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Why is Australia embracing cloud accounting faster than the UK?

27th Sep 2022
Brought to you by
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Xero is an easy-to-use platform for businesses and advisors.

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On a recent visit to Australia, I looked to discover why their businesses, accountants and bookkeepers have adopted cloud accounting technology so quickly.

There are many differences between the UK and Australia. The weather is a little more consistent down under, for example, while the Brits don’t have to contend with spiders the size of small cars. But on my recent trip to visit colleagues and partners in Melbourne and Sydney, I was also struck by the differences in how cloud accountancy compares to the UK. 

I’ll caveat that this is the view from a visitor, whose interactions were with mostly earlier adopters of cloud accounting. I’m also a software sales guy talking about accountancy – this means I may get some things wrong! But regardless, here’s some of what I learned about the two markets. 

Compliance complexity changes the game

There is a prevailing view that thanks to the blossoming of cloud accounting technology, Australian accountants spotted and seized upon the opportunity to add value by delivering “advisory services” faster than anyone else.

In my experience, however, the reality was a little different, with other nuances also responsible for driving this adoption. Perhaps most importantly, the GST Limit is lower, even if year-end compliance requirements are less complex. This means a larger proportion of businesses need to bookkeep on a quarterly basis. 

As a result, there’s increased demand for bookkeeping services, a greater inclination from businesses to adopt technology to save time (also due to the early availability of bank feeds in Australia), and quarterly fees make it easier to justify the investment in technology that drives efficiency.

Meanwhile, other regulatory changes, like Single Touch Payroll, have cemented the level of demand for accounting and bookkeeping services.

What was also clear during my visit was that Australian accountants and bookkeepers quickly realised their existing systems and processes would not allow them to scale to meet this demand. With this in mind, adoption of cloud accounting was a necessity. Not only did it enable them to meet escalating demand – they could also offer new, exciting services to clients. 

The good news is that this change should soon arrive in the UK, as demand rises thanks to MTD for ITSA. While change comes with a certain amount of trepidation, I found that Australian accountants and bookkeepers were excited by the opportunity to grow their business and get clients into better behaviours around record keeping. The UK, I’m sure, will follow suit. 

The buy-in of bookkeepers

Potentially thanks to the quarterly compliance burden, I found that bookkeepers in Australia have now embraced cloud accounting in a big way and are reaping the rewards. This is bleeding into the way accountants are using technology too, I found many may have reached a point of critical mass of clients using cloud for bookkeeping without necessarily converting clients themselves. 

Automation is everywhere

For many accountants in Australia, cloud accounting technology is helping to reinvent their entire workflow in the cloud – tackling practice management, accounts prep, tax and more to drive greater efficiency in processes. 

Also, as in the UK, some clients are left on an existing bookkeeping system with a cloud ledger product used in practice to generate reporting, accounts and tax. Clients with more complex reporting requirements simply sit outside of the core process. 

A healthy market but familiar challenges

Ahead of my trip to Australia I saw some demographic data which suggested that a much higher proportion of accountants and bookkeepers describe their business as in growth mode versus the UK. A tough one to validate, but I did hear from several people about the urgent need to free up even more capacity with technology, which suggests there is still excess demand in the market.

What the community seemed in total agreement of, was that the market had been through several years of consolidation and acquisitions. This is something we are seeing as a growing movement in the UK. 

Sadly, a worrying trend both markets have in common is the lack of new talent entering the market – this is creating an even greater need for capacity. While cloud accounting software can drive huge benefits for accountants and bookkeepers, it cannot replace humans. This is a trend I hope to see fall away in the years to come. 

Final thoughts

Thanks to a combination of market conditions, cloud accounting adoption has soared in Australia. The UK, however, isn’t far behind, and now similar trends are emerging. We’ve got an exciting few years to come.

By Ian Phillips, Head of Partner Sales, Xero

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