Short answer is “yes”. The extended answer follows.
Simpatico with Quickbooks
Quickbooks is a great accounting package. It is not surprising they continue to reign as the defacto accounting solution for small to medium businesses. AP, AR, GL and Payroll are simple, intuitive and well integrated. Setting up a chart of accounts is mostly painless. As a result, any professional accounting firm is familiar with Quickbooks.
To further enhance its value, Quickbooks has a myriad of third party solutions that extend functionality. Bill.com is one such tool. For our business purposes, we use the bill.com’s AP features. The features we use are:
- batch importing of bills,
- ACH direct deposit payments,
- automated check processing,
- self-service vendor remit to management, and
- vendor payment notifications.
There are other good third party solutions for importing batch invoices or bills into Quickbooks. We use ZedAxis for batch invoice importing. We previously used ZedAxis for batch imports of bills as well but have since moved over to bill.com.
We migrated to bill.com for AP in order to process ACH vendor payments and automate check payments. Bill.com is the only small business solution we found that offered ACH vendor payments for Quickbooks. We were hoping to do this straight from Quickbooks but that service is currently unavailable. As we gain familiarity with bill.com, we are discovering other values of the service.
The future of small business accounting is collaborative
A novel approach that bill.com offers is a collaborative vendor/customer network.
How does this work?
It is a simple concept. As with Quickbooks, bill.com has a user center to manage vendor records. It is easy to import, export and sync vendor records between Quickbooks and bill.com. Bill.com serves as a communication bridge between customer and vendor. Via an email invitation, vendors are invited to view and manage their own bill.com records.
Why would a vendor want to self-service?
- ACH. A vendor can enter their bank account name, routing number and account number. Voila! All payments from the customer are now sent via direct deposit.
2. View bill/payment status. The vendor can go online to view their bill and payment transactions.
3. Enter and update Remit to address. If the vendor prefers deceased trees, they can forgo the ACH option. They still can view and manage their remit to information to ensure checks are addressed and sent correctly.
As bill.com gains customers, the value for the vendor increases. With a click of a button, they can link their bill.com profile to other bill.com customers.
What’s in it for the customer?
Quite a lot! Accounting is easy when everything goes according to plan. Consider the AP process. If a bill is entered correctly and the payment is accepted and cashed without incident, the process is quick and pain-free. The time-consuming and frustrating issues relate to the exceptions such as:
- A lost check needs to be resent.
- A check needs to be voided and reissued with a corrected entity name.
- A payment amount is disputed.
- A new vendor remit to address is needed.
- A direct deposit payment fails.
These scenarios leads to additional labor, research, vendor frustration, sometimes duplicate payments, and often bank fees for requests like a stop payment order.
To be clear, a vendor need not self-service their remit to information in order to get paid via bill.com. A customer can enter that information on their behalf. In fact the majority of our vendors do not bother to activate their bill.com account and we setup their remit to information on their behalf.
The world is rapidly evolving. The near future calls for an automated, interconnected and online existence. Bill.com is leading the way for business-to-business bills and payments. The headache of chasing down a lost check or ACH payment is frustrating and a drain on a vendor’s cash flow. By self-servicing their vendor profile, they can minimize these problems.
Besides the online transaction feature, bill.com alerts the vendor via email whenever a bill.com payment is coming. This communication is welcome. It provides both parties with a time-stamped historical record of payments.
How has bill.com worked for us?
We are fans. Though the number of vendors that accept our bill.com invitations and setup their own ACH information is still a small minority, when a vendor does follow through, it is awesome. It instills confidence in the vendor that their payments will not be lost in the mail or that their ACH direct deposits will not be rejected because of a typo. If the vendor makes their own typo, they accept responsibility for their error. This is nice. We are human and therefore mistake prone. It is far more frustrating to suffer from someone else’s errors than our own.
In a perfect world, all of our vendors would request ACH payments. No more lost or uncashed checks! It will be some time before this happens but bill.com is ready.
