First, let’s get one thing out of the way: this isn’t a piece devoted to trashing Quickbooks.
On the contrary: as a fractional CFO who has worked with businesses of all shapes and sizes, I’ve seen firsthand how Quickbooks has revolutionized small business accounting. It gives business owners visibility into their numbers in a way that simply hadn’t been possible prior to its launch—unless, of course, you wanted to be pouring over your books all day.
However, I’ve also noticed a concerning trend, which is that some business owners believe that Quickbooks is the same as having a complete picture of your finances. The truth actually lies somewhere in between: Quickbooks is an excellent tool—but like any tool, its true value emerges when it’s put in the right hands. In this case, an experienced bookkeeper.
Looking for a video version of this blog? Head here for Cass’s thoughts on getting the most out of Quickbooks.
The False Security of Automation
One of the most efficient pieces of the Quickbooks platform is its automation capabilities, especially when it comes to automatically importing transactions from your bank account or credit cards. When you connect your “bank feeds” to Quickbooks, there’s a peace of mind, as there’s less chance of transactions slipping through the cracks.
It’s worth noting, though, that the automated bank feed is merely one piece of proper accounting practices. Let’s say you spent $5,000 at Office Depot. In addition to the office supplies you use every day, you also purchased a new laptop computer and a new color printer.
While your bank feed might accurately show that you spent this money at Office Depot, it won’t be able to determine automatically if those purchases should be categorized as office supplies, fixed assets, or inventory. It can’t tell you if that expense should be capitalized or immediately expensed. These decisions require understanding of basic accounting principles.
The Hidden Costs of 100% DIY Accounting
Here are four risks I’ve seen first-hand when businesses rely solely on Quickbooks without professional oversight:
Missed Strategic Opportunities: Quickbooks can tell you what happened—but it can’t tell you what should happen next. This is where having a skilled accountant or bookkeeper comes in—they not only record transactions but identify patterns, flag potential issues, or spot opportunities for tax savings. They’ll be the ones to notice when your accounts receivable days are creeping up or that your gross margins for a particular product or service are declining.
Costly Classification Errors: One of the most common issues I encounter is improper transaction classification. Many business owners will categorize expenses based on what’s logical rather than what’s correct. (No judgement here—I’m assuming you didn’t go into business to be a financial expert!) For example, a big one we see is when businesses classify loan payments as expenses rather than splitting them between principal reduction and interest, or mishandling owner distributions versus legitimate business expenses. These errors can lead not only to incorrect financial statements, but also incorrect tax returns—and we don’t want those errors to trigger an audit.
Inadequate Financial Controls: As a SaaS-based platform, it isn’t Quickbooks’s job to establish internal controls. That’s why it’s critical to have a bookkeeper or accountant create processes to prevent fraud, ensure accurate reporting, and maintain proper documentation. They can implement systems that verify all revenue is captured, all expenses are legit, and all assets are properly tracked and protected.
Regulatory Non-Compliance: Different industries have different accounting requirements, and various business structures have different tax implications. Quickbooks isn’t able to automatically adapt to these nuances, which is why it’s again necessary to work with an accountant who stays current with changing regulations and makes sure your books comply with the requirements of your industry. Compliance issues can be costly, literally—and we want to save you from any issues down the road.
The Way to Financial Peace of Mind? A Blend of Tech & Human Capabilities
To use a car analogy: think of Quickbooks as a fully-loaded race car, and professional bookkeepers and accountants as the skilled drivers that will maneuver them around the track. The car might have all the latest features, but without someone who properly knows how to operate it, you might find yourself at the back of the pack.
That’s why at Nexagy, we never think of small business accounting and financial strategy as one or the other. We do feel that professional financial management brings several elements to the table that Quickbooks alone just can’t provide, like:
- Strategic financial planning and forecasting
- Tax strategy and optimization
- Cash flow management and planning
- Industry-specific compliance knowledge
- Internal control implementation
- Financial performance analysis and recommendations
Partner with Nexagy For Your Bookkeeping Needs
If you’re looking for a qualified financial professional who can help you use Quickbooks as part of a comprehensive financial management strategy, give us a call. Our team can handle all of the bullet points above and more—head here for the details.