Cloud paves the way for global profession

Tipping point

Quote:

"The consensus view is that cloud accounting is going to reach a tipping point. But no one is confident enough yet to say when it will happen."

At our Xerocon conference in London a couple of weeks ago we published results of a Censuswide survey of 250 UK accounting firms which found that while only 28% of UK accounting firms had begun working in the cloud, a further 27% said that they were planning to do so in the near term.

Accordingly our conclusion was that an adoption tipping point will likely be reached within the next twelve to eighteen months and this is borne out by our own anecdotal experiences in the market.

A broader summary of the Censuswide research findings is available here.

Gary Turner
Managing Director, Xero
@garyturner

Globalisation of Accounts

I fully endorse the view that Cloud apps will change the profession, particularly with regards to location. Many UK Accountants are still at the point where their marketing is aimed at SME's within easy reach of their office. Why else do some accountants have multiple offices in the same region? Cloud is changing that in two ways. First, because of EC legislation allowing storage of documents in electronic format and cloud scanning apps, business can really be paperless. I am based in Belfast but most of my turnover arises outside Northern Ireland, mainly in London and Dublin. I even have a Client in Cape Town, a pub, who uses Xero, Receipt-Bank and a cloud ePOS system to allow us to provide a fully outsourced back office service (bookkeeping and monthly reporting). All of these apps are happy to work in the local currency. Of course I have to sub-contract the tax and companies work to an SA firm. However even then they are based in Johannesburg, nearly 1000 miles from my Client.

Advisory Services

Interesting article.

If you are not using "cloud" applications, then you are standing in the kitchen, whilst the party is taking place elsewhere. This particular argument is well worn.

The stories , and software companies, in this article show that you are able to offer a level of service, that was not possible with "on premise / legacy" systems.

What's really different with the cloud, is the innovation that partners can bring to offering. Developing software on a county or regional basis, is difficult enough, developing for a global audience adds to the complexity - and delivery time-scales.  Partners such as Receipt-Bank, ProfitPal and Fathom illustrate the advantages that partners offer the cloud community.

With the move to reduce the reliance on compliance work, and move to advisory services, then its more than just software that's going to be required in the future accountancy firm. Change in mindset and development of additional personal skills- consultative selling and presentation skills will be an essential.

It's a fantastically exciting time of change - leave the kitchen and join the party.

@LangdonHamblin

Cloud Adoption

In Spring 2013 Thomson Reuters ran an IT in Practice Survey of more than 1,300 accountancy firms. This revealed that accountants are now embarking on their journey to the cloud with 11% already using cloud-based or hosted solutions in their practices, and 23% who would like to move or are planning to move all of their solution or pieces of it to the Cloud in the next 12 months.

Enhanced flexibility was by far the number one reason to move to the Cloud with the advantage of being able to access the system from home or a client’s office. Easier upgrades and support came in second, followed by IT cost savings in third place. 

36% said that the ability to save money would definitely influence their decision and because nothing is loaded on your device, the cost of maintaining an IT infrastructure is removed completely.

The findings suggest that there is still education required to help accountants understand the Cloud - data security was cited as an impediment, when in fact it is one of the key benefits of cloud technology. The increasing use of mobile devices for work tasks, often devices owned personally by staff rather than provided by their employer, is one of the more interesting and perhaps unexpected developments. In the survey, over a third of firms surveyed said that they are already allowing their staff to do this, with even more reporting that their staff are asking to. 

For more information, download the full Journey to the Cloud: 2013 Report.

Proof of the Pudding

While reading this thread I had a call from a client using Xero and was stuck on a few points. I was able to log into Xero and teach them how to deal with the issues and resolve them. Half an hour spent, income for us, client happy and can now move on. All from the comfort of my office. This could never have happened before cloud accounting without visiting the client - in this case 100 miles away. We remain convinced.

Cloud usage

@garyturner @Aalia

I'm amazed at the low percentage of accountants using the cloud that your surveys have revealed.

I've used Xero since 2010 and I've seen a huge uptake since then.

I've also used google trends to track the increase in popularity of the likes of Xero, Kashflow, FreeAgent,

I honestly though the percentages would be higher by now.

Are the firms not already or not considering the cloud just ignoring it, thinking "it won't happen to me"?

Cloud use within the profession

@Kent accountant - There are surveys and there are surveys. Although our previous article indicated that the average use of cloud accounting among some 5,000 AccountingWEB members was 42%, our membership is by its very nature used to using the net and somewhat in advance of the wider profession.

And though you might find it strange, the level of cloud accounting use was down on the previous year's figure of 59%. This is a useful corrective for us because the drop stems from a different audience for this year's survey. Previously we polled CRM & HR users, where cloud applications are much more prevalent, and their uptake filtered through to accounts. This suggests that accountancy does lag behind wider industry; the figures from the Xero and Thomson Reuters surveys, which took in a wider pool of practitioners beyond the reach of AccountingWEB, would tend to confirm this. But the indications from the barrage of recent surveys from the likes of Xero, IRIS and Exact are that the take-up is accelerating quickly and accountants are beginning to catch up.

As the latest findings from Exact suggest, in many cases clients are pushing their accountants into the cloud by insisting on using online systems.

Meanwhile, keep the comments coming. We've got more articles lined up, first on what practice and compliance systems are available in the cloud, and then an item going into more detail about how firms are adapting their services to take advantage of cloud applications.

Thanks John

I think for small practioners just starting out the cloud is a godsend. Yesterday for example I agreed terms with a new client via a skype call - business registered in the UK with directors working remotely in France, Holland and China.

There's a further skype call set for next week to provide them with some initial training on Xero.

This client is a new start up which started in an incubation centre and has just secured six figure funding. They know of dozens of other businesses all looking for a new accountant.

