QuickBooks Setup: Get It Right the First Time (Or Pay for It Later)

You signed up for QuickBooks. You connected your bank account. Transactions are downloading. This should be working, right?

Three months later, your chart of accounts is a mess. Half your transactions are miscategorized. Your P&L makes no sense. And now someone has to untangle it all before tax season.

QuickBooks is powerful software. But power without proper setup is just expensive chaos.

Here’s how to set it up correctly from the start.

First Decision: Which Version?

QuickBooks Online (QBO)

Cloud-based. Accessible anywhere. Bank feeds update automatically. Integrates with everything.

Pricing (2025):

Simple Start: $30/month (1 user)
Essentials: $60/month (3 users)
Plus: $90/month (5 users)
Advanced: $200/month (25 users)

Best for: Most Houston small businesses, remote teams, modern workflows.

QuickBooks Desktop

Installed on your computer. One-time purchase or subscription. More advanced inventory features. Steeper learning curve.

Best for: Manufacturing, wholesale, businesses with complex inventory needs.

For most businesses, QuickBooks Online Simple Start or Essentials handles everything you need. Start there.

Company Setup: The Foundation

The Basics

When creating your company:

Business name: Use your legal business name exactly as it appears on tax documents.

Industry: Choose the closest match. This affects your default chart of accounts. “Construction” creates different accounts than “Professional Services.”

Business type: Sole proprietor, LLC, S-Corp. This matters for how certain transactions are handled.

Fiscal year start: Usually January 1, unless you specifically chose a different fiscal year.

Business address: Your official business address. This appears on invoices.

Key Settings to Configure

Accounting preferences:

First month of fiscal year
Accounting method (cash or accrual)
Close books date (prevents changes to prior periods)

Sales settings:

Default payment terms (Net 15, Net 30)
Invoice customization (logo, colors)
Sales tax (if applicable)

Expense settings:

Default payment terms for bills
Categories you use frequently
Expense tracking preferences

Get these right now. Changing them later often requires cleanup work.

Chart of Accounts: Your Financial Backbone

The chart of accounts determines how every transaction is categorized. Get this wrong, and your reports will lie to you.

Start With Defaults, Then Customize

QuickBooks creates default accounts based on your industry selection. Review them:

Keep what fits: Standard accounts like “Checking” and “Accounts Receivable” work fine.

Rename for clarity: If “Job Supplies” makes more sense than “Supplies” for your business, rename it.

Add what’s missing: Create accounts for expenses unique to your business.

Delete the clutter: Remove unused accounts that just create confusion.

Essential Categories

Assets (what you own):

Business Checking
Business Savings
Accounts Receivable
Inventory (if applicable)
Equipment
Prepaid Expenses

Liabilities (what you owe):

Business Credit Card(s)
Accounts Payable
Loans Payable
Payroll Liabilities
Sales Tax Payable

Income:

Service Revenue
Product Sales
Other Income

Expenses:

Advertising and Marketing
Bank Fees
Contract Labor
Insurance
Office Supplies
Professional Fees
Rent
Utilities
Travel
Meals (note: 50% deductible)

Equity:

Owner Investment
Owner Draws
Retained Earnings

The Golden Rules

Keep it simple. Twenty expense accounts is usually enough. Fifty is too many. You don’t need separate accounts for “Office Supplies - Paper” and “Office Supplies - Pens.”

Be consistent. Once you decide what goes where, stick with it. Inconsistent categorization destroys report reliability.

Think about taxes. Structure accounts to make tax preparation easy. Match IRS Schedule C categories.

Match your industry. A Houston construction company needs job costing accounts. A restaurant needs food cost accounts. Generic charts don’t work for specialized businesses.

Connecting Bank Accounts

Bank feeds are QuickBooks’ killer feature. Transactions download automatically, saving hours of manual entry.

Setup Steps

Navigate to Banking > Connect Account
Search for your bank
Enter your online banking credentials
Select accounts to connect
Set your starting date

Best Practices

Start date matters. Don’t download five years of history. Start from your fiscal year beginning or when you began using QuickBooks. Older transactions need cleanup work that rarely delivers value.

