Why Online Accounting Softwares (QB, ZB, etc.) are not able to replace Tally?

A few years ago, I was tired with manually entering all individual transaction entries in Tally. It's massive and a herculean time consuming task! The transaction entries are building blocks of the Accounting System, akin to each line of code built in a large program, Software, App, etc. well, almost everything these days. Lucklily, now I have an amazing team to back me up and exciting automation tools to take care of this work but I, like many other CAs and CFOs in the country, still prefer Tally over anything else! Why not Quickbooks (QB) and Zohobooks (ZB) or similar online accounting softwares? I know both QB & ZB efficiently as I have worked for over 50 entities in each! Why still Tally? I hate myself for loving Tally more than QB & ZB but I can't seem to get over it! Am I doing something wrong? Are most CAs in the country wrong about QB & ZB? Where is the problem?

It took me few years to understand the root cause and finally arrive at a conclusion that makes some sense. Lets understand it with few basics!

(Note: If you understand the basics, you can skip to the Problem No. 1 paragraph)

Why do we need accounting & bookkeeping and what do we get out if it? Well, the simplest answer is, especially in India, the law tells us to maintain an accounting system and we need to know, accurately, whats happening in our business! Most of us use a magical tool called Microsoft Excel/Gsheet where, literally, that's all we need, until, we dont't! We grow so fast or lose track of finances or literally have no interest or time to understand these financial transactions that we either outsource it to our local CAs for bookkeeping, who also helps us with periodic computation & filings of GST, TDS, PF, PT, etc. or we create an internal Accounts/Finance team, headed by CFOs & Managers to handle this for us. What do we get, eventually, from all this Compliances, filings, bookkeeping & money to professionals handling it? Financial Statements and similar MIS/ERP reports!

What the hell is Financial Statements? Why do I care about it?

Financial Statements; such as Balance Sheet, Profit & Loss Account, Cash Flow Statement, Accounts Payables, Receivables, etc. and countless more MIS/ERP reports, some standardised and some personalised; are set of informations we need to make good decisions and aren't we all dependent on it? A big part of our strategic decision making; where our precious CAs/CFOs are involved securing and confirming those reports are accurate, relevant and timely received; are after analysing these reports! It's a pretty simple! We need these reports and to get these, we need a robust accounting software with efficient system in process in place.

Lets consider this with an example: An entrepreneur makes sales of Rs 5 crores in a year but does not know accurately, what is the taxable profit on which he has to pay Income Tax? Or at the time of making salary payments, he is surprised with salary numbers as he hasn't budgeted or accounted for it earlier! He has to arrange funds immediately, often taking Loan or asking customers for Advance, and take care of salary payments for his team! This is where Cash Flow Statement coupled with Budgeting Reports and monthly Financial Statements helps him plan and manage his cash flows/Accounts receivables and profitability! These magic numbers that help us make smart decisions isn't arrived in an hour or two! It takes the entire Finance/Accounts team handle those accounting entries (building blocks), right from basic, correctly configure in accounting software so that these are correctly reflected before such reports are generated!

Okay. Not so complicated but not so simple!

Exactly! This is where we develop a mindset that we create an SOP (Standard Operating Procedure), to be followed by the Team (including Vendors & Customers) and we instruct/guide our Accounts/Finance Team and we are set. That's true! As an entrepreneur, thats pretty much our job and we let the experts and professionals take care of it for us! Period. End of sentence.

This is where these accounting softwares hits our sweet spot! They promise to automate much of our accounting work, often with such simplicity & precision, that we become brand ambassadors of recommending these softwares to everyone around us! I have done it and I am sure many of you would have, too! Until, you stop! This is where we arrive at the Problem No. 1.

Problem No. 1: The new automated features, online anytime access and collaborative team workings usually hits into a product limitation, by design or by feature or maybe a million other issues that's beyond our control! For example, in QB, one can't upload multiple journal entries via upload tool! It has to be done manually or we have to develop/pay an external tool, integrated with QB, to do it! ZB does not allow you to pass manual journal with accounts receivable/payable! I am still trying to find a workaround for it! These are small limitations that have workarounds, often expensive and/or time consuming. This makes us to hire an expert who already know how to handle these accounting softwares efficiently or invest time with support team to learn/fix these. More often than not, we hate talking to customer support for problems which have shouldn't be arising in first place!

