Every change to your business will have some impact on the requirements of your critical business systems. None is more severe than growth or shrinkage. Most small companies start out with entry-level accounting software like Intuit QuickBooks. It’s a great product for an incredibly low price. But you get what you pay for. Intuit QuickBooks does not scale well when it comes to additional users (typically 10 or more for most versions and no more than 30 users for QuickBooks Enterprise) and the database does not handle large volumes of transactions very well which can result in data corruption or data loss. We’ve seen it far too often with companies managing $50 million businesses on a $1,000 QuickBooks license – it simply doesn’t work well in the end.
In our experience, QuickBooks and other entry-level accounting products generally perform very well for companies with less than $5 million to perhaps as much as $10 million in revenue. It’s not the revenue number that’s the problem. Rather, it’s what makes up that revenue – the number of transactions and the level of detail that is required to manage that amount of money to keep the company profitable. It takes more employees, more users, and more insight into the financials, sales analytics, and more robust operational features to manage a business of this size. If your company is using an entry-level accounting system and you’re growing fast or expect to exceed the $5 million to $10 million-dollar mark soon then you should start to evaluate a midmarket business system which will not only help you manage your current business better – but will position you for continued growth well into the future.
Growth and planned growth can cripple a company’s ability to grow. You can have the best products or services, the brightest employees, and all the money in the world backing you but you will not be successful and your growth will stagnate if you don’t have the right business technologies to act, react, and make critical business decisions in real-time.
With growth comes increased transactions which can degrade system performance. With growth comes the separation of duties within an organization and the increased need for collaboration, alerts, and reporting to keep everyone updated on how their small piece of the business affects other departments, customers, and vendors.
With growth also comes increased compliance and reporting requirements which can be unmanageable when you’re on the wrong business application.
And with growth you are likely to have increasing needs to access more and more data in more and more ways – through alerts, on mobile devices, inside other applications, and in perspective of data inside other applications such as analysis of sales results from your accounting system compared with opportunity data in your CRM system.
Conversely, companies that are shrinking or have recently divested (or plan to divest) part of their business may no longer need the large accounting or ERP system they’re using today and may be better served by replacing it with a midmarket application or even moving down to a simpler application like QuickBooks. The current system will probably do what you need but the cost and complexity are overkill and will eventually cost you more in the long run than simply downsizing to a product that is better suited to your needs.
Remember that we mentioned that companies typically keep their software for about 10 years (or more)? This is important for companies with a high projected growth rate. If you expect to go from zero to $10 million in a few years then you probably shouldn’t start with a product like QuickBooks because you’ll need to slow down during this incredible growth spurt to replace your systems.
Even if you’re projecting modest growth of 10% to 20% annually you will quickly come to a point where you’re outgrowing the features of entry-level systems. A $3 million company today with 20% growth over a 5 year period will more than double. This kind of growth not only means that you may need a new system in a few years – it also means
that you are relying on an inexpensive and less robust business system to help you maintain the 20% growth to begin with – something that may be challenging without the right system and information in place during your most critical point in the history of your business.Read more here.