The automated check feature is another excellent service. We no longer have to lick envelopes and collate checks. We just click a button and let bill.com processes hundreds of our batch check requests.
AP is just one feature of bill.com
Bill.com offers more than AP solutions. Their AR solution is extensive as well. Without direct experience with their AR solution, we will leave that discussion for others.
Costs
The costs associated with bill.com are reasonable. As a point of reference, the cost of a postage stamp is $.55 (as of January 14, 2020). The time, blank check costs, printing, and mailing is a tedious and disruptive process and one we are happy to let bill.com manage. As mentioned earlier, bill.com seem to be the only game in town for small business ACH payments. Our burden and labor for AP is considerably lower since we enrolled in the bill.com service.
Defensibly
Let’s take a moment to consider the strength of the bill.com business. The biggest threat to bill.com is if Quickbooks introduced some of the same features and collaboration tools. The threat from a copycat startup is low. It has taken bill.com hundreds of millions of dollars in venture capital and years to establish a beachhead in the highly regulated fintech space.
Does bill.com pose a threat to Quickbooks?
It would be difficult for bill.com to build the necessary features to displace Quickbooks role as a preferred small business accounting package. Even if they built the necessary chart of accounts, GL, and payroll modules, it would be daunting to create awareness that the service offers an alternative to Quickbooks. Accounting software is extremely sticky and migration to a different solution is risky and seldom ventured.
The curious case of payroll revenues
Let’s take a detour into the business model of Quickbooks. Just as HP and Gillette use a toner and razor blade strategy to earn their revenues, Quickbooks’ money maker is payroll. The license and annual subscription fees for Quickbooks’ core accounting package are artificially low. Where they make a huge portion of their revenues is on payroll subscription costs.
In an analogous example, rather than taking on a behemoth like HP with competitive printer lines, resourceful businesses are attacking their profit centers directly. These folks are manufacturing 3rd party toner cartridges to the misery of HP, Brother, and other printer manufacturers.
Bill.com does not currently offer payroll solutions today, but perhaps they may eventually enter this space.
Is Quickbooks a threat to bill.com?
Bill.com offers services and features that Quickbooks would be loath to replicate. Bill.com’s core business enhances the Quickbooks experience. Quickbooks could increase revenues by mimicking bill.com’s automated check processing and ACH vendor-to-vendor services, but such a plan would be expensive, distracting and likely a drain on profits and profit margins (see also, hard to sell to Wall Street).
Bill.com does not compete directly with Quicbkooks nor threaten their crown jewel, payroll revenues. Essentially it would be a lot of effort and not much gain for Quickbooks to displace bill.com.
Where does bill.com go from here?
Bill.com has much work and opportunity to build out their vendor and customer network. The faster they grow their user base, the more entrenched and defensible their business becomes. They are well positioned to become the Venmo of business-to-business payments.
Storm the Quickbooks castle?
If bill.com becomes as ubiquitous for business-to-business payments and receivables as Quickbooks is for small business accounting, would the next step be to take on Quickbooks directly? As mentioned earlier, they would need to build a chart of accounts, GL, and payroll solution. This would be a complex transformation.
A more interesting expansion would be for bill.com to extend into payroll. This would be a departure from their core, but payroll is a huge revenue source for the likes of Quickbooks and ADP. Besides the technical and compliance challenges such a venture would present, it also comes with the risk of angering a friendly giant. Such a threat to Quickbooks could lead to a retaliatory backlash. Not that it would be easy, but Quickbooks could introduce bill.com features and also create barriers for integration and syncing if they viewed their partner becoming a dangerous competitor.
For the present, Quickbooks and bill.com are playing nicely and not at risk of stepping on each others toes. Their is tremendous growth potential for bill.com in their core AR and AP domains. In a few years we can reassess if the peaceful coexistence is still intact. For those considering bill.com for AP, consider us a testimonial customer for the value of their service.
