The hidden costs of quickbooks

Most small businesses begin their financial lives using Intuit’s QuickBooks. With more than 80% market share, it is by far the most popular small business accounting application. It’s well known. It’s easy. It works, and it offers the functionality a business needs when it’s starting out. It’s also a drain on growing businesses.

If your business has moved beyond the entry level, your organization may be facing several challenges as you hit QuickBooks limits. It wasn’t designed to provide professional financial management capabilities to growing organizations with sophisticated, evolving demands. These companies require more and better visibility into financial and operational performance, and functionality that includes:

• Business process automation
• Anytime, anywhere access
• Enforcing internal controls
• Customization
• Integration with other critical applications

If your company has outgrown QuickBooks, the hidden costs of not replacing it can be staggering. Some of the warning signs include:

• Not hitting quotas or growth targets
• Flat or declining sales
• Missed customer commitments
• Inability to grow and react to market changes and opportunities
• Lack of visibility into costs, profit and loss
• Inability to maximize revenue due to nonoptimized pricing and ineffective discounting programs

At this point you might be thinking “really, all because of QuickBooks?” Yes, because you’ve reached the point where you don’t have the real-time information you need to make strategic data-driven decisions.

How do you know when it’s the right time to make the move? Which options should you consider? What are the hidden costs of waiting? How can you measure the costs against the benefits?

Organizations accustomed to spending extra time managing workarounds in QuickBooks may not even realize the number of inefficiencies getting in the way of doing day-to-day business. These inefficiencies become ingrained in the everyday operations of the business. And because there’s no immediate cash outlay, doing nothing may seem like the only option, or at least the most cost-effective choice. But the reality is: if you’re using QuickBooks, you’re incurring a broad range of hidden costs.

Identifying the pain points and the hidden cost to your business

A study by the largest independent CPA firm in California, Armanino, found these factors consistently slow down the monthly accounting process:

• Over-reliance on manual, paper-based processes
• Lack of integration between financials and other business critical applications
• Decreased staff productivity because of inefficient and lack of automated processes
• Inadequate data and lack of insight into the business

This study corresponds with the main bottlenecks that QuickBooks users identify as their organizations began pushing the limits of the functionality built into QuickBooks:

• Continuing to rely on error-prone, inefficient manual processes – Manual processes are a fact of life with QuickBooks. Unfortunately, they increase the probability of duplication and data-entry errors—making it difficult to gain an integrated, real-time financial view of a company’s end-to-end operations.
• Putting up with impaired financial visibility from information silos – Most companies don’t integrate QuickBooks with other key business applications. It’s very common to see lots of manual integration points between systems in companies using QuickBooks. That may be fine when volumes are small but is a real productivity killer as the business grows. Finance organizations must manually research, re-enter, and verify data that’s already captured elsewhere at the cost of lost productivity, data entry errors and revenue leakage. This makes it impossible to gain a 360-degree view of the overall business.
• Increasing inability to handle growing data volumes – A few of the tell-tale signs for organizations outgrowing QuickBooks are an increasing number of menu and screen delays, the length of time it takes to print reports, trouble with querying, reporting, or other aspects of the software. Most companies find that, as the size of the QuickBooks file increases, the system becomes sluggish as it’s tasked to crunch increasing amounts of data. This critical limitation may restrict capabilities and force users to periodically close the program to maintain data files. Even worse, this shortcoming can produce potentially disastrous results—system crashes and the loss of crucial data, resulting in wasted time re-entering data.
• Using spreadsheets to manage complex processes outside the system — Organizations with sophisticated accounting requirements, such as revenue recognition and job costing, often find the need to develop workarounds because QuickBooks doesn’t provide the built-in capabilities for these complex processes. To solve these deficiencies, finance organizations will often export data to multiple spreadsheets, set up dummy accounts, and ultimately create additional journal entries each month or develop homegrown applications for recording revenue or expenses outside of the system. These workarounds can lead to duplicate entry errors or reports based on incorrect or stale data, introduce inefficiencies into the process, consume additional time and resources, lack control and compliance, and create another source of information outside your financial system.

