6 signs your company may have outgrown using Quickbooks Online accounting software

Posted May 21, 2024

The exhilaration of revenue growth and expansion is undoubtedly a badge of honor for small businesses and startups. However, this achievement is often accompanied by operational complexities hindering efficiency and profitability. Manual and error-prone processes can overwhelm your ability to close books promptly and impede automation integrations as your organization scales.

This pivotal juncture represents a transition where businesses often outgrow entry-level accounting solutions like QuickBooks, an operational rite of passage that signals the need for more sophisticated financial management systems and processes. By recognizing and proactively addressing these operational challenges, you can ensure sustained growth and maximize profitability in an increasingly competitive landscape, feeling informed and prepared for the journey ahead.

By embracing scalable solutions and leveraging expert guidance, small businesses and startups can streamline their operations, enhance financial visibility, and unlock the full potential of their growth trajectory. The reassurance of having the right tools and strategies, guided by experts, is essential for maintaining a competitive edge and positioning your venture for long-term success, instilling confidence in your financial management.

Background on Quickbooks Online

While QuickBooks Online (QBO) remains a popular choice for small businesses thanks to its user-friendly interface and low cost, there may be better fits for some companies. QBO excels in basic accounting tasks and offers robust customer support. However, as your business grows or faces new complexities, QBO’s limitations might become apparent. This is not a roadblock but an opportunity for growth and adaptation. Exploring other accounting software options becomes crucial to ensure your financial needs are met effectively, and to pave the way for a more efficient and successful future.

Many businesses start with QuickBooks Online because of its user-friendliness and affordability. However, QBO’s limitations can become a hurdle as your company grows. If you need help managing your accounting effectively with QBO, we can help. Our team regularly helps clients assess whether QBO meets their needs or if it is time to upgrade to a more robust accounting system. In the following sections, we’ll explore six key areas to consider and signs that may indicate you’ve outgrown QuickBooks Online.

Too Many Spreadsheets

As a growing company, relying on entry-level solutions like QuickBooks Desktop and individual spreadsheets can hinder effective financial management and jeopardize future viability. With increasing data volume and complexity, Excel can introduce new challenges for your financial reporting, accounting, and finance teams:

Data Fragmentation: Invoices, statements, and reports residing in separate spreadsheets necessitate manual consolidation and reconciliation. This patchwork approach obscures a holistic view of finances, hindering informed decision-making, particularly when managing multiple entities.

Manual Data Entry: Essential tasks like expense reporting and inventory tracking involve repetitive data entry across multiple spreadsheets. This time-consuming process amplifies the risk of errors and inconsistencies.

Data Duplication: Similar data points in different spreadsheets lead to discrepancies and potential errors. Reconciling these discrepancies consumes valuable time and resources, further slowing down your team.

Limited Functionality: As your business evolves, complex tasks like multi-currency transactions or advanced inventory management might exceed QuickBooks’ capabilities. Spreadsheets become necessary stopgaps, creating a system vulnerable to errors and inefficiencies.

Your Company’s Organizational Structure is More Complex

To sustain growth and maintain a competitive edge, it is imperative to recognize the limitations of entry-level solutions and embrace robust financial management systems. Streamlining processes, enhancing data integrity, and leveraging advanced functionalities can position your organization for long-term success in an increasingly complex business landscape.

Expanding operations across different geographical areas and industries or meeting legal and tax requirements often necessitates working with multiple business entities and providing consolidated reporting. However, entry-level accounting solutions like QuickBooks are not designed to effectively handle multi-entity consolidation within the system.

Recording intercompany transactions adds complexity and manual data entry requirements. Each entity requires a separate QuickBooks instance and subscription, leading to data siloing. Consolidating accounting data becomes a resource-intensive endeavor, as information must be exported and manipulated outside QuickBooks, or third-party solutions (with additional subscriptions and costs) must be utilized.

As your business scales, the lack of automation and the inability to consolidate directly within the system can drain resources significantly, hindering efficiency and hampering decision-making processes. Recognizing these limitations and adopting scalable, integrated solutions becomes crucial to streamlining multi-entity operations, enhancing financial visibility, and supporting data-driven decision-making across your organization.

Increased Reporting Needs

Once good enough for financial insights, QuickBooks eventually shows its limitations as your need for comprehensive financial reporting grows. For businesses scaling up, these reporting shortcomings often require more capable ERP software such as Sage or Netsuite.

As businesses navigate increasingly complex transactions and require highly customized or specialized reports for strategic management analysis, entry-level accounting solutions like QuickBooks may fail to provide satisfactory results. Frequent signs of insufficient reporting capabilities include:

Increased reliance on external software – Frequent editing and manipulation of data outside of QuickBooks for reporting and analytics (in Excel or with the help of third-party solutions) becomes necessary.
Insufficient analytical features – The inability to import statistical data for KPI/metric reporting and analysis limits analytical capabilities.
Lack of customization – The absence of user/role-based dashboards restricts tailored reporting.
Inability to provide real-time reporting and business visibility – Delayed or static reporting hinders agility and informed decision-making.
Limited dimension tracking – QuickBooks Online (QBO) only tracks categories (general ledger codes), classes, and locations, with no additional or custom dimensions available.

