Is Personal Finance Software all Tapped Out?

I am in favor of using software to make my life easier whenever it’s possible. I have already blogged my thoughts on bill presentment software, I have recently started thinking about whether all of the opportunities in consumer financial software have been exhausted. My recent (albeit somewhat dated) experiences with recent versions of Microsoft Money and Quicken lead me to believe that there might be a few other opportunities out there.

As somewhat who has used the latest versions of Microsoft Money (I will openly profess my ignorance of the latest version of Quicken), I feel that the product has so many features and functions packed into that it defeats its basic purpose. In my view, the purpose of personal finance software is to help individuals better manage their financial lives. The latest version of Microsoft Money appears to be more targeted for armchair CPAs or people with at least introductory accounting skills. There are two important things that could be done to make this product a lot more useful for the vast majority of folks:

Easy integration of web-based banking data – While Microsoft Money does allow me to import data from some of my financial service providers, it often imports the data with cryptic transaction numbers and requires a fairly painstaking process to reconcile Moneyese to an English-language description of the transaction and the appropriate categories.

Cash Tracking – Money is very good at tracking transactions done via credit or debit cards as these generate electronic paper trails. One of the most difficult challenges for someone looking to get a handle on his/her finances, however, is keeping track of cash expenditures. There ought to be a better way to do this short of keeping pockets full of receipts and manually entering them into Money on a post-hoc basis.

With the growing number of PDAs that have some flavor of wireless data access, why not allow users to log cash transactions on a personal register of some sort (we won’t even get into the possible challenges associated with a synchronization solution here — a simple register to jog one’s memory would suffice)?

Practical Advice for Everyday Consumers – Many of these packages give you great advice for complicated transactions such as buying a house, car, or boat or planning for retirement. While this is a great function to provide to users, there are some really really simple things that would be helpful for your average American. For example, how about a “Starbucks counter” that would tell an individual that he/she spent $150 on lattes at Starbucks this month and it might make sense to consider cutting back on that expenditure. Or a “late fee counter” that would tell an individual his/her aggregate spending on late fees, ATM fees, etc. These are little things that most people do not realize can make a real impact on their financial situation.

So what am I looking for in this space? I am looking for someone do to “Money Lite for the Web” for me. All I need is a simple program that will do some basic aggregation along the lines of what Yodlee was looking to do several years ago and to give me some simple analytics and analysis. If I am looking to plan for my retirement or buy a house, I will seek professional advice.

There are also a lot of other neat services that you could wrap around this concept. As someone who buys a lot of things online, it would be nice to have a centralized place where I could store all of my confirmation/receipts from the online merchants that I visit as I always have a devil of a time finding those things when I want to question a transaction or get customer support.

As a venture investor, however, the prospect of taking on two multi-billion dollar software companies is very scary. But at least we know there is money in personal finance software.