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4 Signs You've Outgrown QuickBooks

While QuickBooks was a great option for business before, you’re starting to need ability to support more complex financial operations and reporting functions.

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Team Maxio

June 14, 2020

Color-Coding Spreadsheets, Failed Metric Reports & More.

You’ve been there, right? Rock: meet hard place. Your QuickBooks instance was doing just fine in your company’s infancy.But now you’ve got hundreds of customers, and the FinOps debt is piling up.

While QuickBooks was a great option for your small businesses before, you’re starting to find yourself needing the ability to support more complex financial operations and reporting functions. You may even be asking  yourself: Is it time for an ERP? 

The answer might surprise you.  

Signs You’ve Outgrown QuickBooks

Unfortunately, there’s no silver bullet when it comes to knowing exactly when to call it quits with QuickBooks. Some might say it’s after you reach a certain threshold in ARR or employee count. But in reality, the life of QuickBooks has less to do with how much ARR you’re managing and more to do with how sophisticated your business operations are.While there’s no singular moment in time you can point to universally, here are a few tried-and-true indicators that you may be reaching the end of your QuickBooks lifecycle.

You’ve started color-coding your spreadsheets.

The most obvious sign that your company has outgrown QuickBooks is the color-coded spreadsheet. Because QuickBooks cannot create deferred revenue recognition schedules for subscription businesses, you’re likely augmenting the work in Excel. As you acquire more customers and introduce more complicated, sales-negotiated contracts, the spreadsheet starts to take on a life of its own.

You’re overly protective of your spreadsheet.

There are a lot of things to take obsessive ownership of in a growing SaaS business: company culture, the go-to-market strategy, even the coffee. But your rev rec spreadsheet? Only desperation and the nightmare scenarios you play in your head of broken formulas and reference errors can drive a person to slap the hand of anyone who would dare to touch the sacred spreadsheet. You know your energy is better spent elsewhere, but the headache of possibly breaking your spreadsheet has caused you to impose maximum-security permissions on all of your sheets.

Investors are asking for SaaS metrics you can’t produce.

It’s one thing to go back and forth internally over precisely how you arrived at a certain number. It’s another thing entirely for you to have the same discussion in front of potential investors, or worse, have a potential investor call out an inconsistency. Shaky SaaS metrics erode investor trust and call into question the integrity of your financial operations. If you have this problem, it’s not a matter of if, but when you need to level up from operating in just QuickBooks alone.

Your board is pressuring you to switch to a subscription model.

It’s certainly a common story. You’re a young founder with a great idea and at first, the running of your company may feel more like a spirited side project than a viable business. But quickly, you start to acquire customers and prove out your product-market fit. It’s around this time when your board starts to pressure you to adopt a subscription model. Subscriptions mean recurring revenue streams for the business. Good for you, and good for the board. But it’s going to be a nightmare for you invoicing in QuickBooks, especially if invoice amounts and schedules start to vary.

Extending the Life of QuickBooks by Supplementing with Spreadsheets

There are several challenges with managing your subscription SaaS business with QuickBooks. The first is that QuickBooks can’t generate deferred revenue schedules. Because of this, you start generating them on your own in a spreadsheet. This might work when you have only a handful of customers, but as you grow, it quickly becomes unmanageable.

Another challenge you’ll encounter is invoicing for subscriptions in QuickBooks. While QuickBooks has a recurring billing function, it can’t handle recurring invoices with variable amounts, which is a cornerstone of subscription SaaS businesses. Without the ability to manage this directly in QuickBooks, you’ll have to create a separate tab in your spreadsheet for invoicing schedules.

If you have a complicated invoicing schedule, you’ll have to set calendar reminders for yourself so you don’t forget to send out invoices. If you miss one and forget to send an invoice, you’ll effectively “lose” ARR due to a simple, clerical error.

Once you begin augmenting your work in QuickBooks with spreadsheets, you’ll quickly realize that your system is highly susceptible to human error. Because you’re manually completing journal entries in QuickBooks from rev rec schedules in your spreadsheet, a simple contract change can wreak serious havoc downstream when it comes time to close your books.

In addition to the above, QuickBooks doesn’t have a direct integration with CRM softwares, which means your order-to-cash process is highly inefficient. Without an integration, you’re forced to manage sales orders directly out of your inbox, which is tedious and time-consuming. Once you’ve processed the order, you’ll have to go back to your CRM and manually reflect the completed contract there.

