What's New In QBO | January 2024

Warning: This is a machine-generated transcript. As such, there may be spelling, grammar, and accuracy errors throughout. Thank you for your understanding!

Hector Garcia: Welcome to the unofficial QuickBooks accountants podcast. I am joined by my good friend Alicia Katz Pollock, the original, the one and only Qbo Rockstar CEO and founder of Royal White Solutions.

Alicia Katz Pollock: And I have the privilege of collaborating with Hector Garcia, CPA, the founder of Right Tool for QuickBooks.

Hector Garcia: In this episode of the unofficial QuickBooks accountants podcast, [00:00:30] we're going to be talking about QuickBooks online, new features and improvements for January 2024, based on the list of features published in the Firm of the future article in the second week of January. Hey Alicia, how are you? And most importantly, where are you?

Alicia Katz Pollock: I am great, I am actually on site with a client. It's one of the biggest jobs that I have ever done. It's a cube desktop to online integration for a [00:01:00] major, um, company that does irrigation system overhauls in drought areas. And I'm really excited about it. Not only are we migrating them from desktop to online, but we're actually completely changing their government grant structure, and it's incredibly exciting. I do apologize if my audio quality is not normal. I am in a hotel.

Hector Garcia: Yeah, no. No problem. Alicia, we're very happy.

Alicia Katz Pollock: To be doing this.

Hector Garcia: No problem. Alicia, we understand we got to get these people converted [00:01:30] to QuickBooks online and got to get them up and running for the beginning of the year. So there's a couple of features listed in the firm of the future article. They talked about new updates and enhancements to revenue recognition inside QuickBooks Online Advanced. They're also talking about a new, uh, version of QuickBooks called QuickBooks solopreneur that's coming soon. They also talked about a brand new feature to QuickBooks Online advanced, uh, called forecasting. [00:02:00] And we're actually going to dedicate a whole episode to that because that's actually an entire, uh, new feature. And, um, and that's it. We're going to be discussing those in, in today's episode. So I want to start with revenue recognition updates for QuickBooks Online Advance. I know, Alicia, you've been using revenue recognition from the very beginning. You actively use it in your firm because you take in some sort of prepayments for a whole year's worth of services. And what is QuickBooks [00:02:30] doing now? What improvements are they bringing to make their revenue recognition feature a better. Mhm.

Alicia Katz Pollock: Yeah. So revenue recognition is available in QuickBooks Online Advanced. And I was kind of an early adopter of it. One of the services that I offer is a site wide membership to my training library with, you know, different tiers bronze, silver and gold for different levels of services. And because I'm a cash based company, I am taking all my revenue in one [00:03:00] chunk. And even though I'm a cash based company, because I'm such a QuickBooks and accounting geek, I kind of like I run my company accrual anyway, and then just file cash. So I've been putting revenue recognition through its paces. And uh, when it was first released, it's been, uh, let me actually look back and see how long it has been so that I've been using it. Um, but when it was first released, one of the problems that I was having was just it wasn't that flexible that if I had somebody who subscribed [00:03:30] and then canceled their subscription, there wasn't any way to tell revenue recognition to stop doing the calculations. And this is going back. It actually looks like my very first one was in late October of 2022. So it's been out for about a year. But what they discovered is that when people are having any changes to the revenue recognition schedule or the products or the timing, or like I said, somebody leaves and you need to do a [00:04:00] refund. At first, there was no flexibility for being able to make any changes to it. And so basically the news is that it's mostly increased functionality that now you have flexibility that if you can change the original invoice before the recognition starts calculating, um, whereas in the beginning you couldn't even do that. So I'm really happy about the the changes and it's definitely helping with the the daily real life implications [00:04:30] of the tool.

Hector Garcia: Okay. And since you know more about this, I'll read I'll read the specific features that they're, that they're, um, announcing that they're new. And then maybe you can give us some deeper insight into that. And you might have already covered some. So one of them is it says more flexibility. Quickbooks automatically calculates revenue recognition schedule, but to suit different scenarios, your client can edit a schedule after saving an invoice. While this functionality can help, many kinds of [00:05:00] business project based businesses will benefit the most. What do you think they mean by that?

