It is extremely important for start-up and emerging companies to establish a strong system of financial management early on.  The backbone of this financial management system is an accounting software that creates efficiencies, provides accuracy and internal controls and is adaptable to business growth.  The software should be versatile as the needs of the business change.  As an early-stage startup, a good question to ask is:  Does the software allow you to upgrade as you need more advanced features?  There are a variety of accounting software available on the market:  QuickBooks, Xero, Freshbooks, Aplos, etc. QuickBooks remains the leading choice for the majority of our outsourced accounting clients.  The main reasons for its popularity are for its ease and for its various functions such as reporting, controls, add-ons, and integrations that can carry businesses through all stages of their life cycle.

Reporting

QuickBooks has several features that give financial metrics to analyze your business in detail. The chart of accounts creates the backbone of the financial statements.  QuickBooks loads their software with a chart of accounts template based on your industry type. However, it is encouraged that you customize your own based on what works best for your business. This can be a hybrid approach, utilizing the industry template with some touches that personalize it to your business. As a best practice, it is advisable to take some time in the chart of accounts creation. Making too many changes later might hinder some of the analysis tools to work effectively.

QuickBooks offers a variety of standard report templates to choose from, as well as custom reporting. You can enable the more robust management reports by activating and using various features. For example, the classes feature enables the allocation of income and expenses to departments or segments allowing companies to track the profitability of each segment or class and profitability by customer. You can then produce reports based on these criteria.

The budget feature is also a great management tool that will help with business growth.  Once your company’s budget is input into QuickBooks you can compare actual to budget figures and see if you are on target to make appropriate management decisions.

Controls

As the company grows, more users may be needed to gain access to QuickBooks for a variety of reasons. To control user access to sensitive financial data, QuickBooks allows you to customize permissions to specific areas and job functions. The access can also be set to ‘view only’ mode to limit editing of data to only select individuals. Moreover, as multiple users have access and make changes to the QuickBooks data file, you can utilize the audit trail control feature to get a history of all transactions and the user making the edits. This feature can be useful but will require controlled user access by giving each user their own logins. Once that is complete, the individual activity of each of those users is recorded. Any changes made are itemized by what the original entry was and how it changed. This is also a helpful reminder that it is never a good idea to share passwords for accounting software with multiple users.

Add on features and compatibility

QuickBooks allows add-on’s such as 1099 processing and payroll which can facilitate ease in compliance requirements. The 1099 processing feature allows you to analyze your books for 1099 requirements, run required reports and prepare annual 1099 forms. The payroll add-on feature can be implemented at any point.  It will allow you to pay your employees and can enable Intuit to file all monthly, quarterly, and annual returns as needed. The annual W2 processing is also part of the payroll add-on or as a self-service.

Due to the number of rules and regulations around payroll, we only recommend the self-service option under Intuit payroll if you are a payroll professional. Our small business clients typically use one of the leading payroll companies such as Paychex, ADP, or Gusto.

In addition, QuickBooks is compatible with several financial applications that facilitate the ease of managing your business.  Some of the main applications we use with our clients are:

• Bill.com – This software manages bills, including approvals, payments and enables you to send invoices.
• Payroll compatibility with Paychex, ADP, Gusto – By integrating your payroll with QuickBooks, you can automate the entry of payroll data directly into QuickBooks.
• TSheets – This time tracking application can help track employee time on jobs and create job costing reports.
• Expensify – This is an application used to simplify employee expense management and the reimbursement process.

Integration

Daily accounting becomes easier with the integration of QuickBooks with key financial networks such as Banks and Credit Cards. The bank and credit card feed enables transactions to be automatically uploaded daily from your business bank and credit cards. These transactions sit in a pending state until a user categorizes the transactions and accepts them into QuickBooks. Once you begin using the bank feed feature, QuickBooks begins learning the coding of transactions. As similar transactions are entered and categorized, QuickBooks ‘learns’ how you have accepted the transactions in the past and offers suggestions based on that. This feature allows transactions to be categorized in a similar manner month over month, therefore optimizing the analysis of data. Since the activity is fed directly from the source, reconciling accounts can be done in an efficient manner as well.

As a start-up or emerging company is weighing its accounting needs, it is best to keep growth in mind. Although there are software features that may not be used initially, it is far better to establish a system that will be able to provide solutions as the business grows rather than having to change systems down the line. QuickBooks offers a complete solution for business owners seeking to create efficiencies and lay a solid foundation of financial management for the life cycle of their company.

If you have questions about QuickBooks implementation, upgrades, or training, please contact Sabeen Taha, Manager on our outsourced accounting team.

By: Sabeen Taha