How to Pay Yourself in QuickBooks Online in Different Ways?

As you know, accounting and payroll management are the most important things in every company. When you are a company owner and need some amount from your business account for your personal use. In that situation, you need to have an idea of self-transferring and payroll management. So, to manage payroll and pay yourself, you can use QuickBooks Online to make the process easy.

Here, you may know the process to pay your employees by setting up the QuickBooks Payroll, but the question is, how to pay yourself in QuickBooks Online? So in this blog, we are discussing the ways to pay yourself in QuickBooks Online with a detailed explanation.

Different Payment Methods to Pay Yourself in QuickBooks Online

If you run a business, then you need to be aware of the different payment methods to pay yourself in QuickBooks Online, and their use totally depends on your business structure. There are three types of payment options or payment methods available. Below, we are discussing these three payment methods for self-payment.

• Owner’s Draw: If you transfer any amount from your business account to your personal account for personal use, that process is known as an owner’s draw. It is not taxable, but it affects your business shares in the case of a lower balance in your business account.
• Salary: If you run a corporation, then you can pay yourself a salary using QuickBooks Payroll features, but it is taxable. You get only the net amount from the gross amount.
• Reimbursements: When your business needs some money, and you use your own money to manage the business expenses, and when you need it, you can pay yourself back, which is called reimbursements. That was non-taxable and helps to keep your personal and business accounts separate.

How to Pay Yourself in QuickBooks Online with Different Payment Methods?

To pay yourself in QuickBooks Online, you need to follow some processes for different payment methods. Below, we explain these steps in detail for each payment method.

Steps for Paying Yourself by Owner’s Draw

Set up Owner’s Draw

1. Open QuickBooks Online and go to the Chart of Accounts.
2. After that, click on New to create a new chart of accounts.
3. Now select Equity based on the account type.
4. After that, put the account name Owner’s Draw and click on save.

Record Owner’s Draw

1. Open Banking or Write Checks in QuickBooks Online.
2. Then choose the business bank account from which you need to take funds.
3. Then select the Owner’s Draw account where you need to add that fund.
4. Now just enter the amount and save the transaction.

Steps for Paying Yourself by Salary Entry

Set up Salary Entry

1. Sign in to QuickBooks Online and open the payroll section.
2. Set up the payroll if you don’t have an account.
3. Now, put your employee’s details.
4. After that, set a payment schedule and put the salary amount, and done.

Record Salary Entry

1. Open the payroll in QuickBooks Online and click on run.
2. There QuickBooks automatically calculates taxes.
3. After that, just process the payroll, and QuickBooks records your salary and your business expenses in your account.

Steps for Paying Yourself by Reimbursements

Set up Reimbursements

1. Log in to QuickBooks Online and then open the Expenses tab.
2. Then select New Transaction and click on Expense.
3. Open the dropdown menu and select your personal account from the Payee dropdown menu.
4. Now, put the expense details and select a perfect category.
5. After that, click on Save to save the transaction.

Record Reimbursements

1. Open banking and select the business account.
2. Then choose the amount to categorize the payback.
3. Now, put the amount and save the transaction.

What are the Common Mistakes That You Need to Avoid While Paying Yourself in QBO?

There are many ways to pay yourself in QuickBooks Online, but the main thing is to avoid the common mistakes. That shows your accurate business financial condition and helps your business to grow. Below, we recommend some best practices to avoid the common mistakes that help you eliminate financial or legal complications and improve your business performance.

• Combine Business and Personal Finances: Always keep your business account and personal account different. Try to use a particular business account for all transactions, including paying yourself.
• Pass Over Tax Obligations: if you choose the salary entry to pay yourself, then ensure that your payroll taxes were calculated properly and the tax due was paid on time.
• Try to withdraw a limited amount: when you are doing an Owner’s draw, then try to take the minimum amount because taking too much money from your business can create issues with your business cash flow and business operations.
• Don’t Skip Paybacks Documentation: if you spend money from your personal account to manage your business operations and expenses, then ensure that all these details are updated in your record clearly. Because that may create many issues in the future.
• Ensure your QuickBooks is updated: always try to check your QuickBooks updates because QB updates are important to get an accurate and updated financial record.

Conclusion

Pay Yourself in QuickBooks Online is not a big thing, but if you have the knowledge of Tax Laws and make a plan for the future, then you will be able to manage your business operations perfectly without any legal issues in QuickBooks. In this article, we are trying to describe all the things that you need to pay yourself in QuickBooks Online. We hope this article helps you to get your answer and understand all the things clearly.