Intuit Inc., the Mountain View, Calif., company best known for its Quicken and TurboTax finance software for consumers, is redefining itself as an electronic financial services provider and is targeting small business as its largest and fastest-growing market.
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“We’re making a radical transformation from producing shrink-wrapped products for the desktop PC to delivering products on the Web,” said Intuit Chief Executive Bill Harris. The company’s aim is to provide all the on-line connections consumers and companies need to conduct their financial affairs–and take a lot of hassle out of their lives.
Intuit has a good jump on the competition. Its software already handles close to one-third of tax returns prepared via computer, and its QuickBooks accounting software has a whopping 85 percent share of the small-business market, according to PC Data.
Now the company is expanding vigorously into payroll services. In May, it paid $200 million for Computing Resources Inc., a Reno company that specializes in payroll services for small businesses. Other services that could be linked in the future include employee pension, medical, workers’ compensation, insurance and other benefits.
The aim, Harris said, is to create “a seamless connected system” between businesses and their employees, financial institutions, customers, suppliers and government agencies and to free managers from a sea of paper and storm of data entry.
“People don’t get into small business because they like bookkeeping,” said Intuit founder and Chairman Scott Cook. “That’s the last thing they want to do.
“What we can do is take the administrative hassle out of their lives, so they can do what they want to, like being a contractor, caterer or consultant.”
Unlike some other e-commerce products, financial services can be ordered and fulfilled electronically. “These products are fundamentally all about bits of information,” Cook said. “You don’t have to touch or feel it or try it on. You don’t need warehouses or have to ship stuff.”
In a market filled with plenty of e-finance companies and information sites, Intuit is trying to position itself as a partner to many of them rather than as a competitor.
For example, it has established links with more than 100 financial institutions, including American Express, Bank of America and Wells Fargo, and is working on both paying and presenting bills on-line.
Microsoft has links with 600 financial institutions, but its Money 99 Personal & Business software and on-line services are aimed at helping individuals and sole proprietors manage their personal and business functions together.
Although Microsoft and other Internet portals have plenty of information for businesses, Intuit’s Harris notes that they also cover sports, weather and horoscopes and do not have Intuit’s business depth.
The company’s Quicken.com Web site, which ranks right behind Yahoo! as the most popular finance site on the Internet, has close to 200 million page views per month and is designed to offer consumers and businesses a full menu of financial information and referrals to companies offering insurance, mortgages and other services.
Some new companies offer Web-based insurance quotes for business and a free human resources management system on-line. But Intuit is not particularly worried. “Lots of competitors do one thing,” said Cook. “But they don’t connect everything.”
They also don’t have millions of businesses already using its products and looking for new things to plug in.
“Intuit’s Quicken and QuickBooks customer base and name recognition give it a major advantage in launching payroll and other services,” said Forrester Research senior analyst Brook Newcomb.
Only 20 percent of Intuit’s $240 million in quarterly revenues now comes from the consumer market, while 80 percent is split between tax and small-business products.
The small-business market has the greatest potential. According to Intuit, there are 22 million small U.S. businesses with 20 or fewer employees. About 12 million of them have a PC, and half of these use accounting software. Intuit claims 5.5 million business users of Quicken and QuickBooks. Its main competitors, Peachtree and MYOB (short for Mind Your Own Business) place a distant second and third, respectively, in business accounting software.
Intuit has similar designs on the electronic payroll services market. It notes that nearly 40 percent of small-business owners have been penalized by the IRS for filing late or inaccurate payroll data. The average fine is $845.
That is about what Intuit charges a small business for its automated payroll services, including automatic deposit of paychecks for employees.
Only 14 percent of U.S. small businesses use outside payroll services firms today, and e-commerce analyst Newcomb figures that with its recent acquisition of Computing Resources, Intuit will be able to offer such services at perhaps half what competitors like PayChex charge.
In addition to a possible price advantage, Quicken customers can cut administrative costs by not having to re-enter payroll information that is already in the accounting program. Newcom figures this could be a major advantage since “the more times you retype information, the greater the chance of clerical error.”
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QuickBooks Online Payroll currently has more than 10,000 of Intuit’s accounting customers and it is processing close to $17 million of payroll a week.
One user is Socratic Technologies. The San Francisco research firm has linked the payroll service to its QuickBooks accounting software and uses it to make semimonthly automatic deposits to its 24 employees as well as withhold and pay appropriate taxes.
For $91.50 a month, including all deposit fees, Socratic administration director Ron Treleven said the service is a bargain. Although it is hard to figure exactly how much time and money it saves, he said it does a lot more and is less cumbersome than the previous system, which involved phoning Wells Fargo Bank and punching a bunch of numbers into the telephone key pad.
“The company doesn’t have to worry about lost checks and employees on the road don’t have to worry about their paychecks being deposited,” Trevelen added.