Making the Leap: Why You Should Consider Migrating TO an ERP - PART 1
QuickBooks sets the standard for accounting software, but as you grow you might want to upgrade to an ERP.
Introduction
Many small businesses start out with QuickBooks to meet their accounting needs. It’s a good, cost-effective piece of software with a worldwide network of professionals and support.
According to Slintel, QuickBooks has around 80% market share among accounting software and according to Intuit’s press release its online accounting revenue grew by a further 33% last year.
We’ve always been strong advocates of QuickBooks and we don’t want to underplay its value. However, while it is a popular choice for small businesses to get started, it may not be equipped to handle the growth and complexity of your maturing business.
For example, as your pricing models mature, you expand into other territories, segment your business, integrate with other back-office tech, reporting requirements become more complex. You’ll start to outgrow existing accounting systems which means it may be time to make the leap from QuickBooks to an Enterprise Resource Planning (ERP) platform.
An ERP system offers a range of integrated applications that can streamline business operations, from managing complex transactions like automating your end-to-end quote to cash process and purchasing processes, managing deferred revenue, and slicing and dicing financial data based on business needs. By migrating to an ERP, you can gain real-time insights into your business processes, automate routine tasks, and improve collaboration across different teams.
In this three part series, we will explore the advantages of migrating from QuickBooks to an ERP and provide tips on how to make a successful transition.
The Limitations of QuickBooks for small businesses
One of the main limitations of QuickBooks is its scalability. As your business expands, the sheer volume of transactions and data can overwhelm QuickBooks, leading to slower performance and potential data errors. Additionally, QuickBooks may not have the capability to handle complex revenue workflows like quote to cash or procure to pay, or advanced forecasting or integration and automation. These limitations can make it difficult to accurately track revenue and plan for future growth.
Integration options are also limited. While QuickBooks boasts a robust network of integration modules, many of them are specifically written to work with QuickBooks and the scope of features is limited to the specific module. This can create a “Snowflake” instance of QuickBooks where you have multiple add-on features working independently of each other. For example, you may install a contract management and project management module for subcontracting your work to independent contractors only to find that the two systems don’t code and flow data accurately between each other.
Lastly, QuickBooks may not offer the level of revenue recognition required for a maturing pricing model. As your business evolves, you may require specific ways to track and report revenue that QuickBooks cannot accommodate.
According to a recent study by the Journal of Accountancy, about 40% of CFOs lack confidence in their organization’s financial data.
For example, QuickBooks does not handle Quote to Cash for SaaS license subscriptions and lacks the ability to report deferred revenue by customer contract. This can hinder your ability to analyze data, make informed business decisions and successfully pass a financial audit.
Key features and functionalities of ERP systems for small businesses
Now that we've explored the limitations of QuickBooks, let's dive into the key features and functionalities of ERP systems that can address these limitations and support the growth of small businesses.
1. Integrated applications: Unlike QuickBooks snowflake approach, an ERP system offers a suite of integrated applications that span beyond accounting. These applications can include inventory management, human resources, project management, customer relationship management, and much more. The ERP stores transactions and related data elements in a format that all applications can interpret and flow through the systems.
2. Scalability: One of the biggest advantages of an ERP system is its ability to scale with your business. Whether you have a handful of employees or a growing team, an ERP system can handle increased transaction volumes and support your business as it expands. This eliminates the need for frequent software migrations and ensures that your business operations remain smooth and efficient.
3. Real-time insights: According to Business Insider, more than 80% of business failures come from cash flow problems and a key reason for that is poor reporting. Even if you’re generating sales, poor reporting can lead to an inaccurate view of your true financial position which can hinder decision-making. According to one survey conducted by Digits, most small businesses don’t know where their money[1] is going or their true financial position.
An ERP system provides real-time visibility into your business processes. With up-to-date data and analytics, you can gain valuable insights into your financials, sales, inventory, and more. This empowers you to make data-driven decisions and identify areas for improvement. By having a clear picture of your business performance, you can proactively address issues and seize opportunities for growth.
4. Automation: ERP systems are designed to automate routine and time-consuming tasks. This can range from generating customer invoices on custom billing schedules, routing vendor invoices for review and approval, translating foreign currency for reporting and consolidating multi entities and automating these processes, you can free up valuable time for your employees to focus on more strategic initiatives and value-adding activities. Additionally, automation reduces the risk of human error and ensures data accuracy.
5. Improved collaboration: Collaboration is essential for any business, and an ERP system facilitates seamless collaboration across different teams and departments. With shared access to information and centralized communication channels, employees can work together more efficiently. Whether it's sharing customer data or collaborating on a project, an ERP system fosters collaboration and enhances productivity.
Conclusion
In this first part of this series, we discussed the forces driving small businesses to move to an ERP. Scale, integration, automation, complex revenue recognition are all areas of growth that will eventually push a small business to consider migrating to an ERP. In the second part, we’ll take a look at what factors to consider before migrating and the steps you need to take to pull off a successful migration.
About the Author
Lisa Schulz is a Certified Public Accountant (CPA) with over 15 years of extensive experience in accounting and financial management across both public and private sectors. She has extensive expertise in implementing strategic staffing and technology solutions to streamline processes, enhance efficiency, and mitigate costs effectively. Lisa is passionate about fostering team development and cross-functional collaboration to optimize operational efficiency and achieve strategic objectives. Her dedication to excellence and continuous improvement aligns with her goal of delivering measurable results and driving sustainable business growth. Lisa is based in Oakland, CA.
About Brian Timothy and Associates LLC
Brian Timothy and Associates, provides medium sized businesses with fractional expertise to help them grow and improve. Using our expert consultancy, we’ll bring focus, experience and proven results to help take you onto the next better. Unlike other companies we are transparent and follow through on our promises. We don’t bill endlessly. We don’t pass the baton and we won’t be opaque in our pricing. You’ll see clearly what you get and what you pay for.
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