Small Business Software Grows Up

Intense efforts for product improvements

Microsoft’s introduction this year of its small business accounting software is challenging the two leading competitors—QuickBooks and Peachtree—to step up their efforts with products that are ever-more technologically powerful.

The competition will be intense because “Microsoft Small Business Accounting (MSBA) is technologically more advanced than either QuickBooks or Peachtree and its price strategy is hard to beat: It’s bundled free in selected 2006 versions of Microsoft Office. With more than 400 million users of Microsoft Office worldwide, even if only a small percentage of them upgrade to the 2006 version, the new accounting program could be in the hands of millions of users by the end of the year.

With products as complex and customizable as SBA software, it’s not prudent to rely fully on assessments of reviewers or colleagues. The only way to be sure a product works best for you or a client is to test it with your own accounting data.

If you’re going to buy QuickBooks or Peachtree, purchase the accountant’s editions. They contain nearly all the additional functionality found in the various other versions of the product and they’re typically priced lower.

The stakes in the competition for small business accounting software are high. The current estimated market of small businesses is between 15 million and 25 million, with 500,000 to 2 million new businesses starting each year. Clearly, small businesses will be the winner as their accounting tools continue to improve.

J. Carlton Collins, CPA, president of ASA Research, LLC, is an author, lecturer and analyst of the accounting systems industry. His reviews can be seen at . His e-mail address is .

f you think small business accounting (SBA) software has made enormous technological leaps in power, speed, sophistication and flexibility in recent years, you ain’t seen nothing yet. In each of the past few years, the two leading SBA products—Intuit’s QuickBooks and Sage Software’s Peachtree—have challenged each other, making their products stronger and easier to use as they battle to expand, or at least maintain, their already huge customer bases. But now the competition is entering a new, more intense stage as giant Microsoft has entered the field with two winning strategies. In many ways its new Microsoft Small Business Accounting (MSBA) product is technologically more advanced than either QuickBooks or Peachtree and its price strategy is hard to beat, as it’s bundled free in the 2006 version of Microsoft Office. A five-user stand-alone version sells for $149.

The Value of Industry-Specific Editions
In recent years, industry-specific versions of QuickBooks and Peachtree have emerged to appeal to distributors, contractors, manufacturers, nonprofits and other organizations. While these products have some merit, in reality they have more to do with marketing and product positioning. In most cases they offer only a handful of additional features and reports relevant to each industry.

With more than 400 million users of Microsoft Office worldwide, even if only a small percentage of them upgraded to the 2006 version, Microsoft’s new accounting program could be in the hands of millions of users by yearend. To put that in perspective, consider that currently QuickBooks is the leading purveyor of SBA software, with 90% of the market and an estimated 3 million users. Peachtree, with 9% of the market, reports more than 1 million users. The remaining 1% is made up of a half-dozen other products.

To help determine which product is best suited for you and your clients, we will focus on QuickBooks’ and Peachtree’s new features and only briefly mention the new advances of some of the other products. Since all the functions of the MSBA are new, we will examine only its key functions—especially those we rate superior to its competitors. For an overview of the key functions of the three leading products, see “ Product Comparison Chart for Selected Features.

Caveat : With products as complex and customizable as SBA software, it’s not prudent to rely fully on assessments of reviewers or colleagues. The only way to be assured that a product works best for you or a client is to test it with your own accounting data.

  Software for CPAs Only
If you’re going to buy QuickBooks or Peachtree, purchase the accountant’s editions. They contain nearly all the additional functionality found in the various other versions of the product and they’re typically priced lower.

Both vendors offer CPA adviser/membership programs that include free copies of the software, training, CPE credit, support and other benefits. These programs cost far less than the software itself.

For example, QuickBooks consultants receive a copy of the QuickBooks Enterprise Accountants Edition, plus more than $3,500 worth of software, training and free product upgrades the following year for just $449.

CPAs can join the Microsoft Professional Accountants’ Network at no cost; it includes training, support and a copy of MSBA.

