It's Time to Fix Accounting

After 100+ years of combined industry experience, thousands of customer calls, and literally millions of lines of code, we at Digits have come to an unfortunate realization:

Small business accounting, in the United States, is fundamentally—foundationally—broken. And software is to blame.

While this pains me deeply, as a lifelong programmer, to admit, it also gives me great hope, because if there is anything we have the power to fix, it's the software!

So how did we get here, and what are we doing about it?

The Digits Journey

Digits was born out of frustration 5 years ago. Over the course of my two prior startups, I was struck by the difference in data quality between the product-engineering side of the business (where we had live user dashboards, performance monitoring, and real-time graphs 📈) and the finance side of the business (where I was waiting 2-3 weeks after each month for a black & white PDF balance sheet and income statement 👎).

"That's crazy!", I thought. All I wanted was a real-time finance dashboard that showed a live view of our cash, burn, runway, sales, and top expenses. "How hard could it be?"

Famous last words.

Over the past 5 years, we have obsessively peeled back the onion, from accrual- to cash-basis accounting, to bank feeds and reconciliation, to transaction string parsing and vendor identification, to chart of accounts canonicalization, to custom ML models trained on double-entry accounting rules, and more.

Every layer reveals a whole host of new issues that compromise data quality and inhibit automation, and the roots trace all the way back to the banking mainframe revolution of the '60s and early '70s.

But don't worry—you don't need to know COBOL to understand what's broken, or how we can fix it.

Accounting is Broken

In the US, over 99% of all companies are small businesses. They form the foundation of the US economy, are responsible for over half of net-new job creation, and deliver almost half of the country's GDP.

And yet, for these ~30 Million small business owners, accounting is broken.

Welcome to Financial Reporting, Reimagined

In the world of business finance, we know that quick, data-driven, and easy-to-understand reports are not just a matter of convenience, but a critical requirement—so we’ve focused these last few weeks on pushing the bounds of what's possible.

Our most recent upgrades to Digits make reports far faster to create, easier to customize, and even smarter!

🚀 Unmatched Speed with Digits Reports

Gone are the days of crucial financial insights taking weeks to arrive. Thanks to a brand new technical architecture, Digits reports are faster than ever and now load in mere milliseconds. Imagine this - you're on the elevator up to an investor meeting and you generate a complete, data-rich report in the time it takes to ride up just one floor. This level of speed is about efficiency blended with real-time business decision-making and instant sharing of data-driven insights when you need them most.

Speed of Digits Report Creation

💬 One-Click Annotations

In the high-stakes, collaborative world of business finance, we know the value of a well-placed comment. With our new one-click annotation feature, adding notes to your reports is as seamless as a hover and a click. Share your thoughts, make key observations, tag your colleagues, add hyperlinks, or simply jot down important points right on the relevant part of the report.

commenting on a report

🔍 Data Exploration Unlocked

To unlock true business potential, it’s crucial to keep exploring – to keep asking questions and finding answers in the depths of your data. Powered by our advanced AI, hover-to-discover allows you to dive deeper into your data, unmasking trends beneath layers of transactions, and empowering you with an improved understanding of the dynamics within your business.

Hover to discover on Digits Reports

📊 Instant Trend Analysis

Understanding business trends is at the heart of strategic decision making. Add trendlines and deltas to reports so you can quickly and effortlessly tell the visual story you need. These visual cues can help you, your team, and your stakeholders get a deeper understanding of your financial data and the story it tells – further enabling you to steer your business decisions from an informed perspective.

Adding trendlines and deltas to Digits Reports

🧠 Sophisticated AI Assistance

We've integrated our groundbreaking Digits AI assistant directly into reports to make analysis even easier! Ask complex, tailored questions and let the AI guide you through the sea of data, all while generating insightful graphs you can directly drag into your report. Handling your financials has never been easier – or faster.

Asking Digits AI for help while building reports

With winter approaching, it may be a sign to cozy up and hibernate for some, but not for the team at Digits. We’ve got even more updates and enhancements lined up, so keep your eyes peeled here for what’s next – coming your way soon! 👀

On the Road to Open Accounting: Digits Announces Connect API Platform

Five years ago, we started Digits to empower business owners with real-time, accurate, and intuitive finance. We fundamentally believed that operators had the right to understand their business as it happened, and that better-informed leadership teams would achieve better outcomes.

