Xero sets sights on payroll and final accounts

Cloud accounting software firm Xero is planning to expand its offering for practitioners with payroll and accounts production applications. Rachael Power reports. 

Xero's plans to expand its practice offerings is being mapped out at a series of roadshows this month to launch its new Practice Manager module. AccountingWEB attended its Bristol event last week.

During a product update session, Xero gave an update of its roadmap, which included: 

  • A payroll product planned to go live in April 2015
  • Two new bank feeds for Natwest and RBS customers (it already has an HSBC feed)
  • An overhaul for its dedicated smartphone app and a new version for Android users
  • The launch of Smart Lists, a CRM system for small businesses.

In addition to these forthcoming product announcements, Xero said it had "finally nailed VAT" in the UK. Managers also hinted that Xero was working its way slowly but surely towards delivering online accounts production software. 

Funded through a listing on the New Zealand stock exchange, Xero has been growing rapidly around the world as a bookkeeping challenger to market leaders such as Sage and Intuit. Since 2012, the developer has shifted its focus from small business customers to practitioners who can themselves become an influential channel to the wider SME market. By making it clear that it's going to move into payroll and accounts production, Xero is now stepping up to take on the UK practice software giants Sage and IRIS in their own back yard.

A new "build your own" reporting engine will provide the foundation for Xero's final accounts mechanism. This report generator is expected to be released by the end of 2014. In addition to the usual UK report packs it could be configured to produce a set of final accounts, but won't be iXBRL-ready until next year. 

Accountant Olly Evans, from Bristol-based Evans & Partners, said the Xero roadmap included some real "game changers".

"Adding UK payroll and accounts production will really shake up the accounting software market – often seemingly driven by slow and complacent software providers. The Xero approach is engaging and collaborative where Sage seem to just continually put the price up and never ever speak to me.

"How about allowing businesses to press their own accounts production button? This means that accountants will have to stop relying on the compliance workload, but focus on more useful advice and help services for clients. An exciting challenge I think," he said.

Xero indicated it has no plans to provide a personal tax product to the UK at the moment as it would be a "huge task". But a solution for corporation tax is on the horizon, which pleased several attendees including partner panel member Paul Miller of Cornish Accountants. 

Turning to what's available now, Xero's Practice Manager system brings new workflow management capabilities to its Practice Studio. The main user dashboard includes a 'time summary', daily and weekly to-do lists and a productivity wheel. Time can be measured any way you like or not at all - it's fully customisable. 

The day's jobs can be opened using the 'plus' symbol. which presents a breakdown of how long tasks are expected to take, completion boxes, and space for any notes. 

Other interesting features include:

  • The ability to collaborate - Users can assign jobs to staff and include a partner and manager to oversee them
  • Custom filters - to allow users to view whatever segments they choose, for example completed quotes
  • A Leads section that includes graphs on current leads by staff, month category and won. This module lets you create a new lead, attach quotes to leads and follow up on the 'activities' section underneath
  • Quotes and estimates are easily created - select a template from a drop-down menu, which auto-fills the text box with a description of the service. You can then set budgets and dates. When you click 'next' it brings you to a screen including a task menu which allows you to select which services you'll provide i.e. if it's annual accounts, you can select that you will finalise them, hold a client meeting, etc. You can add and customise tasks to suit you.  You can also add costs or apply mark up. When you're happy with this, you can either save a draft or issue and print, which allows you to customise what parts you want to print out
  • You can then click either 'lost' or 'won' depending on the outcome. When you click 'won', a message congratulates you and you then need to turn a lead into a job. 
  • Creating jobs entails stating its progress (planned, on hold, cancelled) and its start/due date, partner, manager and staff. When you save this, it will then get added to the job manager
  • The Job manager holds  job and schedule information, milestones and tasks. Other tabs on the menu include timesheet, notes, documents, costs and financial, which covers billable rates, invoices and purchase orders. 
  • A report builder that lets you create  custom reports
  • Work in progress manager gives you an overview of work in progress by month, and a breakdown of time, estimated billings and disbursements.
Comments

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Great additions to Xero

exceljockey | | Permalink

These are all great additions from Xero but the writing is on the wall for accountants - your services will have to add value and cannot simply be compliance, as it is getting easier and easier for clients to do this themselves!!!

Interesting approach ...    3 thanks

JC | | Permalink

Creating an accounting or even a CRM (events based) system is not that difficult because broadly speaking (apart from VAT rate changes etc.) it is fairly static and most of the changes are driven by the software house where time is not material

However, with areas such as payroll there is no such leeway - there are annual deadlines to meet and the vagaries of HMRC to contend with

Bearing in mind that they seem to have made a meal out of '.. Xero said it had "finally nailed VAT" in the UK ..' which seems to have taken an awfully long time to have happened - when were Xero setup in the UK (2008)? - can they do this in a timely manner every year

Still, presumably coming to grips with the Government gateway will make life easier in the future on other fronts such as payroll

Of course they could off-load the whole thing onto a 3rd party web-service which seems to be a major part of their business model anyway - so why incur the pain of modules such as payroll?
 

