Last month, I wrote a blog post about doing the bookkeeping for Habitsoft, Inc (creator of Clarity Accounting) using our own small business accounting software. It has been a scary thought for me since I wasn’t the accounting brain behind Clarity Accounting.  My business partner has been doing all the bookkeeping for our company ever since we first started.  However, I was determined to try because I really believe I am very similar to 80% of business owners who dread bookkeeping.  Doing this will help me gain a better understanding of those we serve.

Our fiscal year started in October 1st, 2008 and I began to do the preparations for being the best bookkeeper the planet has ever seen.  I went to the local office supply store and got myself a huge accordion file with 21 pockets (the usual size is 13 pockets).

I labelled the different pockets of the accordion file with different expense and income categories as well as separate pockets where I keep our bank and credit card statements. I also added an envelope in each pocket for smaller receipts so that everything can be neatly kept.

Then, I felt I couldn’t do ANY bookkeeping until I got myself a Stapleless Stapler. 

If you have never seen one of those, you are missing out!  They come in all shapes and sizes and ideally used to staple credit card receipts and purchase receipts together.  I always wished I can just get one receipt for everything, but the reality in my part of the world is that I often get two receipts when I purchase things with my business credit card or debit / charge card.

The way the stapleless stapler works is that it makes a whole through two pieces of light weight paper and clip it together without ever using a single staple.  I had so much fun with stapling my receipts that my bookkeeping was done in no time at all

I also got a car mileage log book that I keep in my car.  I think that really is the best place to track car mileages because it is easier for one to record how many miles or kilometres driven for business while still sitting in the car.  I don’t think we will ever add a mileage tracking feature on Clarity Accounting for that very same reason.  While it may be nice to do EVERYTHING online, there are certain things that are better done “offline”.  Of course, there might be a possibility of doing a blackberry / iphone integration that will allow one to track mileages “online” from anywhere…

Now the challenge will be keeping up with my bookkeeping on a semi monthly basis.  Bookkeeping is one of those tasks that if one ever falls behind, it is such a headache to get back in the game.  I think this works for most things in life. 

I feel somewhat guilty for not boasting about our small business accounting software as one of my favourite bookkeeping tools.  I figure this should be something that is obvious.  Once upon a time, I tried other forms of self-employment and got Quickbooks to keep track of my income and expenses, I probably set up everything wrong and ended up abandoning it all together within 2 months.  Long enough that I could no longer return it to the store.  That’s why I think a subscription model for accounting software is great, you can cancel at any time.

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Recently I wrote an email to Ben Kepes, one of the editors on Cloud Ave – a blog dedicated to writing about the phenomenon of cloud computing.  He had mentioned on his blog posts he was interested in reviewing a few online accounting software applications and I thought I would just write him an email and see what becomes of it. 

What resulted from our interaction was my first guest post ever.  I wrote a post about what I really think about SaaS (software as a service) and where I think this industry is going.  Before entering into the blog world with my personal blog Manifestation Stories (which has been long neglected since I started working on Clarity Accounting), I never thought of myself as much of a writer.  Less than a year after I started blogging, I am now writing for other blogs. 

Here is a quote on what I think about SaaS:

It is unclear at this point if any SaaS player will ever reach significant market share in their target market. Probably not in the way Intuit (creator of Quickbooks) can capture 90% of the US market share in the small to medium sized accounting software space. Interestingly enough, even Quickbooks Online struggles to get the kind of market share in the SaaS business accounting space, reaching 100,000 users online in 2007. This is nowhere near the numbers they are used to in comparison to their offline distribution.

Consumers are increasingly looking for SaaS solutions that can precisely meet their needs. One great example is Freshbooks - an online invoicing software that began by addressing only the pain of invoicing. They have since attracted more than 500,000 users worldwide. While there have been some grumbles within their online forum for them to add additional features to become an accounting software, it seems like Freshbooks is sticking to their plan of being the best online invoicing software possible for the time being.

It really seems like the most successful SaaS players are the ones who take on one or two pains and address them extremely well. Companies who create SaaS solutions with more features do not seem to win over those who focus on just a few features.