As businesses grow and evolve, anticipating future reporting needs and assessing whether QuickBooks remains the appropriate solution is crucial. Compliance reporting requirements to meet industry regulations and standards should also be a key consideration.

Inventory Management Issues

For retail or eCommerce companies, for example, accurate inventory management is the cornerstone of profitability. Maintaining visibility into stock levels, locations, and movement is crucial for optimizing inventory, preventing stockouts, and maximizing sales. However, relying on QuickBooks as your inventory management solution might present frustrating limitations:

Multi-Location Tracking Challenges: QuickBooks often needs help tracking inventory across multiple locations accurately, which can obscure visibility and hamper stock control. This can lead to overstocking at one site and stockouts at another, impacting sales and customer satisfaction.

Basic Reporting Capabilities: QuickBooks’ reporting features for inventory movement and analysis might need to be improved for a growing retail business. A lack of insights can hinder identifying trends, optimizing ordering processes, and effective demand forecasting.

Limited Customization and Scalability: With limited customization options for inventory workflows and data fields, QuickBooks may fail to adapt to your specific business needs. This can result in inefficiencies, manual workarounds, and an inability to scale operations seamlessly.

Need Industry-Specific Features

Recognizing these limitations is crucial for evaluating whether your current system can effectively manage your current and future inventory needs. In the dynamic retail landscape, robust inventory management is pivotal for optimizing stock levels, preventing stockouts, and maximizing profitability – areas where QuickBooks may eventually fall short as your business grows.

QuickBooks is a popular accounting solution, but its generalist approach can limit functionality for businesses with specialized needs. Here’s why specific industries might outgrow QuickBooks:

Inventory-Heavy Industries (Manufacturing, Assembly, etc.): QuickBooks offers limited inventory features, especially in lower tiers. For complex needs, explore software built for comprehensive inventory tracking and management.
Non-profits: Larger non-profits often struggle with QuickBooks for grant management, such as restricted fund disbursement and net asset roll-forwards. Consider solutions specifically designed for non-profit accounting.
Construction & Real Estate: Job costing in QuickBooks might not suffice for larger companies. Dedicated project management or construction software offers more robust features for job costing and project tracking.
Manufacturing: Complex manufacturing needs require specialized solutions. Look for software designed for production scheduling, detailed cost analysis, and shop floor control.
Allocation-Intensive Businesses: QuickBooks lacks automated expense allocation features. Explore solutions with built-in features or consider integrating with Excel or third-party allocation tools.

By understanding your industry’s specific needs, you can choose an accounting solution that empowers efficient project cost management, optimizes budgeting, and ensures long-term profitability. Now, a firm called Fourlane makes the case that switching to Quickbooks Enterprise can solve many of the issues I bring up in this article.

QuickBooks Integration Challenges

Effective cash flow management and stalwart strategic capabilities are essential for small business owners. QuickBooks can be a good starting point, but for growing businesses, its limited integrations create roadblocks:

Disconnected Data, Disconnected Teams: QuickBooks often needs help to connect with other crucial software (CRM, e-commerce, etc.). This forces manual data entry or third-party connectors, hindering collaboration and creating data silos.
Limited Visibility, Limited Growth: Information trapped in separate systems reduces real-time insights, and hampers informed decision-making.
Rising Costs, Stalled Efficiency: As integrations and workarounds multiply, IT costs climb, and scalability suffers.

A robust accounting solution empowers a truly connected business:

Seamless Data Flow: Effortlessly connect with other software for automated data exchange, boosting efficiency and eliminating errors.
Unified View, Informed Decisions: Gain real-time visibility across your entire operation, enabling strategic decision-making with complete data at your fingertips.
Cost-Effective Growth: Reduce reliance on expensive workarounds and integrations. Invest in a system that scales with your business needs.

Moving beyond QuickBooks’ limitations will unlock a more collaborative, efficient, and data-driven future for your business.

Conclusion

As your business expands, the financial acumen required to manage operations effectively grows proportionately. Although QuickBooks Online is a popular and essential financial management system, it needs more scalability to accommodate sustained growth. Some companies use Sage accounting products if they are in the construction industry, for example. The startup CPA firm Kruze Accounting recommends using QBO until you have raised a Series B VC investment, are doing over 20M+ annual revenue, or are ready to get an audit by a Big 4 accounting firm, start filing for an IPO or M&A deal. Then, switching to an expensive enterprise ERP solution like Netsuite might make sense. Huckabee CPA offers QuickBooks training and consultations; if you have questions, reach out for a free consultation and gain valuable insights into optimizing QuickBooks for continued success.