As your company inevitably grows, your accounting and back-office systems need to keep up. Here’s some sound advice.

I work with a lot of startups, often in the emerging tech marketspace. For smaller companies, whose financial transactions are anywhere from, say, $100K per year to roughly a couple million dollars or so, I recommend QuickBooks, specifically QuickBooks Online.

As an entry-level accounting system, QuickBooks is a very good choice for smaller businesses and entrepreneurs who want an easy way to track basic finances. And it works very well—until the company outgrows it. In these cases, QuickBooks can be almost counterproductive, creating time-sapping problems that add up to hours lost and money and opportunities squandered.

Here’s my take on some signs that you’ve reached your limit with QuickBooks, and that it’s time to upgrade your back-office system.

Manual processes are creating errors.

Your “swivel chair computing” techniques just aren’t working. If, for example, you’re manually moving sales data from Salesforce into QuickBooks, it’s not only time-consuming, it can also lead to human errors. And if you’re doing revenue recognition, you have it do it manually, using a spreadsheet—QuickBooks won’t help here. This isn’t a big deal when total transactions are small, but it can become a bigger issue as the company grows larger.

NetSuite automates the data transfer process using APIs, making the rev rec process much easier and more accurate.

Note: If you aren’t familiar with revenue recognition (aka “rev rec”), please reach out. It’s a very important set of processes which 

I’ve also seen many companies use Excel spreadsheets to manually record deferred revenue. Let’s say a customer pays you an annual subscription fee of $1200 for your SaaS product. The accountants must then make a reminder to create a journal entry every month for $100. Again, this is okay if you don’t have many of these types of transactions, but when your total number of customers increases, these workarounds become unscalable.

In NetSuite, payment schedule processes are automated, eliminating the risk of your accountant forgetting to record a payment each month. This automation also gives your employees more time in their day to focus on more value-added work. Or maybe even take off early to get to their daughter’s soccer game. 😊

Tip: Even if you own NetSuite, you may be tempted to buy a process automation platform to automate your repetitive tasks. My advice: 

Audits 

Let’s face it, audits are no fun. So just in case you are audited (and the IRS isn’t the only organization who audits), you need solid checks and balances to have your books aligned for the audit. QuickBooks does okay, but lacks in audit-related areas such as internal controls around approval workflows, separation of roles or audit controls, and so on. This can make the audit even more painful.

Note also that a poor audit can prevent you from taking the next step in building your business: If, for example, you need to get a loan from the bank, are pursuing funding from investors, or are looking at going public, you need a rock-solid, audited set of numbers.

In my experience, NetSuite does a very good job of helping companies keep an accurate audit trail, access audit-relevant logs and workflows, and drill down into the details of transactions where needed. (Auditors especially love to do the latter; it's best to be ready for them 

Vis-à-vis segregation of duties, QuickBooks just isn’t great at this. And this is especially important for the billing processes. For example, QuickBooks won’t prevent the same person from paying and approving a bill, which can leave you prone to accounts payable fraud or other issues. To me, this alone is worth upgrading to NetSuite.

Inaccurate data is preventing informed decision-making.

I read the news. I know that today’s economic environment is more uncertain than ever. Having the right data to make smart decisions quickly can be a make-or-break for businesses of all sizes, but especially smaller ones. One wrong turn and you're in the ditch, as my small business owner dad used to say. To me, this makes forecasting and budgeting more important than ever. And it can’t be done right if your data isn't timely and accurate.

QuickBooks reporting is pretty limited and may require workarounds to make existing reports work. On the other hand, NetSuite’s reporting is very robust, and you can quickly and easily report on any data you’ve entered into the system.

Inefficient billing processes affect your forecasts and cash flow.

Smaller companies are especially impacted by cash flow (read my LinkedIn post “

I’ve seen manual subscription billing get very complicated, even for relatively small software companies. Similar to creating payment schedules (i.e., deferred revenue), you are relying on employees to remember to send a bill every month. Yikes.

The Bottom Line:

I’ve witnessed companies who’ve outgrown QuickBooks move to NetSuite with transformative results. It's that "why in the world did I wait so long?" moment. They quickly see increased efficiency and accuracy, simplified processes and higher employee productivity, improved auditability, and ultimately long-term success. At least from an accounting perspective.

Interested in finding out how to keep QuickBooks from holding you back? Reach out to me on LinkedIn. I’m happy to help.

All my best,

Kim

P.S. As a dear friend and serial entrepreneur once told me, “…companies that run on Excel go out of business.” Good advice.