Outsourcing Some Accounting Functions to the Web Could Save Money

As David Talbot sees it, outsourcing your back-office work to the Internet is more a matter of convenience than of expense.

Talbot and his partner Frank Pesak run A-Frame Software Inc., a small but far-flung “new-economy” enterprise with offices in West Los Angeles, Sebastopol, Calif., and India. Founded in 1988, A-Frame sells what the partners call “work flow” software, which allows companies like their own to manage projects underway in more than one location. The company, which has 46 employees, expects to see revenue hit $3 million this year, up 175% from 1999.

“General ledger is not at the core of our business,” Talbot says. “We’d rather spend our time doing business, not keeping our books.”

So A-Frame--like Adlink Cable Advertising, another West Los Angeles company described in this space last week, and a growing number of other small and mid-size companies--buys its back-office services on the Web.

The strategy:

* Gains all of these companies the benefits of big-company efficiency.

* Avoids the cost and trouble of purchasing and maintaining server equipment, upgrading the system every year or two and even insuring the system against unexpected crashes.

A-Frame Software farms out its general-ledger and accounts-payable functions to NetLedger Inc., (https://www.netledger.com), an application service provider, or ASP, based in San Mateo, Calif. NetLedger competes against two other Bay Area start-ups, ACCPAC International Inc., a unit of Computer Associates International Inc., (https://www.accpac.com), and Intacct Corp. of Los Gatos, Calif., (https://www.intacct.com), among others.

A-Frame experimented with the NetLedger service in the last quarter of 1999 and began using it full-time in January. Talbot expects to begin buying payroll services--presently outsourced to a Southern California firm--from NetLedger next year.

NetLedger’s general-ledger and accounts-payable services cost A-Frame about $500 a year, Talbot says, versus the $12,000 or so the company paid for outside bookkeeping services in 1999. But the real benefit is convenience, he says, noting that company officers can access financial data no matter where they are.

“Before, we had a software package on a stand-alone personal computer,” Talbot says. “If someone wanted to access the data from somewhere outside the office, we had to print it out and fax it, which was awkward and time-consuming.”

Intacct sees itself as “an accounting utility company,” according to Chief Executive David Thomas. The company serves businesses employing up to 500 people with a full-function package--general ledger, financial reporting, budgeting, accounts payable and receivable, invoicing, expense reporting, even human resources reporting. It expects to add a payroll service to the list in the coming weeks.

“If you’re a small operation looking for low cost and ease of use,” Thomas says, “you want to pick something like Intuit Quickbooks. If you’re a small or medium-size operation and you need functionality and scalability, you need something richer.

“With Intacct, you plug into our infrastructure and you get the economies of scale of a phone company or a power grid. All of our resources are available to all of our clients.”

Intacct sells its services on a subscription basis starting at $49.95 per month.

ACCPAC International now makes its package--long sold only as PC software--available on the Web as well. The company sells what it calls a complete business management system integrating an electronic storefront with a complete back-office system. It serves businesses doing e-commerce with a system connecting everything from inventory to invoicing, says Craig Downing, assistant vice president for product management.

“It is important to integrate all of these functions because there’s no point in putting up a Web site if it just generates e-mail and faxes between one department of the business and another,” he says. “A good system integrates everything from your Web site orders to your accounts receivable.”

More specifically, the ACCPAC system automates inventory control, purchase orders, Web site orders, credit checking, fraud protection, accounts payable and receivable, general ledger and even payroll.

The ACCPAC system now available on the Web is designed for businesses employing 15 to 100 employees; cost begins at about $7,400. The company expects to begin selling a similar Web-based system for smaller companies after the New Year.

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Recent Financing and Insurance columns are available at http://161.35.110.226/finin. Juan Hovey can be reached at (805) 492-7909 or at jhovey@gte.net.