Pandle is the latest bookkeeping package to take on accounting software's big boys. While the plucky software start-up has just taken on its 3,000th customer, what chance do they have competing against their billion dollar rivals?
Breaking into the crowded UK market, fighting the likes of Sage or Xero, Pandle has an uphill struggle – which begs the question: are they mad?
As an accountant, Pandle's MD Lee Murphy developed the cloud accounting alternative out of necessity, noticing clients when using established software were making “an awful lot of mistakes”.
“We made Pandle with that in mind, to be as simple as possible so that anyone who uses it should be able to produce a comprehensive and accurate set of records,” Murphy told AccountingWEB, singling out the smaller trader who doesn’t want to be “bogged down with features most small businesses would not use... like advanced reporting".
So instead of trying to rival the big players with flashy features, the software underdog embraces its small scale status, presenting a stripped back, simplistic software.
“A lot of it is about reducing the amount of options,” said Murphy. “If you take away some of those reporting features, it’s a lot easier to navigate and understand what’s happening, and we felt that was a gap in the market – because a lot of people tried using cloud accounting and did not get on, so reverted back to using spreadsheets.”
Many would balk at challenging the big players, but Murphy has form in embracing technology and risk taking. A decade ago, he built a website for his "average-sized" Merseyside-based accountancy firm, at a time before accountants were online. He soon found out, without trying too hard, that they gained clients from London, which alerted Murphy to the opportunity. Soon after, the firm focused on offering its accounting services remotely, and now draws 90% of its clients from outside the region.
Now Murphy hopes other accountants will take a similar chance on the unknown. Pandle wants accountants to shun partnering with the software giants and instead use their white label solution to market their own software to clients. “If the client sees that they’ve got a fairly advanced software platform it gives them more authority, especially at the stage of choosing an accountant,” Murphy said.
Outside of establishing a brand, Murphy sells Pandle's white label solution as giving accountants back the power of pricing. “Because the client has got no point of pricing reference, they’ve got full autonomy over the price,” he added.
And with the Making Tax Digital documents being released soon, Pandle is looking to pick up businesses that previously shied away from cloud accounting, offering a free version.
Whether strategic or not, Pandle is sure to be the first of many entering the market at the right time, and could herald a surge in smaller-end software companies trying to capitalise on HMRC’s digital plans.
However, Murphy casts doubt on a smaller software boom. After all, it's become a scaling game, in which deep pockets are needed to reach prospective customers, and vendors need to have the capacity to take on big volumes of users.
As more people migrate from the desktop giants to cloud accounting, Murphy questions how other smaller companies will be able to compete with the bigger companies, who are dropping prices and offering competitive deals to get users onboard, knowing if they get them at the beginning, they will unlikely change allegiance.
“There are a lot of barriers to the market so far as it is not cheap to develop the software,” he said. “We are about £250,000/£300,000 in to [building pandle] and we are only just getting going, and we still have a lot of core functionality to implement.”
About Richard Hattersley
Richard is AccountingWEB's practice correspondent. If you have any comments or suggestions for us get in touch.