The QuickBooks SaaS story: Can you relate?
You’ve been there, right? 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 business at first, you now need to support more complex financial operations and reporting functions. QuickBooks wasn’t built for B2B SaaS or subscription-based businesses, so finance teams create complicated workarounds to make it viable. At some point, your team has to admit it’s just not a good option and begins looking at an ERP is a necessary move. That process often looks something like this:
We know exactly how disruptive moving to an ERP can be for a SaaS business. While it may be the best next step at some point, that doesn’t make it the next best step today.
Why extend the life of QuickBooks?
With all these headaches, why do we suggest implementing a financial operations tool over moving to a general ledger like Intacct or NetSuite? Because…
ERPs are expensive
The license fees for ERP solutions are costly and typically require a multi-year commitment. It wouldn’t be outlandish at all to estimate that a large ERP 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.
They take a long time to implement
Depending on your growth stage, it typically takes four to 12 months to implement an ERP. You are often required to work with one of their third-party professional services partners.
It’s too disruptive.
To successfully implement an ERP, you need a full-time employee dedicated to overseeing the implementation and another to keep your day-to-day operations afloat during the implementation. Emerging and growing B2B SaaS businesses usually prioritize engineering, sales, and marketing resources over finance and administration. Your finance team doesn’t have the excess capacity to manage the business and make all the necessary business process and configuration decisions quickly.
Can you supplement with Spreadsheets?
The short answer: no. There are several challenges with managing your subscription SaaS business with QuickBooks that spreadsheets just can’t support (at least, not well).
The first is that QuickBooks can’t generate deferred revenue schedules. Generating them on your own in a spreadsheet might work when you have only a handful of customers, but as you grow, it quickly becomes unmanageable.
Another challenge you’ll encounter is problems 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 solutions, 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. Perhaps you create yet another tab to calculate important metrics like ARR, CAC, and CLV in your spreadsheet. 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.
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.
Extend the life of QuickBooks with a subscription management platform
With a subscription management solution like Maxio, you can scale your financial operations significantly without the expense of an ERP or the headache of spreadsheets.
According to Jon Cochrane, VP of Operations at Maxio, “If you want to extend the life of QuickBooks, 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’s 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 A/R management. In terms of reporting, Maxio’s 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.
Closing thoughts and key takeaways
While it may be tempting to switch to an ERP sooner rather than later, there’s actually a huge financial upside to putting off the transition. Delaying the switch for even a couple of years could mean the difference in hundreds of thousands in cost savings.
While managing this delay by augmenting key financial operations in spreadsheets has been the norm for most SaaS businesses, this is actually not sustainable due to its high susceptibility to human error.
A subscription management solution like Maxio can effectively extend the life of QuickBooks for your team without the headache of spreadsheets.