I also offered my crystal ball rendition of the SaaS market:

I have seen this as an increasing trend in the SaaS market place. In fact, our online accounting software has been approached by many of our customers and SaaS vendors to consider “integrating” with other SaaS applications. We couldn’t agree more. It doesn’t serve us or our clients for us to be the “jack of all trades and master of none”. It would be a lot better if we can just focus on what we do best and let others focus on what they do best. At the end of the day, we all win when customers get the best of all worlds.

As I am writing this blog post, Dobes is in the process of finishing and releasing our first working API.  If anyone is interested in testing it out, please let us know!  We already had 2 requests yesterday alone for a working API.

I think only time will tell if my opinion about the SaaS market has any merit. I certainly hope I am right — that way, I can be viewed as an expert. :P 

Where do you think the SaaS market is going?  Any thoughts?

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Less than 12 hours ago, I received an email sent through our contact form from a potential client who wanted to know more about our company.  He wanted to know how long we have been in business and how big our firm is.  He noted that our mailing address looked like a small business running out of some one’s apartment.  He wanted to know if the business he is dealing with is a big, fail-proof company. 

At first I was worried about how best to respond to this inquiry. After all, we are a small company that is run virtually.  Everyone who has ever worked on this project has been contracted virtually.  In the spirit of being an online accounting software, we conduct our business using as many “online tools” as possible.

I wrote back telling only the truth:

• we are a small company
• we operate from home and allow our contractors to operate from home
• when customers write or call, the founders are the ones who answers the emails and the phone – sometimes at very interesting hours (make sure you turn your email notifications off on your blackberry or iphone while you sleep at night)
• when people from Europe and Asia contact us, they get the same quick response as people contacting us from North America
• we don’t have to abide by certain office hours that are restricted to location and timezone
• when there is a quick feature request like adding multiple currencies or fixing software bugs, it is fixed within days (if not immediately).  Some bigger desktop software vendors will require you to wait for a whole year before they release a new version of the software
• we hire the best security and hosting experts with 24/7 security and support to ensure all client data is safe, even while we sleep

I wasn’t sure if it would be ok for me to be so transparent about how we operate.  After all, some of our competitors spend millions of dollars a year running their businesses.  They have offices in multiple locations all over the world.  Recently I found out that a company providing similar services as us burns 6 million dollars a year.  I thought to myself, “wow, give me 6 million dollars and I would only spend a fraction of that amount”.  In fact, within 1 month of our full launch, the business is already paying its own bills. 

Maybe there are many people who have the misconception that small businesses are more likely to fail.  While this is not my belief, I didn’t have any famous people to back me up until this morning when I ran across Seth Godin’s blog where he spoke about how “small is the new big“.  I think Seth is famous enough for me to quote him on this matter:

Small means the founder makes a far greater percentage of the customer interactions. Small means the founder is close to the decisions that matter and can make them, quickly.

Small is the new big because small gives you the flexibility to change the business model when your competition changes theirs.

Small means you can tell the truth on your blog.

Small means that you can answer email from your customers.

Small means that you will outsource the boring, low-impact stuff like manufacturing and shipping and billing and packing to others, while you keep the power because you invent the remarkable and tell stories to people who want to hear them.

A small law firm or accounting firm or ad agency is succeeding because they’re good, not because they’re big. So smart small companies are happy to hire them.

Needless to say, I was relieved.  We are doing something right after all and there is no shame in being small and telling the truth on my blog.  A R&D team of 50 software engineers may not be as effective as one software engineer who created Clarity Accounting within one year.  Talk about real ingenuity and effectiveness…

Seth Godin wrote this blog post in 2005 and I just happen to come across it when he referred to it in his newest blog post “Too small to fail“.  While this post was written 3 years ago, there is really an element of timelessness in his writing. 

Some things will never change…

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It is amazing how hard it is to get back in the game of blogging after an extended absence.  For some people, a 10 day absence might not seem like a big deal.  But I am starting to realize that the longer I don’t write, the harder it is to get back to the groove of writing.  In my defense however, I must say that I have been working very hard on the help files for our online accounting software.  The help file section is created like a whole other blog on our website.  We found this method to be useful in organizing help information as well generating consistent relevant content and SEO credits.

