More than half of U.S. small businesses do not use accounting software.
AMI Partners, Inc., a research firm that specializes in global small business market research, notes this in a recently-published study, entitled “Small Business Accounting is Big…and Getting Bigger”:
“U.S. small businesses (SBs; companies with 1 to 99 employees) spent approximately US$410 million on purchasing accounting software solutions in the last 12 months, and this figure is expected to cross the half-billion-dollar mark by 2008. The nearly 6% annual increase in accounting-software-related dollars augurs well for industry-leader Intuit (with their QuickBooks portfolio) and Microsoft, which recently jumped on the small business bandwagon with its release of Small Business Accounting 2006. More than ever before, SBs are searching for solutions that are easy to install, user-friendly and, most importantly, tailored specifically to their size. In addition, nearly three fourths of these businesses upgrade their accounting software package every one to two years, opening the door for consideration of new solutions.”
One of the most interesting aspects of this study is that it covers very small businesses, down to one employee. Late last week I spoke by phone with Arjun Mehr, the analyst who authored the study. He explained that the sample might include sole proprietors, even, as long as they had an organizational structure such as a corporation or LLC.
He also confirmed one point that I suspected: that the half of small businesses with no accounting software fell primarily into the 1-4 employee category.
In this day and age, it would be hard for me to fathom that larger businesses of 5 employees and up could — or would want to — function without some kind of accounting package. (Of course, just when I think the entire world has to be computerized, I run into a small business still run completely on paper ledgers. Never say never.)
In any event, Arjun concludes that there is “tremendous untapped opportunity” in the market for small business software. That’s going to mean stiff competition among the two vendors, Microsoft and Intuit. Let’s hope this translates into great deals for small businesses.