Accounting Software

Mike's Notes

Some initial notes on discovering accounting software for integration with Pipi and for Ajabbi's use. I got this from an NZ Government website. It's a useful list to start from.

OpenPEPPOL is the international standard to use, and there is excellent documentation.

Resources

• https://en.wikipedia.org/wiki/PEPPOL
• https://peppol.org/
• https://peppol.org/wp-content/uploads/2025/03/eInvoice-benefits-model-v0.3.xlsx
• https://www.einvoicing.govt.nz/software/software-products
• https://www.einvoicing.govt.nz/software/einvoicing-access-point-providers
• https://www.einvoicing.govt.nz/software/software-developers-information
• https://github.com/A-NZ-PEPPOL/A-NZ-PEPPOL-BIS-3.0
• https://github.com/A-NZ-PEPPOL/A-NZ-Industry-Practice-Statements/blob/main/Invoice_content_A-NZ_Industry_Practice_Statement.docx

References

• Reference

Repository

• Home > Ajabbi Research > Library >
• Home > Handbook > 

Last Updated

06/11/2025

Accounting Software

By: Mike Peters

On a Sandy Beach: 06/11/2025

Mike is the inventor and architect of Pipi and the founder of Ajabbi.

"Peppol is a set of specifications for establishing and also the primary implementation of a federated electronic procurement system for use across different jurisdictions. Through Peppol, participant organisations can deliver procurement documents to each other including electronic invoices in machine readable formats, avoiding the labour of data entry.

OpenPeppol, a non-profit international association registered in Belgium, is the governing body of the primary implementation and developer of specifications. The primary implementation of Peppol as at 16 March 2025 had 1,426,623 participant organisations from 98 countries registered to receive procurement documents.

No other implementations of Peppol are known to be in use by businesses or government bodies around the world. Whilst it would be possible for an alternative Peppol implementation to be created with alternative governance arrangements, Peppol specifications would need to be adjusted to remove dependencies on the OpenPeppol association in aspects including mandatory use of OpenPeppol public key certificates." - Wikipedia

eInvoicing software products

"eInvoicing capable software products that have registered with us are listed below. Go to their website for more information and to register for eInvoicing today." - NZ Government

Provider	Product	eInvoicing	Additional information
Access Attaché	Attaché eInvoicing(external link)	Send and receive
Access Financials	Attaché eInvoicing(external link)	Send and receive
Accredo	Accredo(external link)	Send and receive
The Access Group	FastTrack360	Send	* Contact provider for details
Acume	eInvoicing(external link)	Send and receive
Billit	Billit(external link)	Send and receive
B2Boost	B2Boost e-invoicing Service(external link)	Send and recieve
B2Brouter	B2Brouter(external link)	Send and receive	$ Free portal available
Civica	Authority Altitude(external link)	Receive only
Canon Business Services	CBS eInvoicing(external link)	Send and Receive
Cognito Software	MoneyWorks E-Invoicing(external link)	Send and receive
Colladium	e-Invoicing Colladium(external link)	Send and receive	$ Free portal available
Continia	Continia.com(external link)	Send and receive
Cumulo9	eInvoicing – powered by C9 Transact(external link)	Send and receive
Coupa	Coupa Invoice by Valtatech(external link)	Receive only
CSSP Pty Ltd	Cheops(external link)	Receive only
Deltek	Maconomy(external link)	Send and receive	* Contact provider for details
DataPrint	Dataprint eInvoicing(external link)	Send only
Desktop Imaging	Services – Business Process Automation(external link)	Receive only
Efficiency Leaders	RapidAP(external link)	Receive only
Esker	Esker Accounts Payable solution(external link)	Receive only
Esker	Esker Accounts Receivable solution(external link)	Send only
Exedee	OASIS eInvoicing Service(external link)	Send and receive
EzeScan	EzeScan(external link)	Receive only
FlexiTime	Karmly(external link)	Send only
Havi Technology	Havi eInvoicing(external link)	Send and receive
Link4	Link4(external link)	Send and receive
LUCA Plus	Lucaplus(external link) Additional resources(external link)	Send and receive
MAGIQ	MAGIQ Cloud Platform(external link)	Receive only
Ricoh	Medius Accounts Payable Automation	Receive only	* Contact provider for details
Microsoft	Microsoft Business Central	Send and receive	* Contact provider for details
Microsoft	Microsoft D365 Finance & Operations	Send and receive	* Contact provider for details
MYOB	MYOB Essentials(external link) eInvoicing - MYOB Business(external link)	Send and receive
MYOB	MYOB AccountRight(external link) eInvoicing - MYOB Business(external link)	Send and receive	eInvoicing is available if you're an AccountRight desktop user and have an online company file(external link)
New Zealand Post	Datam – eInvoicing(external link)	Send only
OfficeTorque	Peppol Plus		* Contact provider for details
Olympic	DX2(external link)	Send and receive	$ Free portal available
Oracle	Oracle Fusion Cloud ERP(external link)	Send and receive	& Requires integration with an Access Point provider * Contact provider for details
Oracle	Oracle Netsuite Oracle e-Business Suite	Send and receive Send	* Contact provider for details * Contact provider for details
Pacifictech	Sage 300 eInvoicing(external link)	Send and receive
Pacifictech	Sage Intacct eInvoicing(external link)	Receive only
Pagero	Pagero Network(external link)	Send and receive	$ Free portal available
Payreq	Payreq Delivery(external link)	Send only
Payreq	Payreq MyBills(external link)	Receive only
Pegasus	Pegasus Edge(external link)	Send only
Pronto	Pronto	Send and receive	* Contact provider for details
Reckon	Reckon One(external link)	Send and receive
SAP	SAP Ariba(external link)	Receive only
SAP	SAP Business ByDesign(external link)	Send and receive
SAP	SAP ERP Central Component(external link)	Send and receive
SAP	SAP Invoice Management by Open Text(external link)	Receive only
SAP	SAP S/4HANA(external link)	Send and receive
SAP	SAP S/4HANA Cloud(external link)	Send and receive
Steltix	Steltix eInvoicing Automation for JD Edwards(external link)	Send and receive
TechnologyOne	eInvoicing(external link)Getting Ready for eInvoicing(external link)	Send and receive	& Requires integration with an Access Point provider
Thomson Reuters	OneSource		* Contact provider for details
Tungsten Automation	e-invoice Connect(external link)	Send and receive
Unimarket	Unimarket eProcurement+(external link)	Receive only
Unit4	Enterprise software: ERP, FP&A, HCM – Unit4(external link)	Send and receive	& Requires integration with an Access Point provider
Uxtrata	RC – UxtrataRC(external link)	Send and receive
Workday	Workday eInvoicing powered by Pagero (external link)	Send and receive
Xaana	Enigma2.0(external link)	Send and receive
Xero	Register to receive eInvoices – Xero Central(external link)	Send and receive
Xtracta	Xtracta Peppol eInvoicing(external link)	Send and receive

