Wednesday, November 5, 2014

Xero acquires Seattle's Monchilla in $4.1 USD million deal / Startup Spotlight: Monchilla looks to take on Quickbooks

Leon Spencer for ZD Net writes: New Zealand-headquartered cloud accounting software provider Xero is expecting to boost its US online payroll presence with the acquisition of Seattle-based cloud accounting startup Monchilla.
The deal sees Xero cough up $4.13 million cash for the online payroll and cloud accounting software provider, along with 238,490 Xero Limited ordinary shares.
At the time of writing, Xero Limited's New Zealand Stock Exchange-listed ordinary shares were valued at NZ$17.10 each, or about $3,146,600 — bringing the total value of the deal to around $7.27 million.
The New Zealand company, which is dual-listed publicly in New Zealand and Australia, told investors that it had bought Monchilla from its founders, Jack Couch and Nanjuan Shi, and would continue to support the cloud startup's current customers.
However, Xero also said that Monchilla customers would eventually be transitioned from the US company's platform to the Xero platform, netting the New Zealand company a bevy of new US Xero users.
Couch and Shi will remain involved with the operation, and are expected to complement Xero's US product development teams and support its payroll strategy to further its growth in the market.
"We're thrilled to join the Xero team and work together to deliver a world-class, online payroll solution for small businesses in the US market," said Monchilla co-founder and CEO Jack Couch. [snip]  The article continues @ ZD Net, click here to continue reading....
We've previously posted this on ExactCPA about Monchilla

Monchilla offers new cloud-based accounting and payroll option / Startup Spotlight: Monchilla looks to take on Quickbooks with new accounting service / Wave Accounting vs PlanGuru Basic vs Monchilla

We keep a close on on the Quickbooks alternatives and are familiar with ContaAzul & Cheqbook and indeed have commented about them here.  Today someone suggested we look at "Monchilla" - and as we have never heard of "Monchilla"....we are!   Isaac M. O'Bannon for CPA Practice Advisorwrites: A new, completely cloud-based, accounting system is about to give small business owners an alternative to QuickBooks, and some experts think even public accountants will prefer it over other bookkeeping systems.

Monchilla.com announced its beta release at the 2012 Sleeter Accounting Solutions Conference. The Monchilla.com beta includes an entire suite of services including small business accounting, payroll, invoicing, billing, time tracking, electronic payments, and direct deposit for employees.
“We are thrilled to share Monchilla.com with the world.  We know this will help thousands of small businesses, bookkeepers and accountants manage their businesses better and with a lot less work” said Jack Couch, Monchilla.com’s CEO. “By taking advantage of new technology, Monchilla.com makes your life easier, but it also gives you a great dashboard that gives you insight into the health of your business.”
Monchilla.com downloads transactions from your bank and uses repeating transactions to provide future financial data while reducing time spent keying in transactions. Large businesses have separate departments to deal with payroll, financial accounting (historical records) and management accounting (forward looking accounting). The idea behind Monchilla is to bring all of these together into one package so that small businesses can get some of the benefits big businesses already enjoy.  
Monchilla.com also provides something it calls “turn-by-turn business navigation.” This allows users to do “what-if” analysis to see how your business will be affected if you hire a new employee or take on a small business loan. The “write-up” feature is also unusual for a cloud solution, as it allows fast, keyboard only data entry so accountants can quickly update the books before filing taxes.
Randy Johnston, a widely-respected thought leader for the profession and one of the most popular speakers at ASC2012, said “One of the interesting things about Monchilla.com is that it has payroll integrated at such a low cost. I think this and its management accounting provide a solid revenue opportunity to small business consultants and accountants.”  
For businesses that would like to keep QuickBooks they can still take advantage of the impressive dashboard by simply uploading their QuickBooks backup file. The Monchilla dashboard has all of the major financial statements (income, cashflow, balance sheet, etc) including a very interesting cash balance report that will alert you to a cash shortfall. Because it is completely cloud based, it is easy to share these reports with clients or other support staff.
Monchilla’s employee time tracking features can also be used with QuickBooks - good news for small businesses that have been forced to pay for a third party time tracking solution after Intuit discontinued it’s time tracking solution in December.
Monchilla.com is a self funded startup of 11 that already boasts over 1000 small businesses that signed up through it’s inviation only beta.

During Beta testing, Monchilla.com is available free of charge by going to www.monchilla.com and clicking on the “sign-up for a free account” button. When Monchilla releases the final version early next year it will charge users $5 per employee per month for payroll. Businesses that don’t use the payroll service will not be charged. According to the Monchilla.com website, the average company of five will save $800 pear year when switching from QuickBooks.

