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AccountingWEB Insights highlight spring practice software trends
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Software insights: New practice software fashions

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AccountingWEB’s latest insight research confirmed high activity levels in the practice management software market this spring. John Stokdyk explores what the data said about the marketplace trends.

20th Jun 2022
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Towards the end of last year, many practitioners told AccountingWEB they were heading into 2022 with a menu of things they wanted to improve once they had dealt with all the demands of Making Tax Digital (MTD), Covid-19 and self assessment season. 

While suppliers responded to this demand by unleashing a parade of new cloud-based tax and practice products, the latest state of the nation report from AccountingWEB’s software insight team logged several major shifts in user feedback on the suppliers competing for their business. 

It may be a stretch to draw parallels between accounting software and haute couture, but the data gives us an opportunity to see what’s hot and what’s not this season. A close look at these can help highlight the deeper trends within the tax and practice software market.

AccountingWEB head of insight Julian Green divides practice management software shoppers into three camps: “Those who want to communicate more efficiently with clients, those who wish to allocate resources more efficiently, and those who want to improve workflow automation. The current vendors have very different propositions, often with two of the three boxes ticked. The supplier who successfully ticks all the boxes and communicates that fact will gain most new clients.”

The cloud factor

Looking at the satisfaction ratings and respondent numbers – and our research shows that these two factors are related – it’s clear that integrated desktop practice software brands, including Sage, IRIS, BTCSoftware and Thomson Reuters, have been going through a lengthy period of customer attrition. With the big brands bogged down with MTD developments for the best part of five years, nippy little cloud insurgents such as Taxfiler, Senta and AccountancyManager have been luring away customers. 

But small, innovative interlopers are often snapped up by bigger competitors – as we have seen at Senta, Taxfiler, AccountancyManager and GoProposal. Acquired products can sometimes lose their way within a bigger parent group. Senta, for example, fell away somewhat during 2019–20 following its acquisition by IRIS in 2018. The latest survey suggests that Senta reversed that trend over the past year as AccountancyManager’s growth decelerated slightly around the time of its acquisition by Bright Software.

“The latest State of the Nation report from AccountingWEB places Senta as the second-most desirable cloud-based practice management software, while Taxfiler was the best-performing software in terms of usage growth and net promoter score,” noted report author Green.

While the “best of breed” Senta and Taxfiler tools have outperformed the parent IRIS brand, they have now been incorporated into the IRIS Elements cloud suite

In the wider market, experience suggests that the pendulum could be due for a swing back towards integrated tax and practice software suppliers as the transition to MTD for income tax self assessment (ITSA) nears. After Taxfiler’s rapid rise towards the end of the last decade, the suite suppliers enjoyed a revival during 2019 as practices turned to known and trusted software to handle the transition into MTD for VAT.

BTCSoftware vs TaxCalc

While the IRIS Accountancy sat in the doldrums while work was underway on IRIS Elements, TaxCalc and BTCSoftware have been locked in an ongoing tussle for supremacy among smaller practices. Going as far back as 2017, when they finished in a dead heat for the accounts production software excellence award, the two companies have been neck and neck. By the second half of 2021, however, TaxCalc dominated the tax/practice suite segment of AccountingWEB’s insight survey, with more than double the responses of IRIS, BTCSoftware and Taxfiler, each of which claimed a 14% share of the market. 

In one of the biggest shifts in the latest survey, TaxCalc suffered significantly reduced usage among small firms, while BTCSoftware usage went up. The survey was conducted before BTCSoftware introduced its cloud offering last month, but Green speculated that early communication with users about its MTD solutions and cloud migration plans may be helping to turn the tide in that closely fought contest.

Yet to join the cloud practice suite race is the recently formed Bright Group combine, which has tax and accounts production tools in its stable alongside AccountancyManager and the payroll app BrightPay. One insight picked up this spring was that BrightPay’s customer satisfaction glory years could be nearing an end, with customers mentioning accessibility and ease of use as reasons for considering cloud alternatives for payroll. According to Green, ​BrightPay appears to have suffered from not communicating its cloud proposition clearly. If the expanded Bright Group is planning a broader incursion into the UK tax and practice software market, it will need to accelerate its development efforts and make a bigger noise to compete effectively with the incumbent suppliers.

Where do the big platforms sit?

In other accounting software segments such as expenses capture and forecasting, we have seen the big bookkeeping platforms absorb “horizontal” functionality into their core engines. But tax and practice management are more demanding, specialist disciplines and the portents for the platforms repeating the same trick are not so clear in this sector.

While Sage languished alongside IRIS and Thomson Reuters from cloud software incursions into practice, its market share rose 5% in the early 2022 state of the nation survey. This revival should give Sage added impetus in defending its tax and practice market share from Xero and QuickBooks.

The latest AccountingWEB study offers further insights into the beauty parade between the big cloud platforms. Use of QuickBooks and Xero fell in early 2022, indicating a loss of direction over the past 12 months, according to Green. “The reasons are different for each vendor, but the insight suggests it is a result of losing touch with the evolving needs of the users in a market offering great choice and variety,” he said.

While QuickBooks needs to shore up its shrinking market share among UK practices if it plans to compete on this front, broader use of Xero-branded apps was steady among “status quo” and change-aware practices in the middle ground. But Xero’s satisfaction ratings and market shares fell slightly among more progressive and influential early adopter firms in the latest software survey.

Xero has been ramping up its compliance offerings over the past two years. Currently, however, Xero Tax is only suitable for the simplest individual tax clients and hasn’t been used in anger through a full tax filing season yet.

The lack of a track record didn’t stop Xero from storming the UK bookkeeping software market back in 2008–12, so it would be unwise to dismiss the New Zealand developer’s plans for tax and practice products. One pattern that could be emerging from AccountingWEB’s quarterly surveys is the two-tier practice workflow, with firms of all sizes adopting lower-cost tools like Taxfiler and Xero Tax for small company and sole trader clients, while continuing to use the likes of Tax Systems, Thomson Reuters, Wolters Kluwer and Sage for their more sophisticated business clients. 

If you add MTD ITSA into the mix and the 4.2m extra taxpayers who may need help with quarterly filing into the mix, the outlook for further growth and churn is even more likely over the next couple of years.

We want your opinion. Any accountant can contribute to the findings of the AccountingWEB software reports by completing our regular surveys. This interactive project is community-powered and in return for completing the survey you'll get access to our insight reports and the chance to win a £500 Amazon voucher. Take part in the latest quarterly survey

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Replies (4)

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By North East Accountant
22nd Jun 2022 13:15

An interesting read John.

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Replying to North East Accountant:
John Stokdyk, AccountingWEB head of insight
By John Stokdyk
22nd Jun 2022 15:15

Thanks NE...

Do any of those sifts reflect your recent PM software activity or thinking? It's always good to relate the quantitative findings (and historical observations) to what people are experiencing and saying in the field.

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Replying to John Stokdyk:
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By North East Accountant
23rd Jun 2022 10:24

I'm still hoping for one cloud offering to nail the end to end.....and for all client types so we can leave the desktop products behind, and not have a two tier system.

What the main PM cloud offerings lack is being the one central database for all client data and the ability for this data to flow end to end across all the required components.

With the PM products you can get data in but not easily use that data outside the app, ie poor reporting.

But we are where we are and very soon (if not now) practices have to pick their PM software and go with it...time is running out to bed it in pre MTD ITSA.

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By MCV71
23rd Jun 2022 15:29

The relaunched IRIS Elements looks like it might tick all the boxes

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