small business accounting is big… and getting bigger

forecast reveals that small businesses in the u.s. will spend more than half a billion dollars on accounting software by 2008

intuit?s quickbooks software enjoys a clear majority, with microsoft?s small business accounting expected to steal market share
fromami-partners
u.s. small businesses (sbs; companies with 1 to 99 employees) spent approximately $410 million on purchasing accounting software solutions in the last 12 months, and this figure is expected to cross the half-billion-dollar mark by 2008.

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the nearly 6% annual increase in accounting-software-related dollars augurs well for industry-leader intuit (with their quickbooks portfolio) and microsoft, which recently jumped on the small business bandwagon with its release of small business accounting 2006. more than ever before, sbs are searching for solutions that are easy to install, user-friendly and, most importantly, tailored specifically to their size. in addition, nearly three fourths of these businesses upgrade their accounting software package every one to two years, opening the door for consideration of new solutions.

the above findings were released by new york-based access markets international (ami) partners, inc., drawn from its surveys of small and medium businesses (smbs) in key developed and emerging market countries that account for almost three quarters of total smb it spending. ami is a leading consulting firm that specializes in it, internet, telecommunications and business services market intelligence ? with a strong focus on global small and medium business enterprises. ami-partners conducts the industry?s most comprehensive annual tracking surveys of smbs in more than 20 countries, including north america (u.s. and canada); europe (u.k., france, germany, czech republic, poland and russia); asia-pacific (australia, china, hong kong, india, indonesia, japan, korea, malaysia, singapore, taiwan and thailand); and latin america (mexico and brazil).

tremendous untapped opportunity still exists in the u.s. small business market

ami-partners? annual small business tracking studies show that more than half of all small businesses still do not use any accounting software solution. ?these small businesses may be using spreadsheets or even paper and pencil for their accounting needs. however, pressures to operate more efficiently, improve compliance with sarbanes-oxley and other regulatory requirements, and the need to electronically exchange information with larger customers and suppliers make it likely that many of these companies will deploy accounting solutions in the future,? observed arjun mehra, research analyst at ami-partners. ?one aspect of this is having access to an audit trail that mirrors their cash flow accurately. according to mr. mehra, small businesses are faced with the prospect of managing their finances efficiently with internal staff that is not very technology savvy. ?it makes perfect business sense for sbs to switch to an accounting software solution that is geared towards them and does not require costly training to deploy.?

can microsoft upstage intuit?

intuit?s quickbooks suite of products ? pro and basic ? has long dominated the $150 to $300 price band and is widely recognized as best-of-breed in the small business accounting sphere. in fact, intuit?s major strength lies in the fact that they have aggressively pursued this market with their low-end offerings and their product mix ranging from simple start (at $99) to quickbooks premier (at $499). it is this intense focus on the sb space that has enabled intuit to ward off competition from microsoft and best software to date. simple start is an ideal low-cost package for small business start-ups, which have the option of upgrading to basic or pro as their needs evolve and the company grows. intuit has ensured that customers can seamlessly upgrade from one intuit product to the next, keeping many small and even midsize businesses in the intuit fold.

prior to releasing small business accounting 2006, microsoft attempted a foray into the sb financial space via microsoft money, which is more geared towards consumers. microsoft business-solutions products, such as great plains and solomon, have been too expensive and complex for most small business needs. in fact, microsoft tried marketing a scaled-down version of great plains without success. however, many small businesses use microsoft?s excel spreadsheet for accounting, and its outlook application for contact management and email. microsoft?s brand, its office integration story, and the office-like look and feel of sba are likely to attract interest from one of its key target audiences ? small businesses that don?t currently use accounting software. customers who already use microsoft programs may feel comfortable trying microsoft?s accounting software, as it promises to require minimal training to get up to speed. sba allows clients to import data from excel, and to port data from their existing quickbooks software ? features which microsoft hopes will entice quickbooks users to its side.

priced under $200, microsoft?s small business accounting solution ? coupled with microsoft?s extensive penetration of the small business desktop productivity market ? may create the first real threat to quickbooks? market dominance. however, intuit customers have proved impervious to rival attacks in the past, and intuit has proactively announced a new version of quickbooks ? code-named denali and slated for release in early 2006 ? to counteract microsoft?s sba launch. ?one thing?s for sure,? concluded arjun mehra, ?microsoft will help educate many of the small businesses that have yet to adopt accounting software about the benefits of doing so ? which will likely spur sales not only for sba, but for competitive offerings as well.?