Feature logo for blog article analyzing the QBO Essentials vs Plus issue.

When you plan to implement QuickBooks Online, either as a new business or one migrating from another accounting system, one of the first things you need to decide is whether you need QBO Essentials or Plus. You can best answer the Essentials vs Plus question yourself by assessing the level of functionality your business needs from QuickBooks Online.

This article discusses the primary differences of functionality between the Essentials and Plus editions of QuickBooks Online to help you make a determination for your business. If would like further assistance choosing the right edition of QuickBooks Online for your business, please contact us. The primary differences between the two editions of QuickBooks Online are:

  • Inventory Tracking and Reporting
  • Billable Time Tracking and Reporting
  • Vendor/Contractor Payment and Time Tracking
  • Budgeting
  • Multi-Location Support
  • Class Tracking

Each of the functionalities listed above (and described below) are available only in QuickBooks Online Plus. If you need any of these capabilities, you need QuickBooks Online Plus. If you don’t need any of these additional capabilities, you can start with QuickBooks Online Essentials. Below, I will discuss in more detail the uses and benefits of the above capabilities.

Tip: If you’re not sure whether you need the capabilities available in QBO Plus, you can always start with QBO Essentials and upgrade to Plus anytime later.

Inventory Tracking and Reporting

Inventory tracking is the the biggest part of the QBO Essentials vs Plus discussion. If your business regularly or exclusively sells products, inventory tracking is of course quite important. QuickBooks Online has four different types of Products/Services: Inventory, Non-Inventory, Service, and Bundle. All editions of QuickBooks Online allow you to use the Products and Services list functionality. However, only QuickBooks Online Plus has the Inventory type.

Screenshot of QBO showing the ability to use inventory tracking, an important part of the Essentials vs Plus determination.

The Inventory product type has two additional fields that facilitate inventory tracking – “Quantity on Hand” and “Reorder Point”. QuickBooks Online automatically tracks the quantity on hand based on the sum of all posted sales and purchase transactions involving the item. The reorder point is used by QBO to signal to you when you have low stock for a particular item. You can quickly filter your item list to only those with low or no stock to help you avoid stock-outs and lost sales.

Screenshot of QuickBooks Online illustrating the capability to filter by inventoried items with low stock or no stock.

Ultimately, the inventory management capabilities of QuickBooks Online are fairly limited. However, QuickBooks Online provides a solid foundation upon which other integrated solutions can build.

Billable Time Tracking and Reporting

If your business charges time to your clients, you probably already realize that time tracking is a pretty big pain. You might forget to record your time, forget where you noted your time when you invoice the client, or even charge the wrong client for your time. Trying to keep your own head above water with billable time keeps you busy enough, so you certainly don’t have the time to monitor your staff’s billable time, right?

QuickBooks Online’s billable time tracking tools and features help you overcome these common struggles. In QBO, you can use the Time Activity or Timesheet transactions to track billable time you will later invoice to the client.

Screenshot of the time activity transaction in QuickBooks Online, which illustrates how you can track time that is billable to clients in QuickBooks Online.

To learn more about the time tracking capabilities of QuickBooks Online, read: Simple Time Tracking for Billing Clients in QuickBooks Online.

Vendor/Contractor Payments and Time Tracking

Businesses who need the billable time tracking capabilities described above also need to be able to have subcontractors track their billable time as well. In such cases, businesses typically pay their subcontractors an hourly rate and then turn around and bill that cost to their clients. They may do this with or without marking up the cost of the subcontractor. Either way, QBO Plus supports these sorts of billing and job costing methods, while QBO Essentials does not. QBO Plus supports these processes with a couple of features:

  • Time Tracking-Only Users — QBO Plus allows you to create users that can only track their time in QBO. Such users won’t be able to see or make changes to any other part of QuickBooks Online. This is useful for when you need to have a subcontractor track his time in QBO so you know what to bill to your clients.
  • Calculated Markups — QBO Plus allows you to assign markup percentages to expenses from vendors and subcontractors that are billable to a client. This saves time and ensures accuracy and consistency when you bill costs to clients.

Screenshot of an expense transaction in QuickBooks Online Plus illustrating how you can track and add a markup to expenses you want to bill out to a client.

Budgeting

Budgeting is about as popular among small business owners as taxes are. Regardless, it can be a powerful tool to ensure your business has a real plan for growth and profitability. One of the added benefits of QuickBooks Online Plus is access to QuickBooks Online’s budgeting module. When you create a budget, you’re basically defining what you want your profit statement to look like at the end of the year you’re budgeting for. By setting your goal for profitability, you are setting a goal for how much revenue you earn and how much expense you incur. By defining these amounts, youThe QBO Budget module includes the following useful features for creating budgets:

  • Pre-Fill Data — When you create a budget, you can pre-fill the budget with data from the prior year. This allows you to use the last full year of operations as a starting point, and then tweak numbers based on your goals to grow revenue and control expenses.
  • Flexible Intervals — You have the option to do quarterly or monthly budgets.
  • Subdivided Budgets — If you are a business that generates most of its income from only a few clients (or even one), you can subdivide your budget by client. This allows you to specifically define all your revenue and expense goals by client. You can also subdivide a budget by classes or location (see below sections on locations and classes).
Screenshot of QuickBooks Online illustrating creating a budget and the budget module features, including intervals, pre-filling with data, and subdividing the budget by client, class or location.

Multi-Location Support

QuickBooks Online Plus includes support for tracking multiple locations in the same QuickBooks Online company file. This is great for small businesses that want to track their accounting by store locations, offices, departments, etc. When you enable location tracking, each transaction in QuickBooks Online will then be assigned to a specific location. By assigning all transactions to locations, you can run reports segmented by location. This gives you insight on the performance of each location and how they compare one with another.

Screenshot of a profit and loss statement in QuickBooks Online and how it can be segmented by location when location tracking is used.

Class Tracking

QuickBooks Online Plus also supports tracking “classes”, which function very similarly to locations, but they’re more flexible. While locations are tracked at the transaction level, classes can be tracked at the line-item level:

Screenshot of a Check transaction in QuickBooks Online, illustrating the use of class tracking to segment the accounting of a business.

This additional level of granularity allows you to allocate expenses (such as utilities and office administration) between different classes. The most common way for you to use classes is to segment your business. For example, a solo practitioner attorney who specializes in both business formations and contracts may want to track how much profit she makes from offering both services. By assigning all revenues and expense items to either the “business formations” or the “contracts” class, she can determine how much profit she really earns from each service. If you’re familiar with the concept of profit centers, classes are mostly intended to be used like profit centers. Classes also can be further organized with sub-classes.

Conclusion

As you can see, QuickBooks Online Plus offers a fair amount of additional functionality than the Essentials edition does. However, you don’t think you need any of the above features, Essentials is good enough for you. Later, when you want any of the Plus features, you can easily upgrade your subscription. If you’re still unsure what edition of QuickBooks Online you need, please contact us and we will be happy to help you choose the edition that is right for your business.

Innovate Professional Services offers free QuickBooks Online setup and training to clients on a Virtual Bookkeeper Service plan. However, if you just want help getting started, take advantage of our QuickBooks Online Setup and Training Service and get lifetime discounts on your QuickBooks Online subscription.

Blake is a CPA and a law school graduate specializing in taxology, tax and finance process automation and optimization, and cloud accounting systems.

Leave a Reply