Editor in Chief (interim) AccountingWEB
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Third party apps add up to more than the sum

21st Jan 2015
Editor in Chief (interim) AccountingWEB
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AIA

A new movement is disrupting traditional accountancy tools and techniques. John Stokdyk takes a look at how third-party add-on applications are being used by UK accountants.

From tracking usage in our SSA surveys, we estimate that more than 50% of AccountingWEB members now run some kind of cloud accounting application.

The market is divided between three camps:

  • Local, independent software houses who made that fastest running in this country among start-ups and microbusinesses: KashFlow (now part of IRIS), FreeAgent, Clear Books, Liberty, Arithmo, etc 
  • European developers who developed cloud accounting tools and brought them to the UK: Twinfield (now part of CCH), e-conomic, Exact
  • Publicly listed, International developers who are aiming to capture a global market: New Zealand’s Xero, Intuit in North America, and the UK’s own Sage

Each of these groups has suffered their own surges and dips and while AccountingWEB’s figures show FreeAgent, KashFlow and Clear Books with the strongest camps among our members, the global trend, measured by Google in terms of headline interest over the past decade looks more like this (source - Google Trends; Quickbooks Online (red); Xero (blue); Sage One (yellow):

Google Trends - Xero v Quickbooks Online v Sage One

But that’s yesterday’s story. As we head into 2015, the information we are picking up on AccountingWEB is that with adoption rates for the core accounting engines experiencing steady, mainstream growth, the real breakthroughs are now happening among the third party cloud applications that connect into these systems.

New generation cloud firms

One of the clearest indications of the sudden rise in third party cloud applications came from entries to the 2014 Practice Excellence Awards, particularly in the innovation and technology champion categories. Alongside several firms who were developing their own cloud accounting tools, there was a strong contingent of accountants who were deploying multiple cloud tools to meet the information needs of their both clients and their own firms.

Accountancy’s new wave was represented by the 2014 Practice Excellence Award winner for small firms and innovation, Tayabali Tomlin, along with technology champion nominees Jessica Pillow and Sharon Pocock.

All of these firms tell a similar story to that of Sharon's firm Kinder Pocock, who explained: “Two years ago Kinder Pocock realised that online accounting software would become an essential part of business.

“We started using Xero in-house, and offering it to clients.  We immediately realised that Xero was efficient, interactive, easily accessible and easy to use for both the practice and clients. It also gave us a better interaction and relationship with clients… We can see clients’ live accounting data at any time.  This has saved us time, but has created major improvements in the advice and support we offer clients, including in-year tax planning advice, cashflow management.” 

Having made this breakthrough, the firm reviewed all its business processes and rebuilt them using online applications and add-ons, including:

  • Receipt Bank, which lets clients capture and send digital receipts and supplier invoices to Xero, via a photo app, email or even Dropbox
  • Spotlight Reporting for management accounts, cash-flow and forecasting. “We create reports showing actuals, budgets, variances, margins, comparatives, together with charts and graphs to visualise the data on tablets and smart phones.”
  • Practice Ignition - used to create online quotes, letters of engagement, re-engagement letters and requests for records
  • Xero Practice Manager - Once accepted online, jobs are created in its companion Practice Manager module, which triggers in Xero. “Time savings and client satisfaction have been improved greatly,” the firm reports
  • EchoSign (for digital signing), GoCardless (card payments) and Directli (direct debits)

The firm also seeks out solutions for clients including the online point of sale system. For example one e-commerce client was not happy with their online system and with Kinder Pocock’s support they moved onto Xero, using a tailored integration system devised by the firm and the client’s web designer to link the accounting software to the Magento new e-commerce platform.

On the back of this innovative, technology driven approach the firm’s turnover has increased by 40% and net profit by 61% in the past year, with no additional staff. 

“Not only do we gain clients specifically because we use online solutions, but they stay with us because we are able to offer solutions to system problems they may be having,” Kinder Pocock reported.

Valued Accounting tells a similar tale of growth beyond its home region in the North East, and claims to deploy more than 25 different types of software, all of which are chosen for their ease to use for clients so they can “see the end result in a format they understand”, the firm explained.

One client commented in a testimonial for the firm: “If someone had told me I could have saved over £6,000 in accountancy fees and got information I need to run my business quicker I would not have thought it was possible. 

