Manufacturing Software and QuickBooks

QuickBooks + Manufacturing: It is possible!

All too often we hear from potential customers who have either purchased versions of QuickBooks that claim to handle manufacturing, or contracted with consultants who claim they can make QuickBooks fit their manufacturing processes. They all want to solve the problem of Manufacturing and QuickBooks

Needless to say, it isn't pretty, and its very expensive.

Manufacturing Software and QuickBooks

We have said before, QuickBooks is an amazing program, and that's why it doesn't work. It is perhaps the best small business accounting program out there when measured on several key metrics (things like cost, learning curve, support resources, code maturity etc . . .). But it has inherent design flaws when it comes to tracking manufacturing.

But that is not the end of the story.

Integrating the software IS the solution

When done right, integration between programs can be very effective. You get a "best of breed" concept, without compromising all the pieces. BusinessMaster, our Small Business Software Toolkit, comes already able to integrate with QuickBooks. And there is a lot of flexibility to expand on it.

We can bring data in from QuickBooks. That's a helpful element. However we push data back to QuickBooks, and thats where we see the most power.

Data FROM QuickBooks

When setting up BusinessMaster initially, importing QuickBooks data helps avoid some of the biggest difficulties in implementation: Data Entry Time, and Data Entry Errors. Simply importing Customers, Vendors, Items etc.... saves huge costs and hassle.

After setup, it is possible to import from QuickBooks to do advanced reporting and inter-relating data to the Manufacturing System.

Data TO QuickBooks

In the day to day operations, sending data to QuickBooks is a serious benefit. Here are some basic examples already available:

  • Export of Invoices. When the customer is new, BusinessMaster will automatically add the new customer. Same with any new items.
  • Export of Bills. When a new vendor is added, BusinessMaster will automatically add the Vendor to QuickBooks.
  • Export of Payments Received against Invoices.
  • Export of Journal Adjustments for Progressive Billing, including reversal of Deposits. These can be separate from A/R.
  • Export of Labor Collection processed for Payroll.

Inventory: The big problem

Inventory is hard enough to manage itself. How much quantity on hand is one part of the problem, but how much it's worth is another. It's important to understand the function of Inventory Valuation within the accounting package, and then develop a process on how to handle it.

There are many ways to value Inventory on hand, and BusinessMaster provides 3 right out of the box:

  • Standard Cost
  • Current Cost
  • Average Cost

Even these terms mean different things to different users. But at the very minimum, you can get a value of on hand inventory if you maintain your counts correctly. It takes some practice and tweaking, but you CAN do it.

The next piece is to update QuickBooks with the value. There are different strategies to do this, and it really depends on your financial reporting, your preferences, and your complexity. Essentially, we see most organizations boil it down to either of these:

  1. Purchase all goods to COGS(Cost of Goods Sold) and Expense accounts. When they are exported as Accounts Payable (Bills) one side of the accounting entry is A/P, the other COGS/Expense. Periodically, you count inventory, and make adjustments to the Inventory Asset accounts to the right value.
  2. Purchase all goods to Inventory Asset accounts. Then periodically you report on what you have used, and adjust the COGS/Expense accounts.

If the above isn't clear, trust us, we understand. We have seen very simple and very complex approaches, and they each have their merits. Any good accountant will see the issues and provide advice on how to handle it. We can adapt to how your finance team wants to run it. If your financial team doesn't know how to approach this, that is a bigger problem than HOW you track it. We aren't accountants, but we know how to work with them, and that's key.

In closing, we want to re-iterate. QuickBooks is a fantastic solution for Manufacturers, as long as they use it for the Accounting! When it comes to Item management, Inventory Planning, Production Planning, and other unique elements of the manufacturing process, stick to software designed for that. Then Integrate wherever needed.



Want to know more?

We are very interested in talking with you about your needs. We want to make sure we are a good fit, and understand what you are trying to accomplish, and the best way we know how is some quick discussion. Please contact us via the link to get the process started.

Let's schedule a demo of our awesome Small Business Software Toolkit while we are at it!

Quickbooks is awesome, thats why it won’t work

Quickbooks is one of the most installed small business software applications in the world

Quickbooks can also be one of the worst software solutions in your operation . . .

It's critical role in the majority of small operations is hard to over-estimate. There are countless support and training resources, as well as consultants and implementation specialists. There are whole armies of temp agencies that are on call to support it. You can buy it, install it, and begin entering your transactions, downloading them from your bank, write checks and pay employees.