Time scales

Cloudcounter | | Permalink

Was any timescale given for the Natwest RBS feeds?  (The roadshow hasn't come to our part of the country yet)

writing on the wall...    4 thanks

justsotax | | Permalink

exceljockey....one thing that we have learnt from the advent of computers is that crap in = crap out.  Xero makes it no easier to prepare accounts than any other accounting package, maybe the data input is easier (which is generally done by the bookkeeper not accountant), but other than that nothing will change.  Unless the clients you talk of have a knowledge and understanding of accruals, debtors, creditors, depreciation etc etc then any accounts they attempt to complete themselves are likely to be incorrect no matter how good the software.  (you can do a tax return using the revenue system for free...requiring potentially only a minimal number of entries, and yet clients still go to accountants in their thousands....)

Paul Scholes's picture

Not my wall    1 thanks

Paul Scholes | | Permalink

jst - we all have different experiences in these things and I, for one, have spent years educating clients and demystifying what, at the end of the day is pretty straight forward stuff.

Consequently, for years most of my clients keep their own books and the most significant aspect in enabling this is cloud accounting.

I agree if you send an uneducated client off with a desktop version of Sage and ask them to come back in a year with their books, you are going to get the crap you refer to. But if you share their cloud books with them, set it up, gradually work them into each section and then login once a month to check it over then, as in my case, you will get a 95%-99% accurate set of books at the year end.

None of my clients have any problem with letting us know the main year end cut-off items, such as prepayments, accruals, accrue/deferred income, they are used to the simple checklist we send them, and many now post transactions to prepayments for us to set up recurring journals, in fact one or two do their own journals (they too are not rocket science).  Finally, with Fixed Assets, the clients post the asset and many fill out the asset details letting the software post the depreciation automatically.

The last survey I saw indicated that over 30% of small businesses don't use an accountant and that will grow with younger people used to getting everything they want from the net.  It doesn't matter to me as I am a coupe of years off retirement but if a new accountant starts up expecting to spend his/her career preparing accounts & filling out tax returns, they will be out of a job in a few years time.

For me it's great news to see that Xero (and others) will release accounts production to users (from memory they were dead against it a year ago), personal tax returns will go the same way (eg FreeAgent).  So, again, several of my clients now prepare their own returns for me to give the once over to before they submit.  

Some accountants clearly still love form filling but I have better things to do with my time.

My experience as well Paul

exceljockey | | Permalink

The more my clients use Xero the more adept they are getting at doing the things the accountant used to do such as journals and VAT returns. The same clients are also running their own payrolls now as well.

@justsotax knowledge of creditors, prepayments, debtors etc is not rocket science and the bank rec facility in Xero makes it really easy for clients to do it themselves and like Paul says the longer the clients use Xero the better they get. With accounts production in Xero it will be far easier to prepare AFS than it is currently.

I agree with Paul that accountants need to think beyond form filling, journal posting etc as this will become less and less inportant going forward.

Kent accountant's picture

Really?    2 thanks

Kent accountant | | Permalink

Paul Scholes wrote:

"... and I, for one, have spent years educating clients and demystifying what, at the end of the day is pretty straight forward stuff."

Bookkeeping maybe but company accounts and corporation tax returns.

Capital allowances, deferred tax, HP loan repayments etc, etc.

Whilst I encourage clients to do their own bookkeeping and sometimes the payroll, there are some who don't seem able to do it and others who have no interest in doing it.

I think the mass exodus of clients heading off to do their own accounts and tax returns won't happen.

I anticipate working (to varying degrees) for another 15 years, I don't expect to see much change in the work I do unless there is a significant change in the UK tax system (which I can't see happening).

I suppose I can agree to a point

justsotax | | Permalink

perhaps my only question to the client in my new role as a business consultant rather than accountant would be 'what is the best use if your time...preparing your accounts or working on your business' (I can charge a lot more for that advice, and then win the compliance work too...win win).

Agree with Kent.    1 thanks

Sheepy306 | | Permalink

Agree with Kent.

Of all my clients, only 1 fully understands how to take the book-keeping 1 step forwards and actually prepare prepayments, accruals, wages journals and depreciation etc etc , he's also the only client of mine that uses Xero. For him I reduce his fee from say £800 to £350 as it's fairly straight forward and more of a review. He's keen to understand corporation tax, presentation of the final accounts, even deferred tax, but he would never attempt or have the confidence to do all that himself.

For all my other clients, Xero isn't suitable (for a number of reasons) and I don't see my role changing with them in the next 10-15 years either. That doesn't make me behind the times and 'at risk' as an accountant, it reflects the fact that my clients have better things to do with their time and are happy paying a professional to ensure it's all done correctly, I guess in the same way that having a copy of Photoshop doesn't make me qualified or any good at graphic design.

I probably would agree that some basic clients, perhaps the sole traders who really don't want a set of accounts but have to prepare a SA tax return, may want to click a Xero button and prepare a magical set of accounts to save a few quid on accountancy fees, luckily I don't have many (or any I don't think) of those clients.

I applaud Xero for their attempts to move things forward, I am however a little cynical of all the hype surrounding it (Xero aren't the only cuplrits).