Startup Spotlight: Monchilla looks to take on Quickbooks with new accounting service


Mikey Tom for GeekWire.com writes: If you’ve ever taken an accounting course or have run your own business, you know that accounting is a huge pain.  Sadly, it’s a necessary evil for every business.  But Monchilla is looking to make it a a little more tolerable.
The self-funded team of eleven has spent the past 2.5 years building an accounting platform from scratch, including features such as payroll, time tracking, invoicing, electronic payments and bank integration. It’s biggest rival is Intuit’s Quickbooks, not to mention some up-and-coming startups such as IndineroXero and WaveAccounting.
In fact, the company formed because the founders struggled with using Quickbooks in their own software startup and weren’t too impressed when they gave other services a try. ”We had used Quickbooks, but it made us hate our lives because it is so hard to use,” said Monchilla’s Nanjuan Shi.
We caught up Monchilla’s Shi and Jack Couch for this installment of Startup Spotlight:
Explain what you do so our parents can understand it : “We make accounting easy so business owners can make smarter decisions.”
Inspiration hit us when: “We were four guys writing code and we had a full time bookkeeper just to manage payroll and invoice customers and we still didn’t have a clue how much money we would have in three months.  We looked at everything and nothing worked for us.  Then we talked to all of our friends that owned business and found out some of them already made business killing mistakes because they couldn’t see clearly.  That’s when we knew we could do something that would make a big difference.”
VC, Angel or Bootstrap: “Self funded.  This isn’t our first start-up and some of those earlier successes have given us the capital to build Monchilla. We are open to outside funding, we just haven’t needed it yet.”
Our ‘secret sauce’ is: “We completely rethought double-entry bookkeeping to make it more intuitive without sacrificing any benefits.  Its all ham and no burger (we promise we are better at accounting than jokes).”
The smartest move we’ve made so far: “ We tackled the hardest problems first.  Instead of worrying about powder blue versus periwinkle we worked hard for 2+ years on building an engine that could handle everything from payroll taxes to depreciation and now that is paying off.
The biggest mistake we’ve made so far: “When we first started we thought we could just build additional features on top of QuickBooks and we spent several months and a lot of money trying to make that work.  Eventually we realized it was like trying to build a house on sand because every version update would break us and the database wasn’t normalized.  We really didn’t want to have to start from scratch, but we should have figured that out sooner.”
Would you rather have Gates, Jobs, Zuckerberg or Bezos in your corner:“Bezos because he has a very similar outlook on business and the good that it can accomplish, which is what drives us to push through the difficult stuff.  Helping every small business owner be more successful is the most significant thing we can do to make the world a better place and I think Bezos would agree.  I’m also not sure Bill doesn’t hold a grudge for the time he tripped on my console cable and my laptop slid across my desk and hit him on the way down – I know his security guys are still keeping an eye on me.”
Our world domination strategy starts when: “When small business owners have more fun running their businesses because of Monchilla.  We have already seen the kind of gratitude and word of mouth recommendations that comes from that and we can’t wait
to see that happen on a larger scale.”
Rivals should fear us because: “We are ready to spend the next 20 years attacking this problem with everything we have.  And we have the only online service that actually does everything a business owner would expect, including payroll and time tracking, built in.”
We are truly unique because: “We love accounting.  Many accountants don’t even love accounting, but for us there is something amazing about the moment when everything is clear and people are empowered to make smart moves.  As business owners we have sailed the same stormy seas as our customers so we have a good grasp of what is helpful and what isn’t.”
The biggest hurdle we’ve overcome is: “Finding the right team of fanatics.  Software people that are truly passionate about accounting are few and far between.
What’s the one piece of advice you’d give to other entrepreneurs just starting out: “ First, care about other people.  Then find a problem that is so irritating to you that you are willing to sacrifice to solve it for them.  When we started we could see all the time, money and life wasted because of bad tools and we couldn’t help but do something.  We knew we could fix it and we felt like it would have been wrong to ignore it.  Find something like that and you will enjoy getting out of bed and busting your butt.

Posted on 7:57 PM | Categories:

Xero pays $10M NZD for US online payroll company Monchilla / Xero acquisition of Monchilla accelerates payroll expansion / Learn About Monchilla

Tina Morrison for NZ News UK writes:  Xero, the cloud-based accounting firm, paid the equivalent of $10 million in cash and shares for US online payroll company Monchilla to help drive its expansion in the world's largest economy.