eInvoicing Access Point providers

.

Provider	Country	Details
Ademico Software Ademico Software(external link)	Belgium	AP and SMP services With our REST API you can directly from your ERP system: Send and receive invoices and other documents Register companies on the Peppol network.
B2BE NZ Pty Ltd B2BE NZ Pty(external link)	New Zealand	AP and SMP services
B2Brouter B2Brouter(external link)	Spain	AP and SMP services B2Brouter is a tool accessible to everybody, from self-employed individuals to large companies. Case study: B2Brouter use cases(external link) — B2Brouter
Basware Corporation Basware Corporation(external link)	Finland	AP and SMP services Basware has been at the forefront of developing e-invoicing and e-procurement solutions, and continuously keeps track of the latest local requirements on a global scale.
Billit Billit bv(external link)	Belgium	AP and SMP services Billit is a global online invoicing platform.
Canon Business Services Canon Business Services ANZ(external link)	Australia	AP and SMP services Canon Business Services have been successfully implementing Accounts Payable solutions across Australia and New Zealand since 2004.
cbs Corporate Business Solutions CBS Corporate Business Solutions(external link)	Germany	AP and SMP services CBS E-invoice world cloud solution is your secure “one stop compliance solution” with complete SAP integration and holistic project and support services.
CloudTrade CloudTrade(external link)	United Kingdom	AP and SMP services Data capture solution, whereby we receive business documents, extract information, enrich where necessary and post to the recipient.
Comarch S.A. Comarch SA(external link)	Poland	AP and SMP services Comarch e-lnvoicing is a comprehensive product that both streamlines and automates all of your AP/AR invoicing processes, enabling a secure and highly efficient document exchange with your clients.
Sandfield Crossfire (Sandfield Associates Limited)(external link)	New Zealand	AP and SMP services Crossfire by Sandfield is a registered PEPPOL Service Provider and Access Point. Crossfire takes care of the entire integration process including implementation, go-live, monitoring, hosting and support.
eCloud Business Services Pty Ltd eCloud Business Services Pty Ltd(external link)	Australia	AP and SMP services
Edicom Capital S.L Edicom Capital SL(external link)	Spain	AP and SMP services Edicom is a global EDI and eInvoicing SaaS provider with its headquarters in Europe (Spain). Case study: Edicom business case(external link) — Edicom
Esker S.A. Esker NZ(external link)	France	AP and SMP services Esker is a worldwide leader in AI-driven process automation software, helping financial and customer service departments digitally transform their procure-to-pay (P2P) and order-to-cash (O2C) cycles.
Havi Technology Pty Ltd Havi Technology Pty Limited(external link)	Australia	AP and SMP services We can connect your ERP to a single, standard system for e-invoicing and paying in one format. This makes invoicing simpler for you and it makes payments simpler for your customers.
Hitachi Energy Australia Pty Ltd Hitachi Energy(external link) (formerly ABB Power Grid)	Australia	AP and SMP services The Axis Cloud Collaboration Platform provides electronic solutions for supply chain procure-to-pay, contractor work management and electronic catalogue.
HQengine Pty Ltd HQEngine Pty Limited(external link)	Australia	AP and SMP services HQEngine is an Australian independent specialist company offering Digital Spend Management and eInvoicing solutions and services operating our own ATO certified PEPPOL Access Point.
IBM Corporation IBM Limited(external link)	United States of America	AP and SMP services IBM Peppol is a configurable option of IBM Sterling Supply Chain Business Network, a trusted, scalable business-to-business network that helps automate and orchestrate your supply chain processes.
Innovate NZ Business Intelligence Limited(external link)	New Zealand	Unlock the power of automation as our advanced technology accurately analyses and extracts vital information from your documents, delivering them effortlessly through the IDESaaS accredited access point for a secure, fully automated e-invoicing service.