"Adding UK payroll and accounts production will really shake up the accounting software market – often seemingly driven by slow and complacent software providers. The Xero approach is engaging and collaborative where Sage seem to just continually put the price up and never ever speak to me"

BUT........whilst I agree that Sage for example can be slow and complacent (and expensive) with respect to book-keeping software, e.g. Sage Line 50 etc, Xero are now targeting the payroll sector where there are the likes of Moneysoft and numerous other cheap and extremely good packages, and also final accounts where there is VT, Iris, Digita and other products where the marketplace is already competitive and I have to say very high quality. There's only so many times you can try and bash Sage using the same old arguments, when actually Sage isn't necessarily the modern competition.

 

@ JC - My cynical side agrees with you, I despise headline-grabbing sales pitches, whether it's from a politician, newspaper or software provider. My initial reaction is why the VAT accreditation was taken away in the first place, how strange that I didn't hear about it, and how bad must it have been for an accountancy body to have actually got round to doing that.

@justsotax - agree, rubbish in = rubbish out, regardless of the software.

@Paul - I'm not sure it's a fair comparison if you were to give a client Sage and leave them to it for a year, compared to training and regular supervision using Xero. For example, 10 years ago any decent sized client of ours would use Sage, it was the best product at the time, the clients were generally local, I would pop in to see them regularly to check up on things, or they would post me a backup (on a CD or Zip drive or equally old-fashioned technology) of their Sage to review. I don't see how that is any different from the Xero approach apart from the fact that I now don't need to drive 10 minutes to the clients office or restore a backup onto my system. What I would miss out on now would be that opportunity to combine the review of his Sage with a cup of coffee at the clients office and have a face to face chat about the important things affecting his business.

Bob Harper's picture

More efficient...then what?

Bob Harper | | Permalink

All this innovation is/will make accountants much more efficient. This increases productivity which will inevitably result in lower fees for compliance.

Accountants have a choice, find more client to work with or extend the service with added value/business advice. Finding more clients means more marketing which drives prices lower.

The truth is that Cloud moves relationships online and lower prices with bigger providers like Crunch.co.uk. I warned when they started and they have 5,000 clients in five years.The fastest ever growing firm and I see nothing stopping them.

Business advice is not compulsory so firms need to learn to market and sell. But, not all businesses need or want added value. Some will prefer to buy from non-accountants. 

Marketing starts with strategy, positioning and branding. Here is a REALLY good example. My suggestion is for start-ups and sole-practitioners to collaborate because it is not easy to do what needs to be done alone. Without the knowledge and investment firms could be left with the discarded clients/dregs of what well branded firms choose not to work with.

Bob Harper

Network of Alternative Accountants

.

ireallyshouldkn... | | Permalink

Crunch only have 5k clients after all that branding and pushing?

There are 5 MILLION business in the UK. 

In terms of my role, its actually my assistants role which is being squeezed down not mine with the reduced prep time of better software. I spend just the same amount of time more or less as I did before. 

What clients pay is to not HAVE to think about it.

 Most of them could learn how to do it if they didn't have a business to run but would clearly not get things like tax planning right as its a moving target and a full time job to keep up with all the changes. 

 

 

 

 

Bob Harper's picture

Tax is added value

Bob Harper | | Permalink

My prediction/advice for bookkeepers [and your accounts assistance] is to retrain and compete with you, or do something else.

If bookkeeping/accounts assistants retrain and compete with established firms they will drive prices down. You will need more clients along with every other firm, or you will need to add value.

If bookkeepers/accounts assistants do something else then firms still have to deal with the threat/implication of business owners buying online from low cost providers like Crunch and others that no doubt will follow.

Cloud computing will change the profession.

Bob Harper

Network of Alternative Accountants

 

taking the view that everybody will DIY    1 thanks

justsotax | | Permalink

makes you wonder about these hand car wash businesses everywhere.  Surely the vast majority of people own a bucket, have access to a tap and have cleaning product - perhaps it is the process that is complex?  As Ireally says...most people hand over the accounts etc so it can free the time for them to deal with what they do best

Bob Harper's picture

DIY

Bob Harper | | Permalink

Who said everyone will DIY? I am suggesting lower fees/profits for compliance.

Having said that, accounting is simplifying and technology is becoming smarter. 

Technology is just one threat. What about changes to legislation with Ltd Cos and dividends and many accountants would come under pressure as their client's tax bill increase.

I do not stock buckets full of sand.

Bob Harper

Network of Alternative Accountants

 

.    1 thanks

ireallyshouldkn... | | Permalink

I had forgotten how much Bob makes me smile. 

Claims of the "death of the small prac" always seem to assume we are just bookkeepers who know which box to put things on a tax return.

Wasn't true 20 years ago and it is certainly not now.

Btw Bob the 'future' is here right now and quite frankly i think my clients need me more than when I started up 12 odd years ago.

You used to be able to pop into HMRC and get some help with your tax return for example. Try doing that now!

 

Bob Harper's picture

Time will tell

Bob Harper | | Permalink

I've spoken and worked with enough accountancy practices to know the reality.

Manual records, spreadsheets and Sage not being used properly is not the future. Accountants spending 80% of their time on work that can be eliminated will be a history lesson. 

