Will QuickBooks Be Your Accounting Software Next Year?

Larry Myler for Forbes writes:  I just got back from QuickBooks Connect, the first ever Intuit conference for the entire QuickBooks ecosystem , including small business owners, accountants and app developers. I attended the conference because I wanted to assess the relevance of this 30-year-old company in the age of the cloud. Given the current wave of disruption in the small business accounting space, the big question many are asking is: Will QuickBooks continue to be the dominant accounting software for the SMB market? Here’s what I found.

Desktop vs. Cloud and Mobile

Much of the recent disruption that has resulted in the overthrow of market leaders is generally due to a dominant player’s lack of ability, desire or urgency to disrupt itself before competitors can. The tech company graveyard is littered with the corpses of companies whose complacent and even clueless leaders stood idly by while hungry upstarts ate their lunch with cloud-based, mobile replacements of legacy applications. But Intuit has not been guilty of this kind of sluggish response to the SaaS phenomenon. It first launched the online version of QuickBooks in 2000, after a two-year development cycle. While the level of functionality was initially not on par with the desktop version, those discrepancies are almost all resolved, and several aspects of the online version now surpass desktop function. In 2009, Intuit doubled its online product investment, followed closely by heavy investments to make QuickBooks Online accessible on mobile devices.

Intuit’s Achilles’ heel in its transition from desktop to cloud is the inherent disadvantage of being the long-established leader. New competitors start with a clean slate while Intuit migrates from an older platform to a newer one. But Intuit has been here before—moving from DOS to Windows to IOS to mobile. Platform shifts should be a routine part of a technology company’s long-term strategy. So far, Intuit has managed these transitions well.

Many current and new users will be happy with the desktop version of QuickBooks for some time to come, and others will start with or migrate to the cloud. Intuit supports either choice. Tayloe Stansbury, Intuit’s CTO, is clear about his dedication to both current and future customers. “We will continue to offer desktop as long as there are users who want it—and we’ll continue to invest in it. That said, we’re committed to the enhanced collaboration, better workflow, and more frequent upgrades we can deliver to QuickBooks Online users.”

Earlier this year QuickBooks Online sales surpassed desktop sales for the first time, marking a new and probably permanent trend. Intuit has brand recognition, access to capital, and a sense of urgency, so it may be difficult to beat at the game it has played so well for so long.

While attending the conference in San Jose I observed other factors that may prove to be even more important to Intuit customers and prospects than the question of cloud or mobile access.

Customer-Centricity

Customer focus is paramount in the decision to buy from and stay with any vendor. Intuit CEO Brad Smith is quite passionate about why his company does what it does, and for him it’s all about the customer. He has a vision of customer outcomes that would transform the larger economy if realized, and he’s suggesting that QuickBooks can be a catalyst for that change. “If the average small business could raise their profit margin by just 2.5%, that would generate an extra $500 a month for every small business, and that would add over $300B directly to all of our local economies,” declares Smith. “If one out of three small businesses could hire just one more employee we would totally eliminate unemployment in the United States. And if we could increase the survival rate of small companies by 5% over the next decade we would see another quarter-million small businesses create 5M new jobs, and that’s more jobs than have been created in the entire economy over the last several years.”

Hmm. Making more money, growing, and staying in business…all outcomes entrepreneurs want , and Smith is wise to sell the hole and not the drill. Small business owners enjoy getting paid quickly, but don’t want to be bothered with the complexities of creating, sending and collecting invoices. They want to have a record year of sales without having to spend days documenting those activities for accountants. In short, owners want the benefits of entrepreneurship without the attendant accounting hassles. “Our goal is to make accounting invisible and painless for small business owners,” vows Smith. “And as a thirty-year-old startup, we’re just beginning.”  [snip]/ the article continues @ Forbes.com, click here to continue reading....

Xero Invests in Customers' Success With New Xero U Customized Learning Environment

Xero U Gets Accounting Professionals and Small Businesses Up and Running Quickly on Xero Accounting Software With Role-Based "Right-for-You" Educational Content

Xero, a global leader in online accounting software, today launched its new Xero U customized learning environment for accounting professionals and small businesses.

Xero U, the company's education hub, now offers "right-for-you" educational content on how to use Xero that is focused on the job or role that people do -- whether they are an accountant, bookkeeper, advisor, small business owner or financial staff. To learn more, visit Xero U at: https://www.xero.com/us/training/

This new customized learning approach is key to Xero's strategy of putting education at the center of the Xero experience. The company is committed to offering high-quality educational videos, webinars and events that give small businesses and accounting professionals the exact information they need -- when they need it -- to run, grow and thrive with Xero and beyond. 

