The challenge of software pricing for the accountant
Choosing software that complements your business model and allows it to be profitable can be a mammoth task for start-up accountants. Alex Falcon Huerta shares her expertise with software pricing which helped enable her to grow her start-up firm and achieve its tech established status.
A huge amount of time was spent on research, trialling and testing technology when I launched in 2015. There was no app marketplace or app advisory firms to go to for support or multiple conferences where people would discuss the differences, advantages and disadvantages. The products available were old, clunky and less user-friendly.
Setting up an innovative firm, moving to the cloud and bringing in technology as an accountancy firm was required to meet my client needs. These needs were to not receive papers by post and ask them to sign and send it back, or to have multiple versions of spreadsheets going back and forth with VAT quarter and year ends.
The goal was to be 100% cloud, digital and paperless because I wanted to create an agile and flexible business. My vision was to attract global clients and travel more, so I needed a cloud platform that would allow me to manage my team and run the business from anywhere.
Monthly subscriptions and bookkeeping solutions
I use monthly subscription models to keep payments low, which is crucial for a startup. I avoided bookkeeping software providers that demanded upfront payments based on non-existent clients, or add large costs per user. Instead, I opted for Xero, whose pricing enabled my growth plans.
Xero’s monthly fees allowed me to immediately use the product with minimum financial support as I didn’t need to pay a lump sum. Instead, I could manage the payments, recharging the monthly costs to clients.
As I grew, the monthly payments allowed me to scale financially as I didn't need to budget for the increasing number of users.
Clients also benefit from monthly fees as it removes the end of the year bill that comes with the traditional models. Instead, fixed monthly payments allow clients to plan ahead, which greatly improves cashflow projections and budgeting, making growth plans easier, just as it did for my own business.
Admin and other solutions
The decision was more complicated for the other areas of the business, such as emails, storage drives and accounts production. Finding products with the same structure was difficult. They also appeared less advanced than Xero, being less user-friendly and appealing – or they were hosted rather than cloud.
Essentially, you don't want to use a product on the basis that you're going to change it in a year. But it was a matter of time before better products came into the marketplace, which meant a constant review of the technology and its delivery.
Finding the right app
Naturally, it is important to test and review software before implementing them into the practice. My approach was to make a list of my business requirements and a list of the offerings from potential products, including advantages, disadvantages and, most importantly, the costs.
Products costing considerable amounts to add new users posed a scalability issue. However, if the product fulfilled all the other requirements, then it might still be viable to factor in costs. At the time, this approach was time-consuming as I was building a business from scratch with little funds but with scalability in mind, so the reviews had to be comprehensive.
Getting yourself a deal
I had a number of diplomatic conversations with well-known accounting software providers where I gave feedback on pricing structures. I explained my cloud business model, my monthly revenue, my growth plans and my financial situation.
However, providers just viewed me as a nuisance and there was little flexibility around helping me get started.
Xero is an example of a company who listened. At the time, Xero bought WorkflowMax as a practice manager, which was free if you had 25 Xero clients. If I started on another system, I would have to transfer all the data over when I reached 25 clients, which is extremely time-consuming and would have kept me tied in to the other product.
However, if WorkflowMax was free from the offset, it would remove the deterrent of moving over later and would encourage me to stay with Xero products. Xero listened to me and allowed me to have it from the start.
The future of pricing
I didn't want to ask for deals from the software vendors, but I was forced to in order to remain profitable. Combining the cloud business model with traditional ways of working was a struggle, but the vendors didn’t see the bigger picture. Being aware of the inefficiencies of traditional firms, new practices owners were not going to follow out-of-date business strategies.
However, I could foresee that when vendors began to align with new accounting business models, it would be easier for accountants to go it alone. In turn, this would encourage more new practices, creating more revenue for vendors.
The vendors developing accounting-related apps would benefit from recognising this model. By providing pricing plans that can help practices scale, they will be far more attractive to the start-up firms whose scaling of outgoings can dictate its success. Software vendors should consider the lifetime value (LTV) of what a practice can give back by helping it to scale.
Since 2015, there have been a number of changes to pricing. Several tech firms have realised the benefits of this and have lowered their prices, but more need to follow to match the number of new firms setting up.