INPOSIA Solutions GmbH INPOSIA by Avalara(external link)	Germany	AP INPOSIA as a PEPPOL access point connects you to the OpenPEPPOL network, including Australia and New Zealand, and exchanges data securely.
Link4 / LinkF Link4(external link)	Singapore	AP and SMP services Link4, a global eInvoicing leader since 2016, is registered as Link4 NZ LTD with a dedicated New Zealand team. As an accredited Peppol provider that supports most ERP systems, Link4 enables secure, compliant eInvoicing for public and private sectors, offering seamless ERP integration and extensive expertise in New Zealand’s regulatory landscape. Case study: Link4 case study [PDF 3.39 MB](external link) — Link4
LUCA Plus LUCA Plus(external link)	Australia	AP and SMP services
MessageXchange MessageXchange(external link)	Australia	AP and SMP services MessageXchange is a multi-tenanted cloud B2B/B2G/G2G integration service. Our functionality enables our clients to become Peppol e-invoicing enabled and beyond. Case study: MessageXchange case studies(external link) — MessageXchange
OpenText Open Text New Zealand Limited(external link)	United States of America	AP and SMP services OpenText is an experienced global Peppol provider; we are an Access Point, a technology provider, and a subject matter expert.
OZEDI Holdings Pty Ltd OZEDI Holdings Pty Ltd(external link)	Australia	AP and SMP services OZEDI is proud to be a market leading accredited Peppol Access Point for eInvoicing in Australia and New Zealand. Case study: OZEDI's Assurity Consulting e-Invoicing solution | Case Study(external link) — OZEDI
Pacific Commerce Pty Ltd Pacific Commerce(external link)	Australia	AP and SMP services Pacific Commerce is a long-standing Alliance Partner of GS1 Australia, GS1 New Zealand and GS1 Malaysia.
Pagero AB Pagero AB(external link)	Sweden	AP and SMP services Pagero is a leading global eInvoicing provider, working with key NZ companies and government departments to ensure compliance and financial process automation. Case studies: Atherton case study(external link) — Pagero AB Hewlett Packard case study(external link) — Pagero AB
Payreq Payreq Pty Limited(external link)	Australia	AP and SMP services
Power Business Services Limited Power Business Services Limited(external link)	New Zealand	AP and SMP services
SAP SE SAP SE(external link)	Germany	AP and SMP services SAP Document and Reporting Compliance, cloud edition is our leading-edge cloud eInvoicing solution that can co-exist and extend upon your current SAP ERP systems without major process disruptions.  Only available to existing customers.
Saphety Level – Trusted Services SA Sovos Saphety(external link)	Portugal	AP and SMP services Sovos Saphety is a leading company in solutions for electronic documents exchange and electronic invoicing amongst companies. Currently, our client portfolio has over 10,000 companies and over 190 thousand users throughout 52 countries.
Seeburger AG Seeburger AG(external link)	Germany	AP and SMP services
SNI Teknoloji Hizmetleri A.S SNI Teknoloji Hizmetleri AS(external link)	Turkey	AP and SMP services SNI’s SAP AU-NZ e-Invoicing solution is an SAP add-on for creating and exchanging electronic invoices between trade partners, including public entities, organizations, and individuals.
Spend Console Pty. Ltd. SpendConsole(external link)	Australia	AP and SMP services SpendConsole is a proven AI-Powered, PEPPOL enabled AP Automation solution - offering business guaranteed outcomes with its multi-channel Supplier portal, Intelligent Invoice Validation and Robust Integration features. Case study: TAFE NSW(external link)  — SpendConsole
SPS Commerce SPS Commerce(external link)	Netherlands	AP At SPS Commerce, we help companies of all sizes achieve their digitalization goals. Our cloud-native FLOW Partner Automation platform is designed to completely eliminate paper from the supply chain. Case study: Our customers(external link) — SPS Commerce
Storecove (Datajust B.V.) Storecove(external link)	Netherlands	AP and SMP services Send e-invoices from anywhere to anywhere. Peppol Access Point, DBNAlliance Access Point, Cross-Border E-invoicing, CTC Compliance, RESTful JSON API. Case studies: Department of the Prime Minister and Cabinet(external link) — Storecove xSuite(external link) — Storecove
