• Jorge Diaz

Combining Profit First and QuickBooks Online

If there is a good "combo" for the financial foundation of a Startup is this one. Simple, intuitive, and powerful at the same time. So, as you may have probably noticed, I like to write a lot. But I promise this article will be very simple and straight to the point: How to manage a QuickBooks integration with Profit First.


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QuickBooks: the Hero of Small Businesses


Yes, it is. It is like a magic tool that takes care of everything regarding your business accounting. It links to your bank accounts, it classifies every single transaction, helps you send invoices, receives Credit Card payments, prepares your taxes, financial reports... it is an all-in-one tool for Small/Mid businesses.


Sample QuickBooks Online dashboard from their demo video.


If you are not using it yet for your business, I would strongly encourage you to consider it. QuickBooks will save you accounting costs, will give you a way better overview of how your business is doing and will be the headquarters of your startup financial status.


Let's then jump now to the meat of this article.


Profit First with QuickBooks


The main "noise" the Profit First system creates into a business banking is the amount of income distribution transactions across the accounts. That's it. And QuickBooks can handle that, but it will take a manual process each time you do so. I guess, in the future, they will probably incorporate a "Profit First" intelligent algorithm setting.


Right now, by default, QuickBooks assumes many of these as "income" transactions, so you need to act accordingly to clarify each one to your accounting system.


Our 4 Key Facts


To explain it, I will simply point out a few key facts (or steps) we regularly consider in our companies that use Profit First. The internal process I have implemented in our businesses goes as follows:


#1 The person who executes the income distribution is responsible for classifying all transactions in Quickbooks. Either by doing it themselves or with an accountant, as soon as all transactions take place, an exhaustive "labeling" process also occurs. At the very beginning of 2019, it was a little bit annoying because QuickBooks sync with the bank accounts was usually with an offset of 2 or 3 days, but eventually, they sorted it out.


Receiving Accounts regularly label transactions as "Deposit." Make sure to set these all to "Transfer" first and then, to the source of the funds.


#2 All transactions must be matched as "Transfer" and "Matched" on the source and destination. Intuit team has made a fantastic effort with the IA that learns how your transactions are classified in their tool. At the very beginning, it will be "assuming" most of these are income transactions, but with time, it will begin "knowing" how cash moves across your types of accounts. Still, always make sure to classify the operations correctly and match the corresponding one.


#3 Depending on the Business Cash In Flow, we execute the income distribution once a month, whenever possible. If you do it twice, let's say, on the 10th and the 25th, you will end up with double the number of income distribution transactions than if you were doing a single day. In the end, these all get classified and do not interfere with your regular accounting process.


#4 All income moves first into the operations account and then gets distributed from there. Most of the time, the operations account is a "Business Chequing Account" with no transaction limit. Doing multiple transactions from a "Savings" account may generate unnecessary transaction fees. This also helps to maintain a lower amount of transactions on the Profit First accounts and leaves all heavy load to the Operations one.


At least today, with TD accounts, they get all transactions (excluding Credit Card pending ones) immediately after these are posted on each account. The entire process takes less than 15 minutes every month.


Yes, that's it.


What to Do Next?


I love the Profit First system. It is one of the foundations that make many small businesses flourish nowadays; plus, it brings several benefits to entrepreneurs. If you want to learn more about it, I recommend you take a look at some of my other articles:



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