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Can forecasting tools surf the virtual finance tide?


The recent rise of virtual finance services in the accounting profession has come hand-in-hand with increased demand for forecasting software. But with the take-up of specialist forecasting tools stalling, can a new wave of software take hold or will larger integrated players reap the rewards?

28th Sep 2022
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At the height of the pandemic, we saw demand for forecasting tools spike, driven in part by the increased need to monitor cash and the requirement for cashflow forecasts as part of the Covid loan scheme application process. 

However, according to AccountingWEB’s Insights survey, the rate of adoption has since fallen back and has reverted to a slow upward trend. By Q4 2021, 70% of accountants polled felt the mass adoption of forecasting tools was short-lived, and sustained visibility and control of finances seemed to no longer be the priority.  

Despite the relative slowdown in adoption rates, usage rates are still tracking upwards, thanks in part to the rise of virtual finance services in the accounting profession. Almost a third of all entries to this year’s Accounting Excellence Awards mentioned virtual finance director (FD) services, with most offerings built around outsourced bookkeeping and management accounts but some extending into other service lines, including cashflow forecasting.

“Small businesses are crying out for financial information, but they can’t afford it at £1,000 a day for a finance director,” explained Reza Hooda during a session at last year’s AccountingWEB Live Expo. “The alternative is to let your accountant manage it, and they can do it all for £25–30k a year.”

Specialists struggle for traction

For many practices, an increase in in-house bookkeeping has become a gateway into virtual finance services, with data capture apps and bank feeds automatically sluicing up-to-date transaction data into cloud ledger systems. If set up and maintained correctly, in theory, this gives more accurate real-time data for firms to package up into a diverse range of services that includes forecasting.

In spite of this rise in demand, specialist forecasting and reporting tools have struggled to gain mainstream traction in the profession. AccountingWEB head of insight Julian Green highlighted how the differing requirements of advisers and business clients complicated the adoption patterns for such tools. “Specialist cashflow forecasting tools are much less well-entrenched in accounting organisations when compared to other categories such as data capture or expense management,” said Green. 

“In terms of usage rates, cashflow forecasting tools only reach double-digit scores among early adopters and medium-sized organisations. Growth expectations are more limited and the market is undecided on whether this is a positive differentiator.”

AccountingWEB’s Q2 2022 research found that when it came to forecasting, more than half of accountants responding to the survey used Excel, while 18% used the forecasting app on their bookkeeping platform. 

Fluidly (5%), Float (4%), Futrli (3%) and Fathom (2%) lead the specialists in terms of overall usage among accountants, but Float is the favourite of respondents self-identifying as early-adopter small firms – perhaps indicating a favourable growth pattern if the tool hits mainstream practices.

When it comes to medium-sized firms – classified in this survey as those with a turnover of between £500k and £2m – the picture becomes increasingly complex.  

“As highlighted in AccountingWEB’s recent online focus group exploring the software usage of medium-sized practitioners, the challenges facing specialist forecasting apps are complex, since there is no consensus about what the market wants,” said Green. 

“Some practices offering a virtual FD service actively promote the apps with a view to driving behavioural change on financial visibility among their clients. Others regard the apps as only necessary in times of business distress and, as such, they are deemed an additional cost at the wrong time. This makes the decision over whether to buy the specialist app or use the already paid-for built-in app on their bookkeeping platform (or Excel) an easy choice.”

New tools on the block

Another recent development has seen newcomers Syft and Clarity HQ starting to break into this sector. The likes of Syft and Clarity don’t set out to engineer the whole management reporting pack and forecasting scenarios in the way that the first wave financial planning and analysis (FP&A) add-on apps do, but instead simplify the outputs accountants use to illuminate the numbers and spark advisory conversations with clients.

As part of a plan to expand PJCO’s outsourced finance service, Peter Jarman has been selling Syft to “clients who like pictures”. Syft draws information from QuickBooks Online and Xero and turns it into visuals rather than numbers. “We tried all sorts of cashflow forecasts but they’re all pretty complicated,” said Jarman. “Syft doesn’t have as many KPIs but is a lot easier for clients and our staff to understand.”

Clarity, an “end-to-end advisory” engine for accountants, integrates with Xero, QuickBooks and Sage to pull data into the system, set simple metrics agreed with the client and review and monitor client performance from one central screen, allowing practice users to be proactive in the advice they are giving.

There’s no doubt that even in the past three years, the market for forecasting apps in the accountancy world has moved on at pace. However, their continued success, and the success of any new wave of apps coming through, depends on how much additional value they can provide on top of what’s already on offer from the major general ledger players – and at what cost.


Replies (2)

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By Hugo Fair
28th Sep 2022 22:57

My simple philosophy (at the small/medium end of the market)?

If you actually care about (let alone need) forecasts, then you've already got the incentive to use the most appropriate tool (which can be tweaked for your specific circumstances) ... Excel!

If you don't really care (or just want pretty pictures that you will ignore), then plenty of people will be happy to take your money.

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Replying to Hugo Fair:
By D V Fields
29th Sep 2022 20:52

Despite the amusing belief of software providers that you are less likely to enter the wrong value and it will be much quicker to input into their system (especially so if you can import it from a spreadsheet) than using Microsoft Excel; Excel has the distinct advantage of being very configurable (you can tell it to do anything and it does exactly what it’s told), user friendly, well presentable and very powerful. Why would you choose anything else?

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