A wave of bookkeeping tools for SMBs is replacing outdated software

Anna Vod · June 21, 2024 · Short URL: https://vator.tv/n/58c0

Finaloop and other new accounting platforms promise SMBs peace of mind in their books

Running your own e-commerce outside of established platforms like Amazon has its own set of perks and challenges. You’re presenting your brand the way you envision it, building tight-knit relationships with customers, and paying no marketplace fees. On the other hand, you’re responsible for all aspects of the operation – and you need the right financial tools to run your business effectively.

This market was long overdue for an upgrade, according to Lioran Pinchevski, CEO and founder of Finaloop. Pinchevski is a direct-to-consumer (DTC) brand founder who experienced firsthand the perils of using outdated bookkeeping software. Seeing the need for improvement, he launched Finaloop in 2020. Now, Finaloop, among a few other bookkeeping startups, is challenging industry giants in the small and midsize business sector.

“The entire e-commerce industry is built on an advanced technological stack with players like Shopify, Amazon, Gusto, Stripe, and others but the accounting and bookkeeping solutions used by these companies were lightyears behind every other tool in their arsenal,” Pinchevski said in a statement this week.

“E-commerce operators were left with outdated books using archaic software like QuickBooks, Xero, and NetSuite which were created more than two decades ago and that simply could not keep up with the pace of their unique business. I experienced it myself when I founded my own DTC brand,” he added. “The result was inventory mismanagement, incorrect pricing decisions, and completely unreliable financial reporting.”

This week, Finaloop celebrates closing its Series A round of funding. The fast-growing startup raised $35 million from lead investor Lightspeed Venture Partners, based in Menlo Park, CA, joined by participating Vesey Ventures in Tel Aviv, Commerce Ventures in San Francisco, and existing investors Accel in Palo Alto and Aleph in Tel Aviv. To date, the four-year-old NYC and Tel Aviv startup Finaloop has raised $55 million.

The company is dedicated to smaller direct to consumer (DTC) retailers in e-commerce, offering an easy-to-use, intuitive SaaS for bookkeeping, taxes, and filing needs. Integrating with major retail marketplaces and payment platforms like Amazon, PayPal, Shopify, Stripe, and Walmart, Finaloop provides a comprehensive one-stop platform that combines three critical functions: recording all transactions, bookkeeping for itemizing transactions, and inventory tracking that helps with analysis.

For its clients, Finaloop advertises no less than “Books with 100% accuracy, available 24/7.”

Over the past year, Finaloop has witnessed exceptional growth, recording a 400% increase in customers and surpassing $13 billion of GMV managed on its platform. Initial pricing is calculated based on a business’s projected annualized gross receipts, then reassessed for each quarter.

With the new funding, Finaloop plans to bring new features to its users. These will include an inventory management system that’s in-sync with transactions and financials such as real-time landed costs per warehouse on FIFO, PO management, and unit-by-unit stock tracking; B2B features and EDI support; ad spend accruals; accrual automation; and ledger-based financial KPIs and analytics.

“This funding will allow us to continue empowering ecommerce brands with real-time financial visibility, enabling better decisions and sustainable growth,” Pinchevski said in the statement.

In addition, Finaloop plans to expand its partnership network with e-commerce-first fractional CFOs, CPAs, and data-driven marketing agencies.

Looking at other innovative startups in this space, there is Synder, a Y Combinator S21 alum and the 2023 AICPA Startup Accelerator participant operating from San Francisco. Also serving e-commerce businesses, among other segments, Synder provides accounting automation software that syncs data from Amazon, Shopify, eBay, QuickBooks, and other platforms for smooth reconciliation of multi-channel sales. The company recently integrated with Sage Intacct, which provides cloud native solutions across accounting, planning, analytics and payroll for small and mid-sized businesses (SMBs). Synder is backed by TMT Investments.

There’s also Zeni, a 2019 Palo Alto startup which places a lot of emphasis on its AI capabilities. Rather than focusing on the e-commerce market in particular, Zeni offers “tailored bookkeeping for every business at any stage.” The company is backed by Elevation Capital and San Francisco-based Think Investments, among other investors.

Xendoo offers a set of similar services, connecting a business’s accounts across various platforms and synchronizing business data, while relying on QuickBooks and Xero to reconcile books. It’s in business since 2016, operating out of Fort Lauderdale. Among its investors are PayPal, DeepWork Capital in Orlando, Village Capital in Washington, DC, and others.

Docyt is another AI-relying accounting automation and expense management platform. Founded in 2016 and based in Santa Clara, it’s been backed by Page One Ventures, Dallas Venture Capital, Lobby Capital, and AME Cloud Ventures.

Meanwhile, a San Francisco accounting platform targeting startups called Pilot has raised over $150 million from prominent investors Sequoia, Index Ventures, Stripe, Bezos Expeditions, Whale Rock, and a slew of entrepreneurs. Pilot’s accounting team has also attracted some noteworthy clients like OpenAI.

In Montreal, Canada, there’s UpCounting, a growth-focused accounting firm that provides solutions for DTC brands, delivering expertise in e-commerce, marketing, accounting, financial modeling, and taxes. The company, founded in 2019, says it gives business owners financial clarity and peace of mind, and empowers them to make strategic decisions, eliminating the financial blind spots.

As we’ve seen, the fragmented market of bookkeeping offers a plethora of options, each with its own strengths, tailored to meet the diverse needs of small businesses. Whether it’s optimizing processes, offering real-time financial data, or simplifying tax preparation, these platforms empower business owners to manage their finances with confidence and clarity. The right accounting tool can make all the difference, turning what was once a daunting task into a strategic asset.

For other tools handy for SMBs, see my earlier story on business management platforms titled Chasing that American dream, SMBs have lots of tools at hand to choose from.

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