“Valued Accounting implemented systems within my business that have meant I have not had to replace a bookkeeper, that chase my outstanding debt for me automatically and predict my cashflow as well as getting management information I understand when I need it.  They are an intrinsic member of our extended management team.”

The global scene

If further evidence were needed, a couple of research trips to the US provided it. As we reported on the big global accounting software fight, there are around 400 different add-on applications that work in tandem with QuickBooks Online and Xero, particularly in areas such as management reporting, project accounting, KPI dashboards, expenses management, stock control and distribution where local accounting standards are less of a technical restraint on systems.

In an article on  the next generation accounting firm based on findings at the Solutions 14 event in Las Vegas last November, Donny Shimamoto commented how the emerging “virtual infrastructure” of cloud applications “allows the flow of data among systems supporting both clients’ and the firm’s operations, allowing accountants to be a more integrated part of their clients’ businesses”.

David Watson, co-founder of the reporting specialist Fathom described how cloud accounting was evolving into an ecosystem of apps connected by programming interfaces that can save a significant amount of time for accountants who willing to embrace them.

If you look more closely, many of these programs share some common characteristics with Fathom, which is expanding into the international market from its base in Brisbane, Australia. Alongside Fathom at the QB Connect conference in California were 50 other add-on developers, half of whom were from down under. Many of the same people reappeared a few weeks later at Solutions 14 in Las Vegas.

The Xero effect

Few would argue that Australia and New Zealand lead the world market in cloud adoption and that enthusiasm has been accompanied by the blossoming of a new generation of cloud financial software developers.

“Our accountants and audience are at least a year or two ahead of the US in adoption and willingness to step up to that next level of proactive advice,” Watson told AccountingWEB in California. The UK, meanwhile, is somewhere in the middle [see video below for more on this point].

Xero’s influence is a significant factor in the antipodean invasion. “They’re a very good marketing organisation,” explained Watson. “Their entry into the marketplace five years ago really educated the market and now we’re seeing Intuit starting to encourage accountants to be proactive and to look at the ecosystem of apps for each accounting system.

“There’s a huge shift happening.”

If you’d like to find out more about some of these add-on applications and see what they have to offer, more than 20 of them will be exhibiting at Xerocon, on 10-11 February at Battersea Evolution, London SW11 4NJ. Among those appearing will be developers from the following sectors:

Transaction capture and expenses management

  • ReceiptBank
  • Expensify
  • Entry Less

Invoicing/payment & credit management

  • Satago
  • Chaser
  • One Click Cash Collection

Management reporting and KPI dashboards

  • Fathom
  • Float
  • CrunchBoards
  • Spotlight

Practice management

  • Practice Ignition
  • Workflow Max

Replies (22)

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By carnmores
22nd Jan 2015 11:06

thanks John

lots to take on board here , a job for February me thinks

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By RodDrury
22nd Jan 2015 11:21

Yes, but consolidation coming

Great article

We love the proliferation of add-ons, the great new companies that are being created and the massive amount of innovation occurring for small businesses and their advisors. It's a create community of entrepreneurs and their teams collaborating to make a big difference to small business globally.

The wide numbers of add-ons do cause some confusions as its a big effort for accountants to work out which is the best add-on for their groups of customers. We have to do a better job at discovery, evaluation and be more prescriptive for verticals. We expect the add-on directories to get much better over the next year. Xerocon and other industry events create the ideal opportunity to see who is who and build the important relationships with new vendors.

I would just caution that we think we're heading into a phase of add-on consolidation. This is because of two factors. Firstly the larger platform providers are getting their products quickly to the level of desktop software and the last feature gaps are being completed (for example Xero just released Quotes, a popular add-on category). Also the incumbent vendors are using their balance sheets to acquire good add-ons to augment their internal development efforts which are going slower than hoped. We don't think this is a good long term strategy for them but its already happening.

In addition SaaS valuations have make it more difficult for smaller players to receive the ongoing funding many will need to get to viability. Getting to scale is hard.

Our advice to add-on partners is to move from horizontal features to vertical solutions where they can build deep expertise and a loyal client base, leveraging the investments made by the business platforms of scale (Xero, Intuit, Salesforce and the PaaS providers: Azure, AWS, Google).

Add-on ecosystems need to be nurtured and there is a responsibility for the bigger players in the industry to lead and foster these ecosystems. That's something we're passionate about so we can see innovation continue and sustainable companies that provide value to their customers for many years.

Looking forward to more of this discussion at Xerocon.