Xero paid US$4.1 million in cash and issued 238,490 shares valued at $20 apiece to acquire Seattle-based Monchilla from founders Jack Couch and Nanjuan Shi, who will continue with the firm, the Wellington-based company said in a statement. Half of the shares are restricted from trading for two years, the company said.

The software developer wants a million customers, and is targeting growth in the US market where it sees the potential to take market share of an estimated 29 million small to medium sized business owners. The company last year raised $180 million in new capital to fund its US growth plans and is eyeing a US listing after it reaches annual revenues of US$100 million, expected in this financial year, and has tapped former Microsoft chief financial officer Chris Liddell as chairman.

"Over the last year, with Australia and United Kingdom markets performing well, we have been focussing on delivering the best business software for the US market," said Xero chief executive Rod Drury. "The cloud accounting market is just beginning in the US and our proven speed of delivery and the ability to quickly integrate complementary technologies into our platform positions us strongly to take a share of this large market as it develops over the coming years.”

Integrating Monchilla with Xero provides improved business-to-government connectivity and the opportunity to deliver electronic filing and payments of payroll taxes, with calculation support, across the US in 2015,the company said.
Xero said it will support Monchilla's current customers and transition them to Xero's platform over time. Shares in Xero rose 0.9 percent to $16.65, and have shed 49 percent so far this year.
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Xero acquisition of Monchilla accelerates payroll expansion

 


Xero acquisition of Monchilla accelerates payroll expansion in the U.S.
Xero Limited (XRO) announces that it has acquired Seattle-based online payroll company, Monchilla Inc. The company’s payroll expertise and technology will enable Xero to rapidly accelerate the extension of its payroll offering across the U.S.
“We were really impressed by the Monchilla team and how they have approached filing and payment of payroll taxes in the U.S. Combining this capability with the work our own team are doing will allow us to develop a world-class payroll experience for the U.S. over the next 12 months,” says Xero CEO Rod Drury.
Integrating Monchilla with Xero provides improved business-to-government connectivity, and the opportunity to deliver electronic filing and payments of payroll taxes, with calculation support, across the U.S. in 2015.
“We’re thrilled to join the Xero team and work together to deliver a world-class, online payroll solution for small businesses in the U.S. market” says Monchilla co-founder and CEO, Jack Couch.
Xero purchased Monchilla from founders, Jack Couch and Nanjuan Shi, whose continued involvement will complement Xero’s U.S. product development teams and support Xero’s payroll strategy to drive further growth. The total purchase price for Monchilla is comprised of US$4,127,688 in cash together with 238,490 Xero Limited ordinary shares to be issued to the founders at closing (50% of which are subject to trading restrictions and other terms as set out in more detail in the Notice of Allotment (NZX) and Appendix 3B (ASX) filed today).
Monchilla, as an early start-up, has solved the complexity of electronic payroll state filing and was in the initial stages of launching and building a customer base. With the acquisition, Xero will continue to support Monchilla’s current customers and will transition them over time to the Xero platform.
Drury says “Over the last year, with Australia and United Kingdom markets performing well, we have been focussing on delivering the best business software for the U.S. market. The cloud accounting market is just beginning in the U.S. and our proven speed of delivery and the ability to quickly integrate complementary technologies into our platform positions us strongly to take a share of this large market as it develops over the coming years.”
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Oliver Furniss from the Xero blog writes:

The family is growing – Monchilla joins Xero

We have some exciting news to share: Xero has acquired Monchilla to accelerate the rollout of payroll in the US. Monchilla is an online payroll provider that focuses on small business in the US.
Although this was a big decision for us, it wasn’t a difficult one to make. Before deciding to extend an offer to Monchilla, we’ve spent a lot of time looking at how we can accelerate bringing online payroll to all states in the US. And I can say without a doubt, Monchilla will enable us to accelerate our goals in the US but also add experience in building our global platform with best of breed government connectivity.
Xero Payroll
Integrating Monchilla’s advanced technology with Payroll in Xero will offer Xero’s small business customers the ability to calculate and electronically file and pay payroll taxes across the US. But that’s not the only reason we’re excited about adding them to the Xero family. Our companies actually have a lot in common and are aligned on making the lives of small business owners better and making payroll as stress-free as possible.
“It was an obvious choice for us to join Xero to bring our experience in the US to Xero. No other company is building a beautifully designed and full featured global integrated payroll and accounting system. This is something small businesses around the world, but particularly in the US are begging for.” said Jack Couch, co-founder of Monchilla. “We’re excited to be joining Xero and for what the future holds for small business.”
“We’re working to improve the financial lives of small businesses by bringing them the latest tools.” says  Rod Drury, Xero CEO. “This acquisition will further support our customers and accelerate growth in the US.”