Alicia Katz Pollock: Okay, so the first one is that the changing of the invoice that well, on the first level you set up the product and when you set up the product, you determine what the recognition schedule is going to be. Is it daily? Is it is it monthly? In order to use revenue recognition, what you need to use is the service date. So you have to turn on the service date field to even use it. And so [00:05:30] you when the invoice is created, you have the product that has been set up for revenue recognition, and you have the date that the transaction actually happened when this was first put out there, as soon as that invoice was created, you couldn't edit it. If there was no date added, you couldn't add a date. You would actually have to delete the whole thing and start over again. And so now if there was no date applied, you can you can add it, you can edit it. I believe if I interpret this correctly, [00:06:00] that you can only make those changes until the end of the month, as soon as the first cycle of the revenue recognition happens, then I believe it's locked. I don't think you can go back retroactively and change the entire, um, series, which I think is still going to be occasionally necessary and hopefully something that they're still working on. But at least now you're not locked into the invoice and you can edit it. So that's my interpretation of that [00:06:30] first segment.

Hector Garcia: The next one says simplify editing and deleting. Clients can now add products or delete product line on invoice or sales receipts, or void an invoice or sales receipt for any reason after the fact.

Alicia Katz Pollock: Okay, so I think that that lends to the same thing. So with the voiding, as I mentioned, you couldn't change it before. And when you get into this scenario like okay, somebody shifts from [00:07:00] subscription level to subscription level, now you've canceled part of their payment and you're starting them on a new program. So now you're going to be able to make those adjustments to end one of the one of the revenue recognitions. For example, if you're starting another one or if you just refund them, you're not locked in to having to run it for the whole year if you've given them the money back.

Hector Garcia: Now, they don't mention a specific mechanism for refunding. So I assume that if you initiate the refund and you send it back to [00:07:30] the deferred revenue account, it would probably be a manual process for you to make sure that you don't have anything sort of leftover in that liability account. Right.

Alicia Katz Pollock: Right. And one of the things that I do personally is I actually, um, reconcile my deferred revenues, just like I would prepaid expenses where I take their original charge, and then all of the charges that it's split into to make sure that at the end of the year everything was recognized. And like [00:08:00] I said, now in the register, you can actually do some of the work in the register, you can delete transactions, you can edit the transactions. Whereas before it was all 100% automation and you didn't have any control.

Hector Garcia: Do you think it's safe to say that QuickBooks will probably not do any sort of proration calculation for you? Like it would still be up to us to do any to do the actual Proration calculation.

Alicia Katz Pollock: Well, the Proration calculation is the. Do you mean like in the case of a cancellation because or [00:08:30] do you just mean like the splitting of the of the transaction itself? Because all of that's the automated part that you set up the schedule and it'll actually show you how much it's going to, um, to do the splits throughout the year. So you can see that schedule already. Um, and. But work with it, I guess, is the is the right way of of seeing it. I have been in there and able to make some changes to the [00:09:00] to the register as needed. So if I have an unusual situation, I can actually manipulate it.

Hector Garcia: Yeah. Yeah. I meant, uh, specifically for for refunding the prorated amount that wasn't consumed.

Alicia Katz Pollock: Yeah. Right. Now, if you refund for the same product, it just puts the refund right back into the revenue recognition register. And so you can use it as your own offset.

Hector Garcia: And the last item here is adjustable pricing and dates. Clients can now adjust the price of a [00:09:30] revenue recognition item before the schedule begins to post. They can also revise the service date of the line item.

Alicia Katz Pollock: Right. Yeah, and that was the really super important one that I was really in, encouraged them to do that. Like I said, originally when you created the invoice, it was a locked invoice. As long as the product itself was set up for revenue recognition, you couldn't change the date or you couldn't change the dollar amount. Now they're saying, okay, if you [00:10:00] are, um, you can make those edits and it will incorporate it into the schedule until the schedule starts running. Once the schedule starts running, then, um, the schedule does what the schedule does.

Hector Garcia: So, Alicia, since again, since you know this feature really well, uh, these three announcements are very exciting. Is there more stuff missing? Are there any other key features you think that they should be working on, or will that we we could probably expect they'll be adding in the next couple of months? [00:10:30]

Alicia Katz Pollock: Yeah. I don't think it's there 100% done with the editing. Like as I'm sitting here looking at my 20, 23 transactions, um, there were some of the ones, the oldest ones from last October, November that I'm still trying to correct for when there wasn't that flexibility. So I think there's still a little bit of more work to do, but I think they've got it really close to dialed in.

Hector Garcia: And the reporting itself. Do you feel that revenue recognition reporting [00:11:00] is is strong enough?