We're thrilled to share that we recently crossed some major milestones towards this vision, with over 5,000 small businesses on Digits and over 100 Million transactions managed on our platform!

With scale comes perspective (and feature requests!), and as we continue to build out Digits' capabilities, we've been diving deep into the core challenges faced by the accounting profession that impact the quality of service they are able to provide to their clients.

I recently traveled to New York to meet with the leadership of the AICPA and it was inspiring to see how proactively they are welcoming the latest advances in AI/ML and how tightly they are partnering with the tech industry to facilitate adoption across accounting firms of all sizes. We were honored by the opportunity to share our 2024 roadmap and hear their feedback.

Today, we are excited to share our next major initiative publicly.

From Open Banking to Open Accounting

Ever since the European Union brought the concept of "Open Banking" to the forefront in 2015, many have wondered whether and when similar regulation would make its way to the US. The demand is already here: in fact, Visa found that 87% of Americans already connect their financial accounts to a 3rd-party service! Fortunately, the Consumer Financial Protection Bureau (CFPB) appears poised to publish its guidance on the topic soon.

At Digits, we've been major proponents of open banking rules for years, and we were proud to partner with the Financial Data Exchange way back in 2020 to push the industry forward. However, progress has been slow. Despite well-known efforts like Plaid, reliable connectivity to banks continues to be elusive (countless smaller banks and credit unions across the US still offer no connectivity whatsoever) and the financial ecosystem beyond banks is even further behind. While the CFPB is focused on consumer protections, the B2B space is far more broken. It is time for a better future.

Why? Business finance does not stop at banking; that is just a small piece of the puzzle. There are payroll systems, employee expenses, corporate cards, benefits administrators, payment processors, and more. Access to every one of these is required to accurately account for the business's finances and this fractured ecosystem is a major source of pain and tedium for accountants. It's common for a small business bookkeeper to have half a dozen or more separate accounts that they need to remember, log into, and export data from every month, for every one of their clients. This takes them hours.

At Digits, we believe businesses should own their transaction metadata just like they own their money. The right to access and share that data should be theirs, and theirs alone. The status quo where large retailers, card issuers, and payroll providers gatekeep what you purchased, from who, why, or for which employee is no longer tenable, and is holding businesses back.

We are calling this Open Accounting, because like existing Open Banking laws, this data should be freely available, via secure APIs, with access controlled by the owner of the data, not the financial service provider. As a business owner, if I want to grant a system, partner, or contractor access to my data, that should be my choice and mine alone. After all, it's my business!

Announcing Digits Connect

Today, we are excited to back up these words with software engineering and publicly announce that we are building Digits Connect, our open API platform for accounting data.

As Digits has scaled, we have heard countless customer requests to bring in more than just QuickBooks data, whether it be real-time purchases via Stripe, fine-grained customer data from Salesforce, or employee-level payroll details from Gusto. In business, "data is the new oil": the more it is mined, refined and processed, the more it can be turned into something useful, like actionable and automated insights.

We've also heard from accountants that fine-grained data accelerates the bookkeeping as well! As we continue to push the bounds on Digits AI, training it to auto-classify transactions as they arrive, it's no surprise that more context leads to more accurate bookings.

The Power of Modern APIs

Digits Connect is a secure REST-based API for transaction ingress and egress, making it possible to arbitrarily connect Digits to all of the financial institutions your business relies on to move money. Unlike other instrument-focused integrators (e.g. Plaid focuses on banks and credit cards), Connect has been architected from the ground up to work with arbitrary double-entry transaction data and all associated context. This will allow Digits to seamlessly integrate with a range of providers, from payroll to sales platforms.