And for $299 members also can subscribe to Action Pack, which provides $25,000 worth of software—nearly all the Microsoft desktop application software for up to 10 partners and staff.

Intuit offers 23 versions of its accounting software, but most are just lighter and less expensive versions of its primary product, QuickBooks Premier Accountants Edition 2006, which more than 250,000 CPAs use. Unless otherwise noted, all QuickBooks references in this article refer to QuickBooks Premier 2006, which is missing some specialized functions found only in the accountant’s edition. Because the underlying data structure and user screens are similar for all QuickBooks products, users can easily migrate to more powerful editions without reading the operating manual or reimplementing the software. A table listing the prices and the number of users the 23 versions support is shown in “ QuickBooks Products .”

Screens : Intuit has reduced the number of setup screens to 20 from 130. As a result, once it’s loaded, it now takes only 15 to 30 minutes to get under way. In addition, Intuit offers 30 days of free support with each purchase. The product now sports a clutter-free “screen center,” a kind of home page, that displays folders for only the key features/functions a user chooses to activate (see exhibit 1 ).

Each screen center mimics filing cabinets to provide quick and easy access to data on customer, vendor, employee and financial reports. For example, multiple copies of a check might be filed simultaneously under banking, vendor and job cost, simplifying a search for it. Likewise, a company’s financial information is grouped so users can see all invoices, payments, credit memos, transactions, contact information and memos for a given customer either on one screen or on individual “subject” screens and other notations (see exhibit 2 ).

Database : By switching to a SQL (pronounced sequel ) standard database (not to be confused with the more powerful Microsoft SQL Server database), QuickBooks now runs considerably faster and is able to handle as many as 15 concurrent users on its Enterprise version, up from 10 before, making financial data more accessible for sharing, crunching, charting and reporting in other applications.

Audit trail : QuickBooks no longer allows users to turn off the audit trail system. Now the system records and tracks all transactions—even errors that are reversed and corrected, something antifraud-conscience CPAs have been seeking for years.

Mimic client screens: The accountant’s edition lets CPAs create a screen that replicates any screen for any of the other versions of QuickBooks, making it easier to provide consulting via the phone.

Sage Software offers 10 versions of Peachtree, but most are merely lighter versions of the primary product, Peachtree Premium Accounting Accountants Edition 2006. For purposes of this article, all references to Peachtree refer to that edition unless otherwise noted. Details on all the versions can be found in “ Peachtree Products.

Peachtree has been a long-time favorite of the CPA community. Sage reports that about half its sales come directly from CPAs or their recommendation. CPAs who take my technology classes generally consider Peachtree more powerful than QuickBooks.

Tracking parts: The software’s strong suit is inventory. It can track part identification by serial number or by a customer’s stock keeping unit (SKU), which QuickBooks cannot. Manufacturers especially favor Peachtree’s bill of materials (BOM) assemblies, which are displayed in an indented format based on their level of bill of materials; further, each line item displays the cost for each component and the total estimated cost of the assembly. In addition, BOM invoices (see exhibit 3 ) provide the type of detail costing information many customers need.

Auto-fill: Taking a cue from QuickBooks and Excel, Peachtree provides an auto-complete feature that fills in fields as you begin typing based on past entries.

Lookups : Peachtree has cleaned up a few annoyances. For example, ID lookup lists are sorted alphabetically and provide an alert when you try to use duplicate numbers for quotes, invoices, purchase orders or credit memos.

Invoice aging: Peachtree calculates and reports the aging of customers’ invoices—helping to identify financially stressed customers in time to step up collection actions. Peachtree also calculates and reports the number of days it takes to pay invoices.

Internal reviews: The software offers a built-in internal accounting review that evaluates up to 15 types of suspicious transactions and common mistakes, such as duplicate transactions and cash receipts and amounts posted to wrong account numbers; such tools are growing more common in higher-end applications.

Banking : Peachtree downloads bank statements directly into the software, automatically matching existing items and creating those that are missing, such as service charges (see exhibit 4 ).