The future is here now and for the small practitioner it means electronic documents going straight into accounting software and one-ledger accounting.

This will create hyper-efficient accountants who charge lower fees and have more clients per head. That means fewer accountants.

Bob Harper

Network of Alternative Accountants

 

Locutus's picture

We are "business mechanics"

Locutus | | Permalink

Kent accountant wrote:

Paul Scholes wrote:

"... and I, for one, have spent years educating clients and demystifying what, at the end of the day is pretty straight forward stuff."

Bookkeeping maybe but company accounts and corporation tax returns.

Capital allowances, deferred tax, HP loan repayments etc, etc.

Whilst I encourage clients to do their own bookkeeping and sometimes the payroll, there are some who don't seem able to do it and others who have no interest in doing it.

I think the mass exodus of clients heading off to do their own accounts and tax returns won't happen.

I anticipate working (to varying degrees) for another 15 years, I don't expect to see much change in the work I do unless there is a significant change in the UK tax system (which I can't see happening).

I also agree with Kent.

A few people on this site have compared us accountants to car mechanics, rather than brain surgeons.  To be honest, I think it is a fairly good comparison.  In many ways, we are "business mechanics" - we use our skills to keep our clients' "business vehicles" legal and, if they are prepared to pay for it, give them information that helps to run them more efficiently.

In the world of motor cars, some people with an interest in cars, put their overalls on and have a go at repairing their own vehicles.  But most don't because they either have no interest in doing this or haven't got the time.  The same is true with accounts and tax for limited companies - a few people like to DIY with mixed success, but most don't.  To continue with the mechanics analogy, our friends in HMRC constantly keep throwing spanners in the works (iXBRL, RTI, tax enquiries, etc.) to frustrate the lives of DIY'ers

Like Kent, I still expect to still have lots of compliance work in 15 years time.  Compliance will no doubt have evolved and perhaps there will be a bit less of it, but in spite of the growth of the cloud (which I have embraced), I see little evidence of things fundamentally changing for some time.

Bob Harper's picture

Business Mechanics

Bob Harper | | Permalink

What impact will electric cars have on mechanics?

My take (and I could be wrong) is that all industries are going to be transformed by technology...have you heard about London Black Cabs are protesting about an App?

I am not saying there is no future just that fewer accountants will be needed and they will charge less per client. But, there is an alternative!

Bob Harper

Network of Alternative Accountants

 

 

 

Bob...that's the bookkeeping

justsotax | | Permalink

sorted but I suspect many accountants will be relieved that they will no longer get a bag of receipts, and having to 'write off' time to correct these type of things.  Sounds like a benefit to us all?  As for your predictions, I wonder whether you are trying to persuade us or yourself.  No doubt technology will change the way we do things....but like many inventions from 'tomorrows world' the vision and reality are often poles apart.

Disagree

Sheepy306 | | Permalink

"This will create hyper-efficient accountants who charge lower fees and have more clients per head. That means fewer accountants."

But Bob - your Crunch website shows that for an IT contractor signing up to the Premium package it would cost them £1,518 per annum, infact £1,821.60 including VAT, I assume you put them on the VAT flat-rate scheme don't you? They won't therefore be claiming back the input VAT.

You may well class yourself as a hyper-efficient accountant, whatever they are, but you're certainly not charging "lower fees" are you?

I don't consider myself cheap, far from it, but I charge my IT contractor clients less than that. Your sales pitch and driving force towards efficiency and lower prices doesn't stack up with your own pricing model. Presumably if you hadn't embraced technology and streamlined your own operation then you would have charged more? How much do you think you would have charged previously? Just curious.

If your client numbers are correct then you've clearly down well with your marketing, but your business model doesn't necessarily suit everyone else, I assume you've pretty much adopted the SJD accountancy approach?

I have absolutely no intention of lowering my fees or significantly increasing the number of clients, I can't think of anything worse. I still consider that I'll make a very good living for the next 25 years, but as you say, time will tell.

London cabbies

justsotax | | Permalink

are complaining because they think it is wrong that non black cabs get away with using sat nav while they have to do 'the knowledge'....not sure any accountants are suggesting that their clients must provide records in paper format only and written up using a quill (but I could be wrong!)

Locutus's picture

Business mechanics

Locutus | | Permalink

Bob Harper wrote:

What impact will electric cars have on mechanics?

My take (and I could be wrong) is that all industries are going to be transformed by technology...have you heard about London Black Cabs are protesting about an App?

I am not saying there is no future just that fewer accountants will be needed and they will charge less per client. But, there is an alternative!

Bob Harper

Network of Alternative Accountants

In 15 years time, perhaps 90% of us will driving around in electric cars ... but they will still require maintenance.  The motor mechanic will have to develop his / her skill base to encompass electric cars.

15 years ago, some accountants to get by without using the internet or even a computer.  They can't now.  Most accountants developed their skills.  A few couldn't and retired.

As for black cabs ... unless the Courts protect them, they will have to get used to the effects of competition and will in time develop something like an Uber app for black cabs.

In 15 years time, there will still be black cabs around, but people will just hail them in a different way.

My point is that in 15 years time there will be motor mechanics, accountants doing compliance work and black cabs, but the technology they use will just be a bit different.

