"Collaboration: More often than not, accounts are prepared collaboratively by a business owner and their accountant – and there may be a bookkeeper involved for all but the smallest companies."

My experience is that many accountants are very conservative and don't want change. They'll stick to what they know - even if that often means printing out reports for them. Having used an online accounting application (one that I helped develop) with two different accountants, they preferred to receive paper versions of reports than using the login that they had access too.

The inertia in the industry is tough to crack - but perhaps a Google branded offering might be enough to shift people over the line. I think it's telling that Microsoft has been trying to crack this market, albeit with paid models, for some years and still haven't really shaken the Quickbooks and MYOB stranglehold (assuming small biz market - their larger-company offerings have faired significantly better).

"But consider this: the threshold a business owner places on his/her business records are lower than his/her personal information."

I think perhaps the authors underestimate how private people like to keep their business accounts. Our experience is this is one of the key barriers to uptake of online accounting - that the data isn't secure and that it's hosted on a third party server. The idea of another organisation using this information for advertising or other benefits is a significant barrier.

Thinking about the payoff of someone sharing information with their accountant or bank manager. Firstly, those consultants have a strong trust relationship that exists with the business owner. Secondly, the value for disclosure is very high - more funding, overdrafts, analysis and advice on tax implications etc. How often does a business owner just hand over their business records to a supplier because they may receive some small benefit?

With regards to payroll etc. you suggest that "Both of these business processes require updating and validating on at least an annual basis, to keep up with changes in national legislation."

Two points - basic business records and handling of tax in an international system are perhaps more complex than is outlined in your article. GST in some countries, multiple currency support, tax laws and reporting requirements can all have slight differences. That's not to say these can't be overcome, but it's a significant challenge (one that a player like Google may be willing to tackle, but all of the apps on their platform have not required this degree of localisation).

There are many companies already applying the "mechanical turk" model to bookkeeping - it will be interesting to watch that space and see where it goes. Coupled with good OCR could produce interesting results.

All in all I think it will be some time before Google enters this market - certainly not within the next 12 months.

Also - there are a couple of other accounting webapps that may be of interest to your readers:
* Freshbooks - http://www.freshbooks.com/
* Saasu NetAccounts - http://saasu.com/
* Less Accounting - http://lessaccounting.com/

And invoice managers:
* Blinksale - http://www.blinksale.com/
* Simply bill - http://www.simplybill.com/

Your critique of existing online accounting systems basically boils down to the fact that they are not free, and that you perceive them as being too complex. But without any specific examples of unnecessary complexity, how do we know that's true?

With regards to cost:first, we've seen many different kinds of online software succeed with non-free business models -- 37signals, salesforce.com, etc.

And the cost of the software itself is a very small percentage of what it costs to deal with small business finances. Tax preparation and an accountant's time are far more expensive than most small business accounting packages, online or not. The advantages of incumbency with accounting software is much more significant than with personal email or document sharing.

Next -- small business accounting practices vary widely across national boundaries. The localization challenges go far beyond language, making successful delivery of a truly international online service a remarkable feat.

I agree with some of what you've said about wishing for greater innovation in the space, and it may well be a promising area for Google. But your article leaves an awful lot out.

Buxfer (www.buxfer.com) is a great tool for PERSONAL finance management, I use it almost every day to track my expenses, who owes me money, splitting money between groups and comparing income vs expenditure on some of my side projects.

It also has budgeting, but I havent played with that yet =p

Craig

The whole field of computerized accounting is filled with paving the cowpaths set up by paper-based systems designed several centuries ago. This stuff can be made a lot lot simpler.

For example, see http://en.wikipedia.org/wiki/Resources_Events_Agents

I understood that XBRL is about external financial statements. Business management requires detailed info about actual economic events: receipts, payments, orders, inventory and production transactions, etc.

Can you find order line items in XBRL? (I went and looked, but the online doc is too opaque to tell, and I did not find the word "order" anywhere. Googling for XBRL "purchase order" suggests that they are "in the works", but there are impediments to their adoption.

Moreover, XBRL has a rep for being overly complicated (google for "XBRL complicated"), so simplicity was probably not one of their goals.

The big Three do need to produce a PERSONAL online accounting tool. I would use it to manage my statements from my bank. What needs to be done though is for the banks and any other company to agree a common standard of the metadata (not sure what XBRL is). When this is sent to you by post, it can be scanned and the metadata be recognised for what it is. Alternatively these companies can email it to you and export it into your PERSONAL online accounting tool.

The scanning could be done by a trusted company if needed. I could get my Bills addressed to Jez#123456767890JEZ at MAILSCAN plc, and they would automatically process it into my system. Why not trust the big three to do this for me??

I would like my bank to do it for me though.. save the rainforests! I see the end of Paper Mail being delivered through my letterbox in 10 years anyway.. anything important will be couriered to me.

