When small business owner Alex de Bold travels, his accounts come right along with him – in a cloud.
"It's extremely convenient to have access in different places," he said while on a business trip in San Francisco, "because now you're not stuck with one person having a copy of your accounting software on your computer back in Toronto."
It's a growing trend in the accounting software industry, as new players and industry veterans alike roll out cloud-based and "software-as-a-service" accounting options (as opposed to the traditional, desktop-based "software-in-a-box" model).
Canadian upstarts such as FreshBooks and Wave Accounting Inc. are using their cloud-based models to take a bite out of the accounting software market, particularly aiming at sole proprietors and businesses with fewer than nine employees.
The more established accounting software companies seem to be following suit: This past April, Intuit Canada launched QuickBooks Online in Canada, and Sage Simply Accounting will be offering SageOne, its online SaaS service, in Canada next year.
Jeff Cates, managing director for Intuit Canada, concedes that there's more competition as more mobile or SaaS applications come on the market. "We offer choice in the way of desktop software, which still is the bulk of the market, and online. And I think, in time, more and more people will get comfortable with online solutions, as the ecosystem of features or services is built around those products," he said.
John Harris, a partner at Grant Thornton LLP, said that small businesses wishing to stay lean and nimble are demanding the features that cloud-based accounting programs have to offer.
"Someone that doesn't have a formal office and may run their business very lean where they're out on the road … one of the benefits of the cloud computing is, as long as they have access to the Web, they can be virtually anywhere and be able to stay on top of that function," he said.
Mr. Harris said the popularity of the cloud model in consumer software has influenced what small business owners are demanding. "The consumer software that's out there and the ease and flexibility that you have to access it and use it … the consumer on the business side who's doing the accounting is [saying], 'Well, why can't we have these same benefits in the accounting world?' And that's where these companies have come along and developed the software to try to make it happen," he said.
Kasey Bayne, accounting ambassador for FreshBooks, describes her firm's offering as "a cloud accounting system for people who aren't accountants, people with no accounting or finance background, which is a lot of small-business owners out there."
The firm offers a subscription service that ranges in price from free, for three clients or less, to $39.95 a month for unlimited clients, providing services such as online invoicing and payments, expense tracking, time tracking and accounting reports. It released an iPhone app this month.
"You can use it with any computer, you can use it on your smartphone as well … so anywhere, any time, no matter where you are, you can get your invoices and your basic accounting done," Ms. Bayne said.
Another upstart player is Wave, which offers an accounting program that lets users connect with their bank accounts and credit cards to minimize data entry. It builds customer records, creates and tracks invoices and reports, but doesn't do everything a small business owner may need (such as time tracking and inventory).
Wave is aimed at businesses of nine employees or fewer who won't need those extra services, says Rob Maurin, vice-president of communications. Its most notable perk is that it's free, no matter how many clients – and free is the model that will become more prevalent, Mr. Maurin predicts.
"What we see increasing in business-to-business software is the phenomena that have occurred in consumer-facing software … especially free tools," he said. "Google has always been free, Facebook has always been free and Twitter has always been free, and people don't question it. But these companies have … determined it's better for them as businesses and for the end-user to build scale and monetize at scale … than to have a smaller number of users and charge them all $40 a month. And that's the phenomenon we're seeing with B-to-B software now," he said.
To bring in revenue, when users log on to its site, they will see the "business savings" page, and ads for business-related products. "We do it in a way that's not intrusive and doesn't get in the way of doing your accounting work," Mr. Maurin said.
Nancy Harris, Sage's vice-president and general manager, said there's room for both desktop and online accounting programs. The company also also offers cloud-based services for its desktop product, to be re-branded next week as Sage 50 Canadian Edition. "What we call our hybrid strategy, our on-premise and cloud strategy, gives customers the flexibility of both: the performance of the desktop coupled with the flexibility of the cloud," she said.
Intuit's Mr. Cates points out that while some cloud accounting services are designed for very small businesses, with Quickbooks, a company can grow larger and not have to worry about going beyond the program's capabilities. "The last thing you want to do is make a choice on something that isn't going to scale, [a program] you're going to have to make a decision on moving away from in the future."
As more cloud accounting options hit the market from players big and small, there will be a time period, Grant Thornton's Mr. Harris said, where "the bugs get worked out" to ensure products work efficiently, as well as overcoming any security concerns potential customers may have.
"This is in the early stages. There are probably going to be more players in the market and the market will assess the quality, benefits and usefulness of it and then you'll start to see the underperformers falling off," he said.
"This is just the next evolution, and it is here to stay."