Bob Harper's picture

@sheepy - I am not Crunch but

Bob Harper | | Permalink

@sheepy - I am not Crunch but I have some questions:

  • Are you VAT registered?
  • Do you charge less than £125 a month for an all inclusive service with bookkeeping, VAT returns, annual accounts and tax?
  • What is a decent living?

Cheers.

Bob Harper

Network of Alternative Accountants

Bob Harper's picture

15 years

Bob Harper | | Permalink

@Loctus - I agree except that in the future I think there will be fewer accountants and mechanics.

But, with Google driverless cars I am not sure there will be any black cabs!

Bob Harper

Network of Alternative Accountants

 

Crunch?

Sheepy306 | | Permalink

My apologies Bob, I assumed that Crunchers Accountants and Crunch Accountants were associated. The name, logo's and websites are very similar so I just assumed that there was a connection. Thanks for clarifying.

In answer to your questions:

1. Yes

2. Yes. So do SJD @ £110 per month

3. Well a decent living is very subjective and dependant upon lifestyle, location, commitments, hours, family etc etc. But I personally would consider anything over £50k to be preferable to being employed (as an accountant) and therefore worthwhile (it also puts you in the top 10% of earners in the UK), but £100k gives a very good living, top 1% or so of UK earners. £100k+ , well you're doing something right.

What are your thoughts?

Bob Harper's picture

@sheepy - thanks.

Bob Harper | | Permalink

@sheepy - thanks.

Crunch is just about the process...Crunchers are about the people in the business

My impression is that with SJD £110 doesn't cover the bookkeeping. And, with Crunch they look after small businesses not just contractors for that fee.

Most accounting firms I know cannot come hear them in price. However, I accept that people working from how can earn a decent living quite easily.

May I ask:

1. What you'd charge for bookkeeping, VAT, accounts and tax for a business with 150 purchase invoices a month,.

2. Do you perceive any risk from accountants targeting your clients with a profit improvement focus where they do the accounts and tax for cost?

Bob Harper

Network of Alternative Accountants

ShirleyM's picture

Agree with Kent & Sheepy

ShirleyM | | Permalink

Kent accountant wrote:

Whilst I encourage clients to do their own bookkeeping and sometimes the payroll, there are some who don't seem able to do it and others who have no interest in doing it.

We also encourage clients to take on as much as they are willing and able and are happy to provide support, but a substantial number of our clients have no interest in it, or are unable to dedicate the time needed to learn what to do and keep on top of it. In one or two cases, they were so bad at bookkeeping and wouldn't/couldn't get their head round it, so we gave them an ultimatum (choose one only):

  • ​Do the job properly (with support from us)
  • Pay us to do the job properly
  • Find another accountant

They prefer to spend their time earning money and choose not to do the bookkeeping/VAT/payroll/accounts/tax themselves, but we have no problem with anyone changing their mind for future years.

.    3 thanks

ireallyshouldkn... | | Permalink

@Sheepy, Bob from what I have worked out has a franchise which is NOT Crunch. His tiny little franchise which does indeed by I am sure complete co-incidence have a near identical logo and name. "What are the chances or that?" as Private Eye might say.  You pay £375 a month (from his website) to have his wisdom, and he has a handful of franchisees, 5 on his website. Possibly less than before:

http://crunchersaccountants.co.uk/offices/

He has been around these boards for several years selling the same amazing "idea" that guess what the business is changing and you have to change with it.  Earth shattering stuff.

He normally gets banned after getting into a heated argument, normally about "value pricing" to micro entities which he doesn't really understand having presumably never actually done it and then slinks back in a 6-12 months later. 

In Bob's world all accountants sit under piles of receipts and bill by the 6 minute interval and never talk to the client about their business but he is here to save us all with his revolutionary ideas that pretty much most people are doing anyway right now. O and also some complete nonsense that no-one in practice would actually do. That is normally where the arguments comes.

 

Okay, thanks for clarifying    1 thanks

Sheepy306 | | Permalink

Okay, thanks for clarifying that Bob. Does it concern you that someone appears to have stolen the other persons design etc, not sure who did what?

In answer to your queries:

1. My IT contractors don't have 150 purchase invoices per month. It's probably a maximum of 100 receipts for those that choose to take taxi's regularly but typically 50 per month. Decent book-keeping means that the VAT return (flat rate scheme), is a press of a button and 5 minute job at most every 3 months, the book-keeping (on VT Transaction/Cashbook) is imported directly into VT Final Accounts, the accounts are exported from VT Final Accounts to BTC. An annual fee of £800-£1,200 therefore makes a decent return. They are typically very simple straight forward jobs. As a sole practitioner I do most of the work but really I should be paying a junior/freelancer £10 per hour maximum to do this instead, with me handling the final bits. I don't really have any other types of clients where I do the basic book-keeping each month so can't give an accurate price, it's not really my area.

