Friday, January 23, 2015

A new movement is disrupting traditional accountancy tools and techniques. AccountingWeb UK takes a look at how third-party add-on applications are being used by UK accountants.

John Stokdyk for AccountingWeb UK writes: A new movement is disrupting traditional accountancy tools and techniques. John Stokdyk takes a look at how third-party add-on applications are being used by UK accountants.
From tracking usage in our SSA surveys, we estimate that more than 50% of AccountingWEB members now run some kind of cloud accounting application.
The market is divided between three camps:
  • Local, independent software houses who made that fastest running in this country among start-ups and microbusinesses: KashFlow (now part of IRIS), FreeAgent, Clear Books, Liberty, Arithmo, etc 
  • European developers who developed cloud accounting tools and brought them to the UK: Twinfield (now part of CCH), e-conomic, Exact
  • Publicly listed, International developers who are aiming to capture a global market: New Zealand’s Xero, Intuit in North America, and the UK’s own Sage
Each of these groups has suffered their own surges and dips and while AccountingWEB’s figures show FreeAgent, KashFlow and Clear Books with the strongest camps among our members, the global trend, measured by Google in terms of headline interest over the past decade looks more like this (source - Google Trends; Quickbooks Online (red); Xero (blue); Sage One (yellow):
Google Trends - Xero v Quickbooks Online v Sage One
But that’s yesterday’s story. As we head into 2015, the information we are picking up on AccountingWEB is that with adoption rates for the core accounting engines experiencing steady, mainstream growth, the real breakthroughs are now happening among the third party cloud applications that connect into these systems.
New generation cloud firms
One of the clearest indications of the sudden rise in third party cloud applications came from entries to the 2014 Practice Excellence Awards, particularly in theinnovation and technology champion categories. Alongside several firms who were developing their own cloud accounting tools, there was a strong contingent of accountants who were deploying multiple cloud tools to meet the information needs of their both clients and their own firms.
Accountancy’s new wave was represented by the 2014 Practice Excellence Award winner for small firms and innovation, Tayabali Tomlin, along with technology champion nominees Jessica Pillow and Sharon Pocock.
All of these firms tell a similar story to that of Kinder Pocock, who explained: “Two years ago Kinder Pocock realised that online accounting software would become an essential part of business.
“We started using Xero in-house, and offering it to clients.  We immediately realised that Xero was efficient, interactive, easily accessible and easy to use for both the practice and clients. It also gave us a better interaction and relationship with clients… We can see clients’ live accounting data at any time.  This has saved us time, but has created major improvements in the advice and support we offer clients, including in-year tax planning advice, cashflow management.” 
Having made this breakthrough, the firm reviewed all its business processes and rebuilt them using online applications and add-ons, including:
  • Receipt Bank, which lets clients capture and send digital receipts and supplier invoices to Xero, via a photo app, email or even Dropbox
  • Spotlight Reporting for management accounts, cash-flow and forecasting. “We create reports showing actuals, budgets, variances, margins, comparatives, together with charts and graphs to visualise the data on tablets and smart phones.”
  • Practice Ignition - used to create online quotes, letters of engagement, re-engagement letters and requests for records
  • Xero Practice Manager - Once accepted online, jobs are created in its companion Practice Manager module, which triggers in Xero. “Time savings and client satisfaction have been improved greatly,” the firm reports
  • EchoSign (for digital signing), GoCardless (card payments) and Directli (direct debits)
The firm also seeks out solutions for clients including the online point of sale system. For example one e-commerce client was not happy with their online system and with Kinder Pocock’s support they moved onto Xero, using a tailored integration system devised by the firm and the client’s web designer to link the accounting software to the Magento new e-commerce platform.
On the back of this innovative, technology driven approach the firm’s turnover has increased by 40% and net profit by 61% in the past year, with no additional staff. 
“Not only do we gain clients specifically because we use online solutions, but they stay with us because we are able to offer solutions to system problems they may be having,” Kinder Pocock reported.
Valued Accounting tells a similar tale of growth beyond its home region in the North East, and claims to deploy more than 25 different types of software, all of which are chosen for their ease to use for clients so they can “see the end result in a format they understand”, the firm explained.
One client commented in a testimonial for the firm: “If someone had told me I could have saved over £6,000 in accountancy fees and got information I need to run my business quicker I would not have thought it was possible. 
“Valued Accounting implemented systems within my business that have meant I have not had to replace a bookkeeper, that chase my outstanding debt for me automatically and predict my cashflow as well as getting management information I understand when I need it.  They are an intrinsic member of our extended management team.”
The global scene
If further evidence were needed, a couple of research trips to the US provided it. As we reported on the big global accounting software fight, there are around 400 different add-on applications that work in tandem with QuickBooks Online and Xero, particularly in areas such as management reporting, project accounting, KPI dashboards, expenses management, stock control and distribution where local accounting standards are less of a technical restraint on systems.
In an article on  the next generation accounting firm based on findings at the Solutions 14 event in Las Vegas last November, Donny Shimamoto commented how the emerging “virtual infrastructure” of cloud applications “allows the flow of data among systems supporting both clients’ and the firm’s operations, allowing accountants to be a more integrated part of their clients’ businesses”.
David Watson, co-founder of the reporting specialist Fathom described how cloud accounting was evolving into an ecosystem of apps connected by programming interfaces that can save a significant amount of time for accountants who willing to embrace them.
If you look more closely, many of these programs share some common characteristics with Fathom, which is expanding into the international market from its base in Brisbane, Australia. Alongside Fathom at the QB Connect conference in California were 50 other add-on developers, half of whom were from down under. Many of the same people reappeared a few weeks later at Solutions 14 in Las Vegas.
The Xero effect
Few would argue that Australia and New Zealand lead the world market in cloud adoption and that enthusiasm has been accompanied by the blossoming of a new generation of cloud financial software developers.
“Our accountants and audience are at least a year or two ahead of the US in adoption and willingness to step up to that next level of proactive advice,” Watson told AccountingWEB in California. The UK, meanwhile, is somewhere in the middle [see video below for more on this point].
Xero’s influence is a significant factor in the antipodean invasion. “They’re a very good marketing organisation,” explained Watson. “Their entry into the marketplace five years ago really educated the market and now we’re seeing Intuit starting to encourage accountants to be proactive and to look at the ecosystem of apps for each accounting system.
“There’s a huge shift happening.”


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