It's so easy to get, set-up, and use.
And more often than not, it doesn't work.

It's not that the software doesn't work. It's not that it isn't a great tool (for financial reporting). Although many CPA types will argue about this in some of the finer points of accounting, Quickbooks has been a huge success for Intuit.

The real issue lies in what it's designed to do, what users want it to do, and where the limits are.

The classic issue with Quickbooks

BusinessMaster was one of the first manufacturing software applications to integrate with Quickbooks in 2001, when Intuit first opened up their ubiquitous program to data exchange. Data exchange opened up vertical markets to a horizontal application. Quickbooks is a financial accounting program, one most small businesses had (already), and it was positioned horizontally in the market. Horizontally means it did many common things every business needed to do, without specializing in any one "vertical" segment (like a specialty or business focus).

To be horizontal in a software paradigm, is to be broad, wide, covering a large, generic portion of the market.

To be vertical is to specialize in a narrow, unique focus, such as woodworking (or even more focused, custom cabinetry), or custom musical instrument repair (or even more focused, guitars).

For instance, all businesses SHOULD maintain correct Profit and Loss reporting, Balance Sheet reporting, and similar disciplines. And for the most part, it's an almost identical process. But HOW these business drive accounting transactions can be so different. A totally custom cabinet shop buys, sells, inventories, and manages capital equipment totally differently than a local retail store. Even within similar areas like manufacturing, some operations what is WIP (Work In Process Inventory) to one company doesn't even exists in another.

Quickbooks has constantly tried to add features to their application to accommodate many different processes, and stuff them inside their horizontal program. Some are successful, like Payroll. Some are not, like Inventory. And some changes, like incorporating Sales Orders and Invoicing, attempt to push multiple users into Quickbooks, which Quickbooks was clearly not designed to handle. If you have a multi user install of Quickbooks, you know the performance hitwhen more than a few users get in the program.

Here is a small list of problems we see regularly (Keep in mind of course there are users who do pull this off)

  • CRM: Customer Retention Management, or Contact Management. Quickbooks DOES maintain customers, but NOT every contact every employee works with. This requires every user that interacts with customers in any fashion to have Quickbooks installed, and enter data that isn't relevant to any account practice.
  • Item management: The fundamental piece of Inventory Management can be far more complex and sophisticated than what is needed for accounting. Many of the activities in managing raw materials and assemblies are far outside the design of what accounting requires. In fact, I feel confident in saying real accounting doesn't CARE about the part numbers or the discreet parts in general.
  • Inventory: The needs of manufacturing to manage inventory can be so different than just a simple "How much of x product is on hand?" it would take too long to write. Suffice to say, I believe I've "paid the rent" more fixing and solving problems about this one element than any other. When potential clients tell me they are running their inventory in Quickbooks, and they are a manufacturer, I can tell right away there is a fundamental lack of understanding about both Inventory AND Quickbooks. See our Evaluation War Story Part 1.
  • Partial Shipments and Purchase Order Receiving: Most accounting programs treat a Sales Order and a Purchase Order as an accounting transaction, rather than the RESULT of these as an accounting transaction. In doing that, they require back orders and partial shipments to be closed rather than left open. There are work-arounds, but they don't work in most real world scenarios.
  • Billing for Deposits: I've seen more bizarre practices trying to cope with this idea in Quickbooks than I care to remember. If you are taking deposits from customers, or progressively billing customers, ad are using QuickBooks, chances are high you have problems auditing your books up to standard GAAP.

Because Quickbooks works so well for some things, it doesn't work for everything

Quickbooks does work very well as a small business solution for financial transactions. When it comes to Accounts Receivable, Accounts Payable, Reporting, Checkbooks, Chart of Accounts etc... I believe it is basically unbeatable. But I also believe it is limited in it's ability to truly solve the other pieces.

Large scale ERP systems do this in larger companies, but if you saw the budgets for these types of software applications (and I mean annual, not just occasional upgrades) you would understand why there really isn't one totally integrated program for the small business.

Want to know more?

We are very interested in talking with you about your needs. We want to make sure we are a good fit, and understand what you are trying to accomplish, and the best way we know how is some quick discussion. Please contact us via the link to get the process started.

Let's schedule a demo of our awesome Small Business Software Toolkit while we are at it!