Alicia Katz Pollock: Yeah, I mean the reporting is is mostly just taking that lump sum and then dividing it across the number of periods that you want. And so in accrual based accounting that's really helpful because I don't want to just see in my monthly revenue reports my total income for the whole year's worth, I want to see how much money I'm making on a monthly basis for through my subscribers. And so I find it really helpful, and I'm really glad that they that they created this. [00:11:30] I'm really hoping that they flip it on its head and turn it into a prepaid expenses, uh, system as well. That's my fantasy.

Hector Garcia: So just kind of seeing the same thing in reverse.

Alicia Katz Pollock: Yeah, absolutely. That, you know, if I paid my insurance for a full year, I would love to be able, for the prepaid expenses, to be able to break that out into a monthly insurance expense.

Hector Garcia: And guess what? We'll call it expense recognition.

Alicia Katz Pollock: Hey, let's do it. Okay.

Speaker3: Uh, I mean.

Hector Garcia: I [00:12:00] think even beyond just expense recognition, if they figure out the mechanics for this on the other side, you could essentially do the same thing for loan amortization. You know, whether it's you, the company who's lending money or you the company borrowing money, you could essentially load. I mean, other than the amortization schedule, which is a little more complex because revenue recognition is a linear type of calculation, you're sort of like a straight line type of calculation. Um, amortization is a bit more complex or, [00:12:30] or anything that has to do with loans. But the mechanism of entering one amount now sending it to the balance sheet and then over periods of time, converting that to a PNL or just moving from balance to PNL. That's something they can do. I mean, I think the platform is going to be, uh, great to even expand into those areas.

Alicia Katz Pollock: Sure. Well, I mean, they just introduced the fixed asset manager, which is another use of that same kind of technology. So once [00:13:00] they get this working forwards and backwards in assets and in liabilities and using these in QuickBooks online, advanced is I mean, it's going to be a great reason to go to advanced for a whole lot of companies that if it automates all your depreciation, all your amortization, all of your, um, uh, boy, do we need a loan manager. That's my fantasy. Is is being able to do the loan splits appropriately? Yeah. Accurately.

Hector Garcia: Yeah, absolutely. So the second, uh, big announcement here [00:13:30] in the January 1st, the future article is this header that says coming soon QuickBooks solopreneur. So we don't we haven't seen it. We don't know what it looks like. This would be a total speculation, uh, episode, just like we did with, uh, QuickBooks ledger a couple of weeks before it came out. So let's start giving you some background, uh, from what I understand, and extrapolate from the information that's been given to us, uh, QuickBooks solopreneur is going to be a version of QuickBooks [00:14:00] that's focused around, let's call this the non balance sheet businesses. So this would be for the most part uh people that are self-employed. Maybe they get a 1099 at the end of the year. Maybe they're incorporated. But most likely it's a single member, LLC. That's a disregarded entity filing on a schedule C tax return, just like a self-employed 1099 independent contractor individual will. So a version of QuickBooks [00:14:30] that doesn't have a balance sheet, it's much less complex because obviously all the money coming in or out is simply just a category. It's not really an account per se, because account is an accounting firm, and accounts can either be PNL accounts or balance sheet accounts. So essentially, uh, if you connect the banks and use similar mechanisms as QuickBooks online, all you really need to do is pick a category, um, which is essentially be a PNL type of category or an expense. An [00:15:00] expense category. Um, and that's essentially what QuickBooks online Self-employed, a real product that has existed for many years, um, has been however, I don't think that QuickBooks online Self-employed.

Hector Garcia: It has been very popular, or at least as popular as QuickBooks online. A couple of reasons for that. One is never really got accountants to like it, and this proves that accountants are a very important part of the formula. Because because think about it. If you want an accounting software to [00:15:30] be good, the people that do accounting are the ones that should go, this is good, okay? It's as if engineers and architects didn't like AutoCAD. And somehow AutoCAD with would be uh, would be uh, successful. Or if graphic designers didn't like Photoshop and somehow Adobe wanted, you know, Photoshop to be successful. I mean Canva is a different it's an interesting I don't want to like, you know, go off on a tangent here, but like Canva actually succeeded at what QuickBooks online Self-employed [00:16:00] is trying to do. Like Canva is a graphic design software built for non graphic designers, and I assume that Intuit is trying to figure out how to unlock this really difficult thing to do, which is can we deliver accounting software to business owners without the need of an accountant? And I'm not saying to circumvent the accountant just without requiring the accountant or without the small business owner feeling like the software they're buying from a software company requires another human being [00:16:30] to sort of be a middleman between that person and the software. So I think that's what QuickBooks online Self-employed has been trying to do for many years. It's been serving this solopreneur type of, um, uh, small business owner that's again schedule C filer, independent contractor, single member LLC.

