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QuickBooks Online Draws Competitors

quickbooks onlineIs the switch from desktop to online software leaving an opportunity for new players to capture accounting users at Intuit's expense? While no one is predicting any online vendor is going to break the hold QuickBooks has on the low-end accounting marketing, the very existence of a new generation of competitors suggests that there are people out there who see an opening and are willing to invest money to carve a segment of the market.

Vendors with an installed base always have trouble when a there's a shift in platforms, whether it was Novell with NetWare, the WordPerfect word processing package or the bTrieve database engines, which were all displaced by Microsoft products. But the biggest problem observers cite with the online wars is the alleged weakness of QuickBooks Online - that it's just not the same product as QuickBooks widely used desktop behemoth.

 

"You've got core deficiencies in QuickBooks Online," says Randy Johnston, a partner with K2 Enterprises who provides consulting services to many vendors. However, QB Online may also be suffering from a lack of cheerleaders. Johnston adds that, "You don't have many proponents of QB Online out there." What he means by the latter comment is that Intuit has many thousands of users and ProAdvisors willing to talk up its desktop product, but not its online one. And as far as the Intuit product line's making the transition from desktop to cloud, "I think they thought it would be an easier job than it has been," he says.

The new online software world features invoicing and bookkeeping products aimed at users who don't need a full-fledged accounting package, such as Bill.com and FreshBooks. And then there are the true accounting entries such as Wave Accounting and Xero.

Xero Gets Buzz
The biggest expectations are for New Zealand-based Xero. While the product is not being sold in the United States yet, the company has appointed Sage veteran Jamie Sutherland as managing director for this country. He is scheduled to begin his Rod Druryjob in October. And CEO Rod Drury has been talking to American influencers, making a visit last month to the Boomer Technology Circle meetings.

While competing in low-cost accounting is difficult, Drury is confident his publicly-held company is doing it the right way and has spent years developing the product.

"We have taken four to five years and raised the $40 million it takes to do it properly," says Drury. While a number of products have been introduced as "point solutions" such as invoicing or bill paying, Drury believes that businesses want all accounting functionality, including financial reporting and tax.

Drury points out the reason for Xero's perceived opportunity. "We are seeing Intuit failing to deliver a credible online accounting product," he says.

For the smallest purchasers, Xero starts at $19 per month for up to five accounts receivable and five accounts payable invoices per month and up to 20 reconciled bank statement lines per month. The medium plan at $29 per month offers unlimited invoicing and unlimited bank reconciliation while the large plan at $39 per month adds multi-currency. Bank reconciliation is supported by online bank feeds that automatically import and code bank account, credit card and PayPal transactions.

Without selling in the United States, Xero has established a decent installed base. Drury says Xero has 45,000 business customers with 180,000 individual log ins. "We are not far behind them [QuickBooks] already," he claims.

The product has the attention of Jim Bourke, principal of Red Bank, N.J.-based WithumSmith+Brown, although he wants to see the company's plans for the product before providing more public comment. Bourke saw the product at the Boomer meetings

"Xero looks like a very powerful integrated accounting system that has the ability to go from the very small to large companies," he says. And in listing online competitors on the market including QuickBooks and the higher-end Intacct, Bourke continues that "I think it has the ability to go head to head against those guys."

QB Online Surges
Whatever the upstarts' claims, QuickBooks Online is growing rapidly. The company reported 283,000 subscribers on July 31, the end of the company's fiscal year, up from 201,000 the prior year and 147,000 at the end of fiscal 2009. That's an almost 93-percent increase over the two years.

Part of the problem with the Intuit product is that it was written by a different team than the one that wrote QuickBooks, says Jody Padar, CEO and principal of the New Vision CPA Group, based in Arlington Heights, Ill.

"If they would have called it something else, everyone would have been happy with it. It's just not QuickBooks," says Padar. "It's not a bad product." Padar says QB Online "is still meatier than Xero" because it has payroll and Xero does not. In fact, the Xero website, which has a section for product add-ins shows the following for payroll. "Hang in there; at the moment we don't have any add-ons in your region."

