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Recently ReadWriteWeb started a series taking a very high level look at online finance. One of the posts discussed the evolving online finance ecosystem. In the post, RWW editor Richard MacManus interviewed CEO of Xero (see disclosure), Rod Drury…

Disclosure – One of my specialties is accounting software – I quote half a dozen vendors in the below post, some of whom I have past or current consulting relationships with. Full disclosure of all my industry affiliations can be seen here.

A little while ago I posted discussing the recent introduction of multi-currency functionality for several accounting software vendors. My post received a quick and somewhat defensive reply penned by David Turner from FinancialForce. In his reply, Turner is fairly critical of other SaaS players, alleging that:

it’s dawned on them that even SMBs need to handle more than one currency in today’s globalized market….it could be dangerous to treat vital functions such as multicurrency as an afterthought

Without going into the technical details of Turner’s argument, suffice it to say he bought up a few examples of where what he deemed to be poorly executed multi-currency functionality could cause problems for organizations. In his reply I believe Turner ignored context – the companies I originally wrote about were servicing the micro to small market and not big business. As such their customers desired visibility above all, and are prepared to forego 100% accuracy in order to gain that visibility far below the price point of Turner’s company’s offering.

I replied to Turners post commenting that:

I guess there is some context to consider here. FAC (and FreshBooks for that matter) are aimed for micro to small businesses – for them it’s all about giving visibility of their position – that’s more important than to-the nth-degree accuracy… Which beings me back to a conversation I was having with someone today who mentioned the apocryphal accountant who spends all day in the pursuit of a rogue 22 cents missing from the ledger – at the end of the day he’d found the 22 cents but missed the entire point of “value add” in the process.

While I have to admit my comment was a little flippant, and foreign exchange discrepancies should not be completely ignored, I still contend that there is a context issue in all of this.

Deciding to illicit the help of other accounting vendors, I reached out to a number of people to get their opinion on the exchange. I was interested to talk to the traditional desktop accounting vendors – servicing many millions of customers and with either little or no multi currency functionality. Julian Smith, General Manager of MYOB (on premise vendor with over a million users) saw multi-currency as less than critical:

the multi-currency feature is really only relevant to a minority of SMEs – our savvier users are avoiding any currency issues with their online businesses, by using their payment gateway to do the work for them… and they account in one currency…

It’s important to note that Quickbooks only just introduced multi-currency capability – and managed to get to around five million customers without it – so the criticality or otherwise of multi-currency is debatable – a contention that Heather Villa, CEO of IAC-EZ and a CPA herself, concurred with:

for the majority of small business the ability to say invoice and accept payment in multiple currency, may be a beneficial feature, but not one I see high on demand. As an accountant I currently have a client base of over 200 clients, and only 3 of them invoice in multi currency

That said, most vendors agree that multi-currency, while still relevant to only a small number of SMBs, is becoming more important. From Daniel Druker, SVP at Intacct:

more and more and smaller and smaller firms are transacting in multiple currencies – globalization and the internet is pushing down the barriers to working globally – both from a client and a vendor perspective – so more and more firms will benefit from some level of multi-currency capabilities.

Interestingly MYOB’s perspective is that multi-currency introduces an inappropriate level of complexity into accounting products to be used by SMBs and is best handled by their accountants:

There are significant complexities in multicurrency and for users who struggle with the fundamental principles of accounting, adding exchange gains and losses etc can be too much, many users therefore rely on their accountants assistance in this area. Effective usage of multi-currency solutions required significant financial and accounting experience to manage properly – regardless of the solution used. If foreign currency conversion  is a big part of business, often the client will pre-purchase currency notes to get a more favourable exchange rate, thereby making currency conversion data integration (from XE.com or others) inappropriate for their business.

Which, at least to a certain extent conflicts with their statement that:

Despite the complexities of multi-currency processes, their management and integration into MYOB’s desktop and SaaS solutions is a significant part of our R&D roadmap into the future.

And from Rod Drury, CEO of Xero:

…SMBs that do need multi-currency is still a large and significant market possibly with a higher affinity for modern solutions that improve productivity.

Ed Molyneux, CEO of FreeAgentCentral:

We believe there’s a small but important minority of our potential users at the micro (<10employees) end of the market who need multi-currency invoicing (and a somewhat smaller number who also need multi-currency banking)

But it’s still about context – the complexity of the solution needs to be tailored for the needs of the organization. Druker again:

multi-currency capabilities need to be matched to the size and capabilities of the target buyer… if you have simple requirements simple solutions can be very helpful… it’s very silly to ascribe the most complex requirements to very small businesses – they value simplicity and ease of use…Larger business have more complex requirements – they need automation to be efficient, they need flexibility to match their business process, they need exceptions and overrides for when non-standard things happen. But most importantly they are larger, their numbers are more material, they have people on staff who care about being precise, they have audit requirements

And from Molyneux (quoting many of the assertions made in Turner’s critical post:

our users couldn’t care less about ‘GL clutter’, ‘control of unrealized and realized losses and gains being in their hands’, and our software being ‘multi-everything international from the ground up

And one more from Drury:

We want to give the business owner the information they need to make decisions, not think about accounting

SO… where does that leave us at the end of the debate? Clearly in a position of needing to understand the users of software work in – micro businesses are in a daily struggle for survival and trying to manage their time – tools that give them a degree of visibility into their financial position, regardless of the absolute accuracy of that view, will win in the end.

I believe that, the multi-currency functionality rolled out by FreshBooks, Xero and FreeAgentCentral over the past few months is appropriately designed for their target customers – and that, after all, is what is important.

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