Connect everything business-related. All checking accounts. All savings. All credit cards used for business expenses. One disconnected account creates reconciliation problems.

Review security. Bank connections are encrypted and secure, but use a strong QuickBooks password and enable two-factor authentication.

Managing Bank Feeds Daily

Review transactions regularly. Daily is ideal. Weekly is minimum. Letting them pile up defeats the purpose.

Match versus Add. QuickBooks suggests matches to existing transactions. Review carefully before accepting. Incorrect matches create duplicate entries.

Categorize consistently. Put the same type of expense in the same account every time.

Create rules. For recurring transactions (rent, software subscriptions), set up rules to auto-categorize. This saves time and improves consistency.

Products and Services Setup

If you invoice customers, configure your products/services list:

For Service Businesses

Service name (clear and descriptive)
Description (appears on invoices)
Rate (hourly or flat)
Income account (usually “Service Revenue”)

For Product Businesses

Product name
SKU (if you use them)
Description
Sales price
Cost (for margin tracking)
Income account
Inventory asset account (if tracking inventory)

Tips

Use clear, descriptive names clients will understand
Include units in names when helpful (“Consulting - Hourly”)
Set up commonly used items first; add others as needed
Group similar items with consistent naming

Customer and Vendor Setup

Customer Records

Include:

Company and contact name
Billing and shipping address
Email for invoices
Payment terms
Tax settings
Opening balance (if they owed money before QuickBooks)

Vendor Records

Include:

Company and contact name
Address
Payment terms
Tax ID (critical for 1099 reporting)
Default expense account
Opening balance (if you owed them money)

Getting Tax IDs now saves January scrambling for 1099s.

Common Setup Mistakes

Mistake 1: Wrong Start Date

Starting mid-year without proper opening balances creates inaccurate reports. Either start at the beginning of your fiscal year or enter accurate opening balances for all accounts.

Mistake 2: Personal Accounts Connected

Never connect personal bank accounts to your business QuickBooks. Keep them completely separate.

Mistake 3: Chart of Accounts Overload

Creating 50+ expense categories makes bookkeeping tedious and reporting confusing. Start simple. Add detail only when you actually need it.

Mistake 4: Ignoring Bank Feed Cleanup

Connecting accounts but not reviewing transactions creates a backlog. Uncategorized transactions pile up. Reports become meaningless.

Mistake 5: Skipping Sales Tax Setup

If you collect sales tax, configure it during initial setup. Retrofitting later is painful and error-prone.

Mistake 6: Wrong Account Types

Recording loans as expenses or owner draws as salary creates tax and reporting problems. Understand what each account type means before creating accounts.

Mistake 7: Never Reconciling

Reconciliation catches errors. Skipping it lets problems compound month after month until the cleanup becomes expensive.

Your First Month Checklist

Week 1:

Complete company setup
Build and customize chart of accounts
Connect bank accounts with appropriate start date
Import/enter any historical transactions

Week 2:

Enter any outstanding invoices
Enter any unpaid bills
Review and categorize bank feed transactions
Set up bank feed rules for recurring transactions

Week 3:

Create products/services for anything you sell
Set up customer records
Set up vendor records with Tax IDs
Send first invoices from QuickBooks

Week 4:

Reconcile all bank accounts
Reconcile all credit cards
Review Profit & Loss statement
Review Balance Sheet
Make corrections as needed

When to Get Professional Help

QuickBooks setup is straightforward for simple businesses but gets complex for:

Businesses with existing messy records needing migration
Companies with inventory
Businesses requiring job costing
Multi-location operations
Businesses with payroll

A few hours of professional setup ensures correct configuration and prevents months of cleanup later. The cost of fixing problems always exceeds the cost of getting it right initially.

At EZQ Group, we help Houston businesses set up QuickBooks correctly and train staff on proper use. Whether you’re starting fresh or fixing a problematic setup, contact us for expert assistance.