How to Know If Your Business Has Outgrown QuickBooks
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A: This is what I call a "high-class question"--you wouldn't be asking unless you've done things right long enough for your business to grow to a significant size.
Most companies begin their financial lives using Intuit's QuickBooks, one of the best and most popular accounting applications for small business. It's affordable, it's simple and it works. It's easy to find bookkeepers who know how to use it, and it's easy for people to learn.
There's no one answer to how big a company must be before it outgrows the software, though. I've worked with two $25 million companies: a software firm for which QuickBooks worked just fine, and one that needed a more robust platform to track hundreds of invoices and payments per day, something the program wasn't built to handle.
QB does have its drawbacks, and as your business grows you may find yourself bumping into them.
- When you add a wholly new business or an additional store, warehouse or plant, QB's ability to track each entity separately yet still provide consolidated reports is not efficient.
- Complex revenue-recognition programs, such as variable-rate sales commissions and bonuses, are difficult to manage in QB.
- QB files are limited in size. (The Enterprise Solutions system tops out at 1.5 GB.) Once you've reached the maximum, you have to decide whether to upgrade again or shrink the data file by eliminating years of history. I worked with a food distributor whose QB file had grown to 2 GB, and rebuilding the file multiple times a day in order to add new entries slowed the accounting department to a crawl.
- Enterprise Solutions has a 30-person limit on the number of simultaneous users it supports. If your accounting department is larger than that, people will be locked out and not as productive as they could be.
- QB is excellent at slicing and dicing data along common business accounting methods, but the minute you find yourself pulling data from QB to manipulate on a separate spreadsheet, you're ready for a more robust accounting platform. For example, QB won't let you analyze sales based on a combination of location, size of order, products ordered, customer industry and country.
- Complex real-time project accounting in fields like construction, engineering and consulting work--industries that operate along the lines of billable hours--are beyond QB's capabilities.
Compliance and quality
- Government contracts--direct or subcontractors--may require complex invoicing and very specific reporting that is difficult or impossible to implement in QB.
- When a business grows to the point where five to 10 people are logging transactions simultaneously throughout the day, mistakes and corrupted data can occur. I was CFO of a business that entered more than 1,000 transactions per day, and we needed a higher-level system to handle the volume safely and reliably.
- When you find yourself running into the stumbling blocks listed here, act quickly to adopt a more robust system. Yes, the transition will be time-consuming and expensive, but the last thing you want holding your growth in check is your accounting software.