A few weeks ago I wrote about QuickBooks Online, but what about other Web 2.0 accounting programs? In the small business on-demand accounting space we haven’t seen a clear leader emerge yet, but development activity is intense and we’re tracking these three trends:

1. Demanding a lot from “on-demand”. Vendors are writing code like crazy, stuffing an array of features into their Software-As-A-Service (SaaS) offerings. For example: dashboards, Key Performance Indicators (KPIs), Point of Sale (POS), web store / shopping cart, time and billing, A/R, A/P, Enterprise Resource Planning (ERP), purchasing, inventory, payroll, Customer Relationship Management (CRM), merchant card service, project management, Electronic Data Interchange (EDI), bar coding, shipping management, document and image management, government contract compliance…and the list goes on. It’s as if once the “software” is liberated from the shrink wrap box, we expect it to do everything.

2. Niche market excellence. At the same time, several vendors tackle a narrow segment of the online accounting space. One popular example: invoicing and accounts receivable management. Check out FreshBooks and Blinksale. With such a narrow focus you get a well-honed, easy-to-use service but since they handle revenues but not expenses, you can’t create a full Profit & Loss (P&L) or Balance Sheet, the two most important financial reports for managing your business, applying for bank loans, and doing tax returns. I’ve heard that some entrepreneurs combine the revenue data from the invoicing app with expenses tracked in Excel, and…that’s far enough for me – too problematic.

3. Integration. Not surprisingly, then, we’re seeing efforts at integration between apps. For instance both Blinksale and FreshBooks will integrate with BaseCamp’s project management and time tracking systems. Good, but not there yet in my opinion: you still can’t print financial statements. QuickBooks Online Edition is a full general ledger system that prints financial statements, and Intuit’s strategy is to integrate this service with third party apps and custom developers. NetSuite takes it a step further by including more functions into its online offering, and is taking aim at QuickBooks directly. The danger of course is that the all-in-one software might not do a great job at individual components.

The promise of Web 2.0 accounting is enormous – quick start, small upfront investment, and anywhere/anytime access for your financial team – the question now is which combinations of full general ledger and niche apps will work best for entrepreneurs. We’ll keep tracking the trends, and please let us know what you’re seeing out there, too, in this new frontier.