Suma Technology Services LLP Suma Technology Services(external link)	India	AP and SMP services Suma Technology Services LLP is a specialized eInvoicing technology provider. Instead of reinventing the wheel, leverage our certified eInvoicing engine as best-of-breed components to complement your invoicing platform. You focus on what you do best, while we manage the eInvoicing compliance expertise for you.
Tickstar AB Tickstar from Xero(external link)	Sweden	AP and SMP services We are NZ’s most popular provider with over 90% of all NZBNs registered for eInvoicing using Tickstar. We support Xero, New Zealand’s largest telco, largest IT solutions provider and all businesses using Xero. Case studies: Datacom case study(external link) — Tickstar Spark case study(external link) — Tickstar
Tradeshift Belgium / Babelway Tradeshift Belgium S.A(external link)	Belgium	AP and SMP services Tradeshift is a market leader in e-invoicing and accounts payable automation and an innovator in supplier financing and B2B marketplaces.
Tranzsoft Group Ltd Tranzsoft Group Limited(external link)	New Zealand	AP and SMP services Tranzsoft Group is a leading developer of software technology designed to improve business.
Tungsten Automation  Tungsten Automation(external link) (formerly Kofax)	Sweden	AP and SMP services Tungsten e-invoice Connect (FKA) Kofax Invoice Portal provides a global electronic invoicing exchange network, that enables organizations to securely share invoice data electronically. E-invoice Connect helps both AP and AR teams streamline and digitize manual invoicing processes.
Unifiedpost Group Unifiedpost Group(external link)	Belgium	AP and SMP services At Unifiedpost Group, our mission is to make business easy and smart by helping organisations build strong digital connections with their customers and suppliers.
Valta Technology Group Pty Ltd  Valta Tech(external link)	Australia	AP and SMP services Our Peppol Access Point solution helps businesses and technology providers to seamlessly get connected to the Peppol network and enable automation in their Accounts Receivable and Payable processes. Case study: Valta Tech case studies(external link) — Valta Tech
VAT IT Processing (Pty) Ltd eezi(external link)	South Africa	AP and SMP services eezi – Powered by VAT IT is a cloud-native, ERP-agnostic e-invoicing and tax compliance platform. It ensures seamless integration, real-time validation, digital signatures, and automated error handling — keeping you compliant, audit-ready, and prepared for NZ’s evolving framework.
WiseTech Global Limited CargoWise(external link)	Australia	AP and SMP services CargoWise integrates enterprise-grade accounting with logistics, managing costs, revenues, profits, and cash while handling tax, classification, and e-invoicing. It enables faster invoice clearance, reduces errors, and now supports Peppol. Function provided – Access point and address capability lookup eProcurement documents supported: A-NZ invoice extension A-NZ Self-Billing extension Credit note Invoice BIS billing 3.0 Invoice Response Message Level Response.
Xaana Pty Ltd Xaana Pty Ltd(external link)	Australia	AP and SMP services Xaana’s Turium Enigma 2.0 offers a comprehensive Inteligent Invoice Automation solution with an AI-driven eInvoice connector and OCR scanning for AP, AR, Purchase orders and contracts management.
Xero Limited Xero(external link)	New Zealand	AP and SMP services Available in-product, free of charge for Xero customers with Business Edition subscriptions. For non-Xero Customers including Enterprise or software providers, refer to Tickstar from Xero Access Point.
Xtracta Limited Xtracta Limited(external link)	New Zealand	AP and SMP services Xtracta provides a turnkey solution for document data extraction and e-invoicing. Designed for tight integration into all types of ERP, accounting and other business software systems, Xtracta provides a scalable way to offer document data extraction and e-invoicing inside of any software.

