Luca Pacioli changed the world but also is the cause of revenue recognition headaches

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When Luca Pacioli wrote Summa de Arithmetica in 1494, he dedicated 27 pages to an explanation of double entry accounting. These 27 pages caused a revolution almost as powerful as the printing press itself and eventually gave rise to the legions of accountants that track the $71.67 trillion in global Gross Domestic Product each year. To support the accountants around the world and simplify their job, most of Pacioli’s theories have been automated and programmed into accounting systems. Over the next four posts we are going to analyze the positives and negatives of two systems of these systems; NetSuite and QuickBooks. Our main purpose is to help software companies understand which software is better for them.


Intuit, the maker and owner of QuickBooks, was founded in 1983 and became famous for their personal finance software. Success in the personnel finance market led them to conclude that small business would also like a similar product and QuickBooks was born. Currently, the company controls somewhere between 80% and 90% of the small business accounting software market.

Although it has other advantages, QB cannot perform revenu recognition calcualtions

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As a product, QuickBooks offers a number of advantages to customers. First, it is relatively affordable. For small businesses, software startups, and anyone else who is trying to manage costs, this is extremely important. Second, the software is intuitive and easy to learn. Most users are able to teach themselves how to handle the software without much further instructions. Last, the software is well supported. When questions arise, there are robust discussion boards available in addition to the support from Intuit.

However, there are also some drawbacks to the software. For example, QuickBooks cannot handle revenue recognition for software companies. Within QuickBooks, users have to make a single one journal entry for revenue. However, most software companies know that revenue recognition involves calculating VSOE or ensuring that milestones have been delivered prior to booking revenue. None of this additional information is tracked within QuickBooks. To support the entry, the revenue recognition calculations must be performed outside the system.


NetSuite was founded in 1998 with the financial backing of Oracle’s Larry Ellison. In 2000, the company decided to only offer their services as a cloud based product, creating one of the first software as a service companies.

History of NetSuite since its founding

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As a product, NetSuite offers all of the core ERP functionality but delivers it in an interesting way. Through the “OneWorld Suite,” all of the various elements of the product are offered in a horizontal database. This is significant because all of the elements are then interconnected and available for reporting purposes. With OneWorld Suite, business managers gain access and understanding of their key business drivers.

As an example, lets again look at revenue recognition. In NetSuite, the software is also able to track project milestones and delivery. Since this information is stored within the same database, the accounting module has access to it.  As project completion status is entered into the project tracker, the revenue recognition calculations are occurring behind the scenes. When a milestone is completed, the software automatically books the revenue.

Other functionality that may be of benefit to managers include payroll capabilities and the ability to handle ecommerce transactions.  This may be beneficial to companies that are considering more of a web and mobile presence for their business.

Both QuickBooks and NetSuite offer advantages and risks for software companies. As managers, you are responsible to understand the potential gains and the adverse effects before you commit to one or the other. Fortunately, Bi101 is here it help. If you are interested in learning more, please contact us.