Suddenly, the big accounting software platforms have stopped banging on about moving into advisory services. Now it's "all about compliance," Xero’s Damon Anderson told UK accountants at Xerocon.
Coincidentally, the head of Intuit’s accountant business was saying similar things at QuickBooks Connect in San Jose, California the week before. But where Intuit was setting out a general direction of travel, Xero backed up its new strategy by acquiring tax and accounts production app developer Instafile.
According to Xero executives, the company had been helping Instafile integrate with Xero in recent months. “We became so impressed that we decided they should be part of the family,” Xero UK managing director Gary Turner told AccountingWEB in a video interview at Xerocon.
The integration work was evident in a working demo at Xerocon, and the surprise deal generated considerable debate on the show floor and on AccountingWEB.
None of the Xero accountants AccountingWEB spoke to at Xerocon had heard of Instafile before last Wednesday and while they were intrigued by the prospect of a free compliance suite from Xero, several said they would wait and see what happens over the next few months before jumping on the bandwagon.
“They are going to have to introduce a telephone support line if they’re going to work with accountants through self assessment season,” said one practitioner at the event.
The tortured progress of Xero’s payroll module – which has been “radically reimagined”, Anderson told delegates – offers a cautionary tale of what can happen when a general bookkeeping developer dives into compliance waters.
MTD puts the UK centre stage
Thanks to Making Tax Digital, the UK market has become a major international battleground for the big cloud platforms, with Xero and QuickBooks locked in a King Kong vs Godzilla showdown to grab the biggest share of the booming cloud accounting market.
The latest breakdown of their published numbers from Australian analyst Matt Paff puts Xero on 355,000 users in the UK and QuickBooks on 305,000.
In a show of defiance at the threat from its larger US rival, Xero founder and chairman Rod Drury was at Xerocon showing off a revenue chart of Xero’s surging UK income compared to QuickBooks Online's flatter growth line.
Meanwhile, back in San Jose, Intuit CEO-elect Sasan Goodarzi and accountant business head Ariege Misherghi both told AccountingWEB how MTD had stimulated the company’s new-found commitment to compliance tools.
“In the UK our team is flying with MTD and our core team is supporting them. And you’ll see us lean more into tax,” Misherghi said. “When I talk to accountants in Singapore, California and Europe, I find there are more commonalities than differences. There are very important nuances, but the tax workflow is often the same in different regions.
“Our vision for QuickBooks Online Accountant is to have one place where accountants can do everything – and that includes tax. You’ll see some really exciting tax stuff coming out in Canada next week. We’re a compliance business. We’ve been in tax for a decade – that’s not off-putting to us.”
‘We’ll automate compliance’
Taking on fast-changing tax codes in multiple territories, not to mention ongoing tweaks to UK GAAP is not a trivial undertaking. AccountingWEB’s latest Software Reviews comparison of accounts production tools shows that the likes of Sage, Thomson Reuters and CaseWare have struggled to keep up with compliance changes in the recent past.
If specialist UK compliance software developers are finding it hard, can potential customers be fully confident that Xero and Intuit will be able to find the technical talent and sustain the investment needed to carry out the relentless development work?
Gary Turner waved away the concern in his video interview, where Intuit’s Goodarzi batted away similar concerns the week before: “Not to downplay it, but these are compliance changes. What we are great at is solving these compliance changes, fast. We’ll automate them so they don’t impact the end customer,” said Goodarzi.
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.