2. No. In respect of IT contractors, there is no real profit improvement focus to be had, other than tax mitigation/planning, this would also be the case for the majority of my other small sole-traders/freelancers. In respect of larger clients, I charge a premium because I give them a personal service, I provide good quality work, they like me, they trust me, I speak to and see them regularly. They are usually specialists in their fields, for example solicitors, I do suggest cost savings and explain what other firms do by way of a comparison, I go down the pub with them and get to know their staff quite often, I train and advise their book-keepers and cashiers, I provide this advice/banter for free (well, I suppose it's included within my premium fees). They work in their chosen field day in day out, they're successful at what they do, I don't tell them what to do with their business in the same way that they don't tell me how to run my business. I'm not a business advisor or consultant. I'm an accountant that they trust to look after their accounts and tax affairs, some of which are more complex than others. I give suggestions and will bounce ideas to/off them, but this is on a equal footing and I use it to bond/personalise the relationship as much as anything. They will not generally go elsewhere if I bump my fees up a couple of hundred quid.

Accountants are not necessarily good business advisors, that is not a natural progression for everyone, even though it seems to be suggested all the time.

Of course, I may not be representative of other typical accountants,

Bob Harper's picture

Guaranteed success

Bob Harper | | Permalink

@YouReallyShouldn’t – arguments about Value Pricing are always are with people who misunderstand it.

I decided a while ago not to enter into discussions with people unless they have read Ron Baker’s book Implementing Value Pricing. Have you?

The amazing idea I “sell” is accountants doing more for clients. What’s wrong with that? I prefer to believe in accountants over business coaches/consultants and bank managers.

As for earth shattering, if you dig deep in practice strategy you’ll realise that doing more for clients is actually quite a challenge. It requires radical change…a new business model, fresh mindset, new knowledge and skills. Much easy to do the same old stuff with a fixed fee and some online software.

Yes, Crunchers has fewer offices than before. We started with 25 but I’d actually say we only have one “real” office, not five. The reason is that we decided to drastically change what we were doing and the new Crunchers does not fit the original partners.

However, I am sure you will be pleased to hear that Crunchers is working in the pilot office. Feel free to visit their Website and call them for a chat. 

Off the back of the work we have done recently we are going to start to offer Crunchers to other accountants. We think start-ups are best suited but we will work with established firms under the MORE brand.

If you went on the Crunchers Website I am sure you saw the new 100% success guarantee. This means we are able to guarantee profitable sales, not just the leads. To make that sort of guarantee it takes a while to figure out. What do you guarantee?

@Sheepy – no one stole anything from anyone.

I am not interested in discussing strategy relating to IT contractors. For me they don’t count as “businesses” but I understand your strategy.

I agree, not all accountants are good business advisers but I think they have the potential to be.

Bob  

Locutus's picture

Final thoughts ...

Locutus | | Permalink

@ Sheepy - I recognise the world that you describe. It is very similar to the one that I operate in. I agree entirely with everything that you, Kent Accountant, ShirleyM and the other accountants have said on here.

@ Ireallyshouldknow - I know Bob regularly predicts "the end of the world" as we know it, for us compliance accountants. As with all End of the World predictions, I guess it will eventually come true, but I've only got 25 years or so left, before I retire, so I will probably be safe.

@ Bob - I think you need to understand, that the majority of accountants on this site will act for owner-managed small businesses. They may not be "real businesses" in your eyes (and to some extent I would agree with you), but many are prepared to pay people like Sheepy and I to assist them. Those businesses will never be big and will have limited scope for extra services from us. But there is a reasonable living to be made from them, which is how us small practitioners largely earn our money. Speak to you again in 6 months, if the hyper-efficient accountants haven't wiped me out in the mean time.

Confused    2 thanks

Sheepy306 | | Permalink

@ Bob - I agree that IT contractors aren't typical businesses as such but your point was that through efficiencies, technology and the changing approach of the client that as accountants we will be fewer and that our fees will be far less. Your were making a major point of this, that we HAVE to change otherwise we'll be out of a job pretty much, I was simply pointing out that, largely, I don't agree and that there is another way, personal service that clients appreciate and will pay for.

And also, if your own practice is charging IT contractors £1800 then it looked like on the face of it that you weren't quite practising what you're preaching.

Regarding Crunch/Crunchers, I still don't understand this near identical branding but no association. Still, if you're happy with that confusion and don't want to elaborate or there's nothing to elaborate on then that's fine.

I just like to understand other strategies, practices and pricing, as I find it interesting and on the whole useful, I'm struggling with this one though.

Bob Harper's picture

Hope

Bob Harper | | Permalink

@Locutus @Sheepy - I hope for you that legislation changes don't come.

However, the tax planning industry is coming under scrutiny like never before and the National Debt is a massive problem. I suspect that changes will be made to prevent low salary/high dividend tax planning. I also think with tax simplification cash accounting will be mandatory for micro sole-traders/partnership.

When this happens I believe software will be able to do "accounts" and tax returns like they do VAT returns now.

Would those sort of chances cause a problem for the majority of accountants?

 

Bob

Locutus's picture

Clients sometimes can't face it    3 thanks

Locutus | | Permalink

Bob Harper wrote:

@Locutus @Sheepy - I hope for you that legislation changes don't come.

When this happens I believe software will be able to do "accounts" and tax returns like they do VAT returns now.

Bob

Here's an example, Bob.  I currently have 10 VAT returns to do for the quarter ended 30 June 2014.