Many interesting things are happening on the Clarity Accounting front.  We are now being contacted by people from all over the world.  Today, we had a phone conversation with people over in Singapore (a place I used to call home for 3 years of my life) and we are getting requests from people all over the world to tweak Clarity Accounting to support their accounting needs.

One of the most important features we have to support international users is our strong multi-currency feature.  From our research so far, I can honestly say that Clarity Accounting has some of the best multi-currency support out there.  We now support currencies in the following countries: United States, Canada, Mexico, Britain, Switzerland, Japan, Dubai, India, Pakistan, Japan and of course, the Euro for countries in the European Union. 

If you would like your currency to be included in Clarity Accounting, simply contact us and make your request known.

To record multi-currency transactions, you would have to use the “Enter Invoice” tab under the Income section or the “Enter Bill” tab under the Expense section. 

Recent requests from our international customers for multi-currency support also made us realize a wonderful vision for Clarity Accounting.  We are the accounting software that can connect small businesses together all around the world by providing a tool that faciliates doing business with each other.  This is a very exciting vision and we are looking forward to serving people from all over the world.

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Mike, a CPA blogging at “Accounting Unleashed“, starts out his new series of articles on accounting basics with an article “What Are Assets?“. Assets are “what the company owns”.

Assets are broken down on the balance sheet into categories, depending on how long they are expected to last. Assets which last more than a year should be recorded as “fixed assets“, and their value is adjusted over time as the asset increases or decreases in value.  A common mistake made by those new to accounting is to record the purchase of a fixed asset as an expense, like “computer hardware expense” or “furniture expense”, when by law they are required to record these kinds of purchases as a fixed asset for tax purposes.

Most fixed assets, like computer hardware, furniture, cars, machinery, and other equipment loses value over time, because people won’t pay as much for second-hand stuff, and it eventually wears out or becomes obsolete; when these assets are reduced in value the business may record a tax-deductible “depreciation expense”.  The tax laws in your area will have specific rules about the percentage of a fixed asset you can claim as a depreciation expense each month, for tax purposes.

Some fixed assets, like land, buildings, or precious metals and stones, may fluctuate in value, which means that instead of a tax-deductible expense, you will be required to report a taxable “capital gain” as part of your income for that year.

Another type of asset that deserves special consideration is the “pre-paid” asset, such as pre-paid insurance.  Like a fixed asset, you should not record pre-paid insurance, pre-paid rent, or other pre-payments as a tax-deductible expense, except in the tax year that the payment applies.  For example, if you pay a year’s worth of insurance halfway through the year, you can only report half of that as tax-deductible in that year; the other half you must report on your tax return in the following year.  The part that’s left for the next year would be put into an asset called “pre-paid insurance.”

To learn more, read the article which inspired this one:

Accounting Basics: What are Assets

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Our story begins in the gritty metropolis of Richmond, British Columbia. May and I sit side-by-side across a yellow-brown desk from our Accountant. The room smells like dust, ink, and the ozone smell produced by the giant Lexmark laser printer in the corner.

The accountant was asking me if I know an easier way to collaborate with his clients; he’s currently using a solution called “VNC” which lets him control his clients’ computer remotely in order to work on their books. My spider sense is tingling… suddenly I feel like I have stumbled upon a genuine pain in the market. Who else, I thought, struggles on collaboration between Accountant and Business Owner?

This connected with another train of thought that I’d been having, which went something like “Man, does Quickbooks ever suck!”. Although accountants and bookkeepers seem to love it, I find it barely usable. Does it make sense for a long-time computer user (and programmer) with comfort around accounting jargon to find accounting software like this confusing and frustrating?

Given the answers “yes” and “no” to these questions, I decided there was a gap in the market to fill. I envisioned an accounting solution provided online - a “Web 2.0 Accounting Application“, if you will - that was tremendously easy to use and made collaboration a matter of course.

And so I started work on it. Now, almost a year later, we have something ready to try out, show the world, etc.. I hope you like the direction it is going; I do!

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