Rod - Xero

 

Thanks (3)
Replying to lionofludesch:
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By johnt27
22nd Jan 2015 15:32

@RodDrury Lots of interesting comments and insight on the market.

The key to the add-on market as you say is ensure that products available fit the end user's needs properly.

You mention Salesforce and one look at their add-on directory is mind boggling and that's before you look at 3rd party integration using the likes of Zapier. This does create it's own issues which have been mentioned in the original article.

Consolidation in the market is great if it either improves the add-ons features or markedly improves the original software features by bringing this in house. I don't want consolidation to create the kind of platform wars you get with the likes of Microsoft, Apple and Google.

Going back to my Salesforce example and their core product now has a massive amount of unnecessary features unless you operate on an enterprise scale. Much better, in my opinion, to have an excellent core product complimented by excellent add-ons appropriate to your needs than an average product in which you utilise only a small proportion of functions.

Personally I love the proliferation of add-ons as it provides even greater scope to advise people on. I'd like to see TransferWise get into the add-on market for forex payments. Xero already has XE conversions for forex invoices.

The ultimate question though is how long before my Philips Hue lights will flash Xero blue when I reconcile the bank or they flash red when I go overdrawn or a big invoice gets processed on ReceiptBank...

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Replying to daniel_:
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By JordanValdmaTransferWise
23rd Jan 2015 09:32

Xero and TransferWise

Hi, johnt27!

Great to hear from you, you hit the spot.

I could not agree more on what you say about having a good core product complemented by excellent add-ons.

To answer to your interest, I'm happy to say that we are creating a Xero TransferWise add-on, to allow Xero customers to transfer money between currencies at a fair exchange rate.

By the way, it would be nice to have a chat, if you happen to be at XEROCON 2015 10 & 11 of February, Battersea Evolution, London.

All the best,

Jordan Valdma from TransferWise

 

Thanks (2)
Replying to geoff_payne:
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By Malcolm Veall
23rd Jan 2015 10:16

Why Xero is to be highly rated

BryanS1958,

With genuine great respect, you are missing the point – Xero is not designed for us to pick up after the event and put right; it is for us to help the client, hand-in-hand, as the year progresses – to get things “right first time” – that way the client has good management info & the year-end accounts are barely more than running a report. 

I think you know this, (I have looked at your quality posts on other discussions), but readers of this piece will not all have twigged the fundamental change that cloud accounting brings.

Evaluating cloud accounting packages by comparing them with how quickly a traditional after the event accounts preparation / error correction process can be done on Sage/QuickBooks is not going to pick up the advantages of Xero & the other cloud packages.

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By quintodc
22nd Jan 2015 11:24

CRM Xero Add on

Also Add Capsule CRM system to list of excellent Xero Cloud add-ons!!

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By Brend201
22nd Jan 2015 12:19

Thanks for this - but you are messing with my head too!

Text says: QuickBooks (yellow); Xero (red); Sage One (blue):

Colours key shows: QuickBooks (red); Xero (blue); Sage One (yellow):

I think the latter might be more correct - but please confirm.

Thanks (1)
By korecky
22nd Jan 2015 12:20

Purchase invoice Data Capture add-on - Datamolino

Great article. Also a very insightful comment from Mr. Drury.

You can add Datamolino - purchase invoice data capture - to the list of companies that you will see at Xerocon London 2015.

 

Datamolino is a new entrant to this market and works with Xero and UK Sage One Accounts and Accounts Extra accounting software. You can manage multiple companies in Datamolino and connect your folders to organisations in your Xero or Sage accounts easily. 

 

We are looking forward to meet the guys from Receipt-bank, Expensify and Entryless at Xerocon London and get to know each other. There are millions of transactions to process, so we are glad that we can help these guys:)

 

See you at Xerocon. It is great to be working with accountants that have switched to cloud.

 

(disclosure: I am one of Datamolino co-founders)

Thanks (1)
By Numernet
22nd Jan 2015 13:24

Advice for Practices and Small Businesses

Great article John and a subject I am building my business Numernet around.

 

Many small businesses and practices are not aware of the cloud based software solutions that are available and which ones are the best match for their business.  Having worked for a large online SaaS directory I have seen this market develop over the years and mature to a point where SMB's can create cost effective fully integrated business systems without the need for in-house technical expertise.

