I have the latest Office 2016 that supports modern authentication however for some reason QuickBooks is ONLY trying basic authentication. (I did update from Office 2007 so maybe something is lingering from the old configuration)

These steps will walk you through on how to bypass the annoying box that keeps coming up in QuickBooks to authenticate even though you are entering the correct password.

Go here first to make sure SMTP AUTH is enabled for your Office 365 Tenant.

Since I have two factor authentication I will need to generate an App password to use with basic authentication. If two factor is off for you I believe your current password will work for the below steps.

Part 1

  • Type an identifier name such as quickbooks and click next

  • You will then have a generated App password. Copy it and store it somewhere for now and click done or leave the window open for now

Part 2

  • Open QuickBooks and go to Edit>Preferences

  • Select Send Forms and then check the radio button that says Web Mail
  • Click Add

  • For the email ID enter the office365 email address
  • Select Other as the email provider
  • Server Name: outlook.office365.com
  • Port 587
  • Check the SSL/TLS box
  • Click OK and then click OK in Preferences to save

  • Next I want to email a test invoice so the authentication box comes up and saves my password
  • Open an invoice and click Email

  • Change the to address to a test account then click Send

  • Next a box will pop up. This is where you paste the App password OR enter your normal password if you DON’T use MFA 2 factor authentication
  • Click OK to save the password and QuickBooks will attempt to send the message

  • If all was good then you will get a message that says it was successfully sent

  • Check your test email account and the invoice should be there
  • When closing out click NO or cancel so your test email does not get saved on a customer invoice

Reference:

https://quickbooks.intuit.com/learn-support/en-us/other-questions/emailing-invoice-with-office-365-exchange-stopped-working/00/496092