"We're investing heavily in education so that we can teach our customers how to be even more successful in their jobs using Xero as a tool," said Amy Vetter, Xero's Global VP of Education and Enablement. "Up until now, practice owners have struggled to find the training path that is right for the different functions in their firm or business. Xero U will now allow them to find the educational content tailored to their exact role so they can take their knowledge to the next level in a way that is efficient and rewarding."

Right-for-You vs. One-Size-Fits-All EducationOther companies offer a one-size-fits-all approach that often leads with the product and technology and not the specific needs of the business or individual. Xero is offering a fresh approach based on a person's specific job or role. In so doing, the individual can quickly get the information needed and get back to work.

"I love the new role-based training in Xero U because there are so many things about Xero that you can use but they aren't relevant to everyone," said Cristina Garza, founder and chief number cruncher at Accountingprose, a bookkeeping and payroll services firm that serves startups from its co-working office locations in Phoenix and Denver. "I just had a new bookkeeper start on Monday. I can now make sure he gets the exact information he needs for his job without wasting time checking off boxes and digging through content designed for a CFO. And this means that I can get him out there faster working with clients."

Xero created Xero U's new customized learning approach based on customer feedback. By listening and talking to thousands of small business owners and accounting professionals, Xero created courses, content and the delivery methods to suit their needs. Customers can customize their experience with video, webinars and self-paced learning, and live events. 

"And this is just the beginning. As a company, we're focused on offering small business owners and accounting professionals even more customized content to help them succeed -- whether it be Xero product specifics or tips and trends on a variety of other topics that keep them up at night," added Xero's Amy Vetter.

To find accountant, bookkeeper, financial advisor or small business training, go to Xero U to learn more.

Tax Aspects Of Foreign Ownership Of US Residential Real Estate

Stuart T. Freeland for Rackemann, Sawyer & Brewster PC writes: Representation of foreign individuals who wish to purchase US residential property should include careful attention to the manner in which the income and gain from the property will be taxed in addition to the other aspects of ownership. In addition, it is important to be aware of the manner in which the US imposes its estate tax on foreign owners.

The following considerations should be taken into account in order to determine how to achieve an ownership structure that will be most suitable for the client.

1. Involve Home Country Counsel in the Purchase.

The purchaser's home country counsel should be involved from the outset as the home country's tax laws may significantly affect selection of the most appropriate form of ownership. For some countries this may require including an offshore entity between a US entity as owner of the property and the owner in the home country in order to achieve the most favorable tax structure. However, inserting an offshore owner in this manner introduces expense and complexity that is best avoided if possible

2. The US Estate Tax must be Taken into Account.

Under existing law, the US estate tax is imposed at the death of foreign individuals owning US real property based on the entire value of the property that exceeds $60,000. Because many if not most foreign purchasers acquire valuable properties, this often discourages direct ownership by the individual purchaser or purchasers. (It is unlikely that the Congress will rush to provide more favorable treatment.) There are a number of forms of ownership that can be used to avoid the tax that have varying degrees of complexity.

A common ownership structure that will avoid the tax is ownership of the property by a US corporation whose shares are owned by a home country corporation or other entity that is not transparent to the beneficial owners for US tax purposes. The advantage of this structure is simplicity. The disadvantage is the US corporate tax rate of 35 percent and possibly disadvantageous tax treatment in the home country. The second level of tax on the distribution of the sale proceeds by the selling corporation can be avoided in almost all circumstances if the distribution is made in liquidation of the US corporation.

Direct ownership of the property by a foreign corporation to avoid the US estate tax is not advisable. The US imposes a 30 percent branch profits tax on the distribution of proceeds from the sale of US real property by a foreign corporation unless made in connection with the termination of the existence of the corporation and in compliance with a number of requirements set forth in applicable Treasury regulations. The branch profits tax due would be in addition to the capital gains tax imposed on the corporation in connection with the sale for which the rate is presently 35%. Also, as described below, any rental income from the property would be subject to a withholding tax of 30 percent that does not allow deductions for expenses incurred to operate the property.

The US estate tax can also be avoided if the real property is owned by a trust that is not treated as a grantor trust, which requires that the trustee be independent of the settlor, and the settlor must not have reserved a reversionary interest in the trust assets or specified powers set forth in applicable Treasury regulations. This structure may be appropriate where the property is expected to remain in the family when the parents are no longer enjoying it. The trust may be foreign or domestic. Other alternatives are possible; the key is to ensure that there is a blocker between the US ownership entity and the foreign individual or individuals that are the ultimate beneficial owners of the property.

3. Rental Agreements.

If the title to US property is held by a US corporation, there should be a rental agreement, which requires the foreign owners who control the corporation to pay a fair market rent for their personal use. Otherwise, the rental value of their occupancy could be treated as taxable income to them. It is likely that the cost of maintaining the property will produce offsetting deductions that will eliminate all or most of the taxable income generated from the rent.