QB Online is suitable for companies that have no inventory, according to Padar. "I wouldn't keep inventory in QuickBooks Online. But I wouldn't keep inventory in QuickBooks, I would keep it in Peachtree," she says. "For your average small service-based business, it is fine."

Michelle LongA prominent QuickBooks ProAdvisor, Michelle Long, who operates Long for Success from Lee's Summit, Mo., says that, "more small businesses are working as virtual offices or remotely and QuickBooks Online is a great, affordable solution for them." But on the minus side, she cites the lack of features and functions in the Windows product, although continuing that "there have been a lot of new features and enhancements recently."

Among the newer features is the ability to import customer data from Excel, which is available in all flavors. The ability to create and send purchase orders is offered only in QB Online Plus, a five-user package that has a $39.95 per month subscription price. Inventory tracking, also new, is also offered only in that version.

Although QuickBooks offers the single-user Simple Start version on the web-based program at $19.95 per month, it talks most about QuickBooks Essentials, priced at $24.95 per month, which is designed for three users. In contrast to Xero's lack of a payroll module, Intuit has two versions with payroll. It offers Online Essentials with Payroll for $51.16 per month and Online Plus with Payroll for $ 63.16 per month.

Wave Accounting
Toronto-based Wave Accounting takes a different course. While targeting companies with nine or fewer employees, it provides an accounting package. The big difference is that the cloud-based system is free.

"There is a big appetite for free," says Scott Zandbergen, Scott Zanderbergenthe VP of product management who is developing the company's accountants network. Wave does not provide a free program aimed at getting end users to a premium product. It will remain free.

The company gets its income from sponsors who pay to advertise product and services on the Wave site.

Zandbergen says the offers are not shoved in the faces of visitors to the site. "Our intent is not to put a flashy banner ad anywhere there's white space," he says. Instead, visitors must navigate to a page that present the offers.

Zandbergen acknowledges the chicken-egg issue Wave faces. It must attract users in order to appeal to sponsors and it must have sponsors in order to entice businesses to the use the product. However, in the company's nine months in operation, it has nabbed 50,000 users. It received its seed financing of $1.5 million Canadian in June.

The product is aimed at the classic small business client who might use the proverbial shoe-box to organize records or outsource his financials to a bookkeeper. One tool for providing better organization of records is a support for a data feed from banks and other financial institutions. Wave currently supports more than 10,000 institutions and continues to add more based on market and customer demand.

Data from participating institutions is presented to the user on an important transaction screen. "It shows you all the transcriptions from your various accounts. It attempts to categorize each transaction to the right GL account," says Zandbergen. "For the ones that are not coded, they can be coded." And the system learns to recognize similar transactions after that initial coding.

FreshBooks
FreshBooks, another Toronto-based company, does not try to replace accounting packages, but it certainly plays in the same space as some of the offerings.

"We are not an accounting package," says chief marketing officer Stuart McDonald. "We want people to be able to run their businesses, but we do not try to do more than that." McDonald says the goal is product data that can be handed off to an accountant.

FreshBooks targets business with one to five employees. "These are folks that got into business never thinking they were going to be accountants or have to deal with bookkeeping."

In fact, the product tour on the company's website notes that invoicing represents 90 percent of these businesses accounting needs. It touts the product's ability to product one report needed for an accountant to deal with an organization's tax needs at season's end, to import expenses via a CSV or QB file and to calculate sales taxes on invoices and expenses.
FreshBooks starts at $19.95 per month

 

 


Bob Scott
Bob Scott has provided information to the tax and accounting community since 1991, first as technology editor of Accounting Today, and from 1997 through 2009 as editor of its sister publication, Accounting Technology. He is known throughout the industry for his depth of knowledge and for his high journalistic standards.  Scott has made frequent appearances as a speaker, moderator and panelist and events serving tax and accounting professionals. He  has a strong background in computer journalism as an editor with two former trade publications, Computer+Software News and MIS Week and spent several years with weekly and daily newspapers in Morris County New Jersey prior to that.  A graduate of Indiana University with a degree in journalism, Bob is a native of Madison, Ind
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