Ask any business expert and they’ll tell you that cash flow is the lifeblood of any small business.
The way it’s managed, however, is what constitutes the difference between a business that thrives and one that fails.
But, as everyone now says: there’s an app for that.
Accounting software covers cash flow management, plus other functions such as timekeeping and client management, among a whole slew of others. More comprehensive ones even tackle inventory and sales analysis, and offer interoperability with other business software.
For this Q&A session, we invited Tim Chaves, the founder of ZipBooks, free accounting software, to answer several accounting-related questions and share his insights on entrepreneurship.
Interview with Tim Chvez of ZipBooks:
1. To begin, what does accounting software do?
Accounting software lets you record and process accounting transactions through invoicing, estimates, time tracking, and team management. It does the basic functions that an accountant would do, without necessarily having to pay an accountant to do it.
Some accounting programs that have been around longer have extended their functionality into tertiary areas like payroll, inventory control, sales analysis, and enhanced reporting. Some software developers decide to target one particular niche use case and build accounting software that is customized to the needs of a specific industry.
2. What’s the benefit of having accounting software versus an accountant? In other words, can accounting software replace the work of accountants? If not, what is the added value of accounting software versus an accountant?
Accounting software is perfect for small businesses because it takes care of the basics of accounting and costs less than hiring a full-time accountant or engaging a CPA firm. Accounting software replaces the more menial work that accountants used to do such as sending out invoices, time tracking, and expense tracking.
More importantly, well-designed software is going to make fewer errors than an accountant. Accountants are free to spend less of their time on capturing transactions and checking for errors and more time on valuable activities like helping with business plans, company formation, loan applications, and tax audits.
3. Is implementing accounting software as beneficial to a startup as it is for a larger company?
Yes. There is a misconception that accounting is only important for “big companies” but that simply isn’t true. Small companies need to know the health and trajectory of their business at least, if not more, than a more established company.
There is free accounting software out there that is perfect for a startup because they focus on keeping everything simple so you don’t have to be an accountant to do accounting.
4. How large should a company get before using accounting software? Should it start from the beginning?
It would be great to start using accounting software from the beginning so you can keep track of all your expenses and invoices from day one.
It isn’t just about knowing the health of your business; it is also about the time it takes to get that information. The biggest cost for small businesses isn’t the money that they do or do not pay for the accounting software that they use. It is the time they have to spend using the program to get the results that they need.
Whether it be sending an invoice or reconciling business expenses, it is all time away from the work that actually makes you money.
5. What are the must-have features to look for in accounting software?
Must-have features are dependent on the company, but to be called “accounting software” in the formal sense of the word, the program should be able to track money in and money out of the company. It should also facilitate that process, not just track it.
Sending an invoice to your customer is probably an obvious feature that every program is going to have, but you should check if it also allows for recurring invoicing and automatic credit card billing. Different companies have different tax requirements, but that should be there with some degree of customizability, and a spot for notes and terms.
Time tracking and team management are also nice features to have if you are in a service industry. My background is running a digital media agency, so those were some of the first features that we built in ZipBooks.
You don’t know from the start how much your company will grow, but you can rest easier at night when you know that the tracking solution scales with you and can give you reports about who is doing what. When your team grows, it is good to be able to add as many team members as you’d like and also be able to control what team members can do what.
6. What does the ZipBooks software bring to accounting that other accounting software don’t?
ZipBooks’ biggest comparative advantage is its ability to get users paid immediately. When you finish a project and send an invoice, you can always take the more traditional approach to getting paid via ACH or credit card, but what ZipBooks offers to cash-strapped small businesses is that ability to get you paid immediately instead of having to wait to get paid from the client. Invoice financing isn’t new but we are the first software program to build it into the process of sending an invoice.
We think that the way to make money is to make small commissions on transactions that businesses really benefit from, not from a subscription model. This is nice because even though ZipBooks is free, it has no limits for how many invoices you can send, how many team members you can add, or how many customers you can have.
It is also extremely user-friendly. We have almost a maniacal focus on keeping the layout clean and intuitive. You can send an invoice without having to click through endless different views. We also have built the app to be responsive so that you can use it on any device even if you don’t download our native app.
7. What has been the biggest contributing factor to ZipBooks’ success?
ZipBooks pays most attention to user-friendliness and the aesthetic of the product. There are a lot of online invoicing programs out there. ZipBooks was built from the ground up to stand out in a crowded marketplace.
We want anyone to be able to quickly learn how to use it and actually enjoy using it because it works the way you expect it to.
8. What is ZipBooks’ story? How did you get started? What challenges did you face with ZipBooks? How did you overcome them? Tell us more.
We got VC funding earlier this year based on an idea I had that grew out of some pain I experienced regularly running my own business. Growth is a big problem for small businesses because it is difficult to pay your new employees before you get paid on the next big project.
I’d send out an invoice and then have to wait to get paid, but I don’t have that same luxury when it comes to paying my employees. After selling that business, I went back to school and while there, I thought about how I could build a tool to make the small business cash flow problems go away.
There is a litany of issues starting up a new accounting software program in a crowded marketplace. I don’t have time to list them all, but I am excited by the opportunity as well to do things much better than the way they are done now. I want to solve bigger problems with a better business model.
9. As a successful entrepreneur, what have been your biggest challenges?
The jury is still out on whether this venture will be successful, but I have high hopes and the amount of traction that we are seeing already with a product that is still in its infancy is very heartening. The biggest challenge is building awareness. Letting people know that you are there.
The other big issue that we run into is managing the expectations of our new users without scaring them off. A year from now, it won’t take any faith at all to jump on board because the major feature sets will be complete and the brand recognition will be there.
But for now, you are really trying to get companies that want to grow with you and realize that what we are is not yet what we will be and that what we are is still much better than their existing accounting process, which in some cases isn’t much.
10. What entrepreneurial advice would you give to startups?
I feel like most successful startups are doing the same thing. Validate a solution in the marketplace to a problem that is big enough to be worth solving and solve the problem in a way that makes it impossible for established companies to mimic what you are doing.
Find ways to scale awareness with a small, focused team and then once you have a lot of people trying out the product, focus on keeping as many users as possible.
About Tim Chaves:
Tim Chaves is a newly minted Harvard MBA and a serial entrepreneur. He started working on ZipBooks during the winter break of his second year of grad school. He turned down a job offer from Google to pursue ZipBooks full-time and hasn’t looked back since. Tim is married to his high school sweetheart and together they are raising three adorable children.
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