Digits vs QuickBooks Online: AI Accounting Compared

Many small business owners start their bookkeeping in QuickBooks Online (QBO). It’s familiar, and it’s usually the default. But a newer group of platforms is rethinking how bookkeeping should work, and Digits is one of the more interesting ones. It was built around AI from day one, with the idea that software should take on more of the work for you.

We wanted to see how that plays out, so we set up a Digits account and worked through a month’s worth of bookkeeping, using QBO as our point of comparison.

Is Digits a good QuickBooks Online alternative? It can be, especially if you want AI to take the first pass at your bookkeeping. Digits handled most of the categorizing on its own and gave us some useful review tools. But it still needed a careful eye. We corrected several entries, cleaned up vendors, and fixed reconciliation balances by hand.

Digits vs. QuickBooks Online at a Glance

Getting Started With Digits

Setting Up Digits and Connecting Your Accounts

Next, we connected our bank accounts. You can also connect payroll, Bill.com, Stripe, and other financial systems right from setup. Within a few minutes, the AI had already sorted our transaction history and pointed us to a month that needed review.

Setting Up the Chart of Accounts

Your chart of accounts is the list of categories your finances get sorted into, like revenue, software, and rent. Digits will build one for you, or you can upload your own.

We let Digits build it, and it only created categories for transactions it had already seen. Since we’d only connected bank accounts, the list came out pretty thin, and we ended up adding accounts as we went. We did like that the categories are color-coded by type, which helps if accounting terms aren’t second nature to you. Adding one of Digits’ suggested accounts takes a single click.

Next time, we’d upload our own chart of accounts from the start, so everything’s organized on day one.

How QuickBooks Online Compares

QBO uses AI during setup too. It builds a business profile for you and suggests next steps, like connecting your bank and setting up invoices. You can watch the whole process in our QuickBooks Online setup walkthrough.

QBO’s chart of accounts wasn’t a perfect fit either, since it didn’t adjust to the industry we picked. Whichever platform you choose, we recommend importing a chart of accounts built for your business. Our free chart of accounts template is an easy place to start.

How Digits’ AI Changes the Bookkeeping Process

Here’s where the two platforms really part ways. Digits categorizes your transactions before you ever look at them, while QBO suggests a category and waits for you to confirm it. So the question isn’t only whether Digits does more of the work. It’s how Digits changes the work that’s left for you.

Automatic Transaction Categorization in Digits

When we opened our month in Digits, almost everything was already categorized, and a lot of it was right. It caught transfers between our accounts, put Stripe deposits in product revenue, and filed a QuickBooks fee under software. When Digits wasn’t sure about something, it flagged it as “low confidence,” which gave us an easy place to start.

Digits walks you through the month with a simple checklist: book transactions, reconcile, review the financials, and report. What you won’t find is a step to approve each transaction. Instead, you look over what the AI did and fix whatever’s off.

Reviewing and Correcting Transactions in Digits

We went through every transaction in the month, about two dozen total, and found several that needed correcting:

• Interest income was tied to an unrelated Relay account
• An owner draw was categorized as a shareholder loan, even though the transaction said “draw”
• A website fee ended up in uncategorized liabilities
• A transaction fee went to bank fees instead of payment processing fees

Fixing a single transaction was easy. The catch is that the change didn’t carry over to similar transactions, so the same website vendor showed up uncategorized three separate times. We asked the built-in Ask Digits chat what was going on. It explained that editing one transaction won’t update others from the same vendor. Digits may suggest similar transactions to update, but you decide whether to apply the change, and you have to click “apply” after each edit.

There’s also no way to mark a transaction as reviewed. With a couple dozen transactions, that wasn’t a big deal. With hundreds, you’d want your own system for keeping track of where you left off.

Automatic Vendor Creation and Duplicate Records

Digits creates vendors automatically, which saves time, but it also created duplicates. Intuit showed up twice, and Relay showed up three times.

The name on a bank transaction isn’t always the actual vendor. A purchase from an online store might come through as Stripe, and a bill paid through Bill.com might just say Bill.com. We’d like to see a way to review and approve new vendors before they’re added. That would keep your vendor records accurate as transactions grow and make it easier to spot one that doesn’t belong.

At least changing the vendor on a transaction is quick. It only takes a few clicks.