Printing , filtering and drilling down: Users can print selected reports directly from commonly used screens. Likewise, single customer or vendor reports can be printed and drilled down and filtered. The software can save transaction searches, greatly speeding repeat searches.

Design tools: Peachtree improved the tools that customize invoices, quotes and other documents.

Job costing : Billing capabilities were beefed up; contractors can bill customers at several different milestones in a job cycle: calculated on a percentage of the total estimated job revenue or the job completed.

Financial reports : The premium edition includes Crystal Reports for Peachtree, a feature that assembles and formats financial reports. The high-end edition also can export reports in Adobe format, export templates to Word and Excel and produce e-mails that alert users to selected changes in financial conditions. The software contains an archive function so users can access detailed company data and financial statements from closed years.

Reports can be viewed by department, location or product line with up to five account segments in the chart of account numbering scheme. The software contains a consolidation wizard for maintaining a separate set of books for each company yet still produce consolidated financial statements, including budgets by company. It also tracks three-year budgets, employee raises and employee performance reviews.

Conversion : Peachtree can automatically convert data from all versions of QuickBooks, so switching products is relatively painless.

MSBA offers a complete collection of features that CPAs and small businesses have long sought: a powerful database, true networking ability, extensive payroll, a secure audit trail, customization and deep integration with Microsoft Office. Taken together, these functions are unprecedented in the low-end accounting software industry.

Customization : One of the most important features in any accounting system is the ability to easily customize it to meet your needs. With more than 100 user-definable fields, MSBA offers more customization possibilities than its competitors. See exhibit 5 for a customized home page.

As expected, Microsoft has designed MSBA to be tightly integrated with other Office applications; for example, its documents are maintained in Word and all financial data export to Excel for analysis, formatting and charting; even what-if analysis is a breeze. The most impressive integration is with Outlook; all MSBA documents and reports can be e-mailed. Further, Outlook shares and updates contact data in both directions: its contact data can be sent to MSBA and MSBA contact data can be sent to Outlook. Its calendar data post as billable time with just one click.

Scalable database : MSBA operates on the Microsoft Database Engine (MSDE) database, a lighter version of Microsoft SQL Server, but still far more powerful than QuickBooks’ SQL. MSDE, which holds electronic data in much the same way a filing cabinet holds paper documents, with records organized by folders, can accommodate huge volumes of transactions with no performance slowdown. By comparison, all other entry-level accounting systems use databases that degrade considerably as transaction volume grows, forcing customers at some point to switch to a more expensive, higher-end product. It’s unlikely any small business would ever outgrow MSBA’s database.

Network : MSBA offers a true networking environment that lets multiple users access the system simultaneously with more advanced record-locking instead of rudimentary file-locking technology, so multiple users can access a file at the same time.

Audit trail: Like the latest edition of QuickBooks, MSBA boasts a secure audit trail that cannot be turned off to make a correction; the system preserves all entries, making it difficult for an unscrupulous user to kite the system.

Paperless environment : With its built-in electronic document handling, MSBA is the first low-end program to completely support a paperless environment. Users can attach an unlimited number of documents, worksheets, bitmapped images, sound clips and even movie clips to any transaction or item. Exhibit 6 shows an example of an attached handwritten image displayed with a sales order.

Payroll : To produce the payroll module, Microsoft turned to ADP, which developed the most comprehensive program ever provided for small businesses. The cost, including state forms, is $169 a year or $229 for electronic filings. The payroll system actually resides on ADP’s servers and interfaces, via the Internet, directly to each user’s MSBA.

Although QuickBooks and Peachtree hold 99% of the small business accounting market, the remaining 1% still represents a large enough niche market for a few other vendors to hold their own. Here are the highlights and improvements for these programs.

M.Y.O.B. : Sage Software, Peachtree’s owner, also owns M.Y.O.B., an Australian product with a worldwide following of about 500,000 users. It’s available in five versions (two for Windows and three for Mac) and costs from $99 to $399. A single-user version sells for $29; a three-user version for $129.