To streamline partner integrations, we've architected Digits Connect to abstract the accounting complexity, and we've written an execution harness that makes it easy to reshape data from partner APIs into our generalized Connect transaction format:

// Transaction converts a Stripe Balance Transaction to Connect
// - https://stripe.com/docs/api/balance_transactions
func Transaction(txn stripe.BalanceTransaction) connect.Transaction {
	out := connect.NewTransaction()
	out.SetMemo(txn.Description)

	// Balance Transactions are booked according to type
	switch txn.Type {
	case stripe.BalanceTransactionTypePayout:
		// ...
	case stripe.BalanceTransactionTypeCharge:
		out.SetCustomer(txn)
		out.SetEntries([]connect.Entry{
			entry(txn.Amount, "Stripe Charge (gross amount)", Sales, Credit),
			entry(txn.Fee, "Stripe fee", Fees, Debit),
			entry(txn.Net, "Net (less fees)", Clearing, Debit),
		})
	case stripe.BalanceTransactionTypeStripeFee:
		// ...
	}

	return out
}

In this example, we map Stripe transactions to Connect transactions, leaving all of the heavy-lifting (deduplication, reconciliation, etc.) to the core Digits platform. While this connector is written in Go, Digits Connect is built with OpenAPI bindings, allowing connectors in any language. The first set of connectors are already underway.

Stay tuned for additional updates, as we are excited to announce the first set of connectors soon. For those looking for more information on Digits Connect or to partner on making Open Accounting a reality, please reach out.

The Time for Open Accounting is Now

The rise of AI—driven by the rapid evolution of Large Language Models—has ushered in one of the most exciting periods in fintech since the original mainframe revolution of the 1960s and '70s, but access to critical business data is still stuck in the dark ages.

It is past-time for the US to codify Open Banking laws and it is time for the fintech industry to lead the charge into the future, placing full ownership of transaction metadata rightfully in the hands of the businesses themselves.

Let's build the future of Open Accounting together :)

Jeff Seibert

Co-Founder & CEO

Digits Updates: End of Summer Edition

Can you believe summer is drawing to a close already? Even though things are winding down, the team at Digits is charging full steam ahead. We’re excited to share a handful of new features, enhanced with Digits AI, that are sure to help further save you and your clients time, as well as increase your ability to customize Digits.

🤖 Reports: Now with Digits AI!

We've now added Digits AI to the reports builder. You can now toggle between the chart drawer and Digits AI when building your reports, allowing you to add charts and graphs that were previously unavailable. Prompt Digits AI and drag the chart directly from the answer to your report.

Dragging a chart created with Digits AI into a report

🙋‍♀️ Real-time Answers while viewing Reports.

Continuing with the theme of more options and interactivity, we've made Digits AI available to your clients while they view the reports you’ve shared with them! Now clients can ask questions and get answers in real-time, while those details are front of mind (Bonus: One less thing your client needs to bother you about).

asking Digits AI a question while viewing a report

📌 Information you need. Where you need it!

On the topic of keeping important details readily available for easy access and time savings, we've unlocked the ability for you to add information boxes from Digits AI directly onto you or your clients’ dashboard. Simply drag a text box over, and add any material needing quick or regular referencing to the dashboard. All the information you need, right where you need it!

Adding text to a client dashboard

🔍 Back by popular demand

Last and certainly not least - you've spoken, and we've listened. Search is back! Use search to quickly delve deeper into your data, to find vendors, customers, categories, and so much more.

We're thrilled to continue working on enhancing your experience with Digits AI and look forward to bringing you a ton more innovative, and impactful updates in the future.

We have so much more planned for the fall, and are just getting started!

Try Digits Today

Digits at Scaling New Heights

Each June, the brightest accounting and bookkeeping minds gather at Scaling New Heights (SNH) to share best practices and chart the future for the profession.

This year, Digits took center stage.

Our CEO, Jeff Seibert, gave the keynote presentation on AI and Accounting, exploring what our shared future looks likes and revealing how technology is poised to impact the industry in dramatic fashion over the next few years.

The energy and enthusiasm around SNH is always palpable, but this year there was heightened buzz given the rise of Large Language Models like ChatGPT and the new possibilities for automation that these unlock. On the flip side, 3rd-party LLMs also introduce privacy and security questions that become particularly poignant in the context of sensitive business finance data, so there were endless topics for discussion.

Launching Digits AI

In this environment, we were honored to have the opportunity to launch Digits AI, live in-person, and dive into the details of Digits' advanced security architecture. Over the course of the 3-day event, almost 1,000 accountants and bookkeepers stopped by our booth for hands-on demos and Q&A with our product designers and engineers.

Fireside Chat

Following the keynote, Jeff sat down with Joe Woodard, the host of SNH, for a candid discussion around the broader implications of AI, privacy and security concerns, and avenues for adoption within the accounting industry:

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