An app to turn the ‘khata’ digital for small businesses

Gaurav Agrawal runs a furniture-making business in Firozabad near Agra. The 37-year-old took over the family business a few years ago and has grown its annual turnover to ₹4-5 crore, supplying furniture to customers in Delhi, Jaipur and Lucknow. As his business grew, he started looking for an app that would help him manage his orders and payments better than the old ledger books.

“When I was on the road or away from office, and got a call from a customer asking about an order or outstanding amount, I had to tell them I would get back to them later. So I went to Google Playstore and searched for an app that would let me do accounting from my phone,” says Agrawal.

He downloaded a new app called Vyapar and found it served his purpose. That was in 2016 when the startup offering this mobile accounting solution was founded. Since then Vyapar has added several features and also become available on laptops and desktops. Now every shipment that goes out from Agrawal’s Jivik Furniture Art is entered digitally. “This also helps me do my GST return filing regularly,” he says.

Agrawal admits he was apprehensive at first at the thought of an app accessing his khata (account book). But the benefits are many: Customers are notified instantly when an order is shipped or a payment received. Bills carry details of outstanding payments as a reminder. “Earlier I had to meet a customer to reconcile our accounts. But now it’s easy to stay updated and send an account statement at any time.”

Insights for India

Vyapar’s founders Sumit Agarwal and Shubham Agrawal earlier worked at US software giant Intuit whose QuickBooks product was also meant to make life easier for small businesses. But they felt a mobile app would serve the needs of traders and small manufacturers in India better.

Bengaluru-based Tally is the dominant accounting software for SMBs in India. Traditionally it was been a desktop offering bought off the shelf and installed; remote access over the cloud is now being added.

Sumit says Vyapar’s value proposition comes from being designed from the outset as a mobile-first app for use by owners of small businesses, rather than accountants. “We removed the complexity of traditional accounting software and made it easy to use with minimal entries,” he says.

Sometimes the simpler you want a software product to be, the harder it is to design. The challenge for the Vyapar team was to fit time-tested accounting formats into simpler models, while at the same time making it compatible enough to transfer the data into Tally or any other higher level software used by accountants.

A lesson for Sumit from his Intuit days was that a fully online product would be hard to use in India, given the patchy internet in tier-2+ towns as well as security concerns. So Vyapar can be used offline once it is installed—downloads and uploads are limited to what’s needed.

It adopted a freemium model. The free app provides all the functionality, but Vyapar branding appears on invoices. The paid app removes the logo and enables syncing of data on multiple devices. But the main revenue for the startup comes when a user graduates to the desktop version. Most users start with billing but slowly dive deeper into the product.

The overarching aim is to help small businesses go digital in everything from accounts to inventory management. “In India, 80-85% of proprietors use paper to manage their business. It’s guesswork when you ask them about inventory, profit and so on,” says Sumit.

The initial tailwind for tools such as Vyapar came from small businesses requiring to comply with GST. Digitization is imperative as more data has to be tracked, right from the time of sending out an invoice. “The load of compliance is no longer just a chartered accountant’s headache. It is seeping into the daily workflow,” says Asutosh Upadhyay, who manages investments at Axilor, an early investor in Vyapar. “How many businesses can afford a full-time accountant?”

Shift to Digital

Another tailwind was a shift to digital payments. In the post-covid scenario of needing to manage the business from home, a third tailwind has started blowing.

Vyapar is out to catch these tailwinds. So far it has 350,000 active users across its mobile and desktop versions, out of whom 45,000 are paying customers, according to Sumit. “The market is evolving as small businesses change faster. Covid has changed the mindset to being able to control things from anywhere. We’re seeing 15-20% month-on-month growth in our customer base and revenue.”

The startup targets businesses that have matured enough to come under the GST ambit, but not so big that they already have full-time accountants working with Tally. Sumit estimates that segment to comprise 20 million out of the 60-70 million SMBs in India. So that’s a large potential target market for the startup.

Its biggest challenge is competition from other startups as well as a variety of SaaS, fintech and supply chain players trying to enter the largely untapped SMB sector, especially in tier-2+ towns. Vyapar has established a product-market fit with a substantial paid customer base, unlike some that focus on scaling up before finding a revenue model.

“We were at ₹30-35 lakh monthly revenue around this time last year, and now we’re at ₹90 lakh,” he says. “We believe in solving a problem well and getting paid for it, because that builds a strong business for now as well as the future. If the customer is paying, we know the product is useful. When it’s free, you don’t know how strong the use case is.”

Sumit himself comes from a family of jewellery traders in Lucknow. The use case he was solving for was staring at him at home. But requirements differ from business to business. For example, inventory management for a manufacturer is different from that of a trader.

Though he has seen mindsets change at home as well as his growing roster of customers, there’s a long way to go. After all, even the dominant player in business accounting software has less than 2 million customers in India which is a fraction of the addressable market. This also leaves room for multiple players to hone their value propositions and business models.

Sumit remembers pitching Vyapar to a potential customer in Lucknow in its early days. “I started talking about our product and what it could do. Then the store owner said, ‘Yaar, hamare bap-dada yeh kehke gayen ki saare hisab kitab rakho, par tijori mein band kar do (our forefathers told us, note down all your accounts but lock it up in a safe)’.” Being secretive about accounts or maintaining two books, only one of which is disclosed, is so ingrained that it will take time to change. But Vyapar’s founders are happy to digitize one set of books for starters.

Sumit Chakraberty is a Consulting Editor with Mint. Write to him at chakraberty@gmail.com