Sunday, March 13, 2011

Avoid the Intuit Up Sell Machine

Recently Many ProAdvisors and QuickBooks customers alike have been complaining because the standard reply whenever you talk to QuickBooks Support is “you need to upgrade to QuickBooks Enterprise”, as if QuickBooks Enterprise could part the Red Sea, should you need that in your accounting software.

The practice has become almost comical and it highlights a true disconnect between Intuit actually hearing its clients in need of solutions versus their percieved opportunity to close another sale.

First, a little background. Microsoft attempted to compete directly with Intuit by introducing Microsoft Small Business Accounting Software in 2007. In response Intuit slashed its prices on the Pro product so that Microsoft couldn't beat them on cost at the low end. Thus Microsoft couldn’t get a foothold in the market.

The good news for Intuit is, that strategy worked and Microsoft bailed out of the lower end accounting software market, the bad news is that the pricing model is still out there, and we know that after Staples and Costco take their 50%, Intuit makes almost nothing on QB Pro. In fact, they probably lose money.

So now Intuit is stuck with 5 million businesses that use their product for which they lose money. The only way for them to make money is to Sell Enterprise, Merchant Services, Payroll, or some other add on service where they have high profit margins.

This of course has turned the entire corporation into the “Up Sell Machine” that is disenfranchising everyone in the loop.

If they would just charge $250 -$300 for Pro, they would get out of this silly bait and switch routine with their customers and they would make some profit on Pro. As it is they’ve turned themselves into the crack dealer, giving out something for free and then demanding your first born once you get addicted. There’s no middle ground, and Intuit is shameless in its willingness to peddle products and services that their customers don’t need.

So what can you do about it? First I would suggest getting advice from a local QuickBooks ProAdvisor. In General, ProAdvisors are much more concerned about their clients well being and efficient use of working capital than Intuit. You can find a list of QuickBooks ProAdvisors here ( ). While there are good and bad eggs in any profession, my suggestion is interview a few ProAdvisors until you find one you like. I would also say that you generally get what you pay for. While you may not believe that a ProAdvisor whose rate is $150 per hour could possibly be worth 3X the price of a ProAdvisor that is $50 per hour, my experience says quite the opposite. You definitely get what you pay for and often that high priced consultant can work 3 times as fast.

OK, so now you have a ProAdvisor, but they can’t fix your problem. Now you must navigate the gauntlet that is QuickBooks Support. First define your issue clearly so you can articulate it clearly to the support personnel (i.e. don’t let them sidetrack you). Research issues around you problem and get confirmation that upgrading to Enterprise is not what you need. Next block out time to deal with your issue and don’t let yourself get frustrated. Lastly don’t agree to buy anything without a day or two to do some research and sleep on it.

Upgrading to Enterprise may well be what you need in your circumstance, but it’s not the resolution to every problem as Intuit promotes. Do research on the internet and read other articles here in my blog. Based on that information you should get a good feel for whether Enterprise is really right for your needs.

Finally, if Intuit has already got you to buy Enterprise and your business doesn’t really need Enterprise, don’t feel like you’ve made a costly lifelong mistake. We at QB or not QB have developed a serve where we can Convert QuickBooks Enterprise Files to QuickBooks Pro or Premier Format. The conversion can be performed in a few hours and the downgrade to Pro or Premier is a complete process where no data is lost. Visit our website for more details . If you were trapped by the Up Sell Machine once, you don’t have to be trapped by it anymore.

Matt Clark is the Principal for QB or not QB, a company that focuses on helping customers work with large QuickBooks files, prepare QuickBooks files for the scope of IRS audits and convert QuickBooks Enterprise files to Pro or Premier format.

QuickBooks Users that swear by XP, time to move to Windows 7

I was one of you. I was so tainted by all the issues between QuickBooks and Windows Vista that I swore I would never dare trust Microsoft again. I wrapped my self in the security blanket that is the tried and true operating system we’ve all come to know as Windows XP, and I held it as close as child holds its mother.

Well today, I’m declaring that it’s time to turn the page. Let go of the old paradigm, QuickBooks users, and invite in the new joy that is Windows 7. We’ve purchased a few new computers for employees at QB or not QB over the last two months, and I have to tell you that it literally pains me when I have to go back to my old XP workstations after working with new computers and the fun Windows 7

What’s gotten into me?
Speed, Organization, Security, Stability and something we all like “a fresh new look”.

The speed is blazing fast. Win7 starts up faster than XP and Vista despite being a significantly more complex operating system. The task bar has much better organization than XP and there are a variety of ways to attain quick views of individual applications. For those offenders like my self that routinely have 20+ windows open Win7 keeps it simple and organized. You quickly notice the minimalistic appearance that comforts you similar to how you feel just after the maid has come to your house.

Security is beefed up without being oppressive. Microsoft has added bit locker which encrypts all the data on your hard drive while online and keeps out any hackers from potentially taking control of your system. Windows firewall has been significantly improved allowing you many more options in how to administer your firewall. Best of all, Microsoft has allowed you to turn off the ubiquitous message boxes that made everything go dark when appearing in Vista.

With the increased competition for Apple, Win7 has incorporated some very Mac like appearance and ease of use features into the OS. Mind you Mac users still tell me that Microsoft “just doesn’t get it”, but what do you expect them to say, they’re a bunch of artsy-fartsy Mac users that pay twice as much for half the machine. In general you’ll find the updates a pleasant and refreshing update over the XP screens you’ve been looking at for the last 9 years.