Software developers’ information

NZ Peppol eInvoicing Ready criteria

eInvoicing Ready software products are end-user products that can send and/or receive invoices via a New Zealand accredited access point, using the A-NZ extension to the Peppol specification.

To promote interoperability, we assess whether eInvoicing sending products can send the data fields outlined in the link below:

1. Payment due date
2. Seller GST identifier
3. Seller contact email
4. Buyer contact email
5. Payee financial account
6. Item description
7. Reference numbers (Purchase Order, Buyer Reference, Contract, Project, Tender)
8. Remittance information
9. Invoice attachments
10. Invoice note.

Resources:

• A-NZ Peppol BIS 3.0 standard on GitHub
• Industry Practice Statement – Invoice content download page on GitHub

Bootstrapped CPC rule of thumb: ARPU/25

Mike's Notes

Ajabbi is a bootstrapping social enterprise, but the useful measures outlined in this excellent article still apply.

Resources

• https://longform.asmartbear.com/bootstrapped-cpc/

References

• Reference

Repository

• Home > Ajabbi Research > Library > Subscriptions > A Smart Bear
• Home > Handbook > 

Last Updated

09/07/2025

Bootstrapped CPC rule of thumb: ARPU/25

By: Jason Cohen

A Smart Bear 01/07/2025

In the first year of business, you have no data for decision-making.

Even after the first hundred customers, half of those were serendipitous one-offs, not representative of repeatable, predictable customer acquisition, and the scale of the data isn’t statistically significant.

One of the fundamental data-driven questions (but you don’t have data) is: What’s the maximum I should bid for CPC (cost-per-click) campaigns like Google AdWords?

The answer for a funded startup is “Bid as much as possible, to get as many customers—and data!—as you can, as quickly as you can, then rapidly iterate from there in the presence of that data.”

That’s a smart use of money: To “pay to find out.” But what about a bootstrapped, profit-driven business? You don’t have that budget, and you’re keen on getting a reasonable return on investment reasonably quickly.

Here’s my way.

(Tune the exact numbers if you disagree with my assumptions!)

LTV = ARPU x 20

ARPU (Average Revenue Per User) is the amount you charge the average customer every month, which is typically a mixture of different quantities of customers at different tiers, special add-ons, etc..

LTV (Life-Time Value) is the total amount of money you expect to collect from a customer over their entire tenure. A simple version [1] is ARPU ✕ [expected months] meaning the average number of months a customer sticks with you.

[1] The correct version also includes multiplying by Gross Profit Margin, i.e. the cost to serve customers, which for SaaS is tech support, server infrastructure, and payment fees. You should include this for a more accurate calculation; small bootstrapped companies often have very high GPMs, so ignoring it for this back-of-the-envelop calculation was simpler.

Some customers cancel in one month, some cancel in a year, some in five years, and some never cancel! So it can be difficult to compute LTV accurately for small companies, and impossible to know for young companies (where five years hasn’t elapsed yet to see how many customer stuck it out that long). These are among the reasons that I dislike the LTV metric, but it’s common to use it in this context.

If you do have data, the simplistic calculation is [expected months] = 1/c where c is your monthly cancellation rate.

But since you don’t, in my experience (and in a non-scientific survey of some of the 100 startups currently officed at the fabulously Capital Factory co-working space in Austin), a good pre-data rule of thumb is 20 months.

If you have an average customer lifetime smaller than 20 months (i.e. cancellation rate higher than 5%/mo), that’s a dangerously high cancellation rate for almost any SaaS business, and you need to focus on addressing the business issues before acquiring more unsatisfied customers. Use surveys and one-on-ones to try to understand whether it’s technical failings, lack of features, missed expectations, bad service, doesn’t hit pain points, or what.

A healthy SaaS company will have a higher number of expected months, but at the start you also will have lots of mis-steps with weird early-adopters and non-ICPs where your product is at its worst—least features, least quality, etc—so it’s good to assume a low LTV instead of inflating it to where it might be in future.

CAC = LTV / 5

CAC (Cost to Acquire a Customer) is your average total cost to get a new customer, which includes direct costs (AdWords spend, affiliate payouts, the fees your affiliate system charges to process them) and indirect costs (consultants and your own time). So to compute CAC, take your total costs to acquire new customers and divide by the number of customers you acquired.

In general of course CAC needs to be less than LTV, otherwise it costs so much to get the customer that you will never make money. A surprising number of startups have CAC > LTV. Many justify this either by not correctly computing CAC (e.g. ignoring indirect costs) or saying they’ll “fix that later” by raising prices or finding other channels of revenue. Others justify by saying they’re doing a “land-grab” for customers, and just having a customer at all has intrinsic value.

