SmallBizResource Blog -- Women in Business

Wednesday's Woman: IAC Professional's Heather Villa Makes Bookkeeping 'EZ'

Posted by Gayle Kesten Wednesday, Mar 11, 2009, 01:25 PM ET

One of the most laborious tasks on a small-business owner's to-do list is bookkeeping. QuickBooks, of course, is a popular solution, but, according to Heather Villa, it's overkill for businesses that make less than $300,000 per year.

That's why Villa, a certified management accountant who founded Miami-based IAC Professionals in 2002, created her own bookkeeping software. IAC-EZ, she says, is a transaction-based accounting system that only cares about money coming in and money going out of your business; the $19.95-per-month software-as-a-service takes care of the rest. While her firm targets the 10- to 20-person business market, IAC-EZ is more aimed at companies with five or fewer employees.

"My whole thing was, how can I make this easy?" Villa told me. "The majority of these companies have revenues that are less than $300,000 a year. For them the IRS is very lax in the reporting requirements. You don't need a balance sheet. You don't need to have inventory accounts. Basically the IRS just wants to see what went in and what went out."

Villa likens IAC-EZ to taking all of those receipts out of your shoebox and putting them in electronic form. "This allows three things," she says. "One, your accounting bill is going to be a lot less. Two, it means that you can see reports monthly without having to total paper receipts. Three, it allows you to get rid of paper receipts."

A few more points worth mentioning before I bring you into our conversation: The impressively focused and composed Villa is 29 years old. She has two master's degrees from the University of Maryland in business administration and science and management. Villa began her career as a junior accountant at the Reznick Group only to realize public accounting wasn't for her. "The process of public accounting is to focus on historics and to handle tax adjustments," she explains. "The process of managerial accounting is to focus on the now and future. That's where I wanted to focus."

Today Villa has some 45 employees at IAC Professionals, which hit $1.35 million in 2008 revenue and is now having its better quarter yet. Read on for the interview, plus don't miss Villa's blog outlining her top 10 tax tips.

SBR: Why did you decide to focus on the small-business market?
HV: For me, small businesses in the 10- to 20-employee range have been around long enough that they aren't startups, which is a very difficult arena, but they aren't so big that there are too many corporate policies in place. It's a great time to mold and prepare their accounting systems for growth.

SBR: How did you find your first few clients?
HV: That was the great thing about Reznick. They focused on corporate conglomerates and wealthy individuals. I left on very good terms. I explained to them that I realized it wasn't what I wanted to do. My colleagues and partners threw me any leads they got that were small-business based.

SBR: What do you like most about running business?
HV: I love building an organizational culture. It's weird for for me because eight years ago that's not something I would have focused on. Being an accountant, by default, you focus on logistics. My organization is part-virtual and part-resident. Building a mixed culture can be challenging, but it never ceases to amaze me because often my virtual employees who the ones most in tune with our ultimate objectives.

SBR: Did you get any pushback because you're young?
HV: Eighty percent of my staff is older than me. I was worried when I first started the organization. I didn't tell the virtual employees my age because I didn't want that to be an issue. I've realized during the past seven years that it's not a factor.

SBR: Before we talk about your software, what do you use to run your own business?
HV: We have a specially built project management system. We couldn't find anything that had everything that we needed without having to log into 10 different services. Our system was designed by a 19-year-old genius from Omaha, Neb. Inside this one system we do everything: We communicate with our clients, bill them, keep track of time, collaborate on documents, store and archive documents, and handle support tickets. We have a resources tab that keeps track of our guides, manuals, cheat sheets, and resources that we've built over the years. It keeps our calendar. Everything we need to do comes out of that location. The system is stored on three dedicated servers at Rackspace. It's wonderfully encrypted and so secure that last week we locked ourselves out by accident.

SBR: OK, now onto IAC-EZ. Why did you design this software?
HV: I found I was getting a lot of five-or-less groups of people coming to me. Around 90 percent were sole proprietors. They couldn't afford my services. Not that I'm expensive -- we're one of the more economical accounting firms -- but when you're a freelancer, every penny counts.

SBR: Why didn't they use QuickBooks?
HV: They just don't understand how. They can certainly understand what writing a check is, but more along the lines of they don't know where to put things. They don't know the true definition of a liability or an asset, or that when you prepay your estimated taxes it's not an expense because it's not yet an obligation. They don't know that reimbursable expenses aren't taxable income because they equal out. My whole thing was, how can I make this easy? So I created IAC-EZ, which I can say is the first transaction-based accounting system.