The Monchilla team will be joining Xero with Jack and Nanjuan, the Monchilla co-founders, taking up leadership positions within the payroll team. Existing Monchilla customers will be fully supported as we roll out payroll to more states in Xero. We’ll transition Monchilla customers to Xero over time.

US Payroll in Xero
We launched US Payroll in Xero to make it easier for small businesses to manage their payroll, file taxes, and pay their employees while reducing the hassles and costs associated with having separate payroll and accounting software solutions. Early in 2014 we made the decisions to pause the rollout to more states while we built a solid foundation on which to grow and scale our platform and improve the overall experience.

Monchilla is a natural complement to our technology and we’re all excited by the opportunity this brings for us to accelerate towards our vision of supporting payroll in all states with full electronic services. The acquisition of Monchilla comes on the heels of our recent releases of Federal e-file, e-pay and with W-2 forms and filing being released next week. It’s part of our ongoing commitment to deliver beautiful seamless payroll and accounting to the US.

By providing a more complete online payroll solution, even more small businesses will have the chance to experience the joy of online payroll and accounting working as one.
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Posted on 7:33 PM | Categories:

IRS Commissioner Predicts Miserable 2015 Tax Filing Season

Ashlea Ebeling for Forbes writes:Internal Revenue Service Commissioner John Koskinen warned that close to half the people trying to reach the IRS by phone might not get through during the upcoming 2015 tax filing season. “Phone service could plummet to 53%,” he told an audience of tax practitioners at the AICPA National Tax Conference in Washington, D.C. today. That would be down from an already unacceptable 72% during the 2014 filing season. The average hold time projection: 34 minutes! What’s to blame? Budget woes. “All we can do is try to maximize our services as well as we can; as well as we can is still going to be miserable. You really do get what you pay for,” he said.

Koskinen’s remarks followed National Taxpayer Advocate Nina Olson who was even gloomier:“The filing season is going to be the worst filing season since I’ve been the National Taxpayer Advocate {in 2001}; I’d love to be proved wrong, but I think it will rival the 1985 filing season when returns disappeared.”
There are five key factors at play – complicating the upcoming filing season (that’s when you file your 2014 tax return). The IRS agency budget is the number one challenge, Koskinen said. The House has voted to cut the IRS budget for 2015 by $341 million, and the Senate has proposed to increase it by $240 million—that would still be 7% below 2010 funding levels.
In the meantime, Congress keeps passing laws that the IRS has to implement, namely the Affordable Care Act (“ACA”) and the Foreign Account Tax Compliance Act (“FACTA”). For example, Koskinen said the IRS requested $430 million in 2014 from Congress to implement the ACA but got zero, forcing it to take money out of enforcement and taxpayer services budgets.
This will be the first filing season with two major provisions from the Affordable Care Act –the premium tax credit and the individual shared responsibility payment–on Form 1040. National Taxpayer Advocate Olson said she’s very concerned about the IRS receiving accurate information from the health exchanges. It won’t be the IRS’s fault, but taxpayers will likely put the blame on the IRS. Koskinen touted the web pages that the IRS has created to help explain the ACA tax provisions.
Olson expects that implementation of FACTA, which affects taxpayers with accounts overseas, will also cause trouble this filing season. A new withholding requirement will mean there will be an issue with taxpayers trying to get refunds back in a timely manner. “If they are overseas, who are they going to call? There is not toll free number,” Olson said.
Then there are the tax extenders, 50-plus laws whose fate is uncertain. Congress has vowed to vote on the future of these laws in the upcoming lame duck session. But Koskinen warns that if the uncertainty continues into December, it could delay the start of the filing season and delay tax refunds. [snip].  The article continues @ Forbes, click here to continue reading....
Posted on 7:28 AM | Categories:

Tax Tips: Bankruptcy and taxes

Barry Dolowich for the Monterey Herald writes: Question: Unfortunately, I just filed for personal Chapter 7 bankruptcy. I have not filed income tax returns for the last three years because I knew I owed and could not afford to pay. Can I claim my tax debts as liabilities in my filing and avoid paying the taxes using bankruptcy protection?