Profit-seeking bootstrapped companies cannot afford those delusions. Also you need something far stronger than CAC = LTV, because you need to pay for other business expenses and still produce a profit. So how big can CAC be before it’s “too big?”

Growing, funded SaaS companies who treat CAC with respect often commonly target CAC = LTV / 3.

Back at my second startup IT WatchDogs, my co-founder Gerry Cullen used to say “A third to built it, a third to get rid of it, and a third to keep,” meaning a third of revenue goes to pay for hardware/inventory/shipping costs of the sale, a third goes to what I’m calling “CAC” here, and a third for the overhead costs, development costs, and profit.

That’s a good model, and I think a bootstrapped company can copy it, but I urge profit-seekers to instead adopt an even more strict model of CAC = LTV / 5. The reason is that at the start you should be able to find a few efficient ways of acquiring customers, even if those get saturated over time.

CAC = ARPU x 4

If you combine the previous two results, you see that the cost to acquire a customer should be no more than four months of revenue.

Another good way to think about it is: “The payback-period for my cost to acquire a customer is four months.” Also, ideally you’re getting the first month of revenue back immediately, so it’s really three months of cash-float.

Companies with large budgets to deploy at scale will often be happy with 12 month payback periods; some very high volume businesses like shared hosting will accept 24 or 36 months! But a bootstrapped company’s cash-flow won’t allow it, even if the math would work in the long run.

Conversion Rate = 1%

Conversion Rate is the percentage of visitors to your website who convert to a paying customer.

This is another step which in practice should be completely data-driven, segmented by customer type and marketing channel, segmented by landing page, A/B tested and iterated, blah blah blah. But since you don’t have data, and you don’t have enough visitors to have real ratios, you have to take a swag at this number.

In that same informal survey I ran, and bolstered by other formal surveys, a huge number of bootstrapped SaaS companies report a 1% conversion rate.

Another way of saying the same thing is “You need 100 visitors to make 1 sale.”

And since you need to incur no more than CAC dollars in the making of that sale, you need to incur no more than CAC/100 dollars in the making of each of those visitors.

And if you’re running a CPC campaign, that means you can pay up to CAC/100 dollars per click.

And since CAC is ARPU x 4, we can substitute and get the end result:

CPC = ARPU / 25

So for example if your average customer generates $50/mo, you can spend $2/click.

Indeed, this is a great way to prove one of my main arguments for all bootstrapped companies, which is that you should charge a lot more than you think, in part because it enables you to pay quite a lot per click, which enables a wide number of marketing channels, and out-bidding parsimonious competitors whose paltry LTVs preclude them from competitive marketing spend.

Customized

“But my numbers are different!” Of course, but now you have a formula you can plug them into, to arrive at the answer:

CPC = (ARPU) r/5c

Where:

• c = monthly cancellation rate
• r = visitor → purchase conversion rate from the paid marketing source in question

Innovation Accounting in Practice

Mike's Notes

Ajabbi is a bootstrapped not-for-profit startup. Which is a tough way to go. Innovation accounting will help. I had an online meeting earlier this year with Tristan Kromer, and I gained valuable insights from him. Kenny was originally a musician.

The Kromatic resources are testable and strongly maths-based. They also don't make a fetish of Business Canvases like the innovation theatre crowd. The focus is on finding tools that are actually useful in a specific context. If they don't quite work, tweak them so they do, or invent one.

The Monte Carlo simulation is fantastic.

Ajabbi will pay for support from Kromatic once it has the financial resources. 

Resources

• https://kromatic.com/blog/innovation-accounting-in-practice/
• https://kromatic.com/blog/what-is-innovation-accounting/
• https://innovationmetrics.co/innovation-accounting-the-failure-of-the-business-case/
• https://kromatic.com/innovation-resources/product-market-fit-storyboard
• https://kromatic.com/innovation-resources/financial-modeling-template
• https://www.palisade.com/risk/monte_carlo_simulation.asp
• https://innovationmetrics.co/innovation-accounting-ranges-are-key/
• https://kromatic.com/innovation-resources/financial-modeling-monte-carlo-analysis-basic-example
• https://innovationmetrics.co/how-to-measure-innovation-teams-with-tristan-kromer/
• https://innovationmetrics.co/innovation-accounting-innovation-funnel/

References

• Reference

Repository

• Home > Ajabbi Research > Library > Subscriptions > Kromatic
• Home > Handbook > 

Last Updated

27/06/2025

Innovation Accounting in Practice

By: Tristan Kromer & Elijah Eilert

Kromatic: Copied 25/06/2025

It is not enough to say, “We’re early stage and we shouldn’t focus on a business plan or metrics.” It is not enough to say, “We’re focusing on qualitative data.” And it is certainly not enough to say, “We’ll figure out how to monetize later.”