Despite its popularity as a business application for small business, QuickBooks simply wasn’t designed for growing organizations that need advanced functionality to manage sophisticated processes. To accurately forecast upcoming business opportunities and plan proactively, organizations managing complex business processes need an overarching view of company operations—to identify process gaps as well as areas of strength. Limiting collaboration, not providing adequate controls over data, and lack of integration can all delay strategic decision making and obstruct growth-oriented business management.

Eliminating the expensive, old-school options

Just a few years ago, organizations outgrowing QuickBooks faced a difficult decision. Purchasing, installing, and running traditional mid-market financial software, such as Microsoft Dynamics, is a huge and risky investment. It involves purchasing servers and databases, hiring IT staff, engaging specialized consulting services to help with customization, and making an ongoing multiyear commitment to operating and managing complex software. The upfront costs can easily run hundreds of thousands of dollars, and a large number of projects actually fail.

The cost and risk of graduating from QuickBooks has traditionally been high, resulting in too many businesses staying with QuickBooks and dealing with its limitations longer than they should – sometimes to the point where QuickBooks is silently killing the growth initiatives of the business.

Cloud computing changes everything. You’ve probably read about cloud computing —and you’ve used it if you’ve ever searched on Google, purchased something on Amazon, or if your firm already uses web-based payroll, email, or CRM.

A new generation of cloud computing-based financial software has entirely changed the dynamics of graduating from QuickBooks; with cloud computing the vendor takes on all the information technology cost and risk. All you need is a web browser and an Internet connection—no need to invest in technology, servers, software or IT.

QuickBooks’ limitations drive the need for companies to graduate to a more robust system, and cloud computing takes the cost and risk out of moving to an updated financial system. As they outgrow QuickBooks’ capabilities, organizations should consider a cloud-native financial management platform that delivers best-in-class financial and accounting functionality, and offers:

• Anytime, anywhere business visibility
  • Access to real-time data and processes available anytime, anywhere with a web browser and Internet connection, offers unprecedented access to users inside and outside your organization
  • Flexible reporting, with a built-in multidimensional architecture, delivers accurate and timely reports with relevant insights into data
  • Role-based dashboards deliver real-time global and local visibility into the state of the business, to the right stakeholders at the right time, providing deep insights into business performance
• Increased productivity
  • Extensive integrations with leading applications enable organizations to easily, cost effectively assemble an interoperable system of best-in-class applications, providing the best solutions for your business needs
  • Easy user defined workflows automate, control, and streamline processes as needed to optimize processes throughout the organization
• Scalability
  • Scalable architecture grows with evolving business needs
  • Multiledger system delivers scalability and control for high-volume, high-transaction businesses
  • Multiscenario planning drives business performance and management, and enables storage of an unlimited number of budgets, forecasts and other relevant reporting formats

Measuring the true cost of continuing to use QuickBooks

Despite the inefficiencies and hidden costs of continuing to use QuickBooks, when faced with the cost of change now verses the cost to postpone, many organizations conclude it’s more cost effective to keep what they have. While this might have been true when the only option was to switch to expensive on-premises software like Microsoft Dynamics, cloud-native platforms are extremely cost effective. In fact, the time you save, just from automating critical processes and eliminating spreadsheets, can often more than pay for the entire cost of moving to the new system, typically in just a few months.

You can prove this for your own organization by comparing the full costs and productivity implication of continuing to use QuickBooks with the same factors for a new cloud-native financial management system. Thousands of organizations like yours have already made this comparison, and invariably the answer is that graduating to a cloud-native financial management platform results in a tremendous, positive return on investment (ROI).

And remember, there’s more than the hidden costs I’ve outlined here. I’ve shared the warning signs, and these have a real and serious impact on any business seeking to prosper. Our white paper, The Hidden Costs of QuickBooks, includes a sample ROI model showing an annual ROI of 164% with an eight-month payback period, and a checklist of potential savings to identify and calculate revenue increases and cost savings. Use these to build your business case.