QuickBooks runs on Windows 7 like it’s an old friend hitching a ride to the next town. Many people have been quoted by QuickBooks support that older versions of QuickBooks wouldn’t run on Win7, but in retrospect this just seems like another ploy to get you to upgrade your QuickBooks software when your current version is working just fine.

Admittedly some users have commented that they can’t send invoices out of QuickBooks because the native mail program has changed (install Outlook and you’ll be fine), and other users have mentioned printer problems. In general these experiences are significantly outweighed by a large population of happy customers.

With all that said, there are some limitations.
I wouldn’t go to Win 7 if you still use QuickBooks ES 6.0 or Pro/Premier 2006 (or older) on a regular basis. You could probably get the program to work in what’s called XPmode, but you’re likely to sign up for a whole new batch of problems because XPmode is a virtual machine that runs similar to VMware on a MAC and thus can cause extreme amounts of grief. Also if you have an older computer or are lacking hard drive space I wouldn’t consider moving up to Win7. It does take up considerably more room on your hard drive and it’s made to work with more modern motherboards and memory, so I would avoid upgrading machines more than 3 years old to Win7

So open yourself up to the new possibilities XP holdouts. Jump to Windows 7 and let go of all the bad memories you’ve stored up about Vista.

Matt Clark is the Principal for QB or not QB, a company that focuses on helping customers work with large QuickBooks files, prepare QuickBooks files for the scope of IRS audits and convert QuickBooks Enterprise files to Pro or Premier format.

Friday, March 11, 2011

QuickBooks file IRS Audit

Why Does the IRS Want to Audit My QuickBooks File?

If you are reading this article then it is likely that you or your client has received a request to submit a QuickBooks file in conjunction with an IRS Audit or an audit by another government agency. The Internal Revenue Service started this new level of enforcement in 2010 in which their agents are now requiring the actual accounting database (be it QuickBooks or another accounting software) as a part of the audit process. Certainly, government revenue departments can use information to gather any sort of data relevant to an audit. In my role in helping clients prepare their files for submission to these governmental agencies I have noticed some patterns in what the IRS seems to be looking into and I wish to share that with you here.

Improper Payments to Owners

Throughout the history of S corporations (can apply to LLCs also) there has been an undefined area in the IRS code relative to wages vs. dividends. Typically the owner/s of an S corporation (which are generally small in nature) earns ordinary income as the manager of the business and earns dividends as an investor in the business. There is an incentive from a tax perspective for the owner to maximize his or her reporting of dividends because dividends are not taxed for payroll taxes (typically 15.3%) which can be a substantial savings to the owner. There is no direct guideline as to how much the owner must pay him or herself to be in compliance with the IRS, but the owner needs to earn a salary commensurate with what someone performing the same work would receive on the open market.

This opens up a large gray area that seems to be of particular interest to the IRS when reviewing your financial database. Additionally the IRS is looking for any improper payments that pass between the owner and the business that are not recorded in the data file. Prior to submitting a file to the IRS, review any such transactions and have an explanation of why they occurred and why you chose to report the transactions as you did.

Improper Payments to Employees

Likewise, improper payments to employees that are not properly recorded as wages are another area of concern. Especially if you or the client is using QuickBooks Payroll Services, you need to review all transactions between employees and the business to assert that all benefits to employees were correctly accounted for in conjunction with your representations on tax forms.

Make sure to also review any non-payroll transactions with employees and search for any transactions where the employee may have been listed as an "other name" or as a "vendor", because these will certainly be scrutinized during the audit.

Real Estate Concentration

Nearly 70% of customers who contact us to help prepare their QuickBooks file for submission to the Internal Revenue Service are involved in the real estate industry. Whether they are real estate agents, mortgage brokers, construction companies, title companies or otherwise, This would seem to be a substantially larger percentage than chance would predict and so we need to ask ourselves why is the IRS focusing so heavily in this area.

Real Estate has obviously gone through a major boom bust cycle in the United States over the recent years, and it would seem that the IRS is reviewing QuickBooks files to locate significant transfers of money and whether that money was properly classified on the books of the organization. An example of such a misclassification might be taking what should be classified as a capital loss and reporting it as an expense. Additionally the IRS may be looking at transactions to make sure that the owner is materially participating in the business and thus can legitimately take certain deductions.

Whatever the basis for their inquiry may be, it would seem very important that you review all material transactions in detail before you submit your file to the IRS as these large dollar transactions seem to be of special importance in the evaluation process.

What They Are Not Looking For?

Historically IRS audits have focused on businesses that have a large amount of small cash based transactions which can be easily hidden from reporting on tax returns. You may have encountered the occasional restaurant that will charge you $12 to use credit card vs. $9 if you pay cash. That's because the credit card transaction can be easily traced by the IRS. These are just the sort of organizations that have classically been the focal point of IRS audits, however in our experience we see very few businesses that have an extensive amount of small transactions or businesses with an intensive use of inventory (i.e. retail in nature) among our customers. If you, or your client, are having the IRS request a QuickBooks file and that business has a large amount of transactional data, we would suggest that the IRS is more likely looking to review one of the above areas rather than the small individual transactions alone.

Note: This will not be true if you are being audited by a sales tax agency.

The possibilities of what the IRS is reviewing in your data file are infinite, but hopefully this can provide you a generalized guideline for what is likely going to be examined as a part of the audit process.

Matt Clark is the Principal for QB or not QB, a company that focuses on helping customers prepare QuickBooks files for the scope of IRS audits and other legal contests.