As an early-stage venture, you don’t need a business plan, but you do need a business model from Day Zero.

You don’t need a financial plan projecting cash flows 4 years out, but you do need a financial model on Day Zero.

Pointing to examples like Twitter and Facebook and how they found their financial model much later is not a good excuse. Even social media products have clear metrics that they measure in the early stages. Social media and game companies count on the fact that they are acquiring a user’s attention and data, and those are valuable assets that can be quantified and monetized later. But we can measure the user’s attention and willingness to relinquish data right away.

Social media companies are similar to a mining operation. If you were digging up gold from a mine shaft, no one would complain that you didn’t have a detailed plan and metrics to sell it in the market. We know gold is valuable and we can figure out how to sell it later. The value is clear. We just need to know if there is gold down there and how much.

To say, “we’re an early-stage mining operation and we don’t need to focus on a business plan or metrics,” would be an absurd statement. We can quantify how deep, far, and fast we’re digging. We can quantify the mineral content of the soil and the geology of the area. No one would accept the qualitative data of a dowsing rod to make a serious mining investment.

Startups, more than ever, should start with a hypothesis-driven financial model from Day Zero. That is why we use innovation accounting.

In the last article, we discussed why standard business cases don’t work in an innovation context, and the three principles we need in order to replace the standard business case with something better. In this article, we’ll go through how to actually do it. Using innovation accounting, we can build a financial model that is accurate, true, and testable.

How to Solve the Problem

To implement innovation accounting for an early-stage project we need to:

• Identify assumptions
• Construct a visual model
• Build a hypothesis-driven financial model
• Integrate uncertainty

Four steps innovation accounting method

1. Identify Assumptions

step one - innovation accounting method

There are a ton of assumptions that we make when starting a new innovation project. Fortunately, there are a number of different templates and frameworks that capture those assumptions, such as the business model canvas and customer personas. But none are as useful to innovation accounting as a Storyboard.

A storyboard, similar to a user-journey map, maps each step of the user journey from start to finish. This includes hearing about the product or service, actually using it, renewing their subscription, inviting friends, or simply finishing their use and throwing it in the trash.

Storyboards can be used to organize our assumptions into a clear series of actions that the user must take in order for us to both provide value and capture the revenue (or impact if you are a non-profit organization.) The advantage of a storyboard is that it represents observable moments that we can measure. Frame to frame, step to step, each moment in the user journey transitions into another — and we can measure that conversion rate from moment to moment.

If the first step of the story is downloading an app, and the second step is signing up for an account, that is a conversion rate we can measure — the % of people who sign up for an account after downloading the app. If the next step is applying a filter to a photo, then we can measure the % of users that apply a filter. From qualitative data about what the customer wants (to take beautiful pictures) we can map out our ideal story to deliver that value on quantitative metrics.

Even from Day Zero with just a nascent idea, we can create the step by step measurable process by which a person becomes a customer. We may not know the actual conversion rates, but we know what we need to estimate and measure. From there, it is tempting to go straight to a spreadsheet, but sometimes a quick detour will help.

2. Visual Business Model

step two - innovation accounting method

Once you have the basic story down, it’s useful to abstract this into a visual financial model. This really is the same thing as a storyboard where the user’s journey from acquisition to purchase is mapped out. However, we will want to simplify some aspects and include retention (if and how customers buy again) and virality (if and how customers refer their friends to become new customers) which are often left out of the storyboard.

A storyboard or user-journey map is often too detailed for what we need in our financial model. We don’t need to know what % of users apply a filter to a photo, we need to know how many users upgrade, stick around after four weeks, or purchase something so we can zoom out to the bigger picture and only use the most critical metrics that signify important progress towards our business model.

Startup Metrics for Pirates is a widely adopted framework with the right level of simplification for the purposes of innovation accounting. The five components of this framework are Acquisition, Activation, Revenue, Retention and Referral (AARRR, hence the pirate name.)

Acquisition (getting a user to your service or product), Activation (getting the user to have a great first experience and recognize the value), and revenue (getting the user to pay something) should already be on your storyboard. It is only a matter of identifying the step in the storyboard that represents the critical points in your business and thus represent the most useful metrics. This simplified, three-step user journey is often represented as a vertical funnel (although representing it horizontally makes no difference).

