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Internet accounting - the 2008 SaaS roundup
AccountingWEB's internet accounting expert Nigel Harris takes a breather from his computer screen to highlight points that have emerged from this year's crop of software as a service reviews.Having taken on the role of resident Software as a Service (SaaS) and online accounting reporter many years ago when the concept was in its infancy, this year has seen a positive explosion in the market - we’re struggling to keep up with all the new arrivals at the moment!
However, some clear trends have started to develop since we published our last online software buyer’s guide in July 2006.
Back in 2006 SaaS was in its infancy. It was effectively the answer to a question hardly anyone as asking, especially since broadband coverage was still somewhat patchy across the UK. Today BT and cable companies have virtually complete coverage of the country, plus mobile broadband is also effective and affordable.
On the back of the broadband roll-out we have seen the growth in the popularity of online banking and other online applications, foremost being Google Docs and Google’s other online office applications. Awareness of online security procedures by both vendors and users has made using the Internet as safe for business transactions as offline methods. Having become comfortable with these free online applications, accounts users are more receptive to the concept of doing their bookkeeping online too.
The advantages of SaaS products are well rehearsed:
- Access is immediate – there is no software to install or configure, whether you want one or 50 users
- Updates and patches are applied invisibly by the vendor, so there's no hassle for the user. This has the added advantage that SaaS providers can roll out upgrades and fixes on a daily basis if they wish. As a result they tend to be far more responsive to users' demands and requests. I often see suppliers fix problems in a SaaS product between the time I review it and the publication date of my review
- The hosting company takes care of backups and maintaining adequate data storage
- Low financial commitment – SaaS accounting applications are normally taken on a monthly subscription basis, with minimal notice required to cancel. The typical cost is around £25 per month for a limited company, which may include payroll and stock control, for one or more users. Some suppliers charge per user, but incremental costs tend to be quite low
- Subscriptions include unlimited email and (normally) telephone support – which makes the monthly fee look pretty competitive once the annual maintenance for a comparable product like Sage 50 is factored in
- For professional advisers online accounting offers the opportunity to really offer proactive advice – accountants can log on and see their clients’ accounts at any time, advising them on key transactions, or offering support when they see them getting behind. They can also work collaboratively with their clients, sharing the bookkeeping work on a single data set between a number of users and sites.
To spread the SaaS gospel to accounts users, most suppliers in 2006 were relying on accounting firms to do their marketing. Partnership schemes were being offered, often involving some up-front payment by the firm, who were then encouraged to go out and sell it to their clients. Most providers offer free access to their service to accountants of their customers, often via some sort of practice administration page where they can view all their clients who use the service, and perhaps see some key data such as overdue VAT returns.
While internet accounting providers are still keen to work with accountants, they are now seeking customers directly and making more strategic partnerships with business organisations such as the Professional Contractors Group and trade bodies that can promote their service direct to potential users.
SaaS trends in 2008
Having reviewed a number of SaaS applications in the past few months, here are a few trends that have emerged:
1. The market is segmenting, with providers targeting specific niches. FreeAgent, for example, makes no bones about targeting freelancers, one-man consultancies and similar businesses. It is not trying to attract ‘small businesses’ across the board, and has designed its application with the target users in mind. Aqilla, on the other hand, has come fresh into the market and is aiming at the other end of the market – larger, multi-site/multi-user organisations.
2. Not all online accounting products are truly SaaS, Web 2.0 solutions. Online 50, for example, essentially provides the standard Sage 50 accounts software on a hosted basis. Other providers are pushing the boundaries of what is possible with computing “in the cloud”. Online banking and electronic bank statements are key to many SaaS accounts applications, where bank transactions are posted – at least partially – from the downloaded bank data rather than being keyed in. Many also support PayPal, probably the most widely used credit card clearing company, so that invoices can be sent by email to customers with a PayPal link embedded; when the customer then pays the invoice online the accounting application can download and post the banking automatically.
3. Many products are being launched in a far from complete state. This may be down to pressure from financiers or the need to start generating revenue, but it is not unusual to find worrying weaknesses in the SaaS products I review. This pattern is particularly evident in VAT handling, where locking the return periods to prevent the posting of transactions into a prior period is overlooked by many. What is more worrying is that in some cases the developers don’t seem to appreciate why this would be a problem. Having said that, among popular desktop solutions QuickBooks has only just completed the controls in this area, and MYOB still has weaknesses, so maybe I’m being a little unfair!
4. Online accounts services are starting to obtain ICAEW accreditation, putting them on a par with desktop packages. While one welcomes some sort of benchmarking, the accreditation process has come in for some criticism on this site, particularly the way in which products are accredited despite coming with a long list of "limitations" that in some eyes could be regarded as fatal flaws.
5. Two years on and we’re still waiting for the big players to enter the market. Apart from Sage’s involvement with Online 50, there are no big names out there yet. Microsoft has a small online element in its Office Accounting software (the payroll calculations are handled online), but there seems to be no plan to take the whole package online. Some commentators believe the current flood of new SaaS applications is partly driven by speculators laying down markers and hoping to get their company bought up by Microsoft, Google or a venture capitalist such as former Sage chairman Michael Jackson's Elderstreet Investments. If one of these players does make a move, we could see some frantic acquisition activity in this market.
6. Firms which got in early and started promoting SaaS accounting to their clients are already offering a range of options, following my first point above. They have a basic online bookkeeping service for some, a mid-range service for SME clients, and a fully-featured service for multinational/multi-site clients who need things like sales and purchase order processing or real-time multi-currency – and all without the need for any initial investment in software, installation and maintenance, additional servers or SQL licences.
Is this the future of accounting? Probably not yet, but it may not be that far away. This is a moving target, so bookmark this page and we’ll add updates and new names to it over the coming months.
Further resources
Small business accounting software resources - online options
Number of comments: 2
AccountingWEB.co.uk 11-Aug-2008
Categories: IT Features, Software
Times read: 3018
Anthony, e-conomic allows you to either import the entries from an Excel "csv" file or enter them quickly in the system via the day books. You can also upload bank statements and use the automated bank reconciliation feature to do much of the bank rec for you. There's no need to use the invoice functionality unless you want fully detailed aged debtor reports (n.b. By using the daybooks method, you can still obtain balances and individual invoice amounts per debtor - just call the helpline on 08456-800-473 if you have any questions on this).
You can have your own trial free by visiting our web site (www.e-conomic.co.uk).
Mark Davies
I am an accountant working solely on a system of prepaid fees and cash purchases of equipment etc. This means that I have no use for invoices, credit sales and credit purchases. I simply wish to record payments received and made, although my balance sheet will, of course, have the standard debtors and creditors.
All the systems I have come across assume that invoices will be sent for work done and all purchases will be invoiced to the business. These systems usually entail creation/recording of invoices, followed by their payment.
Have you come across any system which works solely on bank/cash payments/receipts?
Any suggestions would be appreciated.
