While working at a refrigeration compressor company, Michael Rogus and Wally DeRouen latched on to the idea that the miniature rod-and-piston design in their employer's motors would make excellent key chains for the NASCAR crowd. Today, the Cullman, Ala.-based business they created, Motorhead Key Chains, which includes several employees and a network of representatives, sells more than 20,000 key chains each month.
Motorhead didn't need a full-blown electronic payment, procurement, and billing system to run its operations. "We're in kind of a low-tech business -- it's a key chain, and we sell to distributors that don't even have a computer," Rogus says. Although any number of programs could have handled the company's basic accounting needs, Rogus wanted a system that would also help manage the manufacturing process and give him an accurate view of the company's financial status. Ultimately, he settled on ePeachtree, which offers accounting, payroll, and basic inventory management from any Internet Explorer 5 window. Using the online program, the company can track raw materials such as pistons, key rings, and labels, as well as automatically reduce material stocks when finished goods are produced and recorded. It also provides reporting capabilities, which include cash flow statements requested by his banker and profit/loss analysis. "It does all your cost analysis for you," Rogus says. That includes average cost basis accounting for his raw materials that vary in price. The quarterly performance reports Rogus mails to shareholders are printed directly from the ePeachtree site.
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Typically, online financial services offer basic ledger management, usually with multiple user access so outside accountants can balance the books or even handle data input personally. Advanced services range from health insurance plans to corporate benefits management, and online sales capabilities, not to mention electronic bill payment, procurement services, payroll services, and even lending. Their standard pitch includes ease of use, access from any net-connected PC, security, and automatic backups.
Makers of financial software, such as Quickbooks and Peachtree, were among the earliest to make the move on line, along with pure-play dot-com financial service aggregator, OneCore. But banks are starting to flex their muscle in the online world. Chase Bank's online unit, for instance, offers payroll, as well as bill payment and a Web-managed tax payment service, along with tie-ins to a range of investment and insurance products from its parent company, J.P. Morgan Chase.
While there are a few aggregators like OneCore that provide a full slate of management and benefits services, piecemeal arrangements are still common. Rather than find an aggregator, Latham Jenkins, president of travel guide publisher Circumerro Inc., turned to a point solution when he wanted to expand his company's benefit plan. Circumerro recently signed up with the e401k service from Fidelity Investments to offer retirement savings for its 13 employees. The all-Web interface of e401k proved to be not only a time savings for participants, but also a cost savings for the company. "With some of the more traditional 401ks, the expense was higher and the ability to really comprehend the program was much more labor- and time-intensive," says Jenkins says.
Dealing with finances on line can be convenient but businesses need to be aware of the pitfalls. Just as the occasional transaction ends up garbled in the physical world, mistakes can and do happen on line. Janice Milliard, accountant at Irvine, Calif.-based Freeclub.com Inc., used OneCore for an operating account as well as payroll service, but she is moving her company away from the soup-to-nuts financial services bureau in part because of a simple but serious accident. "Someone had put in a wrong number and closed our account," Milliard says, which led to a wave of bounced checks, which inconveniently coincided with her weeklong illness. Although the problems were solved, it seemed prudent to move money management off line.
It wasn't all bad -- "we were with them for about two years, and they definitely were a nine [out of ten] for the most part," says Milliard -- but the gaffe, combined with the introduction of new fees from OneCore, were enough to make her look elsewhere. Since then, OneCore has phased out the money market account option that caused Freeclub's problem in the first place, and now allows customers to link almost any bank account to the OneCore system.
Online access to every facet of financial management is by no means universal at this point. All of the companies SBC contacted for this article still need to pick up the phone or write a letter to manage their health insurance plans, for example. Many are not taking advantage of the full suite of offerings from their chosen providers.
Brent Benger's Memory Makers Fine Art Photo Studio in Scottsdale, Ariz., creates custom limited edition art prints. The business had expanded to two stores and a Web site, and the inefficiencies were showing. "I had all these databases in different locations. If I wanted to see what the sales were from the night before, I would have to go down to my store and open QuickBooks," he says. Web sales had to be entered into the system manually, and because there was no separate online sales category, web sales were relegated to one of the two store accounts, where they didn't belong.
In order to alleviate the situation, Benger chose NetLedger, an online accounting system, because it provided not only a way to integrate his books into a single account and manage them from anywhere, but also a Web site with a shopping cart tied directly into the same system. According to Benger, the system doesn't allow him to slice sales finely enough to make meaningful comparisons between the performance of different sales reps, locations, and products, but he acknowledges that he's getting a lot of help for well under $100 per month.
Online financial services can't replace a smart small business CFO and at this stage are unlikely even to replace many of the conventional fiscal management providers that serve a company. With attractive pricing and a maturing range of features, however, many can deftly (and affordably) handle the hassles of black and red ink.