Research indicates that 64.4% of small-to-medium-sized-business owners use accounting software like QuickBooks on a regular basis, and some are even replacing human personnel with these virtual solutions. It’s true that QuickBooks has revolutionized bookkeeping for business, but is it actually sophisticated enough to replace professional accounting services? It’s understandable that, as a business owner, you want to save money wherever possible, but there are still quite a few financial processes that require the expertise of a knowledgeable human accountant.
What QuickBooks Can Do
To understand the value of QuickBooks, it’s important to break down the differences between accounting and bookkeeping. QuickBooks is, at its core, a bookkeeping program. It can process your invoices, manage sales and expenses, track your employees’ time, and generate useful reports for budgeting and tax purposes. You can even pay bills and receive due date reminders.
While you might gain a lot of valuable accounting insights from QuickBooks’ balance sheets, profit-and-loss statements, and cash flow reports, the information you receive is still limited to raw data. And that’s the big distinction between bookkeeping and accounting. Bookkeeping helps you to keep your financial data in order; accounting takes things a step further, devising actionable recommendations and strategies based on historical data, missed opportunities, and sound financial principles. For that, you need the help of an accountant.
What QuickBooks Cannot Do
Accountants use QuickBooks. CPAs use QuickBooks. Payroll managers use QuickBooks. The software is trusted by millions because it’s powerful and versatile, but it’s only as good as the person pulling the strings. There are several important things it cannot do.
Keep You in Compliance
QuickBooks is an excellent piece of software, but relying on QB alone can land you in hot water. For instance, tax legislation is constantly changing, and the program is seldom updated as quickly as the laws. If QuickBooks miscalculates your refund based on outdated tax rates or adjusts for a deduction that you no longer qualify for, you may find yourself fined or audited by the IRS. That’s just one reason why it’s so important to work with an accounting professional who remains current on the guidelines and legislation.
Grow Your Business
More importantly, QuickBooks cannot guide the kinds of high-level financial decisions that will help you to grow your business. It can create some pretty impressive reports, like income statements that highlight correlations between revenue growth and specific expenditures. But without an informed expert to analyze and interpret those reports, you can only guess at how the information might be used to improve your bottom line.
A knowledgeable accountant, and especially a certified public accountant (CPA), specializes in analyzing the minutiae. They identify the kinds of financial indicators that even the most intelligent software would miss, like the relationship between profits-and-losses and external market trends.
Save You Time
Anyone can learn to use QuickBooks, but bookkeeping and financial analysis are time-consuming processes that demand a lot of attention. The more time you spend analyzing and breaking down financial reports, the less time you have to run your business. The process also takes considerably longer for a non-professional than for someone who specializes in finance, so it’s just not an efficient use of your time.
Correct Your Mistakes
Finally, QuickBooks is not error-proof. Even though it provides you with the tools to manage your finances and taxes, the onus is on the user to ensure that those tools are utilized properly and the data inputted correctly. This can be extremely difficult for someone without a financial background. Consider that 60% of business owners admit to having an average to below-average understanding of accounting—and those are just the ones willing to admit it.
Account reconciliations are especially difficult to manage, and many businesses fail to maintain accurate, matching records—not because of fraud, but because of oversight and inexperience.
QuickBooks and Accountants Go Hand-in-Hand
By combining sophisticated accounting software with the services of a trusted CPA firm, you can ensure that your business:
Remains in compliance with the IRS and other state and federal regulators
Remains profitable and experiences steady growth over time
Manages its income, expenses, payroll, and taxes as efficiently as possible
By sharing software access with your CPA firm, you’re able to manage the simple day-to-day recording duties while your accountant takes care of the big-picture work. Cloud-based software systems have made it easy for CPAs and clients to share financial data in real time and ensure that all information remains current and accurate. Some CPAs even take things further, providing CFO and business management services to better serve their clients.
So while software has become an essential part of the bookkeeping and accounting process, it will never replace the invaluable insight and discernment of an experienced accountant. The software is just the paintbrush and canvas; the accountant is the artist who brings the canvas to life.