Tag Archives: Accounting & Finance

Accounting Software for Second Stage Companies


If you’re in second stage, chances are you’re already using QuickBooks, and are starting to get frustrated with its limitations. Welcome to the club!

The temptation to switch accounting software to get better reporting is great, and sometimes necessary. Sometimes. It’s also very easy to fall in a rabbit hole chasing the perfect accounting software, and that’s what I want to help you avoid. Here are a few things to consider if you’re itching to switch.

If what you want is easier access to data, simply moving from QuickBooks to QuickBooks Online will allow simpler access to data from anywhere at any time. Granted, the conversion is *not* as easy as QuickBooks would lead you to believe, and I would strongly recommend paying to have it done by a pro. Otherwise, I can pretty much guarantee there will be expletives involved and your bookkeeper won’t be talking to you for some period of time. (Both out of legitimate frustration and because they’re busy fixing what the QuickBooks conversion messed up.) Just ask me for quotes from multiple sources lest you think I jest… That said, the CEOs I know who have been through the conversion are happier to be closer to their financials, even though there are some sacrifices in terms of functionality.

If you are trying to do something QuickBooks can’t easily do, here’s the question I’d start with. Do you really *need* to do something it can’t do? If you find yourself saying something along the lines of, “Yes, my business is different and we need something special to handle our unique situation”, I’d like to challenge that. As a second-stage company, you’re in a tough niche. You’re big enough to be outgrowing your existing software and processes, but not yet big enough to stomach the switch to enterprise solutions. (Cost-wise and/or time-to-implement-wise.) However, it is tempting to bite the bullet and move to a “grown-up” solution because you know you will eventually grow enough to need it.

While it’s true you may eventually need to switch accounting software, it’s to your advantage to wait until it’s absolutely necessary, so you can focus on investing in areas that will contribute more directly to the bottom line. So how will you get what you need in the meantime? Here’s a valuable second stage secret. Most second stage companies are using QuickBooks and making it work just fine. How? By solving simply.

As entrepreneurs, it’s our mission to create something special and unique, which leads quite logically to believing it’s so unique it requires its own solution. Chances are if you’re struggling to get the data you need to manage your company, it’s because some fundamental piece is missing, leaving a gap that you’re inventing things to fix. The gap you feel is real, I don’t dispute that! Over time I’ve learned there are a handful of basic tools that are likely to get you what you need. No invention required – truly!

The thing is, these basic tools are very rarely taught at the level you need as a second stage CEO. Hence the reason you’re experiencing a gap. Fortunately, a guy by the name of Greg Crabtree has written THE book on finance for second stage companies called “Simple Numbers, Straight Talk, Big Profits!” I’ll leave summarizing the book for another article, but trust me when I say it’s an easy read that will generate at least of a couple of “Aha!” moments. Before you create that next new report or look further into changing accounting systems, take a look at Greg’s book. And let me know what your aha moments were! Happy reading!

Are You Getting Paid Yet?


Skipped paychecks for owners are a common reality of early stage companies. Both startup and second-stage companies often don’t have the access to capital they need. When cash gets tight, one of the easiest ways to “fix” it is for the founder(s) to hold a paycheck, or simply not write checks at all.

There’s certainly no harm in holding a check for a few days here and there. The harm is in longer term situations of chronic underpayment or lack of payment altogether.

These can be sticky situations to discuss. All other business metrics likely point to success, so bringing up this topic might seem like a failure of some sort. Or the lack of funds may be seen as a function of time; one that will be fixed with growth/more clients/by continuing forward. Whatever the reason, the subject of owner payments often gets swept under the rug.

It’s time to clean under that rug. Please understand – I know you’ve reached this point of success because you’re persistent. And hardworking. And tenacious. But hoping this issue will resolve itself through more hard work isn’t the answer. It’s time to stop and plan before the issue becomes a problem. If you think it won’t, I’ll be happy to take your bet on that one. However, I propose we skip the bet and continue the conversation.

Even if you believe there’s no ability to resolve the situation now (and you may indeed be right), please stop long enough to determine when and how you’ll be able to resolve it.

At this point, one of the best things you could do is pick up the book “Simple Numbers, Straight Talk, Big Profits!” by Greg Crabtree and read the first three chapters. This book is the single most succinct, straight-forward discussion of owner payments I’ve seen, and I personally wish I had found it 15 years earlier in my entrepreneurial journey. If you don’t have time to read all three chapters, start with Chapter 3.

This chapter helps identify where your issue is (for companies in the 1-5 million in revenue bracket the answers are remarkably similar), how to fix it, and how to forecast your profit. After all, the reason you’re not getting paid when you should be is likely to be because you’re not profitable enough. (Cash flow is likely an issue too, but that can be addressed if profit is where it needs to be.)

Keeping an eye on your profit, forecasting how long it will take to reach a healthy profit (Crabtree suggest 10% is the new break-even and 15% is a healthy profit), and figuring out how you’re going to get there as fast as possible is one of the most valuable things you can do for yourself and your team. As Crabtree points out, profitability is the oxygen of a business – without enough oxygen, the company won’t be around for long for anyone.

For Crabtree’s method of calculating profit, he provides a simple spreadsheet as the first download on his free tools page.

And especially if you’re a visual person, I’d use his method of graphing Revenue, Equity, Pretax Profit and Distribution (which you’ll find in Chapter 3 as well.) Forecasting key indicators is your key to answering the “when” question. Happy forecasting!