Since 2015, AccountingWEB has tracked “the MTD effect” driving the adoption of online cloud accounting tools. But the figures from our 2018 awards survey uncovered a new twist to this tale.
The PC-based accounting systems that saw out the 20th century are undoubtedly giving way to a new generation of online bookkeeping systems. Only Sage 50cloud, VT Transaction+ and QuickBooks Desktop remain from that era among the 11 programs listed on our comparison table of the most popular small business accounting packages.
The user feedback coming out of our annual awards and software reviews survey highlighted the “MTD effect” that stimulated cloud accounting adoption within the profession – which has more than doubled since the original 2015 Budget announcement.
In comparison to responses from practitioners taking part in the Accounting Excellence Awards, the cloud growth rate among the wider business population in our survey stalled slightly since Treasury minister Mel Stride announced the switch in direction from MTD for income tax to VAT in July 2017.
The MTD dip: Accounting Excellence practitioners vs software survey
Xero vs QuickBooks: The big showdown
Towards the end of 2018, we set out how Xero and Intuit QuickBooks were locked in a struggle for dominance, with roughly equal market shares in terms of quoted user numbers. The ratings collected from more than 1,900 small business software survey participants reveal the neck-and-neck intensity of the competition.
Xero changed the game when it entered the UK market in 2006-7 and cemented its position as the leading cloud player by capturing the first wave of early adopters. But Intuit QuickBooks has been gaining ground rapidly in the past two years. Competition is particularly marked on the practice side of the profession, where QuickBooks has taken a four-point lead over Xero as the market shifted from trendsetters to more price-sensitive “second wave” cloud users going online to cope with MTD.
Sage, which retains a significant UK customer base after a generation of desktop market leadership, did not have a good 2018. Difficulties executing its transition to cloud products, confused branding and marketing strategies and executive clearouts were reflected in poor engagement levels with the 2018 survey population. Sage appears to be more focused on the mid-market at the time of writing, but with rebranded cloud suites in place, it needs to prove to existing customers and prospects that it remains a relevant supplier of bookkeeping tools.
For all the focus on the big suppliers, there are interesting stories among the smaller UK independents. Multiple award-winner FreeAgent is no longer part of that pack, having become part of the Nat West/RBS banking group in 2017. Now available as a free offering to bank customers, FreeAgent has reportedly added tens of thousands of users to its camp.
Integrated cloud practice suite Capium has also benefited from MTD, building up a 6% share of our survey population. Taxfiler’s hook-up with IRIS/KashFlow is another example of the practice in the cloud concept catching on both with startup firms and with established practices that see the advantages of online systems, but shy away from configuring multiple tax, bookkeeping and practice software tools.
Since we collected the ratings and reviews for our 2018 awards and software reviews, Xero and QuickBooks Online Accountant have both moved more actively into accounts production, tax and practice software, challenging bookkeeping software suppliers Sage and IRIS that have been in this market for decades.
Against the backdrop of the MTD-fuelled rise in online accounting, compliance tools are going to take on a much deeper significance in 2019. To find out how fast and how far that shift is moving, we need your help. By adding your ratings and comments to our online survey, you can help AccountingWEB track what’s happening in the market and the relative positions of the different products.
We will share the information with AccountingWEB members and suppliers in updated Software Reviews on the site, and will also present Accounting Excellence Software Awards based on your votes.
The bot race
We heard a lot about bots in the past two years, but in spite of the tradeshow demos, few sightings have been recorded in the field. The developers assure us that voice will be the next major interface to sweep through accounting software – but how many people do you know who prepare their accounts, payroll runs or tax returns on mobile devices?
For all the new thinking that has taken hold within the profession, recording, reviewing and analysing transactions are reflective, desk-bound activities. Artificial intelligence could change that side of accounting, however, judging from the way autocoding has become a standard feature of online accounting software.
Having seen one technology wave surge into the mainstream, eyes will be turning towards the next big thing. Analysis from Hg Capital, an investor in IRIS and other accounting software providers, suggested that AI won’t spawn new types of application, but will be seen instead in enhancements to existing tools.
The speed and ingenuity with which developers introduce new AI capabilities will probably be the most important differentiator within the industry over the next couple of years. Our old friend Making Tax Digital could accelerate things again on this front, where AI data-gathering bots could alert accountants and their clients to impending deadlines and act as a go-between for compiling the data and collecting authorisations for filing regulatory updates.
If you are considering your options for small business accounting software, visit our latest Software Reviews comparison table. Detailed reviews are available for the 11 most popular applications rated by more than 1,900 accountants.
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.