It happens thousands of times every year. Successful businesses outgrow their entry-level accounting systems. More often than not, the system is QuickBooks and the logical next step is a cloud-based solution that offers greater efficiency, more automated processes, and a better customer experience.
If you’re contemplating moving your accounting system to the cloud, this white paper outlines key things to consider, including whether staying on premise or moving to the cloud is right for your business.
When your business has outgrown the entry-level accounting system QuickBooks, you experience one or more pain points that might include: excessive use of Excel spreadsheets, lack of required reports, manual duplication of data into other business systems, and the need for constant proofing. Each of these issues requires time, sometimes overtime, and possibly additional staffing.
Excel Is a Headache
One of the surest signs that you are ready to graduate from QuickBooks is that you have to dump everything into Excel to see what is going on in your company. When you were just starting out, it was enough to see the balance in the checkbook-style ledger. That told you whether you could pay your bills for the month. Time goes by, there’s money in the bank, your business is expanding. Congratulations! But now you need to roll up and consolidate financials from multiple divisions or entities to see how you are doing. Maybe there are multiple currencies involved or complex revenue recognition issues to manage — tasks that QuickBooks was not designed for.
Reporting and Auditability
Now you may have to work late pulling reports together manually for board meetings, building or updating spreadsheets because QuickBooks does not have the reports you need. Directors want to see the relationship between cash flow and operations. Profitability comparisons across divisions. What-if analyses of the options before the board. In short, they want visibility into the business. You pray that QuickBooks doesn’t crash as you export the data.
Problems with reporting and auditability (they go hand in hand) are the two most common trouble spots for small and mid-size businesses that have outgrown their initial system. The more you have to do in Excel outside your core accounting system (QuickBooks or any other), the more common they are.
Proofing Overload
Spreadsheets are silos of information. The data they contain is static as soon as you export it from QuickBooks. Every time you touch the data — to refresh the inputs, to modify a formula, to add a row — it may introduce an error. The chances of error increase if there are multiple touchpoints in your organization for processing or reporting the data.
All of these pain points cost you time that could be better spent elsewhere. Maintaining a spreadsheet farm may even mean that you have to hire additional staff. Still, the greatest danger associated with spreadsheets is that there come to be multiple versions of “the truth.” The report you create tonight may circulate through the organization and become a template that different departments or divisions modify for their own purposes. Everyone is creating one-off versions of reports that don’t tie off, but everyone believes their own version of the truth and acts accordingly. Some refresh their data regularly; some don’t get the memo.
The pain points that develop where QuickBooks no longer fits your organization are also pointers to the way out. We’ll return to that idea as we envision a new way of working.
Real-Time Visibility
Imagine that the General Ledger view is open in front of you on your screen. All divisions and offices in your firm access the application over the internet, as do you, and all transactions are written to the same database. So you — the CFO of your company — are looking at your company’s finances in real time. With a single mouse-click, you select Sales Budget vs. Actual by Location, and print it. A job that used to take hours is done in under a minute.
Or envision the Expense Management view open in front of you, the controller of a professional services firm. You can improve your firm’s cash position through timely billing and charge-backs. You want to see whether the staff at remote client sites are entering their time and expenses at the end of the day, as required by company policy. You are pleased to see that compliance is way up because the staff can now just key in the data and scan in their receipts before leaving the job site. They are more motivated to do it because they get reimbursed faster, thanks to an automated approval workflow. You are happy because approved expenses are immediately available for invoicing.
All the executives and senior managers have a customized dashboard open in front of them, showing the key performance indicators they need to do their jobs. Operations staff have secure access to the exact, real-time financial information they need to do their job. They can see more clearly how their decisions and activities impact the company as a whole, so a virtuous cycle is established that enables them to improve performance. The executive team can monitor the function they are responsible for, drilling down to the most granular level or pulling back for a global view, comparative analyses, and what-if scenarios.
Multi-Dimensional Reporting
Underneath the various dashboards, reports and analytics is the same thing: dimensionality. You tag transactions with codes for various dimensions of your business: customer, vendor, employee, project, spend, profit or payroll, for example. These codes index entries for analysis and reporting purposes. Some dimensions are common to all companies, but you can define others that are especially relevant to your business.
