Navigating QuickBooks Drawbacks
QuickBooks is the accounting software industry’s number one seller and is rated as editor’s choice by c|net and PC Magazine. These sales points gathered from QuickBooks’ own website attempt to convince everyone that they provide the best accounting software package around.
To the uninitiated user these awards sound great. However, users need to be aware of several significant drawbacks and problems with QuickBooks. Speaking as someone in the business of keeping books, I have dealt with QuickBooks for a number of years and have gathered some unique insights into the common problems faced by the average QuickBooks user. I’ve selected some of the typical problems I encounter and how to avoid them (if possible).
QuickBooks Problem #1: Opening Balance Equity.
If you have QuickBooks, you will notice this account on several reports. This is what QuickBooks uses as a “catch-all” category. When you initially set up your accounts, you enter in your beginning account balance amounts (unless you are a brand new company with no activity). The problem is that if you do not input an amount, or input an amount correctly, the difference will go to Opening Balance Equity. If it is not fixed, it will stay there indefinitely. These user errors are typically easy enough to overcome, but QuickBooks in its’ attempt to “leave you time for your clients” will often try to help you balance a transaction. If you are trying to perform some functions such as void checks, record a bank charge, etc, and you are not sure of what account to use, QuickBooks will ask you if you want the software to balance the transaction for you. As we are all now used to, the default answer to any box that pops up on our screen to offer assistance is “Yes” or “OK”. Clicking these buttons will send the balance of the transaction to Opening Balance Equity. The problem? You and QuickBooks have just eliminated one of the main reasons you have accounting software. Your accounting software is designed primarily to give you information about the day to day operations of your company. If you do not know where your money is coming from or going to, you are not going to be able to make competent decisions based on your accounting information. In order to fix this problem, you must turn on the require accounts option under the company preferences setup. Turning on this option will not let you record a transaction without providing an account.
QuickBooks Problem
#2: Cash vs. Accrual reports.
QuickBooks offers you two main options when you run reports. You can run them on a cash basis or accrual basis. While this means nothing to the average non-accountant user, the distinction between the two is important. In short, the cash basis reports are inaccurate about 99% of the time. They typically fail to adjust for things such as payroll taxes, credit card transactions, etc. and if there’s anything not entered correctly (see QuickBooks problem #1), some items will be left off the report altogether. I typically recommend never using the cash basis reports at all.
QuickBooks Problem #3: No Actual Year End Cut Off.
QuickBooks will allow you to enter a transaction for any date that you wish. While this is convenient for purposes of making projections, it can have bad consequences if you go backwards. More often than not, someone will put the wrong year in the date field around January 3rd or 4th. They have been typing “2004” for a year, so out of habit they will do so even when it is “2005”. QuickBooks does not warn you of this obvious error, so it goes uncorrected. The problem is that you have just skewed your data for year to year comparisons. If you are recording an expense, you have also just changed the balance of your retained earnings. Any time your retained earnings changes it must be explained on your tax return. These errors are virtually impossible to find and fix after the fact, so you are left with unexplained changes on your tax return.
QuickBooks Problem #4: Optional Account Numbers.
To the average user, account numbers are not something that typically is a consideration. Therefore, QuickBooks allows you to not use account numbers. If you are using a CPA or tax preparer for any accounting function, this feature alone will drive him or her crazy. Account numbers are used to help sort the information into a relevant format, and to help keep your data in some semblance of order. Not using the account number feature typically increases the amount of work your CPA or tax preparer will have to do every time they do any work for you. In order to take a step towards lowering your annual costs, use account numbers, not just descriptions.
QuickBooks Problem #5: File Sizes.
QuickBooks retains every transaction you enter from the day you started using it. While this is useful to get historical information, on a practical basis, the file sizes can easily get large enough to be unmanageable and slow your computer to a crawl. The QuickBooks fix is to compact your data. When your data is compacted, you lose all of the detail, rendering historical information unusable. Most people are split between the two extremes, wanting detailed historical information and a fast performing system. With QuickBooks you can have one or the other but not both.
QuickBooks Problem #7: Splits.
When entering transactions in QuickBooks, you can split a check over several accounts. Virtually all accounting software programs have this feature. For example, when you pay a payment on a note, part of the payment goes against the principal of the note, the rest goes to interest expense. When you look at the detail of either the interest expense or the note payable, most software systems will show you information such as the check number, the payee, etc. so that you can determine what makes up each account. In QuickBooks, on a split transaction, the detail reads “-split-“. You are left to your own devices to try to figure out what makes up this detail. Intuit, the publisher of QuickBooks, is aware of this issue but has no resolution at this time.
In conclusion, QuickBooks is a number one seller but it does have a few weaknesses. If you are a QuickBooks user, you need to be aware of these weaknesses to maximize your QuickBooks experience.
Click here to return to referring page or here to return to the home page.