There is a famous tale from India known as the blind men and the elephant. In the story, six blind men touch parts of an elephant to find out what it is like, but each one only touches one part. When they compare notes, one describes the tusks while another describes the legs, tail, head, etc. In the end, a man with sight has to describe the entire elephant in order for the blind men to understand the “big picture.”

What is QuickBook's true cost of ownership

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When it comes to understanding the IT cost of supporting QuickBooks, most software companies are like the blind men. They may claim they understand how much it costs, but they are only describing a part of it, primarily the licensing cost. If they were to step back and see the big picture, they would realize that the direct IT expense for supporting QuickBooks must include network connectivity, availability, security, database management, and backups/restores. The indirect IT expense for supporting QuickBooks may also include manual labor hours, contractors, time tracking systems, revenue recognition software, and any other additional systems that integrate directly with it. When looked at from the “big picture” perspective, QuickBooks can be a costly implementation.

To illustrate the point further, let’s examine the cost of the revenue recognition process under QuickBooks and the “big picture” required to support this process. The first expense that should be recognized is QuickBooks’ licensing expense. Since QuickBooks is the system of record, it is required revenue recognition software. However, as we have noted here previously, QuickBooks is a bookkeeping system and only records the final revenue calculation. The actual revenue recognition schedule is probably tracked somewhere else like a spreadsheet.

The expense of spreadsheet software is probably minimal and would be purchased anyway, so this is not an actual expense. What can be recognized as our second expense is the manual labor required to calculate and track the revenue recognition schedule. Depending upon the size of the software company, this may be performed by two or three additional accountants within the finance department. These accountants may dedicate upwards of 75% of their time tracking calculations like VSOE and determining when project milestones have been completed so that revenue can be recognized.

Without revenue recognition software, firms need to hire more accountants

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The third expense that should be included in our “big picture” is a percentage of the time the IT department spends on security and backup/restores. If QuickBooks and other revenue recognition software were not in place, then these additional expenses would not be required.

Once companies understand the “big picture” in regards to the expense of their QuickBooks implementation, they also realize that they have been paying a high price for minimal functionality. QuickBooks does not provide workflow, revenue recognition software automation, and business intelligence of any kind. And yet it is expensive.

QuickBooks total cost of ownership

When software companies look at the “big picture” around IT expense, they realize that it is time for a change. Overpaying for minimal functionality is a poor business decision, especially when there are alternatives. If you realize that your company has outgrown QuickBooks and you would like to know what options are available, please contact us.

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