The QuickBooks Conundrum: A Love-Hate Relationship

October 7, 2010

2:08 pm

This is a guest post by Michelle Hoffman of Hoffman CFO Consulting. HCFO helps lots of young companies understand their finances and put solid internal practices in place. You can reach her on Twitter @hoffmancfo.

I hate QuickBooks. It’s not because our company didn’t win Intuit’s $10,000 business grant, or because we have to pay $500 a year for each consultant listed on the Certified QuickBooks Professional referral list, which drives searches by zip code, not expertise. It’s because their new releases never fix some of the most annoying problems, like when you select the “Print non zero rows” checkbox for reports and it generates zero rows anyway, and if you put a customer deposit in using “Make Deposits” it won’t show up on your customer detail reports, but if you record it via a journal entry it will. Most grievous of all is that the user community desperately wants the Online product, but they seem to spend development money regularly updating the user interface but not improving the functionality, which lags behind other QuickBooks products. But do I recommend QuickBooks for emerging technology companies? Absolutely. Here’s why.

For price, ease of use and functionality, it’s hard to beat QuickBooks. Comprehensiveness and basic reporting is where QuickBooks really shines. For the accounting tasks an emerging technology company needs to perform such as:

  • recording sales and expenses,
  • processing or recording payroll,
  • sending 1099s to EVERYONE you bought anything over $600 from (yes we mean everyone, even Staples – thank you Congress for this new requirement),
  • recording and tracking computers and servers,
  • producing basic financial statements for banks, potential investors and your tax accountant,

QuickBooks is your best low cost solution.

QuickBooks has what many popular products (including tracking your company’s finances on spreadsheets or in Google docs) do not: full general ledger reporting. What is a general ledger? Wikipedia describes the general ledger as the main accounting record of a business which uses double entry bookkeeping. Think of it as a list of all of your financial transactions–at the most basic level your income and expenses. Clients often ask us to check out new “accounting” products they want to use, but most we review, while having cool features and functions, are sales centric and typically don’t have a full general ledger. Without a full general ledger, it’s difficult to track and report on the financial results of your operations. If you are a startup looking to grow, it’s going to be important to generate and share with banks or investors financial information in the form of what is most commonly know as a Profit & Loss (What you made less what you spent) and a Balance Sheet (a snapshot picture of your assets, liabilities and company’s equity). These reports are delivered with QuickBooks, as well as many others. Most reports have options to filter or modify and all (except in the Online basic version) can be exported to Excel to create nice reporting packages.

A good QuickBooks consultant can help you configure QuickBooks in a way that properly captures the transactions of a technology or ecommerce company. Delivered reports can also be customized to meet specific needs. Whatever you do, even if you feel like you don’t have the finances for ongoing, outside accounting support, engage a knowledgeable accountant to set up your system, give you some training and “how to” steps. For example, our firm offers a “Jump Start” product, which does exactly that for new companies. Once you are set up, check in with your accountant on a regular basis, or when your business model changes, make sure you are accounting for transactions properly. Revenue recognition issues, net v. gross reporting, the proper accounting for chargeback and refunds are all issues that can crop up quickly in emerging technology companies and they are easier dealt with in the early stages.

So you have decided to give QuickBooks a try? Now you have to select the version that best suits your business model. Here are some selected pros and cons of the three most common QuickBooks options.

QuickBooks Online (Essentials or Plus Versions)

Hot

  • Web-based and easily accessible by multiple people in various locations.
  • Allows automatic postings from many banks and merchant accounts (caution- you still must review postings-QuickBooks auto-post feature has limitations).
  • For no additional cost, create time reporting-only user ids for employees—time then flows to invoicing ‘module’ for easy invoice creation.

Not so hot

  • Functionality lags behind other versions; Online has no project reports and tracking product or project profitability is difficult.
  • The ability to customize invoices is extremely limited in Online versions.
  • Navigation for the Online versions is somewhat awkward and can require more steps than other versions. For example, when saving time sheets, there is no “Save and Next”. The program saves for the selected dates and then reverts back to the current date. Tedious if you are entering the time of others or time from previous weeks.

QuickBooks Mac

Hot

  • The latest version has much improved functionality and flow—Mac users now have a much better version of QuickBooks than ever before
  • If your accountant uses a PC, which they probably do, there are nice technologies that can bridge the gap so they can log in to your hosted QuickBooks Mac file.

Not so hot

  • Report filtering requires building a big, awkward list versus the nice drop downs/check offs found in the PC version.
  • Some nice features found in other versions are missing, for example, it lacks of a “View History” button on bills and less experienced users might not know to go to Edit-View history from the menu bar when researching transactions such as when a was a bill paid.
  • While the QuickBooks Mac file can be converted to a PC file and supposedly imported back again, bank reconciliation detail is totally lost in the conversions so we don’t recommend this.

QuickBooks Pro/Premier

Pros

  • This product has the most features and functionality (excluding Enterprise version), including some useful, basic project cost reports. We also sometimes recommend clients get the Accountants version, which gives better visibility into journal entries and has some additional reports.
  • For government contractors, or those requiring strict controls over time reporting and approval, this product integrates well with some good, inexpensive, 3rd party time reporting systems.

Not so hot

  • The transactions displayed for a vendor in the Vendor Center don’t include certain transaction types—we recommend creating and memorizing reports from the “Transaction list by Vendor” for comprehensive review.
  • Many QuickBooks reports allow you to report “Accrual” or “Cash” via a radio button option. However, the reports only properly filter for certain types of transactions. If you use a lot of journal entries, you need to work with an accountant to get true cash numbers.

How long can a company use QuickBooks? As companies grow, they often ponder the need for a more integrated, powerful accounting system. We have looked at next-level, systems for clients and found the mid-market solutions not as mature as we had hoped. While that market might be soon emerging, for example SAP launched its online version in July to compete with NetSuite and other products are in the market or on the way, it still costs thousands of dollars, even upwards of $20k to configure and go live on some of these products—not very “mid” when you’re migrating from a $500 accounting package.

Over time, what we’ve seen work best for emerging technology or ecommerce companies, is to put some resources towards developing a good reporting layer on their platform or getting good data from their shopping cart application that can give accounting the numbers it needs for QuickBooks. Additionally, many startups use PayPal in lieu of their own merchant accounts, and the PayPal reports are sufficient to make the proper corresponding entries in your general ledger. When executed properly, the reporting layer approach allows a company to focus its resources on its technology offering, but still produce a good, audit-worthy set of financial statements using QuickBooks.

Disclosure: Hoffman CFO was a community sponsor of TechCocktail DC Oct, 2010.

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