However, Retention and Referral are usually not included. That’s just because a storyboard or user-journey map are typically linear. Assembled with yellow sticky notes, it’s hard to represent retaining a customer or referring a friend (although we’ve seen some creative uses of blue sticky tape). But with a journey simplified into a shorter conversion funnel, loops can be more easily added to show where a user retains or refers a friend from a later stage (such add Revenue) back to Acquisition.

With an easy-to-understand visual model and these last two Pirate Metrics in place, we’re ready to make the leap to a spreadsheet.

3. Hypothesis-Driven Financial Model

step three - innovation accounting method

A hypothesis-driven financial model sounds complex, but it is not. It can and should be as simple as your visual model. Each step can be converted into a row in a spreadsheet, starting with Acquisition for the top line to represent the consistent number of organic visitors to your website or storefront.

However, unlike a traditional financial model, the number of visitors is not guessed from month to month and hard coded. Instead, a single assumption sets the number for that variable, and a formula varies the value from month to month in the spreadsheet. That way, if the assumption turns out to be wrong, changing a single cell in the spreadsheet will correct it throughout the model.

Each subsequent row applies the same logic as the visual model. The % of visitors that activate in your user journey becomes a variable that is held constant from month to month, changing visitors into users. The next row might convert users into paying customers who have taken a trial of your product and decided to buy based on another variable, the % of customers who purchase after trial.

Referral and Retention loops require a bit more thought as they impact Month 2 based on Month 1, but still only require a couple of additional rows of calculation.

With minimal effort – most teams take 1-2 hours to do this under guidance – a simple spreadsheet is constructed which is driven by a few variables. Those variables can be updated as more information is available.

Of course, this is a wild oversimplification. But with startups, start simple. We can add complexity over time.

With a tech startup, we often don’t even model costs on Day 1 because user growth might be all that matters for a social media app or game. However, costs can be introduced and more complexity added as the company grows.

This basic model allows us to do some basic scenario testing. We can immediately start testing out different acquisition and retention rates to see what the impact on our growth will be. We can even set certain conditions our business must reach in order to meet our growth targets.

With a limited number of variables, we can see that if our actual retention rate falls below 20%, our referral rate must increase accordingly if we are to continue to grow. This sort of scenario analysis is basic, but effective for helping early-stage innovation tests set pivot-or-persevere thresholds for their business and start designing tests to establish the actual numbers.

Although entrepreneurs can dictate the shape of their business model, reality will ultimately dictate what numbers go into the variables.

Here is a financial modeling template for startups if you would like to try it out.

4. Integrate Uncertainty

step four - innovation accounting method

Lastly, we have to integrate uncertainty.

Although the basic hypothesis-driven financial model allows us to play around and try out different scenarios, it doesn’t actually tell us what is going to happen or the likelihood of success. But we can do this if we get a little data and integrate uncertainty.

Statisticians have a few tricks we can adopt here. Hurricane forecasts, baseball games, and even startups can use a technique called the Monte Carlo Method to predict outcomes based on uncertainty.

Instead of entering a single number into each of our variables, we enter two numbers to represent the range and a distribution curve which tells us the likelihood of any individual outcome within that range. This is not easy.

For example, I may not know the outcome of rolling two six-sided dice and adding the numbers, but I know for certain that it is between 2 and 12. It’s most likely that it’s 7, but 50% of the time the number will be between X & Y.

We can make the same estimations with our business model variables. We may not know what price the customer is willing to pay, but we should be able to say that they will pay between $10 and $100. That’s all the information we need to start building a Monte Carlo simulation.

The math behind choosing the right distribution curve is tricky, and the art of choosing the right range requires a bit of training. But both can be accomplished with a little effort. Building the right spreadsheet is even more complicated, but more and more tools are being created that allow teams to run Monte Carlo simulations right in their spreadsheet or in a specialized application.

Here is a Monte Carlo simulation example if you would like to try it out.

In practice, this means that innovation teams and executives can create go / no go criteria for their pivot / persevere decisions. You want your project to be at least 10% likely to reach 1B in revenue? The Monte Carlo simulation can tell you if your project has reached that threshold. If not, you can stop the project with confidence that it would not achieve your goals and move on to test the next idea.

The output of the Monte Carlo simulation is a chart that shows a range of possible outcomes at any given point in the future and allows you to calculate the likelihood of any individual outcome.

Lessons Learned

This process is repeatable and is applicable to all types of business models. It doesn’t matter if it’s B2B, B2C, B2G, a network, a platform, or anything else not yet invented. Building a model from Day One allows innovation projects to make better decisions, make useful predictions, and demonstrate real progress to stakeholders.

Start by:

• Identifying assumptions
• Constructing a visual model
• Building a hypothesis-driven financial model
• Integrating uncertainty