These types of businesses aren't interested in doing business with accountants in the traditional way - face to face meeting are a thing of the past - it is all skype, email, text and facetime

But where to start?

I've spoken to several people from accountancy & bookkeeping who want to (or know they have to) get their feet wet (said looking out of the window) but they are unsure which puddle to try and fear making a mistake, having to dry off & try another.

I've said on another thread that the number of possible systems is a good thing, compared to what we have been used to in the past, but, much like me with mobile phones, how do you compare the offerings and will each provider be open about what functions they don't support?

The problem is that people don't have the time to test out a selection and the risk is that the systems with the biggest marketing budgets and fancy websites with act like trawlers, leaving us with a small number of monopolies (again).

C'est la vie.

Agreed

I agree Paul, my preference is with Xero. I have previously looked briefly at Kashflow and FreeAgent but just didn't have the time to consider them properly.

I've also recently set a client up on ClearBooks, but again I'm contemplating not using it and moving because I'm very comfortable with Xero - so why change?.

All of the packages I've mentioned are consistent in showing a shift from being designed specifically with accountants in mind to being designed for businesses.

This again supports the view that businesses will start to do more bookkeeping and accounts work themselves.

designed for business but only so far

KA - even though I'm fortunate to have (and use) the time to check and try out various systems I'm now pretty saturated with just 3 (CB, FA & Xero) but have found it important to get these in place to make sure that I'm able to offer the closest fit I can between client & system.  

The hope I suppose, in the sort term, is that as new features appear, and are lauded, on one system, others will match, or even better them cutting down the concern that there's another, even better, system out there.  

However, as I alluded to above, what I worry about is what can be described as the Sage effect which tends to happen when one system trawls & collects users through force of marketing and where users (in this case accountants & bookkeepers) promote the system even though they have had no experience of others, thus compounding the effect.  What then happens is that the monopoly no longer has the need to innovate and milks its users who are stuck because they have thrown all their eggs into one basket.

Some potential monopolies are as worried about this as their users and it was refreshing to hear Phil Robinson state again at Iris World that he doesn't want us to feel stuck with Iris because of the fear of jumping ship, he wants us to stay because of the company's innovation and the work it does with users to lead & develop change (the reason I stay with them).

Monopolies rise & fall in any industry but in ours we retain an inertia to change and, traditionally, have not been that good at thinking outside the box.  Consequently rather than take this opportunity to see what else is out there we hang back until the last minute, when the herd is running, and take the easy route by jumping out of our current box (eg Sage) into the next one.

I agree that there is a differentiation, between Landed & Cloud, over accountant and business (ie non-accountant) design but there is an even bigger differentiation within the Cloud systems, eg between Xero & FreeAgent, with the former targeting accountants (at perhaps the expense of their business users?) and the latter's more open approach to all, but still with its feet planted firmly in its business users.

There is now an added dimension to all this as the Cloud bookkeeping systems begin to develop their "accountants only" facilities to enable year end accounts & tax return compliance work as well as practice management, in direct competition to the likes of Iris & Digita, who are working towards taking their established accountants' systems into the Cloud.

Xero already has this shift in hand and Clear Books is developing its "Pro" facilities for accountants and I'm sure others will follow (are following?).

There are therefore interesting times ahead, especially as the Cloud only providers will have to work out whether they want/need to provide these added benefits for use, by firms, with just their own bookkeeping users within the firm or for all the firm's clients (Xero's work papers is a good example of this dilemma).

To my mind however a far bigger decision involves whether the compliance stuff should also be made available to business users. With the shift away from the accountant's/bookkeeper's monopoly over bookkeeping, enabled by the Cloud systems, isn't the logical progression to enable business users to do the year end submissions as well?  Let's be honest, bookkeeping and payroll is as, if not more, complicated than SME year end compliance.

From a survey run by Clear Books 31% of it's users don't have an accountant and they will, presumably, be using government tools to make their year end submissions and this is evidenced by the significant number of accounts submitted to HMRC & Companies House directly by businesses via joint filing, without the mention of an accountant's name.  As Iris has done with its free payroll basics, which is a better alternative to HMRC's PAYE tools, why shouldn't it also enable say FreeAgent's users to create and submit accounts to Companies House & HMRC?  

Similarly, with the prime benefit of the Cloud systems being collaboration between accountant and client, why should the client not be able to collaborate in the preparation of their tax return, why keep that side of the software locked within the accountant's area?

The answer would appear to involve self interest.

Ultimately, very little of bookkeeping, payroll or government submissions will have, or need, human intervention but the Cloud, and the above decisions, can hasten or delay this ideal situation.

insight

wondering why practices are still a bit reluctant to the cloud?

in my opinion still driven by client demand... https://www.accountingweb.co.uk/article/client-demand-drives-cloud-adoption/548095

Accounting in the cloud eliminates the need for an administrator

In the infancy stages of a company, a bookkeeper is sufficient. Once your company grows, a bookkeeper then becomes inadequate and an accounts department is mandatory to survive.

It’s a sign to bid goodbye to Excel and hello to applications. Go digital; automate tasks with cloud-based apps that will cut down admin work by 50 per cent.

Going paperless optimizes the accounting division; forming a system that allows accountants to work on different finances simultaneously, which immensely increases productivity and efficiency. Check out how to pur your accounting in the cloud and how it helps to eliminate low-level tasks here: http://bit.ly/1hkeqRs

"driven by client demand"

leppam - the survey you refer to (run by your company) says that:  "47% of respondents said that a client request for a cloud accounting solution would make them put one in place" 

I don't think this indicates that clients are demanding that accountants move to Cloud technology, or am I missing something?

I doubt that any of my clients would have driven me to take up Cloud bookkeeping, rather they rely on me to drive it.