How QuickBooks Online Handles Transaction Review

QBO uses AI to suggest categories too, marked with a small star. The difference is that you look at each suggestion and confirm it yourself. Every account shows how many transactions are still waiting on you, and you can set up rules for vendors you see every month.

We always recommend tagging every transaction with a vendor or customer for cleaner reports. QBO flags any that are missing, and you can pull up your full vendor list anytime.

So with QBO, you’re confirming as you go. With Digits, more of that happens up front, but you still need to check its work.

Bank Reconciliation and Month-End Review

Reconciling means matching your books to your bank statement, so you know every transaction is accounted for and the balances line up.

What Happened When We Tested Digits’ Automated Reconciliation

Digits offers automated reconciliations. You upload your bank statements, Digits matches everything up, and you review anything it flags.

Digits didn’t pull statements from our bank, so we uploaded them ourselves. That’s where things got bumpy:

• In one month, it misread the statement’s closing balance
• In another, it used a starting balance that didn’t match the statement
• The screen listed transactions from other accounts, which made the real problem harder to find

Each issue was fixable. Once we corrected the balances, everything balanced, and a CSV upload of one statement worked well. Still, we expected the automated reconciliation to be smoother. We had to double-check and correct balances before we could finish.

How QuickBooks Online Compares

In QBO, you type in the statement’s ending date and balance yourself, and QBO selects the transactions that cleared. When everything flows in through the bank feed, it usually lines up without much effort. It’s not foolproof, though. In our month of bookkeeping in QuickBooks Online, a small credit never came through the feed, so we added it by hand. And a simple typo in the ending balance can send you hunting for a difference that isn’t really there.

QBO also has a books review, a checklist that flags loose ends like uncategorized transactions or accounts you haven’t reconciled yet.

No matter which platform you use, your bank statement has the final say. Automation doesn’t replace checking that ending balance yourself.

Reporting and Ask Digits

The ledger view quickly became one of our favorite parts of Digits. It lists every account on your balance sheet and income statement, along with every transaction that landed in each one. Click into something like owner’s draw or consulting revenue, and you can see exactly what’s in there. It’s a handy way to catch anything odd before you finalize your reports.

Ask Digits was the other highlight. The chat answered questions about our books and helped us use the platform better, like showing us where to set a custom date range on a profit and loss report.

Digits also has the standard profit and loss and balance sheet reports. QBO’s standard reports will feel familiar to most owners. We didn’t test a similar chat assistant in QBO.

Pricing and Value

Digits isn’t necessarily the cheaper choice. Its pricing is fairly close to QuickBooks Online’s, and it’s toward the higher end of the alternatives we’ve tested. So it comes down to whether its AI features make your bookkeeping easier to manage.

Still deciding between the two and leaning toward QBO? You can get started with QuickBooks Online here.

Should You Switch From QuickBooks Online to Digits?

Where Digits Has an Advantage

• Automatic categorization. The AI takes the first pass, so you’re not starting from scratch
• The ledger view. It’s easy to see what landed in each account
• Ask Digits. You can get answers about your books and the platform without leaving it

Where QuickBooks Online May Be a Better Fit

• Confirming as you go. You approve each transaction and always know what’s left
• Vendor control. You can see your full vendor list, and QBO flags missing vendors
• A familiar review process. You enter the statement balance yourself, and the books review catches loose ends

If you like the idea of AI doing the first pass and you have someone who’ll review its work carefully, Digits is worth a look. If you’d rather approve transactions as you go and keep a tighter handle on vendors, QBO may be the better fit. Whichever you pick, someone still needs to make sure your books are accurate.

More QuickBooks Online Alternatives We’ve Tested

• Xero vs. QuickBooks Online
• Kick vs. QuickBooks Online
• Count vs. QuickBooks Online
• FreshBooks vs. QuickBooks Online
• Puzzle vs. QuickBooks Online

Prefer to watch? The full series on YouTube covers setup and a month of bookkeeping for each platform.

Key Takeaways

• Even with Digits doing the first pass, our review turned up several miscategorized transactions
• Fixing one transaction in Digits won’t update similar ones unless you apply the change
• The automated reconciliation showed wrong starting or closing balances in two months, and we corrected them by hand
• The ledger view and Ask Digits were the most helpful features in our testing

FAQ

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