Around half of these could be done by automated software by the clients themselves, but they choose to get me involved ... and I often use the automated software to do the job they could do.  As for the other half, I mostly do all of the bookkeeping, as part of the package.  Some of these, I have tried to get clients to do the bookkeeping and VAT, but they just can't face it and keep paying me to do it.

I ask you, Bob, if many clients aren't prepared to do their own bookkeeping and VAT return, how likely is it that those people will then suddenly start wanting to do their own accounts and tax returns themselves, which is arguably more technically complex?

Bob Harper's picture

Bookkeeping

Bob Harper | | Permalink

@Loctus - my argument isn't that there won't be any accountants, just much fewer.

If the changes happen (and change always happens) then the amount of work in the profession will drastically fall. This will create over capacity and lower fees. There is no reason why bookkeepers can't do this type of work and reduce needless costs of running a business.

Keep in mind that the technology exists now to make bookkeeping MUCH quicker with electronic images going straight into bookkeeping software.

Yes, the chances are the clients you have experience with will be happy to pay someone to do their bookkeeping, accounts and tax. The only question is how much but are they the client of the future?

Why have you tried to get clients to do their own bookkeeping?

Bob

.    1 thanks

ireallyshouldkn... | | Permalink

@Loctus, the trouble with Bob is he doesn't actually understand the dynamics of the small business and dismisses anything that doesn't fit into his world view.  Take the contractors above, whilst they are not a "proper business" they have very real compliance needs and not only have the ability to pay, but are willing to pay for good old fashioned service which Bob cant understand the 'value' of.

He is a bit like the Michael Gove of accounting, fortunately with zero clout.  Ie great on theory, falls down on understanding and dismisses anyone who disagrees or who indeed has not read the right book!

Bob Harper's picture

@YouReallySHouldn't - I do

Bob Harper | | Permalink

@YouReallySHouldn't - I do appreciate contractors have compliance needs and value good old fashioned service. 

However, I do question a) if they will always have the same requirements/needs and b) the opportunity cost of a life full of basic form filling - I think accountants have more to offer.

Bob

 

 

 

One of my (as yet) unanswered    1 thanks

Sheepy306 | | Permalink

One of my (as yet) unanswered points Bob is that I assume that you are already fully embracing technology and software and therefore reducing your overheads and maximising efficiencies. You're also warning that we are being FORCED to reduce our fees as well as the fact we will naturally lose clients to those that will cut-out the accountant.

So when are YOU expecting to reduce your fees to an IT contractor from £1,800 to something a bit more 'futuristic' e.g. lower ? After all IT contractors definitely sit as a 'future' type of client. Or do you consider £1,800 to already be a very low fee, in which case there's a communication problem and a lot of practitioners out there really have nothing to worry about as long as their fee is normally below that level, which for the majority on here is probably is.

I think I would rather resent it if I followed your advice, reduced my fees to say less than £1k whilst you still carried on happily charging them £1,800, I would of course also most likely be paying you (or someone else with an 'alternative' approach to accountancy) for this 'business' advice.

You're entitled to charge what you like, many accountants 'may' charge £1,800 or possibly more, I'm just using it as an example because that's what your website states you charge and there seems to be a disparity between what you say and what you do. Which of course you're fully entitled to do so, if that suits. It's probably an oversight and there's a simple answer, because although I don't agree with what you say or your approach, you are educated, presumably successful, and have a strong belief in what you do, which is good.

Bob Harper's picture

£1,800

Bob Harper | | Permalink

@Sheepy - What Website are you referring to?

Bob

.    1 thanks

ireallyshouldkn... | | Permalink

@Bob again you utterly fail to understand the work involved in contractor accounts and dismiss it as "basic form filling". 

If you treat them like that you will find they quickly disappear to either the large 'sausage machine' types or to proper accountants like myself and Sheepy.

For me personally its a good source of income and I enjoy working with those clients. 

I dislike dealing with retail, trades and other "messy" jobs as its generally just bookkeeping and the clients largely uninterested so little scope to do much with them. 

 

 

 

 

 

 

Bob Harper's picture

What specifcially?

Bob Harper | | Permalink

@YouReallyShouldn't - unless you are doing personal financial planning, I'd be interested to know what you think is so enjoyable and interesting about IT contractors compliance.

Bob

Locutus's picture

Bookkeeping, trust and IT contractors

Locutus | | Permalink

Bob Harper wrote:

@Loctus - my argument isn't that there won't be any accountants, just much fewer.

If the changes happen (and change always happens) then the amount of work in the profession will drastically fall. This will create over capacity and lower fees. There is no reason why bookkeepers can't do this type of work and reduce needless costs of running a business.

Keep in mind that the technology exists now to make bookkeeping MUCH quicker with electronic images going straight into bookkeeping software.

Yes, the chances are the clients you have experience with will be happy to pay someone to do their bookkeeping, accounts and tax. The only question is how much but are they the client of the future?

Why have you tried to get clients to do their own bookkeeping?

Bob

I have tried to get clients to do their own bookkeeping, as it is lower value / less interesting work for me.  I am prepared to do it if the client is prepared to pay my normal hourly rate for it and where there is some strategic advantage to me doing, such as being able to make a huge mark up on the end of year accounts.