Hector Garcia: However, um, another major problem that QuickBooks Self-employed has had is that it's not the same platform as QuickBooks online. So the interface [00:17:00] feels different. Uh, there's no, uh, upgrade path to go from QuickBooks online. Self-employed, sorry. From QuickBooks Self-employed to QuickBooks online, I wasn't even interesting is that it was never called QuickBooks online Self-employed. It was called QuickBooks Self-employed. I think they left that online out on purpose, uh, to kind of delineate that it's two different platforms. Uh, accountants were never able to, to create QuickBooks Self-employed accounts. It always has to be the end user that created them. So [00:17:30] what they're trying to do with this announcement of QuickBooks solopreneur and again, this is speculation. This is this is my experience. And Alicia's experience is trying to, uh, reinvigorate or reinvent this specific market that they're targeting, but try to make it more friendly towards the either one, be able to allow these people to be able to eventually upgrade to QuickBooks online if their business grows to a certain size. You know, many [00:18:00] single member LLCs become multi-member or become S corporations at some point in the life cycle. And secondly, I think they want accountants to to be able to collaborate with, uh, with uh with the, with the end users. However, however, and I think this is what will throw this entire theory, um, uh, into um, or at least it will debunk this theory here is that they're going to release this with QuickBooks Live tax immediately, which is actually the [00:18:30] opposite of an accountant friendly product. So this is what my initial thoughts are. What do you think, Alicia?

Alicia Katz Pollock: Uh, so I've been kind of puzzled by this announcement because they've got QuickBooks online Self-employed already. They've got QuickBooks ledger now, and there's also QuickBooks money as well. There's another app that is that sounds to me like kind of the same thing. So I've been trying to figure out where this fits in the puzzle, what makes it different, what's the differentiator. And [00:19:00] I'm definitely flying blind on the whole thing. But I think what you just said is the driving force on this is the fact that self-employed had no roadmap up to grow your business and move into QuickBooks online, like you couldn't migrate from self-employed to simple start. So my speculation, my own personal speculation is that this is kind of a another version of QuickBooks Self-employed, but that does work in the chain of software [00:19:30] so that if you do want to upgrade, you can. So that's my my supposition with it, say that it's schedule C, and that was what was special about QuickBooks online Self-employed is that the chart of accounts was kind of locked in to rails on your schedule. C maybe this is another thing about it is it's schedule C, but maybe you can still change your own chart of accounts. They eventually did add that to self-employed, [00:20:00] but you know, it just made it a little cumbersome. And so. I'm. I'm kind of, you know, I don't want to say skeptical. I don't know what the use case is for the skew yet. And that's what I'm waiting to find.

Hector Garcia: Yeah, you're right, it's truly puzzling because there's also this product called QuickBooks money. And and when you go into the QuickBooks money website, it says business banking. So it's got the word business in it. Like I always thought business [00:20:30] money was. I mean, uh, QuickBooks money was just like for individuals, but but it sort of geared towards businesses and invoicing and getting paid and that sort of thing. So I think that too many products, it's actually going to confuse the market. However, one thing that's really important to mention is that the TurboTax market or the TurboTax product is expanding beyond, uh, just [00:21:00] people that make the decision, hey, I'm going to go to TurboTax and see if I can do my own taxes. Uh, what's happening is two things. Number one, if you go to TurboTax and you go to small business or, or business tax returns, there's no longer a quick access. I don't know if it's hidden somewhere. The ability for you to self, uh, to choose the option to self prepare your small business tax return and pay 100 bucks. 200 bucks. It's only QuickBooks. I'm sorry, TurboTax [00:21:30] live. So it's the assisted element of it. And now you get to see the pricing on I mean the pricing on, on on an S-corp or a C Corp or an or partnership return, it's $500 to $1000. So it looks like TurboTax is getting away from the self-serve, you know, do it yourself type of of tax return for businesses. Okay. They still have that for the for the individual for businesses. And I think that strategy is [00:22:00] aligned hand in hand with the recent announcement they made that QuickBooks Live tax was going to be launched launching in January.