SBR: What does that mean?
HV: QuickBooks focuses on your accounts. You put in your bank account, savings account, or credit card account, and then you enter the transactions that occur in these accounts to make it balance. Same thing with Peachtree and MYOB, and online services Clarity and Less Accounting. With transaction-based accounting, we don't pay attention to your accounts. We pay attention to your transactions. It can also be known as receipt-based accounting. We just want to know what comes in and what goes out in regard to business. We don't care what account it has to do with. You just enter your transactions when the actual expense occurs. In QuickBooks, everything has to go in there or your accounts won't be in balance. You have to enter all of your deposits, all transfers, and when you pay your bill. All of these things are very standard in the process of accounting, but they aren't required by the IRS for small businesses earning less than $300,000 in profit.

IAC-EZ prevents people from making mistakes. We use terms people understand -- money coming in and money going out. We use bills, and we use invoices. When you enter an invoice in QuickBooks, you have to tell which asset account it is. Is it an accounts receivable? Is it a reimbursed expense? Is it a prepaid invoice? With IAC-EZ, you enter the invoice, and we know what to do with it. We enable you to generate financial reports, and we have a cool tag feature that allows you to [label] transactions. We have a freelancer who works for several different magazines, so he tags his expenses and income as it related to his magazine clients. When he's looking at his profit and loss, he can click one of his tags and filter his profit and loss by the magazine.

We also keep track of contacts and year-to-date totals. We integrate with FreshBooks[among others], which is an invoicing service. Remember, we work on the recording of the information. It would be stupid of us to make them not only enter invoices in FreshBooks, but then again in IAC-EZ. So we've linked with them, and we import all of their invoice data. FreshBooks users then only have to enter their expenses.

Our last feature that everyone loves is our tax estimations. When you sign up, you have to give us your personal information, like number of dependents and the kind of entity that you are. We use that data to fill your tax estimates. When you go to your tax page, you'll see a running estimate of how much your tax liability is for the federal and state -- we're adding those on -- so you can make your quarterly tax payments appropriately.

SBR: Does your software do the actual tax filing?
HV: That's the next release [due out shortly]. We're going to have a "send to accountant" option that lets you email your accountant with all of your report data to them in a secured format. Or you'll also have the option to request an IAC professional to complete your return for you.

SBR: In terms of designing the software, did you again engage with that 19-year-old?
HV: Yes, and with a bunch of other developers. We developed on the Ruby on Rails open-source platform. I showed them what I wanted in a 100-page Word document and with about 50 different Excel sheets. The process took about a year from my ideas to full implementation.

SBR: What kinds of mistakes do you see small business making with their taxes?
HV: The biggest is miscategorization. They don't understand how things need to be categorized and aren't looking at individual expenses. For example, what they label as a $1,000 credit card expense could comprise $500 for Web design and $500 for advertising. They're recording it as "credit card expense" when they need to split the transaction. Another issue is they don't know what is tax-deductible and what isn't. They think if they buy a business gift of $500 it's tax deductive. But it's not. Only $25 of the gift is tax-deductible. This lead into depreciation -- most people don't understand the difference between deducting and depreciating, why one is better than the other, what you can and cannot do, and the different forms of depreciation.

SBR: Any other tax tips you're sharing with clients?
HV: The biggest thing I'm pushing is to take advantage of Section 179 depreciation, which allows you to instantly depreciate purchases up to a maximum amount. The cap on what you can depreciate has been upped to $250,000 for this year and next year only. In 2010 it will drop to $125,000 and then down to $25,000 after. So buy your assets now. The more you can depreciate, the lower your taxable income.

SBR: What technology can you not live without?
HV: Without my calendar, without my task list, without my emailbox, I think I would explode. Of course I have to say my BlackBerry is right up there with it. And then I love my Drobo . It's this really cool, pretty black box made for people who don't really know too much about technology. You connect it to computer, and it looks like an external hard drive. It has multiple hard drives in it, so it never lets you lose any of your data. All of your data is saved several times, spread out over different hard drives. Every since I got it, I don't have to worry about anything at all. My whole network is just there.

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