QuickBooks® is a common software used by small businesses because it is easy to use and doesn’t require hiring an accountant with a degree to use it. However, for smaller builders looking to grow their business, here are a few reasons why QuickBooks may actually be holding your business back.
Generic vs. Industry-Specific Job Costing
While generic accounting software like QuickBooks gives you some flexibility, it’s a short-sighted view. By using an industry-specific managerial accounting that’s integrated with your business management system, you can better determine profitability and margins from your overall projects to individual houses and options.
In addition, an industry-specific sub-ledger job cost accounting for home builders means accurate reporting instead of generic job cost reports. Breaking down the revenue and costs by category and product line is essential to having profitable products that meet market demand. You need a system that helps answer questions such as:
- Is this house plan my most profitable?
- What is my least profitable plan?
- How many options am I selling?
- How much am I making on each option?
- What is the profitability by project [development]?
- Getting answers to these questions are key to making the right decisions.
Following Accounting Best Practices is a Requirement as You Grow
QuickBooks users do not need accounting skills and may not understand accounting terminology. Transitioning your accounting procedures to follow best practice is essential for a growing business. This means tight control over accounting staff and ALL accounting procedures are requirements.
By using an integrated job-costing accounting system, you learn professional accounting procedures from transaction entry to journals to general ledger to trial balance to financial reports. Internal controls determine that corrections will create separate entries so that a clear audit trail is maintained.
Stand-alone Software vs. an Integrated Solution
Using stand-alone accounting software like QuickBooks, your business can be taken over by manual spreadsheets to track key data.
However, using an integrated ERP that includes the three principle systems of a business--sales/marketing; purchasing/operations, and financing/accounting—the whole team, from executives to operators, can see real-time data and make important decisions without waiting for aged historical information. The data is presented in each department enabling management to see the flow of production and provide your team a more holistic picture of the business.
An integrated ERP provides all stakeholders with access to information that impacts the bottom line, not just accounting information. Trades can see when they are scheduled to do work, when their work was approved by construction and most importantly when and if they been paid. Leveraging full ERP processes means a team is working together and maintaining their own positions, so people aren’t “all around the ball at the same time”.
If you're looking to grow your business, you need to understand the impact and limits of the accounting software you're using. Download the guide 11 Signs Your Business Has Outgrown QuickBooks to learn more!
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