As mentioned before, problems with reporting and auditability are the two most common trouble spots for small to mid-size businesses that have outgrown QuickBooks. The point is that you don’t need spreadsheets to provide flexible reporting and analysis when you have a dimensional cloud accounting solution. It is much easier to make sound business decisions when you have real-time visibility into your company, and you can’t get real-time reporting from spreadsheets.
Stop the IT Bleeding
Last, but not least, when you move from QuickBooks to the cloud, you get out of the IT business and into your own business. Imagine writing a check to the cloud vendor for turnkey service instead of to Dell for servers, Microsoft for licenses, and your IT support for managing it all. Imagine never having to install another version of the software, never having to restore a computer that has crashed and never worrying about losing your data. Forget all the other pains of IT ownership. All you need is access to the internet, at any time, from any location, 24/7/365. The cloud vendor does the rest.
Outgrowing QuickBooks is a gradual process. Unless there is a compelling reason to migrate, such as an acquisition, organizational inertia tends to take hold and delay the process of selecting a replacement. Just staying put seems like a safe option, but is it?
The only way to find out is to calculate the total cost of ownership (TCO) of your current QuickBooks set-up and compare that to your options for replacing it. Contact our Strategy team for help developing this.
Direct Costs and Hidden Costs
Let’s net this out. The direct costs for your current setup are obvious. You simply add up license costs for the number of QuickBooks instances you have (and Excel, if you are using that for reporting), the costs of the servers they run on, and the portion of your IT costs attributable to QuickBooks. You also need to take the time to properly quantify the hidden costs of lower productivity and poor data quality.
QuickBooks replacements fall into two categories – software installed on-premises and cloud financials, available as software as a service (SaaS). Each category has its own cost structure, which is accounted for differently in your company’s financial reporting.
Be sure you identify and compare ALL costs, not just the license fees for on-premise and SaaS, as SaaS fees typically include all maintenance, updates, upgrades and customer service costs, which onpremise software does not.
Drowning in Fees
According to research firm The Yankee Group, the license fee for on-premises software accounts for only 9% of the total cost of the installation. All the other things you have to buy and pay for to run the software successfully make up 91% of the dollar cost.
By contrast, the SaaS subscription fee represents the bulk of the TCO — 68%. The remaining 32% of the total costs cover implementation, configuration, and training. These are costs that you would incur no matter what solution you chose; in the on-premises example that the Yankee Group used as a benchmark, these expenses represented 44% of the total cost.
Rapid ROI
When you upgrade from QuickBooks to the cloud, your ROI comes mainly from three different areas: the revenue component, cost savings, and increased productivity.
First, a robust cloud accounting application can eliminate revenue leakage from sources such as improper posting of invoices and lengthy billing cycles so that you get paid sooner. It also enables you to pinpoint factors that affect revenue — for example, reporting of billable hours — and target them for improvement.
Second, you can better control costs. The obvious savings come from eliminating the usual hardware, software, infrastructure, and labor costs associated with installed software. Additionally, you save by reducing G&A costs as a percentage of revenue and putting controls and limits in place.
Third, a substantial portion of your ROI comes from measurable productivity increases. For example, automating manual processes can significantly shorten monthly closings and consolidations. Companies that graduate from QuickBooks frequently report saving 30-40 hours a month in this area alone. Reducing Third, a substantial portion of your ROI comes from measurable productivity increases. For example, automating manual processes can significantly shorten monthly closings and consolidations. Companies that graduate from QuickBooks frequently report saving 30-40 hours a month in this area alone. Reducing
Move Fast to Avoid Missed Opportunities
The direct and indirect costs of running QuickBooks are so specific to every user’s organization that we hesitate to generalize about them. Except for this: They are higher than you think. Settling for lower productivity and questionable data quality doesn’t just cost you money and time. It’s like driving with your handbrake on. Business moves fast in the world around you, and you are missing opportunities if you slow yourself down.
If you move to a cloud accounting application, you will probably also be surprised at how short the payback period is. It is possible to achieve 100% ROI in 4 to 18 months, depending on your situation.
If your business has outgrown QuickBooks, now is the time to move to the cloud. Firms that fail to do so miss opportunities and fall behind their peers and their competitors. They also are unable to deliver the same level of customer experience that cloud-empowered companies can.
To learn more about moving to a cloud accounting solution, contact Armanino. We can help you assess your needs, identify a cloud vendor that will work best for your business and plan a smooth transition and implementation.
