QuickBooks Online for First-Timers: The Minimum You Must Set Up Before You Touch Payroll

Oct 27

If you’re new to QuickBooks Online (QBO), it’s easy to jump straight into payroll because that’s the exciting part—your first employees, first paychecks, first milestone as a real business. But before you process a single paycheck, you need to get your foundation right.

Think of QBO like a house. Payroll runs best when the plumbing (your chart of accounts, settings, and integrations) is installed correctly. Here’s what you should set up first so your numbers flow cleanly, your reports make sense, and you avoid expensive cleanup later.

1. Verify Your Company Settings

Before anything else, open Settings → Account and Settings → Company and confirm:

Your legal business name exactly matches your tax registration.
The EIN field is filled in (you’ll need this for payroll tax forms).
Your address matches your official filing location.
The fiscal year start month reflects your accountant’s recommendation (usually January).

Getting this right ensures your tax filings, W-2s, and bank syncs all reference the correct entity.

2. Create or Clean Up Your Chart of Accounts

Your chart of accounts (COA) is the backbone of your books. QBO’s default chart is fine for hobby projects, but not for a growing business.

Start by reviewing your Income and Expense categories. Ask:

Do you need separate income categories for different product lines or services?
Are your payroll accounts mapped correctly (Wages Expense, Payroll Tax Expense, Payroll Liabilities)?
Are duplicate or unused accounts cluttering your reports?

If you’re unsure what belongs where, you can export your COA (⚙ → Chart of Accounts → Run Report) and compare it to IRS business expense categories.

3. Link and Test Your Bank Feed

QuickBooks automates reconciliation by linking directly to your bank, but don’t turn it on without reviewing settings.

Go to Banking → Link Account.
Connect your business checking and payroll account (if separate).
Turn off “auto-add” until you’ve verified your rules.
Create a test import of one transaction, categorize it, and review how it posts to your chart of accounts.

This is the fastest way to catch problems like double-counted deposits or personal charges slipping into your books.

4. Confirm Your Tax Settings Before Adding Employees

Even if you haven’t added payroll yet, go to Taxes → Payroll Settings and make sure:

Your federal EIN is entered.
The correct business type (LLC, S-Corp, sole proprietor) is selected.
You’ve registered for state withholding and unemployment tax accounts with your state government.
Your state ID numbers are entered into the Payroll Settings screen.

If you skip this step, QBO may hold back payroll filings or calculate incorrect liabilities.

5. If Using, Add Key Integrations Early

Syncing tools before your first payroll can save hours later:

Time tracking (QuickBooks Time or Homebase).
Receipt management (QuickBooks Receipts, Dext, or Hubdoc).
Payroll benefits (QuickBooks Payroll, Gusto, or your provider).

Start small—connect only what you’ll actually use. Every integration adds complexity.

6. Test Reports Before Payroll Starts

Run these three reports and review for accuracy:

Profit and Loss — does income and expense flow to correct categories?
Balance Sheet — does equity match contributions and draws?
Payroll Summary (after your first run) — do totals match gross pay and liabilities?

If anything looks strange, fix it now—clean books make payroll reliable.

7. When to Ask for Help

If your chart of accounts, bank feeds, or payroll setup already feel overwhelming, don’t guess. A QuickBooks ProAdvisor can verify your configuration in a single session and prevent the common “cleanup after payroll” nightmare that many owners face in year one.

Book a 15-Minute Setup Call
Get your base configuration done right before you touch payroll.

Book a Call