point when I get asked about our ability to connect our payroll system with QuickBooks because getting those two systems to work will require a good amount of knowledge about your QuickBooks environment. Both QBO and our payroll system are highly configurable and with that comes multiple options. Many of these options create variables that must be accounted for in connecting the two systems. Unfortunately, this connection is not something that works just because a couple of the right boxes are checked.
You could keep learning about this...
Or you could hire Whirks.
We already know this
stuff for you.
Or you could hire Whirks.
We already know this stuff for you.
One of the first hurdles we must overcome is using account numbers. Within your Chart of Accounts inside QuickBooks, you have the option to enable account numbers or leave them blank. As a best practice, we believe that using account numbers within QuickBooks is a best practice, and our payroll system requires that they are used, so if you are already utilizing account numbers, you’ve made it over the first hurdle, and if not, we are not able to create a connection between our payroll system and your QuickBooks environment. (Side note: adding account numbers to QuickBooks is easy and if you want help figuring it out, we’ll be glad to give you some pointers!)
A second hurdle is the use of classes. Classes are ways you can categorize your financial statements and are often used to track dollars to locations or departments within an organization. If classes are used in your labor allocations, it is best for those same classes to be set up with payroll so that data can accurately feed to your financials.
Once we have account numbers and classes set up in both systems, we can begin the process of mapping your payroll items to the appropriate general ledger categories in QuickBooks. This process is normally quick and will typically involve a round or two of testing to make sure everything is mapped the way you need it to be. The team here at Whirks will work with you through this process to adjust anything that is needed so that your labor data is accurate.
Integrating QuickBooks Online with your payroll software
After all your labor mapping is complete, it is time to integrate! We do that through a series of FTP transmissions that we maintain on your behalf. On your end, you would invite Whirks as an Accountant User to your QuickBooks Online account, and we would then begin to feed labor data to QBO as part of your payroll process. This part is pretty easy…unless you already have multiple accountant users! One of the limitations to our connection is that Intuit, the company behind QuickBooks, allows a limited number of accountant users. If you have already reached your maximum, then we will not be able to set up the connection.
Manual Entry through Reports
Do technical details and lingo make you want to vomit? If that is the case, we have another option. For most small businesses, entering payroll into QuickBooks is not a very time-consuming process. We normally see this happen through the use of a Journal Entry. In QuickBooks, click the button to add a transaction and choose Journal Entry. Enter the appropriate details then save. If you don’t know what you should enter, just ask your accountant and they’ll be able to provide some direction that is specific to your scenario. For the majority of small businesses that we help, the payroll journal entry is less than ten lines and can be added in about 90 seconds.
Here’s a quick tip for those manual journal entry adders: Copy the last payroll journal entry, change the date and the details then save. This will save you from having to enter the accounts each time you add your labor details.
With a little direction, the Whirks team will be able to create a General Ledger report within our payroll system that will give you a line-by-line detail of what your entry should look like based on the rules you are your accountant setup. This sounds like a lot more work than it is, so don’t be intimidated if you aren’t an accounting expert or if you don’t have a vast QuickBooks background.
Custom Report for Third-Party Providers
Did you know there are third-party software providers that will allow you to import data directly to your QuickBooks Online company? Many of these companies have done the software development work on your behalf and all you need to do is connect their app with QBO, and upload data files to get the data to sync to QBO. The good news here is that many of these third-party companies will provide a template of how they need to read the data that we can use to build a custom report within our payroll software. The end result is that after payroll is processed, you can upload that custom report to their software, and the data will sync to your financials! A pretty easy process, but it does require a manual touch, and maybe more importantly, it requires you to remember to do it!
As you can see, there are multiple ways to get your payroll data back in your financials. Depending on your own comfort level with software, tech skills, and accounting understanding, one of these options can be a great fit for you.
If you are a current client and need help setting up this integration, reach out to your Client Success Specialist and they will be happy to assist you. If you’re looking to learn more business tips, check out this article about what to do when you get tax notices.