 

As a Xero approved developer I can provide custom integrations but to be honest its better for the client to use solutions which already offer integration as standard or use third party providers such as OneSaas or Zapier (although I have had some issues here).  These providers are developing their products to keep up-to-date with the latest versions of the software again avoiding the cost of bespoke development time.  As the market continues to mature and legacy systems get replaced the need for custom integrations will diminish.

 

It's an exciting market to be a part of with many benefits for the business which take up these opportunities.

Thanks (1)
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By ColinNibbs
22nd Jan 2015 14:43

Am I alone...

Am I alone in not trusting cloud accounting? What happens if the company behind it goes bust? It has happened to me twice, so I need a system which I can back up on my own systems. Does Xero enable me to do that, or is there another company out there that does cloud accounting with physical back ups - like the very expensive Sage.

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Replying to DJKL:
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By cjfrisby
23rd Jan 2015 12:16

It looks as though you are

ColinNibbs wrote:

Am I alone in not trusting cloud accounting?

It looks as though you are alone amongst your fellow accountants, but you're not alone among the wider readership.

It is virtually axiomatic that anyone using a 'cloudy' service or application is putting the provider of that service or application is placing them at an equal trust level to themselves.

But 'trust' is not a transitive relationship. The fact that I trust my friend does not mean that I trust everyone he trusts. So I don't, for example, do my online banking on his computer. Is it still safe to give confidential details to my accountant?

Whom will my accountant be blaming when my data leaks. In a sense haven't they already leaked it by using these services? Claiming that you kept a secret because all the people you voluntarily passed it on to also promised to keep it a secret, is simply a contradiction in terms.

These questions would have had an obvious answer just a few years ago, but now I suspect they are simply being brushed aside for convenience, lazy thinking and competitive pressure.

 

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John Stokdyk, AccountingWEB head of insight
By John Stokdyk
22nd Jan 2015 14:44

Apologies @Brend201 and @korecky

1. The colour legend in the text did get scrambled... I switched the underlying data selection for the graphic (so it showed worldwide interest rather than UK) and unintentionally altered the colour scheme. Glad to see you haven't lost your eye for detail - thanks for letting us know about the error.

2. I'll be looking forward to finding out more about Datamolino at Xerocon (not to mention Numernet). I had noticed the name on the exhibitor list but overlooked you in my quick compilation. The oversight has been fixed in the list at the end of the article.

As Rod from Xero pointed out, there's a big, big job ahead to catalogue (and rate) all these add-on vendors. This article was just an initial step for us on AccountingWEB - covering both sides of the Atlantic.

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Replying to lesley.barnes:
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By johnt27
22nd Jan 2015 15:28

Pedants row

You mention GoCardless as a credit card payments solution - I trust this is an error unless they have announced new features in the last 24 hours?

Of course there are lots of great card payments add-ons available - PayPal, Stripe to name a couple.

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By johnt27
22nd Jan 2015 15:34

Great little article and I couldn't agree more.

With the greater integration you can gain with cloud accounting, invoice scanning, credit control, expenses and payroll integration it's easier than ever to make life simple for clients.

What holds larger practices back is the software companies themselves - they are still driving an all in one server based solution which poorly support cloud systems.

Don't get me wrong some like Iris (in the UK) try and build better integration but it's not API based and that's where it fails.

My prediction for the future of accounting practices is a move back to "best of breed solutions". Don't like your client database? Switch to a cloud CRM better suited to your business, reconnect it to your cloud based tax, accounts, billing systems etc and carry on.

We're already beginning to see this with Xero offering some functionality and FreeAgent provides tax filing within the program, but when we can file tax returns, accounts and annual returns etc for all clients from the cloud, without having to re-input data from one system to the other or go through clunky data import processes then you'll see adoption sky rocket.

The question is are Sage, Iris et al up to the challenge? After all they badly missed the first wave of development in the cloud accounting arena.

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By BryanS1958
22nd Jan 2015 18:23

Why is Xero highly rated?

Having spent absolutely ages redoing records entered by a client who uses Xero I've found it to be hopelessly inflexible if anything goes wrong. It was also quite poor if bank credits were for more than one client or more than one invoice. In addition, no telephone support and e-mail support took a long time to return messages. Having recommended it to the client in the first place I felt badly let down and haven’t recommended Xero since.

I’ve used Kashflow, but am now mainly using and recommending QuickBooks Online for my own practice and many clients, I find the reporting to be far better, bank feeds work well, it’s reasonably intuitive, there is live chat, telephone and e-mail support and an added bonus for me is that it has the ability to record and charge time. All for £4.99 a month (price when I subscribed, now increased I believe). It also has monthly updates and several of my suggestions for improvements have been implemented.

