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When your favourite accounting software hikes its prices

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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?

9th Aug 2023
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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.

Last week saw a collective intake of breath from the nation’s number crunchers as Dext changed its pricing structure, Xero bumped up its rates, and Sage raised its accountants’ network cost. 

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.

Cost-benefit analysis

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.

Alternative solutions

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.

Data migration 

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. 

Client impact

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

Replies (25)

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By johnthegood
09th Aug 2023 18:20

exactly the reason why we have never subscribed to the notion of being a "xero only" or "QBO only" practice, I do not agree with the statement that "any software will do the job" they are all different and do different things for different people, thats one of the foremost skills in being an advisor now - which one is best for the client, not always best for the accountant.

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Replying to johnthegood:
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By mrshamilton
15th Aug 2023 07:28

I used to think like that until I moved to a xero practice. We do use any software that the client wants but if the client wants direction we point them to xero as we are able to support them more and truly believe it's the best all round bookkeeping software.

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By Open all hours
09th Aug 2023 20:15

‘any software move is an opportunity to speak to the client’. They’ll really look forward to that.
We don’t need ‘an opportunity’ to be created by this monstrous imposition.
We’ll take our own opportunities to speak to clients and when we do we will sympathise and at the same time rage at the injustice of fees being paid to third parties just so that they remain compliant.
AE pension providers and software companies really have run rings round HMRC and the client picks up the tab.

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By TB93
10th Aug 2023 09:29

Dext seems to be the main culprit for this.
I hope people aren't paying a fortune just for bank statement conversion when there's the likes of LimeBooks that includes this for free.

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By AndrewV12
10th Aug 2023 09:31

'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?'

well as the accounting and taxation software goes up quarterly, its an on going decision, most of us do what I do;-
i)stay with current provider,
ii)pay up
iii) hope it does not go up again.

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By bendybod
10th Aug 2023 09:35

I'd love to be able to get rid of the Sage subscription but given that two of my largest fees are using it, I will suck up the cost rather than risk upsetting them and them moving to another accountant!

I'm interested to know how many practices split their invoices in to labour costs and software costs? Obviously we factor both in to the fee. In my experience though, data capture software more than covers its cost in a reduction in labour.

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Replying to bendybod:
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By whyowhy
10th Aug 2023 10:59

We itemise the software costs on the proposals and state that cost increases are passed on to the client.

I think a lot of the software solutions in the accounting industry whether for document capture, basic bookkeeping or tax filing are in the cash-cow phase for the owners.

Going forward I think it is going to get easier and easier for accounting firms of all sizes to start building their own solutions using AI etc. At the moment, we are beholden to a few big players but that will change. They should enjoy their day in the sun.

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Replying to bendybod:
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By AS44NG
17th Aug 2023 20:04

"... Sage subscription but given that two of my largest fees are using it, I will suck up the cost"

This is our dilemma too. We literally have 2 clients left on Sage, with over 130 on Xero. The Sage clients are both very good fees (and clients) which is the only reason we persist with Sage. I am tempted to cancel Sage and do the accounts at the client's premises next year.

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By Postingcomments
10th Aug 2023 09:36

As a general rule in life, try not to become too wedded to any product - because companies will use that against you and gouge you for its use.

If a service ups its price too much or introduces a load of ads or annoying features, I have no problem moving to something else. Even if it might mean I don't see the 406th 4 hour long Game of Thrones episode for another year!

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By SUE ROLFE
10th Aug 2023 09:42

I was faced with a 40% increase on my compliance package. It was the incentive I needed to move products which will save me approx £6k pa. Don't be worried about moving..its not as bad as some would have you believe.

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Replying to SUE ROLFE:
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By bendybod
11th Aug 2023 14:36

If only I could persuade colleagues of that....!

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By JS23
10th Aug 2023 09:43

I think the software companies lured accountants in with cheap prices initially with a view that once they are through the doors, we can control them how and when we want.

We cancelled our Dext as it was notorious with price increases.. Hubdoc does the same on Xero so thank you but no thank you Dext.

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By BIGWAL
10th Aug 2023 09:44

Do the plainly co-ordinated price hikes s indicate a refer all to the monopolies commission? - perhaps the professional bodies should do so.

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By carnmores
10th Aug 2023 10:30

in principle, i am not averse to price increases but I am against price gouging. this tends to happen when

a) a mandated move from desktop to online 'necessitates' an aggressive expensive new subscription model payable monthly. we all know that this is profiteering and is not in the clients interest a lot of software houses think they can get away with anything they like

b) when there is a purchase of a software product by another company, inevitably there is a large hike in price and a fall off in the product quality. we have all seen this happening over the last years. what is particularly galling is when the new owners try and improve software they have purchased and invariably muck it up. totally unnecessary and not what we the customers want. but they dont care they want to screw as much money as they can out of us.

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By Catherine Newman
10th Aug 2023 12:09

I can't thank contributors on here more for recommending VT. I wish I'd listened earlier. Batch entry rather than entering every client is amazing. Filing a VAT return was really quick once I registered my ASA.

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Replying to Catherine Newman:
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By tanyajackson
10th Aug 2023 13:39

Agree, VT is a great software, however it's limited to desktop which limits client access. It's great for smaller companies and soletraders.

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By tanyajackson
10th Aug 2023 13:37

Recently had an increase from a software house. I went with them a few years back on the basis that the monthly cost per user was fixed for life. Turns out, we had diferent ideas of what that actually meant.
Software houses have wasted so much time and money on MTDITSA, which they assumed would pay for itself once everyone jumped on board, becasue that hasn't happened, they've had to recoup their development costs.
The more competition, the better.

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Jennifer Adams
By Jennifer Adams
10th Aug 2023 18:45

With bated breath I'm waiting for TaxFiler to increase their fees.

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Replying to Jennifer Adams:
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By carnmores
10th Aug 2023 19:19

I know exactly what you mean, they released Essentials which I believe has separate tax and accounting modules, why? price gouging . According to a couple of members on here it didn't work properly ( see my previous comment - they have form here ). I will not move until I have to .
I believe it is not compulsory to move yet and the price increases that occurred postpurchase are manageable and fair. I started at £18 pm and now its £38 which is OK for about 50 clients

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Replying to Jennifer Adams:
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By carnmores
10th Aug 2023 19:19

duplicate , they need to speed this part of AWEB

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Replying to Jennifer Adams:
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By AdamJones82
10th Aug 2023 19:44

Taxfiler won’t be there much longer. There’s already an option in Iris Elements to import Taxfiler data

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By carnmores
10th Aug 2023 19:59

Yes thanks i meant Elements i dont dare press the button.

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By Nebs
11th Aug 2023 10:13

I know we all moan, but it is still better than the old days when the only software was excel, tax returns were completed by hand, and accounts were typed using several sheets of carbon paper, and delivered to HMRC on the morning of a commissioners meeting.

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Replying to Nebs:
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By neilrobinson5
11th Aug 2023 14:01

Ah, the good old days. You've got me all nostalgic.

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Replying to Nebs:
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By bendybod
11th Aug 2023 14:38

Sometimes I wonder!

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