When your favourite accounting software hikes its pricesby
In light of a number of rises over the past week, what should accountants consider when deciding whether to lump the latest price hikes or pack up those bags of receipts and move on?
For American statesman Benjamin Franklin, nothing in this life is certain apart from death and taxes. However, for those in the accounting profession, perhaps you can now throw regular software price rises into the mix.
In forums, social media posts and online groups, accountants debated the impact the increases would have on their firms, their business models and their clients, with many threatening to jump ship to other vendors.
So what should an accounting firm consider when deciding whether to lump the latest price hikes or pack up those bags of receipts and move on?
For Billie Mcloughlin, a practice consultant for the 2020 Innovation group with a focus on helping members with technology through her Tech-Talk programme, these questions are part of a daily discussion with members – and are best approached in the cold light of day in an analytical fashion.
Speaking to AccountingWEB, she advised accounting firms to consider five key points before deciding whether they should move accounting software in the wake of a price rise.
Even with the additional cost of a software price rise, do you know your return on investment?
Don’t just consider how much you are charging your clients versus how much you spend on the software, but also look at how much time it’s saving you or your team. Correcting errors for less adequate software is not only costly but painful for staff and can affect morale.
For those looking to shift from a model of absorbing the software cost into the overall client fee (in Mcloughlin’s experience the majority of UK practices) to directly billing or recharging the client for it, be aware of the difference between direct pricing and discounted rates for firms – although the markup tends to be minimal for most firms.
Knowing what else is on the market is key. Are there similar options at lower costs? The answer may well be yes, but as the next point makes clear, not all software solutions are created equal.
And what will you be using the software for? And for whom? As former Xero head of UK sales Glen Foster recently pointed out, “lots of businesses have pretty simple accounting requirements so whichever system you pick will serve them well.”
It’s also worth remembering to factor potential transition costs, staff and client training needs, and any potential downtime into the equation as well.
Don’t be short-sighted when it comes to switching. Your present situation is similar to looking at a balance sheet. Forget the past, how does it look as a snapshot at this moment in time? It’s also important not to lose sight of the overall value. A piece of software may be 50% cheaper but how much staff time could a 10–20% loss of accuracy suck up?
Usability and functionality
The big question to answer on this front is “can the new software deliver the same results with the same efficiency?” Factors to consider when answering this include processing power, speed and accuracy.
Assess the downtime – with receipt and invoice capture and processing tools such as Dext, AutoEntry and Datamolino, the work isn’t instantaneous, so how is your firm set up to handle this? Some practices funnel the paperwork through at 5pm on a Monday and can then start work on Tuesday morning, so a slightly slower tool is fine. However, for those looking for a faster turnaround this might need some thought – is any potential move worth tweaking your processes? It’s important to think about all your tools like this, almost on a case-by-case basis.
The basic functionality of tools may be the same or much of a muchness, but are there parts of your client base who have specific needs? For example, if you have clients who are vets and require several different VAT codes to be pulled from one invoice, is there a system where that’s easier?
It’s also worth investigating which industries particular software packages target, for example, sole traders, landlords or e-commerce. If this matches your client base (or a decent chunk of it), this focus may help to bring further efficiencies now or with future developments, and also could bring new clients to your business.
For those with their hearts set on moving, data migration is probably the most costly thing in terms of time, but the good news is that it’s a one-time cost.
Transitioning data between software systems can also be complex and risky, so make sure your new software can handle this process smoothly to avoid data loss. It’s also advisable to use the new vendor’s client success team – it’s their job after all, and they should be there to support you.
With most accounting software these days, it’s not hard to set up your clients. However, adding functionality such as bank rules, integrations or how you do the bookkeeping can be tricky, especially when you’ve got 150 clients to start from scratch with.
Automation is fantastic but it doesn’t just happen and the machines take time to learn. Be sure to factor this time into the overall calculation.
As we all know, the decisions we make as a firm also affect our clients, so it’s important to assess how any changes might impact them.
When it comes to software moves, smooth transitions retain clients, abrupt changes unsettle them. In a perfect world, the most streamlined way to tell them would be: “Instead of logging onto that app, you log on to this one.” But the more clients you have to communicate this to, the harder this becomes.
Realistically, how many will grasp the nettle straight away? In Mcloughlin’s experience, roughly a third will be fine, a third you’ll have to chase, and the remaining third you’ll have to force the changes on in a year-end meeting.
Also, be ready to answer questions. Clients may ask why they weren’t on the tool in the first place, or if the new software is a better product. If you’ve moved to an inferior product because of a price rise that doesn’t affect them, this is potentially hard to justify.
Finally, ending on a positive, Mcloughlin reminds us that any software move is an opportunity to speak to the client. If there’s a new process or service you’re looking to develop – cashflow forecasting or management accounts, for example – this could be a good time to gently raise it again. Picking up the odd bit of new work may help to take the sting away from the pain of software transition.
11 August 2023: This article was amended to remove an incorrect reference to the pricing of invoice volumes on Dext