Microsoft Takes the Free Way, Mixes in On-Demand Services

Many small and home-based businesses still handle accounting tasks with a spreadsheet or even pencils, paper and calculators, according to Microsoft.

The reason: cost and complexity. The Redmond, Wash.-based company thinks it has an answer to both objections with today’s introduction of Microsoft Office Accounting Express 2007, a free version that is a fully functional, double-entry accounting product, according to Rajat Taneja, general manager of Microsoft Small Business Applications and Services. (The Express version is available as a free download here.)

While the free software takes care of the cost, Taneja said, Express’ startup wizard and the look and feel of other Microsoft Office products addresses the complexity. He said Express is also designed to make it easy to import financial data from Intuit QuickBooks, Microsoft Money and Microsoft Office Excel.

Accounting software needs to be “accessible and eliminate friction,” Taneja said. Friction, he added, is “anything that you waste your time on.” For a small business, “anything” could be payroll, monitoring online sales, checking customers credit history and much more.

That’s where Microsoft’s online-servce-centric approach comes in. Microsoft Office Accounting Express 2007 and Office Accounting Professional 2007, which costs $149 (a price cut over the previous version) mix financial-management software with payroll, e-commerce and other services from third-party providers.

“It’s an agressive move,” Joe Wilcox, a senior analyst with Jupiter Research, said. “They are trying to gain traction in a market where they’re not the leader, and what costs less than free.”

Lunch Is Free, Desserts Cost Extra
While the accounting software is free, Microsoft hopes small businesses will choose to subscribe to one or more of the seven fee-based online services. Microsoft will then share revenue with the service providers. The new products “blur the lines between software and services,” Taneja said.

That is, while many software-as-a-service vendors are targeting small businesses with purely Web-based applications that require only a browser to function, Taneja said this represents more of a hybrid. While the accounting functions are local on your office computer, you can file taxes and withholdings, manage online sales and handle payroll “in the cloud,” Taneja said.

“It’s an important accouncement,” Wilcox said. “Microsoft is doing with software what other companies are doing with Web 2.0.” While Web-based companies monetize through advertising, Microsoft will monetized with ADP services and other services. “It’s another way to look at software as a service,” he said.

Intuit also recently announced that it was mixing accounting with Web services through its integration with Google AdWords in the 2007 edition of QuickBooks. “The Google deal was huge. I don’t know if people realize how big it is,” Wilcox said. “Google’s purview is the Web. To take its products to the desktop is huge.”

The online integration with Microsoft’s accounting software works like this. If you sell (or want to sell) products on eBay, for example, you can list items, upload images, track status and download and process orders for those products through the online auction site. Currently, Taneja said only eBay is supported, but Microsoft may in the future work with other e-commerce service provides to offer comparable features.

To help automate your accounts payable and receivables process, you can use PayPal, which integrates with Microsoft Office Outlook 2007 with Business Contact Manager and Microsoft Office Word 2007, to send invoices via e-mail and allow customers to pay invoices using PayPal. You can also accept online credit card payments through Chase Merchant Services, PayPal or VeriSign.

To ensure that you are extending credit to companies with good payment histories, Microsoft has teamed with Equifax to let you monitor customers’ credit in near real time. Services fees range from $29.95 a month (to monitor 30 business records) to $49.95 per month (to monitor up to 100 business records) to $99.95 a month (to monitor up to 300 business records).

By subscribing to ADP Payroll Solutions, Microsoft says that you can process payroll, direct-deposit employees’ salaries, and pay taxes online. ADP Payroll costs $169 per year. Electronic tax filing services are an additional $60 per year.

You can also download and reconcile bank transactions. Taneja said that while initially its small business accounting package supported only a few hundred banks, more than 1,000 institutions signed up to provide online banking.

Using Microsoft Office Live service, you can now share books online with you accountant via Office Live Web-based services.

Focus on Features
Accounting Express 2007 will, according to Microsoft, allow you to do the following tasks:

  • Create and track customer quotes and invoices
  • Accept payments and returns
  • Use 22 pre-defined customizable reports that you can customize to your business
  • Customize the data elements in a form and save specific layouts
  • Implement role-based security
  • Integrate with Microsoft Office Word, Outlook and Excel to avoid double entry and enable further analysis of financial data
  • Organize business information in one place: That is, accounting Express 2007 and Outlook 2007 with Business Contact Manager share the same data to help ensure that information stays up to date
The $149 Office Accounting Professional version will be available in early 2007 in retail stores, but a trial version is currently available. The Professional version offers inventory management, multi-currency invoicing, multi-user access, fixed asset management, job tracking, a dashboard to view and manage business information, integration Microsoft Point of Sale retail product to track sales and customer information and run financial reports.

Battle of the Accounting Software
Has Microsoft succeeded in chipping away at QuickBooks? “It’s made some progress,” said Jupiter Reseach’s Wilcox. However, he said that QuickBooks is very popular with accountants, who have enorous influence over their customers. Microsoft has to win over accountants with Office Accounting Express 2007 and Office Accounting Professional 2007. “It faces the same challenges other companies face when competing with Microsoft.”

Dan Muse is executive editor of’s Small Business Channel, EarthWeb’s Networking Channel and ServerWatch.

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