Answer: Debts are divided into two categories: dischargeable and nondischargeable. Dischargeable debts are those that the debtor is no longer personally liable to pay after the bankruptcy proceedings are concluded. Nondischargeable debts are those that are not canceled because of the bankruptcy proceedings. The debtor remains personally liable for their payment.
As a general rule, there is no discharge for you as an individual debtor at the termination of a bankruptcy case for most taxes, or for taxes for which no return, a late return filed within two years of the filing of the bankruptcy petition, or a fraudulent return was filed. However, claims against you for other taxes predating the bankruptcy petition by more than three years may be discharged. Payroll taxes are fiduciary taxes and are nondischargeable.
Simply, if the income tax debt meets all five of the following rules, then the income tax debt is dischargeable in Chapter 7 and Chapter 13 bankruptcy petitions:
• The due date for filing a tax return is at least three years ago.
• The tax return was filed at least two years ago.
• The tax assessment is at least 240 days old.
• The tax return was not fraudulent.
• The taxpayer is not guilty of tax evasion.
The fact that you may qualify for Chapter 7 bankruptcy protection indicates that you may be a prime candidate to file an "Offer in Compromise" with the IRS to negotiate a palatable deal for the open (not canceled) years along with the unpaid payroll taxes.
If a debt is canceled or forgiven, other than as a gift or bequest, the debtor generally must include the canceled amount in gross income for tax purposes. A debt includes any indebtedness for which the debtor is liable or which attaches to property the debtor holds.
There are several exceptions and exclusions from the inclusion of canceled debt in income. The exceptions include:
1. The cancellation of a student loan for a student required to work for certain employers.
2. The cancellation of debt (accrued mortgage interest) that would have been deductible if paid.
3. The reduction of a debt by the seller of property (foreclosure) if the debt arose from the purchase of the property (nonrecourse debt).
4. The reduction or discharge of debt on a principal residence pursuant to the Mortgage Debt Relief Act of 2007.
The following are "exclusions." You do not include a canceled debt in gross income if any of the following situations apply:
1. The cancellation takes place in a bankruptcy case under the U.S. Bankruptcy Code.
2. The cancellation takes place when you are insolvent (your liabilities exceed the fair market value of your assets) and the amount excluded is not more than the amount by which you are insolvent.
3. The canceled debt is qualified farm debt (debt incurred in operating a farm).
4. The canceled debt is qualified real property business indebtedness (certain debt connected with business real property).
Generally, the debts, if discharged in bankruptcy, will have no income tax consequence to you. As per the above, you will need to file all your back tax returns, and then wait two years to file bankruptcy in order to have the taxes discharged.
Posted on 7:24 AM | Categories:

How to Work Around Intricate 'Kiddie Tax' Rules

Julien Block for AccountingWeb.com writes: The Tax Reform Act of 1986 introduced the complicated "kiddie tax" rules. They drastically restricted the ability of higher-bracket parents and grandparents to shift investment income from themselves to their lower-bracket children and grandchildren by gifts of cash, stocks, mutual fund shares, real estate, money and other inc[sniome-generating assets. It's possible to work around them, but you have to know all the ins and outs.

How did Congress clamp down on income-shifting maneuvers? Our lawmakers targeted children under the age of 14 who received investment income. The 1986 act imposed theparent's top rate on such income. But children who had attained the age of 14 were unscathed by that year's version of tax reform. The legislation retained the old rules for those children. It said they should continue to be taxed at the children's rate.
When did the 1986 measure apply parental rates to children's income? When a child underthe age of 14 received "unearned" income. This meant investment income from interest, dividends, capital gains from sales of assets or distributions from mutual funds, rents, and other kinds of unearned income.
The act authorized some relief from kiddie taxes. They kicked in only when a child's investment income exceeded a specified threshold that subsequently was adjusted annually, as explained below. No relief, though, for earnings that were generated by money or other assets received by the child from persons other than parents—grandparents or aunts, for example.
The rules introduced by the 1986 act have been amended several times. But previous versions and the one on the books for 2014 are consistent. They generally tax the excess income at the parent's top rate, which can be much higher than the child's. For instance, they tax interest income at the rates for salaries, pensions, profits from self-employed ventures, and other kinds of ordinary income.
For 2014, those rates go as high as 39.6 percent, versus a top rate of 20 percent for dividends from stocks and stock funds and for long-term capital gains from sales of individual stocks, shares of mutual funds and most other assets. Note that 2014's maximum rate is more than 39.6 percent for individuals subject to: the Medicare surtaxes on investment income or earnings; or phase-outs for dependency exemptions and certain itemized deductions because their adjusted gross incomes surpass specified amounts.[snip]  The article continues @ AccountingWeb, click here to continue reading...
Posted on 7:19 AM | Categories: