Small-Business Accounting Enters Big Time

Although Intuit's QuickBooks software still enjoys a clear majority, Microsoft's Small Business Accounting is expected to continue stealing market share. More than three fourths of businesses upgrade their accounting software package every one to two years, opening the door to consideration of new solutions, according to AMI-Partners.

But more than half of small businesses still do not use any accounting software, instead opting for 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, according to Arjun Mehra, a research analyst at AMI-Partners, who said that 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 small businesses to switch to an accounting software solution that is geared towards them and does not require costly training to deploy.

The million-dollar question is whether Microsoft Small Business Accounting will overtake QuickBooks as the accounting software of choice for small businesses. Intuit's QuickBook's suite of products has long dominated the $150 to $300 price range; prior to released Small Business Accounting 2006, Microsoft tried to capture small business accounting market share with Microsoft Money, which is more geared toward consumers than businesses. Microsoft's business solutions products, such as Great Plains and Solomon, have been too expensive and complex for most small business needs. Microsoft tried marketing a scaled down version of Great Plains without success, according to AMI-Partners. But many small businesses use Excel for accounting, and Outlook for contact management and email, and customers who already use Microsoft programs may feel comfortable trying Microsoft's accounting software. According to 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 Small Business Accounting, but for competitive offerings as well."