If US property that is directly owned by a foreigner will be rented to third parties, it will be necessary to determine whether the owner will be treated as conducting a US trade or business and must therefore obtain a US taxpayer identification number and file annual US tax returns. (Most foreign individuals do not wish to become US taxpayers.) If the owner will actively manage the property, the rental is likely to be treated as a US trade or business. The rental may also be treated as a US trade or business if a managing agent engaged by the owner is authorized to operate the property in a manner that would be treated as a trade or business if conducted directly by the owner.

4. Withholding Requirements

The US imposes a withholding tax at the rate of 30 percent on the distribution of rental income from US real property to foreign owners. The tenant must withhold the tax and transmit the funds to the Service. Where the tax imposed on rental income is withheld and paid in this manner an income tax return is not required.

The US also imposes a 10 percent withholding requirement against the amount realized from the sale of US real property by a foreign owner that holds title to the property directly. The withholding can be avoided by obtaining a withholding statement from the IRS, which requires the seller to enter into an agreement with the Service that provides for payment of the tax and security for payment. This effort is likely to be time consuming and expensive. For that reason, most sellers allow the withholding to take place. The purchaser must withhold and transmit the funds to the Service. The seller must file a US tax return and either claim a refund or pay any additional tax due.

5. Reporting Requirements

Reporting requirements include information returns as well as income tax returns, and the penalties for failure to file these returns can be substantial.

6. Tax Treaties.

The effect of tax treaties between the US and the home country on the taxation of the owner must be taken into account. These treaties generally provide significantly more favorable treatment to owners who reside in a country with which the US has income and estate tax treaties. The US has income and estate tax treaties with most of the major countries of the world.

7. State and Local Taxes.The manner in which the owner will be taxed by the state and community in which the property is located, including state income and death taxes and local property taxes, should be taken into account.

Xero loses another top exec / in U.K. Xero has lost its United Kingdom sales manager to competitor Sage

Stuff.co.nz writes: Software company Xero has lost its United Kingdom sales manager to competitor Sage a month after the departure of its United States chief, Peter Karpas.

Sage, a British accounting software company listed on the London Stock Exchange, said on October 22 that it had hired Xero's national sales manager, Nick Longden.

The press release quoted Longden as saying he had been following Sage from afar.

"Sage is a fantastic brand and undoubtedly the leading provider of accountancy and bookkeeping software to small businesses in the UK. Now is a great time to be joining," he said.

Longden had been with Xero for two years, during which time its UK sales had grown significantly.

In an operating update this month, Xero said its UK customer numbers had risen 103 per cent in the past year to reach 61,000.

The UK is now Xero's third-largest market after Australia and New Zealand, on 158,000 and 119,000 respectively.

Commenting on Longden's move, Xero chief executive Rod Drury said: "It is a credit to our leadership position in the UK that Nick was approached by our competitor.

"Xero is the UK's leading online accounting provider, doubling to 60,000 online customers over the past 12 months."

Sage said at its interim results announcement in May that its Sage One small business accounting product had trebled its subscriptions in the UK and Ireland to 33,000 over the 12 months to March.

Xero rival poaches UK sales boss

Holly Ryan for the NZ Herald writes: Accounting firm Xero's main UK competitor Sage One has poached the company's UK Sales Manager, a month after the departure of Xero's United States chief executive Peter Karpas.

British accounting software firm Sage One has announced that Nick Longden has taken up the post as Sage One's general manager for the UK and Ireland, having been with Xero for two years.

In a release on Sage's website, Longden said he had been following Sage's success for a while before deciding to take up the role.

"As a champion of the software industry, I've followed Sage from afar and like many others, have had my own view of the company. Sage is a fantastic brand and undoubtedly the leading provider of accountancy and book keeping software to small businesses in the UK. Now is a great time to be joining," Longden said.

Xero chief executive Rod Drury saw the move as a compliment to the company, which he added had been doing well in the UK, and said he was happy for the departing Longden.

"It's pretty flattering, I mean you'd expect with the progress we're making in the UK for the incumbents to chase our staff, which they do all the time. We're big fans of Nick and we're pretty excited for him, he's a great guy. We see it as a compliment to us really," Drury said.

Longden, who had seen strong UK sales growth in Xero over his two years at the firm, said he was excited to be joining the firm.

Both Sage One and Xero have been seeing strong growth in the UK, with Sage One trebling its paid-for subscriptions to 33,000 over the year, according to figures released in March, and Xero more than doubling its customer numbers with growth of 103 per cent to 61,000 customers in the UK, and consistently strong growth seen over the last few years.

Drury said he was happy with the direction the company was heading, and said the Australian and UK markets were both gaining momentum, with the US following behind this.

"We're making good progress in getting strong US talent into the business and we've got a good team in the UK," he said. "With the appointment of people like Andy Lark, we're really putting in a strong team in the US now so things are going well."