We often get asked “at what point does a company outgrow QuickBooks? It is a startup accounting package, after all.”
And frankly, we have to agree. It is a startup accounting package.
…And an accounting package for growing firms, and a general ledger for certain well-established businesses. Basically, QuickBooks is an accounting package that can grow with your company to the tens of millions of dollars.
Ok, ok, so we like QuickBooks—but we aren’t jaded into thinking it is the end-all-be-all of software.
The fact is, QuickBooks does have an image problem. It is commonly seen as being the software for DIY solopreneurs. The reality is, however, it is a robust general ledger and reporting package if you know how to use it.
In our experience, companies rarely outgrow their accounting package— they outgrow their accounting processes.
The antiquated back-office
There are many $5M businesses that have a back office that operates the way they did when they were only $500K in revenue. They are burdened with a lot of paper, a lot of manual entry, few controls, and reporting that is “flat,” bearing minimal usable metrics.
Not only is this typical back-office inefficient, a back office operation that hasn’t scaled with the business is depriving the business of more complex financial reporting and analysis—and insights and trends that can identify trouble spots and help them grow.
Is QuickBooks capable of delivering that information? Yes. Then why don’t more companies use it to get better information? More often than not, the challenge is not that the accounting software can’t DO something—it is a matter of the staff not knowing what it CAN do. It takes time, thought and a strategy to setting up these procedures.
Knowing how to use the various complexities built into QuickBooks can enable you to track job profitability, metrics by division, sales rep reporting, budgets and forecasts, etc. If you know how to go beyond the canned functions, you can leverage QuickBooks to do a lot more than even what it was designed to do.
Understanding the digital “plumbing”
There have also been developments with QuickBooks over the past few years which have extended its usefulness beyond just debits and credits.
While QuickBooks handles a company’s accounting, it has opened its platform for developers to integrate third party applications for all sorts of activities that tie into financial processes; activities such as approving and routing vendor invoices, allocating labor costs to jobs, and managing inventory. The integration of third party apps significantly extends the life of QuickBooks for companies whose needs become more complex as the business grows but don’t want the disruption of moving to a new system.
Garbage in, Garbage Out
As with all systems, the way you put the data in determines what you get out of it. Often the system is blamed for incomplete reporting, but in most cases it is the user’s error, sloppy inputs or inconsistency in the way the data is recorded. Defining the way you want the reporting to look involves designing the data entry processes and the controls to make sure that it is consistently being entered in the proper way.
The Prism Effect
Think of the difference between a prism and a piece of glass. If you shine a light through a piece of glass you get white light. If you shine that light through a prism you see a rainbow of colors on the other end. Think of your accounting software as the prism—if you understand how to get the data entered in the right way, you will gain granular details and metrics by which to make better decisions about business growth, cost savings and strategic investment opportunities.
We find that if you take the time to design the inputs to ensure the right reporting, and have processes in place to ensure the consistency of the data being entered as designed, you can get robust reporting out of QuickBooks.
So does QuickBooks serve the small solopreneurs? Yes. But it also, when used properly, can serve strong growing businesses for many years and through many stages of growth.
QuickBooks isn’t the right solution for all businesses. Read Part II of this discussion here.