Founded by Daisuke Sasaki and Ryu Yokoji in July 2012, freee aims to make bookkeeping and accounting quick and easy. While the idea seems simple, no one seems to have created an easy-to-use piece of accounting software for Japan.
For many years, Yayoi has been dominating the accounting software space with over 60 percent market share in Japan. Sasaki says that Yayoi follows the dual-entry bookkeeping method, which could prove to be difficult and unnecessary for many small businesses. It functions okay but it lacks invoicing or bank account integration. It is at best an upgraded Excel spreadsheet.
On the other hand, freee’s offer is so much more compelling. It is built on the cloud and is accessible via any web browser. Accounting entries are highly automated. For example, if a payment was made to Softbank, freee automatically turns it into a journal entry and classifies the expense as a telco billing. All the accountant has to do is to approve the bills.
Freee also helps small businesses generate tax reports in a few clicks for tax submissions to authorities. Automation is made possible because freee is integrated with over 1,600 banks in Japan.
“Bank account integration has been around for many years but we are the first to use it for business,” says Sasaki. “We want small and medium businesses (SMBs) to just care about their expenses and invoices and leave the accounting job to the software.”
Sasaki, a former Googler who was in charge of SMBs, realized that technology literacy in small businesses in Japan is really low. Many of them still use faxes along with pen and paper when doing their accounts.
“Something is wrong about Japan’s SMB market and I really want to solve the problem. There are no tech products to help a SMB that is affordable in the market,” adds Sasaki.
Since its official launch in March 2013, freee is now used by over 67,000 SMBs. Sasaki declined to reveal the number of paid users. Freee charges individual self-employees US$10 a month, and $20 for corporates.
When the company was founded, Sasaki faced two problems. First, his team was so passionate about the product that they cared too much about its look and feel.
“We discussed a lot how the product should look like. Maybe too much. In the first two months, we made no progress. We decided to stop and make decisions fast and things started to move.”
The team was coding 15 hours a day, rushing for their launch. But when the prototype was ready, Saski faced the second hurdle – skepticism from the market.
“We showed our product to some potential users before launch. But they looked at it with the traditional accounting mindset and thought we can never disrupt the accounting industry,” he says.
Despite the naysayers, freee launched in March last year to good feedback. Sasaki says that happy freee users brought in more users. A customer was so impressed with Sasaki’s accounting software that he even wrote a book about tax filing using freee.
What we learned was that even though the initial feedback was not good, it is important to just launch and see what the real customers are saying. We are fortunate because we have early adopters who help to give good reviews on the internet and other people followed.
Sasaki has also been pretty creative in distributing his accounting software. He sold coupons on Amazon because, as he puts it, “people actually search for accounting software on Amazon.” As credit card spending is automatically tracked and recorded on freee, more owners are happy to spend, knowing that freee will track the expenses. This in turn makes the credit card companies more willing to promote freee for free.
Other distribution methods include partnering with point-of-sales (POS) services like Square and any retail iPads powered by POS software. Freee also gets cozy with tax advisors, and has so far partnered with 300 of them. “If they say that freee is good, then word will spread and it’s good for business,” says Sasaki. Freee also offers its API so it is easy for any application and POS to integrate with it.
We want one million SMBs to use our product and we aim to create a network of SMBs who can easily make transactions within the freee network. We also want to globalize our product. Right now, freee is only in Japan. But once our product is more stable, we hope to enter other Asia markets, hopefully starting next year.