Cloud accounting software house Xero has turned publisher this summer with the launch of a practical handbook for cloud-based advisory accounting.
Written by Xero vice president Doug La Bahn with Josh Drummond, 'The Pacesetters' is chock full of case studies and quotes from UK accountants who have made the transition from compliance-focused business models to more advisory services.
‘The Pacesetters’ draws from La Bahn’s benchmarking research with Xero partners around the world and advances the developer’s contention that the more wholeheartedly practices commit to cloud accounting, the better they do.
As well as helping practitioners to overcome the initial hurdles of migrating to the cloud, the book lays out a growth roadmap based on the experiences of Pacesetter firms who learned by trial and error – so those who want to follow don’t have to repeat the same mistakes.
“It’s not theoretical book,” La Bahn told AccountingWEB. “It’s an operating manual for how to run a firm, written for the audience that is challenged with how to get ready for Making Tax Digital (MTD). Half the text is from 19 partners who have already done it and they told us how they did it.”
Who the book is written for
Most of the 19 Pacesetters are familiar within AccountingWEB’s Accounting Excellence community and fall into the category described in the book of “cloud champion”. But as La Bahn acknowledged, not every accountant is able to live on the cutting edge.
“There is a different audience. MTD is a big catalyst – and the bulk of accountants are in the process of making that change. We can simplify that by sharing best practices,” he said.
Most practice owners recognise the need for change but don’t always have the time or capability to implement it themselves. As the book puts it, they’ll often ask tech enthusiasts within the firm to act as cloud agents and “find out what the deal is with cloud; make it work for us”.
Cloud champions who run their own firms are able to shape the change agenda themselves. Cloud agents operate under an executive licence, but it’s a lot harder to influence autonomous decision-makers in a multi-partner practice. Larger firms often evolve towards cloud accounting on a departmental basis, so cloud agents need to establish common objectives that bring these independent silos together, according Xero UK’s director of partner and product Damon Anderson.
“You can’t do that as a sole voice in a large practice. You’ve got to get buy-in from different people by aligning processes around a common objective and educating them about cloud products,” said Anderson.
Paul Lodder has been the cloud agent at Leeds-based Sagars, which he credits with helping him along the way to becoming a partner.
At the outset, he said, “It was really hard work for me, because no one likes change.” He started the Sagars transition by moving internal bookkeeping clients from Sage and Excel onto Xero. Clients didn’t notice any difference and the initial move allowed Sagars staff to develop their skills on relatively low-risk jobs.
“Once we felt we had sufficient team knowledge, that’s when we really started to roll it out to clients,” he said.
As the Sagars example shows, ‘The Pacesetters’ does not hide the hard work that goes into becoming a cloud practitioner. One early chapter focuses on mistakes the Pacesetters made. Overenthusiasm and embracing too many new systems at once was one of the most characteristic errors.
“A lot of accountants fall into the trap of using every app their clients want,” said La Bahn. “But there’s a learning curve. There’s just a handful of apps your accounting firm should be great at.” From painful experience, the Pacesetters learned to narrow their focus down to apps that save time, in particular data capture tools that automate bookkeeping by processing receipt data or electronic documents into the accounting ledgers.
The book advises implementing cloud systems in stages, built around plans that acknowledge the different attitudes and skill levels among both staff and clients. As well as managing the different constituencies at different times with appropriate support, Pacesetters advise implementing one app at a time. Champions and change agents within the firm need to share their knowledge effectively through structured training and in particular ensure that principals, partners and managers all have a good working knowledge of the tools their teams are using.
Once a firm is firmly established in the cloud and has access to better data, what are they supposed to do with it? Pacesetters don’t see cloud accounting as a destination in itself, they see it as a vehicle for driving their underlying business models.
Three approaches were identified within the participating practices, best summarised by the service level categories at current Accounting Excellence client service champion Kinder Pocock: “support me”, “guide me” and “grow me”.
- Support me – Better known as the compliance model, these firms focus on delivering highly repeatable services that satisfy government laws and regulations. The model acknowledges that many clients don’t need value added services and caters for them as efficiently as possible by accumulating compliance knowledge and aligning it to process efficiencies.
- Guide me – The “simple advisory” model uses tech as a platform to provide insights based on up-to-date numbers and additional forward-looking services such as cashflow forecasting, budgeting and planning.
- Grow me - Complex advisory work is often the preserve of larger firms and advisory boutiques, but increasingly open to Pacesetter challengers who develop specialised business lines with expert advisers and tailored cloud solutions.
Later chapters in ‘The Pacesetters’ delve into the challenges of moving up the advisory ladder and growing the firm around these approaches. One of the biggest challenges according to La Bahn is finding people who can deliver these services. “Accountants need to have good staff and people who can relate with clients. It’s such an interesting challenge for the profession as a whole,” he said.
Xero has been working with accountancy bodies on these issues alongside its more obvious technology work. Since many accountants are coming into the profession without these skills, many of the Pacesetters have grown their own talent pools internally with apprenticeships and collective self-improvement schemes.
What makes a Pacesetter
Asked if there were any particular qualities that marked out a Pacesetter accountant, La Bahn replied: “making the best use of their time”.
He continued: “That points them to look at how they create value for their clients and they use lots of technology to automate low value tasks such as keystroking data.”
To pull together the book’s core messages, La Bahn suggested some pointers to help accountants track their progress. The first test of success is happy and loyal customers: “Pacesetters measure that. They look at number of referrals, client retention and feedback to show whether they are really serving their clients.”
The other key characteristic is “enthusiastic and energised employees”, he said. “Pacesetter offices are not full of people with their earphones on. They’re the opposite, they enjoy talking to clients. There’s a big shift from being in a dark room entering data to serving clients. You can monitor that from data showing how often are they interacting with clients. Those things retain clients, provide more services and becomes very measurable in revenue and monetary growth.”
If you'd like to hear more about the experiences of UK pacesetter accountants - and ask them your own questions, register for the Accounting Excellence Insights Talk on 27 September.
About John Stokdyk
AccountingWEB’s Head of Insight has been with the site since 1999 and likes to spend his time studying accountants’ technology habits. When not nerding out, you can find him exploring obscure indie music and searching for the perfect organic sourdough loaf from his base in Brighton, UK.