Tally has a simple Journal entry feature (F7 Journal Entries) that lets me bypass anything that I couldn't otherwise enter properly without compromising relevance & precision! All I need is to have sound knowledge of Accounting. It's not even necessary to be a CA or an expert here. Most of these are basics taught to us in 11th & 12th Standard (Commerce Students). Only these basic accounting knowledge is required to operate and are heavily utilised in Tally!

Problem No. 2: This is less thought of, talked or debated, but is the root cause of all accounting softwares. All accounting softwares, both online and offline, are nothing but a Product with thousands of features that are very well stitched together with efficient workflow and with a beautiful & intuitive user interface that lets us love the overall product. They have teams comprising of worlds best designers, techies for both front end and back-end platform technologies, that even I don't really understand and few industry experts. All these features, part of one big product, have one thing in common. They all have same underlying fundamental assumption. "The transaction should have happened exactly as the feature of the Product has assumed to configure it!"

For instance, money received from customer against a sale bill should be configured correctly in accounting software so that the feature is correctly utilised by the user. This helps in getting correct Financial Statements and this transaction reflects in various reports designed in accounting software (both online & offline). The SOP suggests, for instance, a sales bill of Rs 1 Lakh to be recorded first via invoicing/sales feature (correctly configured with stock item, GST classification & categorisation, TDS expected to be deducted, etc.) and then payment should be received in accordance with this configuration! We blindly think, 'Our customer is aware of the law and agrees with our interpretation and our accounting software configurations exactly how we think they would operate! As a true entrepreneur, please respond in the comment, how many times does this really happen? Maybe 5-6 out of 10 times, if you are already well established and deal with companies that have strong accounts/finance team! What really happens here is client pays us without deducting TDS or deducts excess TDS or does one of the million other possibilities that the software feature hadn't thought of, and yet happens! Especially in India!

What do we do about it?

Half of the time, we need support team to help us fix these issues with a work around and they would blame us for not following or interpreting the law/software feature correctly while providing us the solution that is often not as simple as we think it would! Tally, by its fundamental design architecture, fills this gap, to an extent! The accounting softwares continues to add features, always with the assumption, that things would go right (as its meant to be), always! It fails, often, especially for users like us who are accountable to our clients to deliver timely reports! Ultimately, entrepreneurs need timely reports to make startegic decisions, deal with compliance and tax payments and budget or plan future cash flows!

The problems, in simple words, can be summed up here. "Either the Product does not have the feature to cover a specific SOP that is an established industry practice or client preference; or the Product's underlying assumptions on it's features doesn't satisfy the accounting transactions leading to glitches!" TDS should have been deducted by customer. If it doesn't, you need a workaround! To do the workaround, either you need an expert who has experience/knowledge to handle these or invest time with customer support to fix these issues. This is extra painful, if these problems are repetitive in business! Consumes a lot of time that results in higher cost!

Okay. Now that I have understood the problem, is there a solution?

I believe implementing the solution lies in the hands of those very geniuses who have created these wonderful accounting softwares for us to use! They are techies and are not accounting industry experts. An intrincal way of designing a product is to list out all its features, individually, and map it with all the possibilities that an individual feature can take care of. One of the solutions that I can think of is, when a particular feature is added, a question should be asked, what if the underlying assumption does not satisfy here? The possibilities have to include instances that may sound absurd, illogical or doesn't satisfy the underlying assumption of that feature but it needs to be included! What are the possibilities here that would help him design a better feature? Tally, to an extent, does it so logically that helps us give a sense of control of the entire product, unlike QB & ZB, which merely gives us the sense of just getting control of features, one transaction at a time!

At the conclusion, I would like re-iterate that I am not against any accounting software, personally or professionally. We professionals have learned to put client comfort's policy first before we recommend them an accounting software. What we really need is that these giants should listen to us, probably more than what they are doing now, until some entrepreneur, reading this articles, decides to startup and puts them out of business in few years!