However, it is not something that I really push and I'm quite happy for the client to do it themselves where they are cable of doing it.

You have been focusing a lot on cost and efficiency, but forgetting the human element.  Businesses are run by people.  Many of these people will absolutely not feel comfortable themselves doing end of year accounts, corporation tax and the other nonsense that scary HMRC / Government Departments throw at them.  It's just not what they've been trained to do in their lives, so they understandably seek the advice of another human, whom they trust, to help them.

Trust and the accountant-client relationship are essential in our profession.  There are probably accountants operating above a chip shop in Hounslow that will charge half what I do.  But I don't lose clients to them, due to the trust factor.  My clients trust me, but don't trust them.  Cost is important up to a point, but is not the only factor.

As for your comment about IT contractors to ireallyshouldknow.  I also have lots of clients that are one-man-band professionals.  I like them as clients - they are my bread and butter.  What I like is that they tend to have relatively few business transactions, they are profitable (so they can afford to pay me) and there are no particular complications in preparing the accounts.  It's better than being an auditor, working on CIS subbies or retail / cash business.

Bob Harper's picture

Time

Bob Harper | | Permalink

@Locutus - your strategy works provided 1) you don't die of boredom or 2) the legislation doesn't change. No one knows the future but I think changes will come that will significantly reduce the work and make reporting much simpler.

Enjoy it while it lasts.

Bob

@Bob,    2 thanks

ireallyshouldkn... | | Permalink

@Bob,

Re "personal financial planning", no idea what that is in your mind, but you do realise accountants deal with the whole picture. Ie CT, income tax, PAYE VAT, the lot? And not just add up what is there. You get involved, discuss, plan, change.  if that is "personal financial planning" then yes I do that.  For me its "what I do". Not doing so would fail the first hurdle. 

I like dealing with smart interesting people who appreciate that making it look easy and run smoothly is hard work.  I really don't enjoy spending the day balancing a bank account or chasing round trades people for paperwork. 

Quite frankly i would like to see Bob try his hand and work out the level of dividends a client should take over a 3 year period to balance even some basic variables such as child benefiit, getting a mortgage, kid off to uni and a sudden cashflow issue caused by one of their customers not paying up. And thats an easy one. 

 One thing it is not is routine or dull, unless you are working at a very low level on it like a bookkeeper who is dabbling in tax without understanding it.  Yes that would be dull, yes tech will reduce your role, but anyone doing anything badly will struggle and their business will die under them. 

If however you are doing proper job as an accountant then there is a huge niche available, tech is not going to topple that. As above, its about relationships and trust, not about sticking someone up for a quick buck and moving on. 

Perhaps Bob its only you and your (reducing number of) franchisee's that are doing badly?

+ had to laugh at the "if the legislation doesn't change".  The whole point Bob fails to grasp is because it is constantly changing, and it a full time job to keep up with our clients delegate keeping up with it to us. They are busy earning money. Maybe one day Bob if you ever find your self in the position of little time and lot of cash you will find that paying people to do stuff well makes a lot of sense. 

 

Bob Harper's picture

Tax

Bob Harper | | Permalink

@YouReallyShouldn't - the change of legislation I have in mind will mean that the clients you are talking about will not be able to use a Ltd Co. So, that means pretty much everything you rely on to make a living disappears.

Bob

.

ireallyshouldkn... | | Permalink

Bob re legislative change yes this has all been considered, I have various scenarios sketched out and a plan for all of them. I am not too over-exposed on any one item of legislation or any one client type.   I am well aware that some contractors only exist due to legislation, but we have plenty of client who is the wind blew to make small companies a poor choice would just switch to a partnership. Slightly lower fees yes, but its not a large drop and there would be fees to deal with the close down of the company and transfer etc, and many would still want to be companies even if the tax breaks go down, eg NI on dividends. 

 

 

Bob Harper's picture

Cash Accounting

Bob Harper | | Permalink

@YouReallyShouldn't - one off fees for change does not create a profitable sustainable strategy. 

What about mandatory cash accounting for micros....I think HMRC missed an opportunity with current rules but this could change and be extended to Ltd Cos.

Your strategy, like many/most other accountants seems to be based on the past and "hope". All I am suggesting is that accountants take the lead with business advisory service and wealth management. There is no one better.

Bob

 

have we gone full circle?

justsotax | | Permalink

Accountants don't want to do the bookkeeping - gives the lowest return for the most work - so technology will help this.  Sure things will change - but as every other discussion on here mentions....there is always someone willing to do something for less money - there is no surprise in that. (whther that is QBEs/Chartereds working from home etc etc) - that 'threat' already exist.  This is not ground breaking stuff.

@bob, building a business for    1 thanks

ireallyshouldkn... | | Permalink

@bob, building a business for something that might or might not happen in the future is a very poor strategy for today. 

As is being a consultant on something you haven't done and don't understand. 

 

Bob Harper's picture

Better results

Bob Harper | | Permalink

@YouReallyShouldn't - expect that the strategy I am suggesting produces better results today.

@JustSoTax - it is not just about lower fees but significantly less work.

Bob

 

 

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