3 key questions about cloud accounting
Accountant practices have been trying to gain more clients and higher reputations through the use of cloud accounting software. But what does this mean for the firms, the clients and the profession?
Accountants used to get new clients through advertising in media, and word of mouth. However, clients are now demanding that bookkeeping is compatible with at least one of the popular cloud accounting platforms; such as Xero, Sage, Pandle and Kashflow.
This is comparable to a study carried out by CIMA last year which found that firms were reluctant to adopt cloud computing with 66% of businesses citing data security as a main worry. Only one in four firms had adopted cloud technology for business systems with 19% making use of the cloud for financial accounting, 34% used cloud technologies for management reporting.
Carl Reader, director for D&T said, “Clients don’t want annual accounts, tax returns and audits, that doesn’t add to their business, we are being automated out so this is the way forward to truly add value to your clients’ businesses.”
What are the benefits of cloud accounting?
The positives include being able to keep track of the business records at any time and cloud accounting gives clients a variety of accountant practices to choose from.
Paul Bulpitt, head of accounting at Xero said, “With Xero, they will get information at their fingertips, direct feeds, automated processes, making it all so much easier and especially regarding payroll. Within the next two years everyone will have to use accounting software.”
Cloud accounting software company Xero has carried out research which proves that businesses using the software have higher survival than those who don’t. The research revealed small businesses who used an accountant through the software grew net profit 23% faster.
Bobby Lane, head of outsourcing and business development at Shelley Stock Hutter said, “The monthly bookkeeping that used to take 3 or 4 days was done in 5 hours. They have more control of their business on a day to day basis with streamlined processes and actually fees haven’t been reduced.”
Lane continued, “Accountancy practices have to continue to evolve, we are in a fast moving technological environment, which is going to automate even more processes and those firms that don’t evolve will simply disappear. In the past we would have had piles of paperwork manually, had to adapt to a new market, but it’s been a huge benefit and set a new standard.”
Have accountants sold out their independence?
Cloud accounting company Xero is in a powerful position to connect accountants and clients through its certified professionals’ directory. The terms and conditions mean that accountants give control of their business to the owners of the software and their customers.
To access the Xero directory accountants have to pass the annual test as well as promoting Xero with using their link and logo on their own website, which means that Xero is turning accountants into its own marketing service.
Additionally, the rules are segmented into platinum, gold and silver accountants, due to their practice size and reputation. Therefore, certain firms, such as the ‘Big Four’, are always the first recommended result. This is an issue for smaller accountants and practices as the lack of options makes it an unfair market, and they are losing their independence.
Lee Murphy, owner of accounting software Pandle, “I estimate only about 20% of customers today are using cloud tools with professional quality control, this will only increase, and accountants need to be where the action is. Indeed, barely a day goes by when I don’t see some of the 3,000 accountants I follow on LinkedIn declare their accreditation with Xero.”
Paul Bulpitt said “I don’t think the challenge is independence but how accountants work, as new technology develops there is a clear digital skills gap.”
Bobby Lane added, “We are dealing with a generation of entrepreneurs who are used to technology and getting more content online in a digital world.”
Will accountants be losing their control of their business?
Clients used to be able to search and meet face to face with professionals in local accounting firms, and gain a more personal relationship throughout their bookkeeping, as first points of contact.
Paul Bulpitt, also the owner of The Wow Accounting company said, “It restricts the target market for accountants if clients only go locally. It’s a bigger challenge to have that personal touch.”
Bulpitt continued, “Yes, accounting will all be online. Although in the short term it may be tense but in the long term it will save people time and money. I’m happier with data kept on their server than my own so that there is more control and safety.”
Richard Anning, head of IT, FCA said “Changing software to suit the clients of the business is less easy through cloud customisation. However, everyone uses some sort of cloud already, so cloud accounting is technically ‘unavoidable’. Yet, there is no public cloud for higher, wealthy clients, as wealthy businesses don’t want their records online.”