Is QuickBooks an ERP System?

Is QuickBooks an ERP System?

QuickBooks is not necessarily an ERP system. However, we see it as commonly referred to as an ERP system as some people feel that ERP systems and accounting systems are comparable. If you are in a group that does NOT regard it as an ERP, then this article may not be for you. However, if you do regard it as an ERP, then read on to learn about two camps inside the QuickBooks ERP group:

  1. consider it the most intuitive, tiny ERP system (terribly simple) perfect for companies who don’t have large budgets and overarching needs.
  2. Or, regard it as the most terrible ERP system (simply terrible) prone to errors and causing similar issues as spreadsheets such as duplication of data across systems, lack of control, unavailability of real-time financial data, and overreliance on analysts for reporting.

In either case, read on to learn more about why these camps differ in their opinions about QuickBooks.



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Terribly Simple ERP camp: QuickBooks is the best ERP ever

To some extent, we agree with their assessment. That QuickBooks Enterprise/Online/QBO /QBE (collectively referred to as “QuickBooks” henceforth) is most certainly one of the easiest ERPs ever built. Why? Because it is designed for users who don’t have experience with any other more sophisticated ERP systems. Moreover, its design is friendly for accountants or business users with preliminary accounting knowledge (or needs). Yet most of the complex tasks are still expected to be performed either manually or through the use of spreadsheets.

When you log in to QuickBooks, everything looks great. You can create invoices or bills without any limitations, and perform journal entries as you like. Financial statements that you need for the most common usage are all pre-built. The batch process is super easy and you just have to watch a couple of YouTube videos to master it. You can connect your bank accounts with one simple click. And all your transactions are right there for you to perform reconciliation or close books. The recurring entries and closing process is super easy as well.

The users of this camp feel that QuickBooks is the best system ever designed. And every single ERP system out there must be inspired by its business model. Now let’s hear from the second camp why they feel that it’s terrible.

Simply terrible ERP camp: QuickBooks is the most terrible ERP system ever

If everything is so easy about QuickBooks, why does the 2nd camp feel that it’s terrible? Well to understand their perspective, let’s first analyze the demographics of these groups.

Recapping the point mentioned above for the 1st camp the userbase of that camp didn’t have experience using a “real” ERP system.

The 2nd camp, however, consists of users who have used at least one ERP system in the past. Or have significant experience solving complex business or accounting problems–using a system. They have seen the fully automated, end-to-end integration of the processes first-hand. And they understand that their lives weren’t as difficult when they had access to such a system. They didn’t have as much chaos and didn’t have to manage as many spreadsheets. They also didn’t have to create as many ad-hoc processes even though the other company was much larger in operations.

While the 2nd camp agrees with the 1st camp about the overall ease of use of QuickBooks, they feel that QuickBooks’ design has limitations as per their experience.

To understand this better, let’s take an example of a hypothetical business. When a business is small, say under $5 mil, the teams are small too. Their employee strength could be 5-6 people while each employee is independently responsible for their functions. One for sales, the other for purchasing, and the third for accounting. They can manage their functions as they want, without overstepping.

Continuing to the same example. Once a company grows past $5 mil, most likely the order volume would go up. More people will need to manage each function. The functions such as operations or finance would grow in proportion as well. With more people added to each group, they will bring unique perspectives to each problem. Different ways of documenting processes. Different ways of performing the same tasks. With the functions being independent, they would have their budgets and freedom to buy the software/tools that make them efficient. With the added growth, additional processes such as geographic or product expansion would emerge.

While QuickBooks could be great to assist with accounting for this company, the other processes would remain largely manual or disconnected if managed in different software (such as an inventory or WMS add-on for QuickBooks, or an add-on to integrate Zoho or Salesforce CRM with QuickBooks, FreshBooks, Xero, or Sage). For instance, inventory not connected to the accounting system or the warehouses are completely isolated or running based on an “honor system.” Or the sales system living a life of its own or running manually. Likely, there will not be end-to-end visibility as well as limited control over the processes.

Let’s take a hypothetical example of a business problem at this stage. If their salespeople or customer asks them to sign a large contract where they expect them to deliver within 10 days. Without the data available for previous successes or failures, it’s very hard to commit to the delivery date as well as execute with confidence. If they need the necessary data to back up the decisions and whether they have enough capacity to commit to such demand, it will require duplication of their data across multiple systems and the help of an analyst who can quickly crunch a report.

As you can imagine, it would be a nightmare to be in this position and this is why they feel that QuickBooks is simply a terrible ERP system as It is not designed to be an ERP system.

Now you must be wondering which perspective you should focus on. Or, in other words, which camp should one join?

Here are our take and recommendation

We recommend that first identify the camp you belong to. Are you a company that is under $5 mil in revenue and with limited experience in the team with a real ERP? In this case, we recommend managing with QuickBooks and with isolated systems (such as an inventory add-on for QuickBooks, or a WMS add-on for QuickBooks, or an add-on to integrate Zoho CRM with QuickBooks). Or, the combination of manual processes augmented with the use of spreadsheets.

On the other hand, once you grow past $5 mil, find a fully integrated and connected ERP system such as Acumatica or Infor CloudSuite Industrial (Syteline) and embrace the way they work as they are designed for a completely different purpose. For a whole new game. For a new level of complexity.

It’s just unfair to compare QuickBooks with an ERP system or call it an ERP system.

What if I want a system that is as easy as QuickBooks but has all the bells and whistles of a sophisticated ERP system

Well, for all practical purposes, we have a piece of bad news for you such a system doesn’t exist. While there are systems that would be closer to providing a similar user experience, such as Acumatica, replicating the same user experience is nearly impossible.

Think of it this way if you have always driven Honda Civic Coupe and became obsessed with how smoothly it swerves around turns, it would be hard to replicate this experience when your family is ready for an SUV. You can embrace the way SUV works, which would meet the needs of your family better. Or, you can remain single with the smooth ride you have always enjoyed. It’s your choice whether you want to ride a Civic or an SUV based on your needs.

There is no practical way of designing an SUV that feels like a Civic.

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