I imagine its some googlers 20% project already.. it requires users to have trust that this OUR data is being managed responsibly.

For SMB's though.. doesn't Google have a relationship with Quicken? I imagine they are talking how to integrate this into GAFYD as we speculate!!

Keeping Final data with any company is a trust factor. Most companies don't like to have their with any other company other then their Chartered Accountant Firm.

SOX compliance is another pillar which needs to considered too for sustainable practices.

We are talking MONEY here and no company I know of would want to risk their companies books on BETA software. After all what happens after 6 months and they find a major logic flaw in the software. Google says it only BETA software and the companies affected shouldn't have been using it in production. Google is off the hook, after all it is BETA software.

It's not going to happen, at least not the traditional way Google does things.

I agree with this wholeheartedly Bob - I think the underlying system must work in these terms, but the UI and process for entering data can be abstracted. Some of the systems in my initial comment definitely steer away from this kind of language. However, there are some circumstances where you have to expose the debits and credits approach (accountant corrections for example).

"Moreover, XBRL has a rep for being overly complicated (google for "XBRL complicated"), so simplicity was probably not one of their goals."

Agreed - and certainly not particularly relevant/suitable for small business. Strikes me that it's much more geared towards bigger business with heavy compliance/reporting requirements.

PD mentions "Most companies don't like to have their with any other company other then their Chartered Accountant Firm." I think this reflects that trust relationship, and also the fact that accountants and business bankers are bound by codes of conduct that increase a business owner's confidence in handing over sensitive data.

Dave says:
"Next -- small business accounting practices vary widely across national boundaries. The localization challenges go far beyond language, making successful delivery of a truly international online service a remarkable feat."

And Jez says:
"The big Three do need to produce a PERSONAL online accounting tool."

Those two comments I think point to where Google will head first. By focusing on personal finance, many of the localisation issues disappear - limited largely to multi-currency support which is a well solved problem.

Dear Google: If you're hiring an M&A advisor, I am available.

I find it interesting that I am willing to host my code with a third party but cannot imagine hosting my financial information with any third party. And I agree with Dave - even if I were to decide to use an online accounting software, there is no way I would ever host it with Google.

As someone who is married to an accountant I doubt she would use such a system first, Second there are a lot of securty concerns. Typical accounting packages hold bank account numbers as well as a lot of other personal informatiom. This would be a gold mine for identity theives and they would try very hard to get their hands on this type of information

Putting Trust aside for one moment (because it can largely be addressed by people voting with their feet; opt in contracts; privacy laws in many jurisdictions; and not to mention Google Analytics already has a lot of revenue data), we think this commentary is very timely.

Saasu.com quietly compete in this space in more countries than most of the firms listed above (around 50 today) and with more users than many and with a 'carefully designed and engineered simplicity takes priority' approach.

Our thousands of users do trust us (based on what they tell us) but yes it is a serious hurdle and yes we work hard to continue to earn and improve that trust improving world class technology, people and more.

I think overall however the decision to trust someone else with your data is a commercial reality driven by time, if you save small business people enough time they don't mind the risk provided there is a way of migrating if they really really need to do so.

There is also the simple reality that plenty of clients of ours have told us over the years - 'I had my laptop stolen/dropped etc... and my MYOB files were lost but I was up and running with Saasu.com the same day. Thanks...'

We say 'your saasu.com data is backed up constantly intraday and has a guy with a gun on the door protecting it - does your laptop have that'?

The functionality debate is interesting, we think most people underestimate the real business benefits of online financial management and confuse it with simple invoicing. Sure that is a good place to start but it is only one. We go way beyond invoicing, but you can start there if you wish.

Many online accounting companies already do anonymous industry benchmarking and their clients are interested in seeing it and their clients also use SaaS providers for other key infrastructure (e.g. google corporate email, skype business for phones, word press for publishing, ebay pro for distribution etc...) so they are more than aware of the trade-offs that arise when information sharing is part of the price paid for 'network effect' benefits.

Also, SaaS delivery to small businesses is very nearly a consumer market in terms of scale and management approach so 'Google style' products and services can be powerful. That said, even though XBRL is interesting it is some time away in this segment due to the simple amount of time required to get your head around it (reduces payback for time poor owners) and lack of SME/SMB priced products supporting it.

Of course we all have reservations about market power being abused but that is the wonderful world of capitalism, speaking personally now I believe the open web is more than capable of enabling consumers to aggregate their views and influence corporations who don't deliver an appropriately fair or transparent service.

Happy to discuss more here or via our simplify life blog at saasu.com

Cheers, Peter.

CEO

PS: Wait until you see our two Q1 releases and you'll really see what we mean about some of this stuff!

More and more people will feel comfortable using these services as time goes on.