Thanks (2)
AshTag86
By Ash_D86
23rd Jan 2015 11:05

Correcting Transactions

@BryanS1958 - there are many features that can help if a transaction's been posted incorrectly, for example the remove & redo or unreconcile tools from every Bank Account. Once the incorrect records have been selected, removed or unreconciled, they can easily be recoded. 

If you have situations where a bank statement line covers multiple clients or invoices, you can make use of the split payment feature available in the reconciliation page. I've included links below to our Xero TV where you can watch a short video on how this can be done. 

Remove & Redo / Unreconcile

Split Payment

Ashley Driver
Education Specialist, Xero
@Ashtag_86 @Xero

Thanks (2)
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By carnmores
24th Jan 2015 13:42

its all rollocks

nothing i have seen suggests that cloud accounting is fundamentally riskier than desktop , far from it i would suggest with the constant onslaught on PCs from trojans etc

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By BryanS1958
24th Jan 2015 22:49

Is this a Xero Infomercial?

The way the article is written it seems heavily weighted towards Xero. Is Xero paying for this article directly or indirectly? I'm not saying Xero is a bad product as such, but there are others that are as good or better. Xero probably suits larger SMEs with in house accountants who understand accounting. Once something goes wrong it is difficult to correct after the event (or was when I used it). I don't have time, and they can't afford, for me to handhold clients every step of the way and some clients are unteachable.

Ultimately desktop software such as QuickBooks is still much faster and more functional than cloud accounting software, which tends to have lag due to refresh rates, limited reporting, no multi-windows (yes, I know you can have multi-browser tabs, but not really as fast or easy to use) and so on. Maybe Sage Accounting is the way to go, with accessibility from anywhere via data saved on the cloud, but input locally (my understanding, I've never used it because I'm not a fan of Sage or its pricing).

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By carnmores
25th Jan 2015 13:09

Agreed

:-)

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John Stokdyk, AccountingWEB head of insight
By John Stokdyk
27th Jan 2015 11:06

No apologies for writing about Xero add-ons

Thanks for your feedback, Bryan, but you seem to have missed some important references to Sage One and QuickBooks Online in the article.

The piece is all about what I have spotted as a new phenomenon (for the UK) - specifically cloud-based add-ons that hook into online accounting systems, and how some firms are adopting them. 

The piece acknowledges that some of them work with Sage One and QBO too - Sage 50 Accounts and its on premise siblings are no strangers to third party applications, but it Sage One doesn't have the same infrastructure yet. QBO has hundreds of add-ons too - and has been supporting them in the US for more than a decade, but QBO is much less mature at this stage in the UK.

It was the presence of 25+ such applications at Xerocon next month which has presented an opportunity to get to know some of them better. As Fathom's David Watson told us in the article, Xero has played a significant role in stimulating the latest generation of Australian and New Zealand-based developers who are making a lot of the running at the moment.

Often when writing articles we will use some event or announcement as a "hook" to focus our own and readers' attention on an issue. This is why the piece unapologetically looks at Xerocon exhibitors. If the article has aroused any curiosity, it means you have the opportunity to do something about it in the next fortnight.

The article was the first pass at what is going to be a major focus of AccountingWEB during the next year. I have heard reports that Sage One is beefing up its add-on network, so we'll be looking into that, and we're also keen to map which add-ons work with all of the main accounting engines, so systems that are compatible with QBO, FreeAgent, KashFlow, Clear Books and the rest will all be getting a look in as we catalogue what's currently available.

Thanks (2)
Replying to lionofludesch:
By Steven_Satago
09th Feb 2015 22:50

we're agnostic

Hi John, Nice to meet you at Xerocon today. Although we're big fans of Xero, we do integrate with the main cloud players in the UK (Xero, Freeagent, Kashflow, QBO, SageOne) as well as most desktop packages (including Sage50 and Sage 200).

We, I guess obviously, are looking forward to the other accounting software companies putting more focus on their own add-on ecosystems. The individuals I speak to in the companies are very, very enthusiastic, it's just a case of making that enthusiasm institutional. 

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By AndrewV12
28th Jan 2015 13:40

Im old school

I am old school and refuse to have my head turned by new ideas, lets keep it simple.

 

However in 10 years time we will all be using them.

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