By Allan Maurer
ATLANTA – People talk a lot about the way software-as-a-service (SaaS) has enabled many businesses to afford technology that only the largest firms could buy under licensing models. But the other side of the coin is that SaaS also makes creating a technology company much easier and less expensive. “We would still be in the garage if not for the SaaS revolution,” says Steve Bachman, CEO of Atlanta-based AuditMyBooks.
Instead, the company, founded in 2008, helped small businesses scan nearly 1.9 million QuickBooks transactions for fraud or errors in the first two months of 2011, saving its customers nearly $12 million, the company says.
Bachman explains, “The AuditMyBooks Analyzer scans QuickBooks for more than 20 different warning signs of errors and fraud. Assuming you could run the same 20 tests manually at the rate of 1 transaction analyzed every 5 minutes, it would take more than 157,000 hours to analyze 1.9 million transactions which represent a cost to businesses of almost $12,000,000.”
Accounting errors common in small businesses
Accounting errors are unfortunately quite common in small businesses. Sixty percent of such errors result from simple bookkeeping mistakes or misapplication of easily understood accounting standards. Although unintentional, mistakes can still lead to bigger issues like penalties from erroneous tax filings.
Fraud is also an ongoing problem for small businesses in the U.S. The Association of Certified Fraud Examiners (ACFE) estimates that organizations lose 5 percent of their revenues to fraud, and small companies represent more than 30 percent of all fraud cases. ACFE research also shows that small businesses suffer the highest median losses of any sized company at nearly $150,000 per occurrence.
Repurposing security tech
The company, funded by the management team and grants from teh National Science Foundation and SBIR grants to the tune of $180,000 with another $500,000 Phase II grant in progress, was started by a group of tech execs who had worked together and had a variety of skills and experience, Bachman says. They have combined experience in financial systems, information security, spyware, intrusion detection, and content filtering and management.
They asked themselves, “Why can’t some of this technology used for identifying threats in information security be used in other ways?” They indeed found that they could use some of that forensic technology on financial transactions instead of file downloads or web transactions.
Then they asked themselves that other ultra-important question of the successful entrepreneur: what market is underserved?
It certainly isn’t large enterprises, Bachman says. “They have lots of resources and money and they get everything,” he notes. “But we saw a monster hole in tools and technology to protect small businesses. They have a need that lacks a good solution without an expensive and time-consuming end-of-year audit and review.
“It’s a $944 billion a year problem affecting 30 percent of all small businesses,” Bachman says.
So, when Intuit, which makes QuickBooks, which owns 71 percent of the small busines accounting market, introduced the Intuit app center, the AuditMyBooks team saw a big opportunity – 4.5 million QuickBooks users looking for complementary solutions.
AuditMyBooks standalone app is cloud-based and connects to QuickBooks via the Intuit app center, so Intuit is handling all the hosting.
“We’ll enhance the product over time,” says Bachman, who adds that the 12 employee company may seek growth funding toward the end of 2011.
