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Coronavirus fuels cloud accounting surge

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It may be stating the obvious, but AccountingWEB’s 2020 software awards provided concrete figures to confirm that cloud software helped the profession cope with the Covid-19 pandemic.

16th Dec 2020
Editor in Chief AccountingWEB
Columnist
In association with
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AccountingWEB’s annual software survey has tracked the migration of professional accountancy tools from PC desktops to cloud applications over the past decade. Against that backdrop, the pandemic-ridden year of 2020 marked one of the biggest shifts in that long-term transition.

By all measures, cloud bookkeeping is now well established among accountancy practices. Thanks to the introduction of Making Tax Digital for VAT in 2019, business users are starting to follow and that will accelerate as even the smallest businesses prepare for quarterly income and expense reporting under MTD from April 2023.

AccountingWEB’s annual software survey offers a consistent record of broad software usage trends for nearly 20 years and among this year’s respondent population, 78% used cloud accounting apps, up from 69% last year.

With the pressure on to comply with MTD for VAT last year, the survey registered a minor surge from desktop products such as VT Transaction+, Pegasus Opera 3 and Sage 50cloud, but this momentum stalled in 2020.

Cloud practice tools

The traditional integrated practice suites also made visible gains on the back of MTD last year. But amid the lockdown disruption of 2020, many accounting firms switched to specialist practice management tools to co-ordinate remote work.

With little spare time to dedicate to wholesale overhauls of their practice systems, specialist cloud practice management programs such as AccountacyManager (26% of the practice management category vote in 2020, up from 18% in 2019), Senta (22%, up from 15%) and Glide (6%, up from 1%) came into their own as remote working became the norm.

The fastest growing cloud practice management shares the ability to define workflows and assign the tasks that need to be carried out on clients’ behalf between different practice team members. As AccountancyManager’s Jonathan Stobart explained in April’s analysis of the practice management response to coronavirus: “We all appreciate cloud practice management is the future. In the current climate, people are embracing it a little earlier than they intended to. They can keep the practice running as efficiently as if they were working in the office.”

The growing dominance of cloud developers in the practice management software category should give pause to more established suppliers such as IRIS, Sage, Wolters Kluwer (CCH), TaxCalc and BTCSoftware.

Remember, too, that with MTD for income tax on the horizon in 2023, we are likely to see millions of small businesses making the switch to MTD-compatible digital record-keeping systems. The accountants who work with those clients will need practice products to support those efforts and the likes of Xero, FreeAgent, Taxfiler and QuickBooks look to be moving in this direction. It’s going to be a very lively market for the next couple of years.

Other cloud app advances

The chart below brings together trend data going back to 2017 and before, showing the way “Cloud” accounting has become the profession’s bookkeeping mainstay. MTD helped to accelerate that process and to a lesser extent, the adoption of smartphone expenses data capture. But as our chart illustrates, the 2016-17 MTD effect we saw in this category was minor compared to the surge hat has taken place during 2020.

Forecasting, planning and analysis (FP&A) software also prospered as accountants suddenly needed to produce cashflow forecasts to see if their clients had the resources to continue trading or to apply for government-backed coronavirus support loans to see them through the crisis.

2020 Accounting Excellence software awards trends

Data and expense management

It should come as no surprise that the use of expense capture applications mushroomed during 2020. Where 12% of the total accounting population recorded in our 2019 software survey also rated an expenses data capture app, the figure more than doubled to 45% this year.

Sage’s AutoEntry subsidiary bagged the biggest share of the vote, but was beaten to the 2020 expense management award by FreeAgent Mobile. To reinforce how the market has shifted towards built-in apps, Receipt Bank’s share of the ratings fell back this year.

In response to similar points raised in AccountingWEB’s receipt scanning webinar, Munch grumbled: “Frankly the built in tools I have seen on expense management for the larger ERPs are token gestures and merely pointing you to acquire add-ons.”

Arguing that better payment systems and invoice/receipt generation were needed, the AccountingWEB member added: “Why banking applications do not deal with these at source is a mystery.”

Cashflow forecasting

Accountants embraced cashflow forecasting in large numbers during to support clients through lockdowns, revenue freezes and coronavirus loan applications.

Businesses needed cashflow forecasts to complete those applications – but just as important, their advisers could use the same tools to ensure they would be able to keep up with repayments when they came due. 

Based on the proportion of accounting software users to those who rated products in the forecasting, planning and analysis (FP&A) category, the penetration of our sample population jumped from 13% in 2019 to 33% this year.

Like expense capture and data management, the move of FP&A tools into the mainstream is being partly driven by the big platform developers building such tools into their core products. Xero and QuickBooks are already well down this path; at the same mid-market developers such as FinancialForce, Unit4 and Aqilla are also moving in this direction.

The annual software survey provides an excellent long view on how technology habits are changing within accountancy. After the year we have just witnessed, making any definitive predictions on what is going to happen next in the software world is somewhat tricky. But this year’s results confirm that the regularly repeated observation that the pandemic accelerated technology change.

With Brexit, the VAT domestic reverse charge for construction firms and a new off-payroll IR35 regime for private sector engagers looming in in the early part of 2021 practitioners will have their hands full with compliance issues. But when the dust settles our software survey will be back to see if the momentum of tech transition has continued.

Replies (2)

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A Putey FACA
By Arthur Putey
16th Dec 2020 17:52

Is this due to all the advice from SAGE?

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ghm
By TaxTeddy
17th Dec 2020 11:05

You have to wonder how much of the move to cloud-based accounting is driven by lack of choice. For example, as a sole practitioner using an iMac I would quite like to run a desktop based accounting system, but what choice do I have? I think the situation isn't much different for practitioners using Windows systems.

This year, because I have been able to team up with a very good bookkeeper I have been offering clients who use spreadsheets the opportunity to move to cloud based systems - with all the "advantages" that entails. How many do you think have taken this up? One.

I am sure that larger practices would also like an element of choice. Certainly, they need multi user systems - but we had those long before cloud based systems became fashionable.

So I think the reality is that we are all using cloud based systems not because they are great but because we just don't have any alternative. Of course, if Google is hacked a few more times, that could all change.

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