New features: The product can accept short shipments, partial shipments and back orders and still track all purchase-order items. It can handle sales on items not yet received, allows negative item counts as a preference, receives inventory without knowing cost, tracks inventory received into multiple warehouses or specific locations within a warehouse and handles items moved from one location to another while a new location report tracks inventory levels.

In addition, M.Y.O.B. added multiyear budgets, support for multiple locations, the capacity to maintain up to seven years of transactions and the ability to print ready-to-file W-2s and W-3s on plain paper. Users can drill down on income statements and balance sheets, produce year-to-date amounts on paycheck stubs and handle scheduling of recurring transactions, batch e-mailing, exception testing, discrepancy tracking, auditing and subtotaling of time-and-billing reports by job.

NetSuite : Unlike the other products, NetSuite is Web-based. It has about 9,000 customers and uses the Oracle database. It rents for $99 a month for one unlimited user and 10 limited users; each additional unlimited user costs $49 a month. Advanced modules, such as customer relations management (CRM) and e-commerce, are available for $199 to $449 a month.

New features : NetSuite has added spellcheck, duplicate detection, transaction merging, electronic fund transfers to vendors, publishable dashboards (data screens), key performance indicators, escalation and follow-up workflow capabilities in CRM and just-in-time inventory ordering.

New add-on solutions include lot management, multiple budgets and allocation capabilities. NetSuite also can handle noninventory and service items and other charges in assemblies.

Simply Accounting : This software is available in three versions that are priced from $49.99 to $699.99 for up to six concurrent users. It has about a million customers.

New features: Integration with Microsoft Outlook, a new form designer, new report sorting and filtering options, the introduction of 25+ performance indicators, warnings for duplicate form numbers, one-step allocations, the ability to export and re-import information (such as price lists) to Excel, twice as many (20) payroll-deduction fields, job categories, integration to handheld devices, a new departmental trial-balance report and inclusion of salespersons’ names on quotes, orders and invoices.

As you can see, small business accounting systems are becoming very powerful and sophisticated. And with the introduction of MSBA, the competition will become increasingly intense. The stakes are high: The current estimated market of small businesses is between 15 million and 25 million, with 500,000 to 2 million new businesses starting each year. Clearly, small businesses will be the winners as their accounting tools continue to improve.

  Product Comparison Chart for Selected Features
  QuickBooks Premier Accounting Peachtree Complete Accounting Microsoft Small Business Accounting
Single-user pricing $399 $499 $149
Five-user pricing $1,499 $999 $149
General ledger
Accounts payable
Purchase orders
Accounts receivable
Sales orders
Job costing
Fixed asset accounting
Point of sale
Report Writer
Bank reconciliation
Departmental accounting Yes Yes Yes
Setup wizard Yes Yes Yes
Export reports to Excel Yes Yes Yes
Group reports for printing Yes Yes No
User definable alerts No Yes No
Secure audit trail cannot be turned off Yes No Yes
Company financial dashboard Yes Yes Yes
Ability to memorize transactions Yes Yes Yes
Online banking Yes Yes Yes
Sync customer and vendor data to Outlook Yes No Yes
Attach pictures and documents to transactions No No Yes
Alternative part numbers No Yes Add-on
E-mail invoices Yes Yes Yes
Track multiple warehouses No No Add-on
Track serial numbers No Yes Add-on
Cash-flow forecasting Yes Yes Yes
Maintain multiple price levels Yes Yes Yes
Time and billing Yes Yes Yes
Time-and-billing integration to Outlook No No Yes
Fixed asset accounting Yes Yes Yes
Integrated Web store No No Yes
Auto complete text fields Yes Yes Yes*
Calculates days-to-pay for each customer No Yes No
Built-in internal accounting review function No Yes No
True networking environment that does not need to be toggled on and off No Yes Yes

* Microsoft Small Business Accounting provides auto-complete text via a drop-down window.


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