Hector Garcia: So QuickBooks Live tax essentially is just, uh, selling TurboTax to QuickBooks users. Okay. And that's circumventing accountants, of course. I mean, I assume that in order to, uh, avoid, you know, getting accountants, you know, really mad in this situation that they're going to try not to market to account to QuickBooks [00:22:30] users that have an accountant or a ProAdvisor attached to it. But I'm certain that they'll miss the mark at some point. They won't be a perfect system, and you know it's going to happen eventually, no matter what. Um, but that's that's the thing. So that's QuickBooks Live tax. That's the, the essentially what they, what they announced that they're going to start marketing hard to QuickBooks users. They're going to sell TurboTax to them. They're calling it QuickBooks Live tax. But essentially is the TurboTax platform. What I'm what I'm assuming is they don't [00:23:00] want, um, customers to see it as two different brands. So so QuickBooks. So they're going to so when you get your tax return done, it'll be called QuickBooks Live tax. Essentially they're going to maintain the QuickBooks name at the forefront. Maybe some will say it'll say powered by TurboTax or something like that or or or or you know, there'll be a small TurboTax logo somewhere, or when you finally file, it'll say it'll say, you know, uh, filed by TurboTax. [00:23:30] But essentially what I think is they want they truly, deeply want to, uh, make sure that QuickBooks customers see QuickBooks as not just the accounting software, but also the compliance tax software. And because a lot of a lot of self-employed individuals are not in QuickBooks online, uh, they are going to market them through this new QuickBooks solopreneur product.

Alicia Katz Pollock: Yeah. I mean, when I first heard the news that they were [00:24:00] expanding the, the, their tax service for small businesses, I mean, they started it last year. Um, but my first reaction was, oh, great. They're competing, trying to compete with their own audience again for the accountants and the tax preparers. But then what? You know, they did say that it's not going to get advertised in product except to people who don't have an accountant user. So there's that. But then I also just kind of started thinking about the bigger market in general [00:24:30] that, um, we are you know, we have a problem in the, in the industry right now with the, with people leaving the industry, and there's not enough accountants and CPAs out there for all of the small businesses that are getting started. And so I actually came around to feel like this is a really good solution for a lot of those micro tax clients that firms don't want to take on because they are so small. They're not lucrative. They you can't upsell [00:25:00] them on advisory services when they can barely afford their their have their taxes done in the first place. And so I actually kind of see this as Intuit stepping in and solving a problem in the industry with those lowest level clients that, you know, when when you talk, when you hear from the thought leaders about how to grow your firm, they're always saying, you know, raise your prices, show your value, and cut off your smallest and and clients that [00:25:30] that don't forward you towards your bigger goals. And then that leaves a nowhere to go for the smallest businesses and no one to do their tax returns and nobody that they can afford. And so I actually think that this is great for Intuit to step into this void and solve this problem for small business owners. So I definitely came around to that, that point of view about it.

Hector Garcia: Yeah, sure. But it is solving the problem for the small business owners, providing [00:26:00] maybe a more competitive, um, option for small business owners to get their tax returns done, but not necessarily solving a problem or adding more tools for accountants to be successful and profitable. So again, this is a situation where, um, you know, I am I'm a I'm a I'm a shareholder of Intuit. So I love the fact that they're doing this. This is going to, you know, essentially this is this is great for the company, but accountants are going to have a tough time seeing [00:26:30] now this huge encroachment into, um, what was just accounting software and who are are accounting software partners offering a tax services for the, you know, for the Proadvisors and the accountants that do both QuickBooks consulting bookkeeping and tax. Um, and uh, and again, as we mentioned before, inadvertently, our clients are going to see these offerings. They're going to see these options. And accountants [00:27:00] are just not going to be terribly happy about this. One thing that I do want to mention, uh, as I mentioned earlier, that if you go to turbotax.com and you go to business and you try to pick one of the products that you only see the live options, uh, or the assisted options that are like $500 and above with this QuickBooks Live tax, if you actually go and see the website and you look at the at at the small print, it says starting from [00:27:30] 169.

Hector Garcia: So what I'm assuming they're doing is they're shifting the market from if you're a small business owner and you want to do your taxes with TurboTax, you're probably going to pay 500 bucks or above, anchor that that you know, that that small business taxes are expensive or they're, they're bigger investment. Uh, and. As an added value of being a QuickBooks customer. If you actually add on QuickBooks Live tags, you're going to get that savings because you're going to pay [00:28:00] significantly less, maybe as a bundle type pricing and that sort of thing. So that's my take on that. And I think that's eventually where, um, where QuickBooks solopreneur is heading, as well as with QuickBooks Live tags. Well, with that being said, um, we're going to talk about on next episode, we'll go deep dive into the new QuickBooks Online Advanced Financial Planning or the forecasting. We'll discuss that in detail on that episode. But with that being [00:28:30] said, thank you very much for attending this one, and we'll see you on the next one.

Alicia Katz Pollock: See you in the next one.