A Report on Microsoft Office Small Business Accounting (SBA) from the QuickBooks Consultant’s Perspective – Part 1

Here is part one of our report on the new SBA product from the QuickBooks consultant’s perspective. In this article, we assume you are already an expert with implementing QuickBooks systems for your clients, so we won’t cover the basics of the program. Instead, we’ll introduce both the “Assets” and the “Liabilities” we have uncovered in the SBA product, and in future articles we’ll suggest workarounds for problems we’ve found.

Scheduled for release on September 7, 2005, Microsoft’s SBA is full of impressive features. It includes great integration with Microsoft Office, and it provides most of the basic features most small businesses need to track their accounting.

While we are quite impressed with the feature list, we are concerned about the functionality of certain core aspects of the product and how it will impact the accuracy of financial management reports, and, perhaps more importantly, the reports that consultants and tax preparers will rely upon to prepare financial statements and tax returns.

It should be noted that Microsoft has been not only open to hearing about, but also receptive to the Sleeter Group’s constructive criticisms and concerns about SBA. More importantly, their team of managers and engineers seems genuinely interested in completing the development of a viable and competitive product that will meet the needs of the small business marketplace.

The Assets

SBA comes complete with the features you would expect to find in an entry level accounting package and, not unlike QuickBooks, the accounting is largely handled behind the scenes using easy to understand forms and lists. List elements in SBA, such as customer and vendor records, have a great capacity for storing helpful and much needed information, including easy to access links to related historical data. In addition, the user interface is designed around the familiar Microsoft Office platform which makes navigation within the application familiar to most new users.

One of the most impressive features of SBA is its seamless integration with the Microsoft Office suite of applications. SBA includes the “Business Contact Manager” that provides integration between SBA and Outlook. We think that this feature will be extremely useful for clients with sales or support people who need access to customer information.

In addition to accessing basic customer information, sales and support reps can create several transactions directly in Outlook Business Contact Manager (BCM) that can be imported into the SBA database. Some of the functions that can be created in BCM and transferred to SBA include:

• Creating Quotes (Estimates)
• Converting Quotes to Sales Orders
• Converting Quotes and Sales Orders to Invoices
• Capturing and routing billable time

We are also glad to see that Microsoft has already released a Software Developer’s Kit (SDK) and numerous solution providers have already developed add-in products. Many of the same developers that have created QuickBooks add-on products are developing their links to SBA and several add-ons will be released simultaneously with SBA. For more information on these providers and the products that have already been developed, visit http://sba.microsoft.com/solutions.html.

In addition, Microsoft is partnering with accountants and consultants through their Microsoft Professional Accountants Network (MPAN). There are various levels of membership, including the “registered” member status which is free and provides valuable tools such as free CPE, and sales and marketing assistance. For more information on joining the MPAN program visit:

http://www.microsoft.com/smallbusiness/accountants/partnerprog.mspx

The Liabilities

While the above provides an excellent example of Microsoft’s attention to the needs of consultants and end users, as well as their apparent commitment to the product, we are concerned about several accounting and setup issues we found within the first release of the product.

In our testing, we identified the following issues that would prevent us from recommending the first release of the product.

Note:
Microsoft has indicated there will be a service pack that fixes some of these issues when the product is released but we have yet to see these enhancements. If you are evaluating SBA, make sure you download and update any service packs as soon as they become available.

Issue we have identified:

• Cash Basis reporting – In testing the accrual to cash conversion, we noted several issues that caused us great concern. For example:
• We created an “other current liability” for a Line of Credit. We then transferred $500.00 from the line of credit to our checking account. On the cash basis, the transfer shows as income in the P&L and flows through to net income on the Balance Sheet. This would result in the company paying taxes on borrowed money, and is clearly incorrect.
• On the cash basis, “Credit Card Purchases” that hit expense accounts are removed from the accounting altogether. That is, they are relieved from the balance sheet as a liability and from the P&L as expenses. This results in an understatement of liabilities and expenses on the cash basis.
• Journal entries impacting strictly P&L accounts are not reflected when reviewing cash basis reports. So reclassifications using journal entries will not work for cash basis clients. Journal entries affecting a Balance Sheet account and a P&L account will show up as either negative or positive income (depending upon how the debits and credits are recorded).

• Start Date Issues – SBA requires the user to use a start date that is within the first fiscal year. In testing we found this to be problematic in numerous ways.
• Despite SBA’s built in help suggestions to the contrary, we could not find a way to change the start date or the first fiscal year once it was defined
• No transactions could be entered before the start date.
• Cash and credit card beginning balances entered through the setup wizard are not reflected in the bank reconciliation screen making the initial reconciliation difficult, if not impossible.
• For customers with beginning balances entered through the set up wizard, you are unable to assess finance charges on those balances and all balances are recorded as of the start date.
• For vendors with beginning balances entered through the setup wizard, no detail is provided, only one balance is shown and there is no way to record or track relevant discount information.
• Any balance posted through the “Opening Balance” field in any of the lists (i.e. chart of accounts, vendor, customer. Etc) is booked to the “Start date” defined when the company file was created.
• Because of the nature of the “Start Date,” posting opening balance information was often found to be cumbersome at best, and inaccurate at worst.

In addition to the accounting issues noted above, there are numerous software design issues that may cause problems as we begin to implement the software with our clients. Some examples of these issues are as follows:

• Software Functionality Issues –
• Job costing:
• No job costing can be done at the “Customer” level. That is, all job costing requires an actual “job”.
• Jobs cannot have unique addresses; they are driven by presets at the customer level. This will cause problems for clients who have multiple jobs that need to be invoiced at different addresses.
• Not enough Itemtypes – many of which are imperative to creating end-user solutions in several industries such as retailing where daily totals must be posted in a single transaction (invoice or cash sale) so that all sales, discounts, gift certificates, and payment types (credit cards, checks, cash, etc) can be accounted for. Missing items include:
• Discount
• Payment
• Other
• Groups (kiting is available, but very limited)
• Assembly
• Subtotal
• Reporting limitations (beyond cash basis)
• Lack of a true G/L report
• Class based reporting limitations
• Job Cost reporting limitations
• A lack of related document notifications
• If a user creates an invoice and an outstanding sales order exists, no notification is provided of the existing sales order.
• If a user creates a check and there are outstanding payables for that vendor, no notification is provided regarding the outstanding payable(s)

Overall, although we’ve found many relatively serious issues with this first release of SBA, we do see that Microsoft is sincerely dedicated to getting this product right.

We will continue to report on the product’s advancements as well as providing our own in-depth analysis of each issue we find along with workarounds as we find them.