Finally, you’ll still be accountable for producing SaaS metrics, even if those aren’t readily available for you in QuickBooks. In your spreadsheet, perhaps you create yet another tab to calculate important metrics like ARR, CAC, and CLV. The problem here is that the application of formulas isn’t always consistent. Since there’s no governing body for SaaS metrics like there is for GAAP financials, a lot of these terms are up for interpretation.As you can see, while it can be tempting to attempt to extend the life of your QuickBooks instance in order to delay the switch to a big ERP, supplementing QuickBooks with spreadsheets alone is a largely error-prone process that ultimately opens you up to more risk than its worth. It’s more of a stop-gap than anything, and stop-gaps aren’t solutions.

Extending the Life of QuickBooks with a Subscription Management Platform

There are a variety of reasons to put off the transition to a large ERP. The most obvious is that they’re extremely expensive. It wouldn’t be outlandish at all to estimate that a large ERP, like Intacct or Netsuite, will cost you upwards of $100,000 per year. If you can delay the adoption of an ERP for just 3 years, that’s $300,000 in cost savings.

Another reason to delay the switch to an ERP is that it’s time consuming and disruptive to business operations. With most ERP implementations requiring at least 6 months, you’d need a full-time employee dedicated to overseeing the implementation and another to keep your day-to-day operations afloat during the implementation.

Luckily, there are ways to delay implementing an ERP by extending the life of QuickBooks. With a subscription management solution, like Maxio, you can extend the life of QuickBooks and scale your financial operations significantly, without the headache of spreadsheets.According to Jon Cochrane, CPA and Senior Product Manager at Maxio, “If you want to extend the life of QuickBooks, then you need an automated way to bill, collect, and report revenue.” That’s precisely what Maxio is. Maxio is a subscription management platform that is designed to sit between your CRM and General Ledger in order to streamline financial operations and reporting.With Maxio’ bi-directional QuickBooks integration, you eliminate the process of manually updating QuickBooks with Maxio transaction data and mitigate the risk of investors spotting errors in your spreadsheets. Maxio generates rev rec and invoicing schedules from transaction data pulled directly from your CRM.You can also automate invoicing directly from Maxio and even set specific parameters for email cadences for AR management. In terms of reporting, Maxio’ SaaS metric reports use your real transaction data to generate metrics, standardizing the application of formulas and removing speculation about where specific numbers came from.

Finally, you never have to worry about human-sync errors between your spreadsheets and QuickBooks because Maxio continually scans for discrepancies in your numbers and alerts you when out-of-balance accounts require your attention.

All in all, the cost of adding a subscription management solution to QuickBooks is a fraction of the cost of transitioning to an ERP, and it takes mere weeks to implement, rather than months. What’s more, because Maxio integrates with ERPs as well as smaller ledgers like QuickBooks, you can continue to reap the benefits of Maxio even after you have outgrown QuickBooks once and for all.

When Is It Time To Switch To an ERP?

Even though it may not be as soon as you think, there will come a time when you do need to switch to an ERP. More often than not, this has less to do with the size of your company and more to do with the sophistication of your business model.

For example, one of the most common reasons companies invest in an ERP is that they’ve decided to go international and operate that leg of the business as a subsidiary. Once you start introducing multiple entities into the mix, it can be difficult to keep everything straight without a more complex system.The other primary reason to switch to an ERP is in the event of a merger or acquisition. With multiple companies’ financials being consolidated, the ability to manage more complex data sets becomes crucial. 

These are by no means the only reasons to switch to an ERP, but they are by far the most common ones. The main takeaway here is that, contrary to popular belief, ARR and headcount are not the primary catalysts of switching to an ERP.Additionally, the nice thing about a subscription management solution like Maxio, is that it scales with you as you transition to an ERP. With Maxio’ integrations with Intacct and Netsuite, you can marry the best of an ERP to the flexibility and SaaS focus of Maxio

Closing Thoughts & Key Takeaways

If you’ve stuck with us this far, you likely know that QuickBooks alone is not cutting it for your SaaS business anymore. While it may be tempting to switch to an ERP sooner rather than later, there’s actually huge financial upside to putting off the transition for a few years. As mentioned above, delaying the switch for even a couple of years could mean the difference in hundreds of thousands in cost savings. With that in mind, it makes sense to extend the life of your QuickBooks instance for as long as possible. While augmenting key financial operations in spreadsheets has been the norm for most SaaS businesses, it’s actually not sustainable due to its high susceptibility to human error. Rather, a subscription management solution, like Maxio, can effectively extend the life of QuickBooks for your team without the headache of spreadsheets. Interested in learning more about how Maxio can help you extend the life of QuickBooks at your company? Sign up for a free demo and learn how Maxio can help your business grow.

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