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Think you have maybe outgrown Quicken as a small-business accounting solution? Maybe, maybe not. OK. Small-business accounting systems (including Quicken) are supposed to do three things:

1. Measure your profits & cash flow so that you can prudently manage your business.

2. Track the assets & liabilities of the business so that you know what you own & what you owe.

3. Generate the business forms that you use to transact business.

As long you keep these three accounting system tasks in mind, you will find it easy to tell when you have outgrown Quicken & should move up to a more full-featured small-business accounting system.

Symptom #1: You want to use accrual-basis accounting

Quicken measures income & expenses using either cash-based accounting or very simple accrual-based accounting. If you want to do sophisticated accrual-based accounting rather than cash-based accounting, you can not use Quicken. You will need a more full-featured accounting system, such as QuickBooks from Intuit or Peachtree Accounting for Windows.

Symptom #2: You need detailed records of more than just cash

To keep detailed records of assetsbesidescash & your investments, you also need to use a small-business accounting system. By example, if you buy & sell inventory items & want to track those items, you need an accounting system that includes inventory management features. (Most small-business accounting packages provide these features.) If you own a lot of depreciable assets & want to track them, you need an accounting system that includes a true fixed-assets module that easily handles depreciation. (This is a less common feature, by the way.) If you want point-of-sale accounting, or other special features, you also need to upgrade to a more powerful accounting system.

Symptom #3: You need business forms other than checks

One other issue is business forms. Quicken produces check forms & Quicken Home & Business produces invoices & customer statements, but you may need to produce other business forms, such as purchase orders. If you want to automate production of these other forms with an accounting system rather than prepare them manually, you really need to upgrade to a more powerful system.

Before you jump to another accounting system: Two Caveats to Consider

Before you purchase a new accounting system to take care of the tasks I have just described, there’re a couple of things to keep in mind. First, no accounting system is perfect. I have seen more than one business waste enormous amounts of time, energy, & money pursuing the perfect accounting system. If you have a system that works reasonably well, lets you gauge the performance of your business, & in general does most of the things you need it to do, you may create more problems than you solve by converting to a more complicated new system.

If Quicken works reasonably well & presents you with only a handful of minor problems & irritations, I had suggest you stick with Quicken.

Also, the more powerful small-business accounting systems generally require you (or some one who works for you) to know a lot more about accounting than you really need to know to operate Quicken. When you get right down to it, all you really need to know to operate Quicken is how to use a checkbook & enter payments & deposits into a check register. In comparison, to use a full-featured small-business accounting system, you (or your employee) should know how to perform double-entry bookkeeping, understand the tricks & techniques used in accrual-based accounting (accruals, deferrals, reversing journal entries, & so on), & be easily able to read & use the financial information contained in a standard set of accrual-based financial statements (income statements, balance sheets, & cash flow statements). Note that the cash flow statement produced by an accrual-based accounting system will not look anything like the Cash Flow report produced by Quicken.

About the author: CPA Stephen L. Nelson wrote the bestselling book on Quicken & QuickBooks as well as the downloadable do-it-yourself guides at Incorporating a business, Limited liability company formation, Subchapter S corporation setups.

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