by Y Combinator8/15/2016
Sway Finance automates accounting for SaaS companies. It uses a combination of machine learning and payment processing integrations to manage bookkeeping in real-time with perfect accuracy and at a fraction of the cost of a traditional bookkeeper. Founders Catherine Jue and Ashwin Kumar, sat down with us to talk about what they’re building.
What YC Likes About Sway Finance
“There have been many attempts to automate different pieces of business accounting, but all of them seem to have failed. I think Sway is perfectly positioned to take advantage of two trends. The first is that there are an ever increasing number of saas businesses who have a unique, but constrained, set of accounting challenges. The second is that businesses are storing more and more of their information in an API accessible format. By focusing on Saas businesses, Cat and Ashwin can actually do what accounting software has always promised because they know everything going in and out of a business. This is how you build the future of accounting.”
-Aaron Harris, Partner at Y Combinator
YC : Where did the idea for Sway Finance come from? Catherine: When I was growing up, I had to help my dad with his small business. One of the things I did was reconcile things using QuickBooks. It always took hours and so when I started studying machine learning in school, I realized that a lot of these things could be automated. I met Ashwin at UCLA and we started attending a bunch of hackathons together. We won a bunch and realized that we work well together.
Ashwin: The idea for Sway Finance came from one of those hackathons. It started off as a financial management tool on Slack because we saw so many businesses using Slack. But once we started talking to companies, we realized that companies needed a tool that did more than just show them numbers. One of the things we kept hearing was bookkeeping and accounting took up a lot of time and money, so that was what we worked on simplifying.
YC : What’s wrong with just using accountants? Ashwin: Companies pay accountants a few hundred to thousands of dollars to do their books for them once a month. But it’s not as easy as just handing over your books and you’re done. There’s still a lot of back and forth because the accountant won’t know what an expense is and you’ll have to find your receipts and figure it out.
Plus, businesses run into delays all the time. Instead of getting their books done at the end of the month, we hear stories of businesses receiving their books a month later. The only real way to get around that is to use QuickBooks, which means learning about accounting yourself. We saw an opportunity to automate all of this so companies can just focus on growing their business.
YC : How does Sway Finance automate bookkeeping? Catherine: You connect your Sway account with your email and all the services you’re taking payments from–things like Stripe or Paypal. Sway will grab the receipts from your email and itemize each transaction. Then, we automatically update your QuickBooks or preferred accounting software.
We also separate out credit card fees, refunds, and subscription payments. So once you’ve set up your account, Sway just runs in the background and can be sent to a tax professional to do your taxes whenever you want.
YC : How accurate is Sway? Ashwin: It’s about 90% accurate at categorizing each item automatically. It’s not perfect yet, which is why we work with professional bookkeepers to review each account. One of our theses is that computers can actually be more accurate than your traditional bookkeeper.
When you’re looking at rows and rows of numbers across thousands of transactions, the numbers tend to blur together and you’re likely to make errors. A computer doesn’t get tired and can do the same task in minutes instead of hours. As we gather more data over time, the algorithm will learn to categorize expenses even better.
YC : Does this apply to every single industry or is it specific to SaaS? Catherine: Sway works really well for SaaS companies because they have a similar workflow when it comes to capturing transactions. We know that other verticals use a different method for capturing their transactions so Sway won’t work as well at the moment. We’re working on a specific model for each industry to ensure our high accuracy.
YC : Have you gotten any pushback from accountants or firms? Ashwin: They’ve responded surprisingly well. We pitch them on letting our software do all the menial tasks of bookkeeping so that they can focus on other aspects of accounting like advising companies. It makes their lives easier because they don’t have to spend hours reconciling transactions and they really like that.
We’re not replacing accountants. We’re helping them get more business because we help them move faster. We’ve heard from some accounting firms that they were able to take on more customers because their accountants weren’t bogged down by bookkeeping. They get really excited when they hear they don’t have to do bookkeeping anymore.
YC : How do you compare in speed and price to a typical bookkeeper? Catherine: We have a monthly flat fee of $99 while most bookkeepers and accounting firms charge anywhere between $300 and $1000 per month. Some of our customers actually weren’t able to hire a bookkeeper because it was so expensive. In terms of speed, Sway can do a month’s worth of bookkeeping in several minutes.
YC : That’s a huge difference. Why haven’t any of the accounting software companies built this yet? Catherine: It would have been impossible for anyone to do something like this because the technology just wasn’t there until recently. It was incredibly difficult to integrate with older payment processors like a POS system. But with the rise of developer-friendly companies like Stripe and PayPal, we’re able to use cloud computing and machine learning to automate bookkeeping. And most of the accounting software companies are huge, which means they aren’t able to roll out products and features as fast as we can.
YC : What’s the long-term vision? Ashwin: We want to provide financial tools that every company can use regardless of their size. A lot of that will be done by bringing down the price so that even mom and pop shops can afford their version of a full accounting team.
Eventually we’ll expand beyond bookkeeping to help companies with business intelligence. We want to offer real-time financial income statements so that companies know exactly where they stand at all times.
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