What to do with QuickBooks

Well @routerguy has called me out. And he did it well. He asked great questions which I think deserve a response.


The question was in response to my post about “Why QuickBooks will always be sub-par”. He asked (and I’m paraphrasing here): We would love to ditch QuickBooks, but where do we go?


I have been asked this question innumerable times. And I have avoided answering it, especially in public spaces, for a couple of reasons. One, I just don’t have that much experience with other accounting systems. I have used lots, but I can’t navigate anything as quickly as I can QuickBooks. There has just never been a need. Basically everyone uses QuickBooks. And I feel bad recommending something I am not an expert in.


But the biggest reason is that there is no simple answer. I will never write a blog post that says “5 reasons to use X instead of QuickBooks”. It would likely create great traffic for me, people love anything that comes in a list they can scan without reading and anything that gives them a quick answer. But it would be a disservice to my clients and readers. There is no one size fits all.


If you really want to ditch QuickBooks, you need to stop thinking about your software as your accounting system and start thinking about your “accounting information system”. Your AIS is so much more than what software you use. It is how customers send you data, how that data gets input into a system, what that system is, what outputs you need, and when you need outputs. It involves more variables than you have even thought about. In fact, most business owners have AIS that was created by accident. MANY of them have systems built around QuickBooks. But QuickBooks is NOT an AIS system. It can ONLY be a part of one, because it is only a tool. The real, and important, questions have to with how you use that tool in your business.


I know that @routerguy, being an information systems guy, will totally know what I mean here.


So, start thinking about your AIS system as a whole. I suggest starting with understanding what the individual pieces and parts might be:


Pre-Sales Systems

Do you have to order items from a vendor with a purchase order? Do you quote work for clients with a sales order before they agree to hire you? Do you have to do anything that requires deliverables or the storage of data before a customer actually becomes a customer?


Billing and Sales Systems

Do clients pre-pay for services? Do you bill them later? Do they pay on site or do you extend them credit? Do you have to do progress billing? Do you need detailed itemized invoices or just a piece of paper that shows what a client owes? Do you have to submit bills to regulated companies, like insurance companies?


Payment and Banking Systems

Do you take checks? Credit cards? Cash only? Do take them in person? Or via the web? Do have lots of transactions? Or just a few? How do you deposit money to the bank? How do you know which client to apply a payment to?


Reporting and Internal Controls

What kind of reporting do you want, or need? Do you need to see detailed breakdowns of different types of sales? Or do you have only one type of income? Do you want to see your sales by day? Week? Month? or Year? Do you want to see sales by a region? By a customer or by a sales rep? How do you make sure that your records are accurate? Do you have half a dozen people involved in billing and collecting money from clients so you want firm controls to make sure there is no malfeasance? Or are you the only person in your business and you just want to double-check your work? What about expenses? Do you want to see dozens, or hundreds of expenses? Or can you have 8 to 10 accounts that get you close enough to knowing where your money went?


Balance Sheet and Inventory Systems

Do you have inventory? Do you need to track inventory?Does your inventory need to be detailed? Does it need to be real-time or can it be updated yearly? Do you need to track inventory by item count or by value? How often does the price levels of inventory items change? What method do you want to use to value your inventory? Do you use credit cards?


Operational Systems

Does your operations need to integrate with your accounting function? Do you need to track customers and relationships? Do you need to bill based on your calendar? Or do you can you track your life via Google Docs and just record accounting information somewhere else?


And remember, as with any system, the more detail you want, the more expensive it will be to set-up and maintain it. More complexity creates significantly more opportunity for failure. You might like to have a real-time, by item inventory, but given what that would cost in time and material to operate, is it really worth it? Who knows. But as the business owner, you get to decide that.


Now, I have purposely tried to make the questions overwhelming to try to drive home my point. For most small business, it won’t be THAT overwhelming. Here are a couple of things to look for, that I think are mandatory:


-Needs to have direct feeds to bank and credit card accounts. If you are inputting activity by hand you are DOING IT WRONG.

-Needs to have at least basic income and expense tracking and reporting. You need to be able to review, monthly, what money came in and where it went.

-Needs some sort of reconciliation system so that you can double-check activity entry and make sure everything is recorded and only recorded once.

-Not mandatory but highly recommend would be a system that allows multi user access and is stored somewhere online, so you can get access to it anywhere.



I really like Wave Accounting and Xero. I am also intrigued by a banking system called Simple. But you know what? I use excel for new side businesses and for ALL my personal accounting. I love excel. It is fast, easy, and I can make it do anything I want. It works for me. And that’s the secret. Do what works. Maybe you don’t even need just one program. Maybe that isn’t the best option. Maybe having two programs that do different, distinct part of your AIS is the best option. Just don’t duplicate the parts of your AIS! That is always a bad idea.


My point is this. Business owners, like people in general, like to take the easy way out. It’s why we all know that McDonald’s is killing us but we still go there. We don’t want to put the time in to do it right, we would rather it be easy. And believe me, QuickBooks is the easy option.


But if you want something better than the easy option. If you want to be better than average, you will have to put in some extra WORK to get there. Most people won’t, but for those that want to, give me a call and I would love to help you through it.


Problems in Business

I spoke recently to a group of students at Cal State Fullerton. They were preparing sample business plans and we went over the most common business problems each of their proposed businesses would face. I realized after talking with them for some time that most business problems fall into just a few categories.

Understanding the core problems of a small business, may help business owners to know where to focus their energies. So I thought I would make a new series about the core problems that face businesses.
Today’s problem is what I called the “utilization problem” and is a fairly straightforward problem.
Any business that has large capital investments in equipment or facilities faces this problem. If you start a gym, an auto shop, an appliance repair company, anything where you have equipment or facilities that generate your revenue you face the problem of having those facilities lying idle and not generating revenue.
This also applies to a business that relies on a heavy investment in education. Doctors, dentists, lawyers, anyone that bills by their time can also face this problem. Any time a doctor doesn’t have patients in his office, no revenue is being generated.
So, core business problem number one: the utilization problem. If you are going to generate revenue from a significant capital investment, make sure you focus your business planning on how to keep as many “butts in the chair” as you can.