Cloud Accounting

Introducing Microsoft Dynamics 365 for Financials

There is an important new development in the accounting software space: In November 2016, Microsoft entered the small and medium-sized business (SMB) financial software market with the introduction of Microsoft Dynamics 365 for Financials. Many who have been around the industry for some time know well that this is not Microsoft’s first entry into the SMB market, having had questionable success with two products that no longer exist: Microsoft Small Business Financials (discontinued in 2011) and Microsoft Office Accounting (discontinued in 2009).

This new offering, in my opinion, is Microsoft’s strongest foray into this space — and is the company’s SMB accounting product with the best chance of success. One of the goals of this article is to let readers know what markets Dynamics 365 is aimed at, as well as the product’s pros and cons and how it is positioned vis-à-vis other SMB accounting products. All of this, from the experience and vantage point of someone who has been very well ingrained in QuickBooks products and the Intuit Reseller Program (my firm was the first member when Intuit officially started their partner program in June 2006).

In this series of articles, I will discuss:

  • Market positioning of the Microsoft offering
  • Product features, functionalities, and technical background of Dynamics 365 for Financials
  • Pros/cons of the Microsoft partner program
  • Our experience ramping up and becoming a Microsoft partner

What Is Dynamics 365 for Financials?

Let’s begin with a baseline definition of the platform. Dynamics 365 is the next generation of Microsoft Azure-hosted (IE, cloud) business applications. Dynamics 365 is the new branding and bundling of several software applications that already existed along with some new ones.

At present, there are two editions of the Dynamics 365 suite:

  • Dynamics 365 Business Edition, and
  • Dynamics 365 Enterprise Edition.

The Business Edition is aimed at SMBs with less than 300 employees and will be the focus of conversation in this article series. Dynamics 365 for Financials is the accounting/ERP software component of the Business Edition. I was one of the beta testers for Dynamics 365 for Financials, when it was called Project Madeira, code name for the new cloud ERP application built from Dynamics NAV (more on that in future articles).

Other optional component modules round out Dynamics 365 Business Edition:

  • Dynamics 365 for Sales,
  • Dynamics 365 for Marketing, and
  • Dynamics 365 for Customer Service.

These are reduced feature set versions of their bigger brother applications found in the Enterprise Edition. Dynamics 365 Business Edition is available only as a cloud offering.

Microsoft Dynamics 365

For full disclosure, the bigger brother Dynamics 365 Enterprise Edition is aimed at companies larger than 300 employees. This suite includes what used to be known as the Dynamics AX accounting/ERP application as well as optional modules for Sales, Marketing, Customer Service, Field Service, and Project Management. Dynamics 365 Enterprise Edition is available as a cloud offering or on-premise, ground-based installation.

Back to our subject matter, Dynamics 365 for Financials is priced at $40 per user per month, or $50 per user per month for the complete Dynamics 365 Business Edition suite, which adds the Sales, Marketing, and Customer Service modules (available starting in Summer 2017 per Microsoft). There is a pricing option for light users who need read or minimal capabilities. Those are called Team Members and priced at $5 per user per month.

Market Positioning

Microsoft knows that QuickBooks dominates the SMB accounting/financial/ERP market. Including QuickBooks Online and all QuickBooks Desktop Editions, Intuit has over 90% market share of organizations with fewer than 20 employees, approximately 70% of those with 20 to 49 employees, and 60% of those with 50 to 99 employees. Others of significance in the playing field are NetSuite, Sage, FreshBooks, Xero, and Zoho.

The target persona of Dynamics 365 for Financials is a 10- to 250-employee company. Such a company is likely using QuickBooks but has reporting, connectivity, integration, or security challenges. Typical pains of such target users are:

  • Insufficient reporting,
  • Manual processes that result in duplicate data entry and errors,
  • Disconnected systems and information that is stored separately,
  • Accounting that occurs in Excel instead of in the financial system, and
  • Lack of proper workflows and audit trails that put the business at risk.

Of specific focus are organizations that are outgrowing their basic accounting software – for example, outgrowing QuickBooks’ user and transaction limits – or that need to replace outdated/legacy systems.

How Is it Sold?

Of particular interest is the fact that Dynamics 365 for Financials is available for purchase only through a Microsoft Cloud Solution Provider (CSP), and not sold from Microsoft direct.

Other SMB financial software solutions (some whose name specifically implies speedy record of accounts) are sold directly by the software publisher as well as through other channels, resulting in unwanted competition for the software margin dollar. Coming from that SMB financial software world, this came as a great surprise.

More on this in the next articles where we discuss the pros and cons of the CSP program and our experience becoming a Microsoft partner

Conclusion (until the next installment)

This new development from Microsoft in the SMB accounting/financial/ERP space is the most intriguing in a long time. I am definitely excited about providing solid coverage on this new offering through this article series. Many are intrigued by this opportunity, while others are curious at least. I am here to facilitate our path to growth and breadth of knowledge together.


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About the author

Mario Nowogrodzki

Mario Nowogrodzki is an information systems consultant and instructor. He is the founder and principal of Mendelson Consulting, which specializes in software solutions that maximize accounting and management information system processes to optimize operational and financial results.
Mario is a frequent author and instructor of accounting technology topics and a contributing author and speaker for Intuit, Accountex (formerly The Sleeter Group), and The Woodard Group. A leading figure on the national SMB financial software scene, Mario was a charter member of the Intuit Reseller Partner program and was selected to serve on the Intuit Solution Provider Advisory Council for three consecutive terms (longest ever tenure).
Mario is a Certified Public Accountant since 1992 and has the Certified Information Technology Professional (CITP) designation from the American Institute of CPAs. As an Advanced Certified QuickBooks ProAdvisor, Mario’s firm was recognized as ‘Killer VAR’ and ‘VAR Stars’, prestigious distinctions awarded by “Accounting Technology” magazine and “Bob Scott’s Insights” acknowledging commitment and character as a value-added-reseller. He was also selected as a ‘Technology Pacesetter’ by “Accounting Today” magazine recognizing reputation among peers and participation on advisory boards and speaker panels at industry events, and is a three-time recipient of the ‘Top Technologist’ award by the Sleeter National Consultants Network. Most recently, Mario was named to the “Insightful Accountant” ‘Top 10 ProAdvisor’ list, an exclusive list of prominent consultants honored for their accomplishments and leadership in the field of QuickBooks, and was named Top Integrations ProAdvisor out of a field of over 150,000 ProAdvisors worldwide.
In addition to working with end users and advisors, Mario and his firm provide consulting services to accounting firms and other businesses. Find out how they help enable success through technology, Mendelson Consulting. You may reach Mario at mario@mendelsonconsulting.com.

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