Biggest change since computerised tax return, says industry expert.
Cloud accounting software’s ability to see client data in real-time has triggered a review of services among large accounting firms, veteran accounting consultant David Smith told BoxFreeIT. Firms were looking at adding proactive checks on clients’ sales and debtors to find where they could give assistance, said Smith, organiser of Accountants Technology Showcase Australia (ATSA), an annual conference on technology for accounting firms, in an interview with BoxFreeIT about the impact of cloud software on the profession.
For the first time ATSA’s programme is dominated by sessions on cloud software or services. Nearly half the 60 sessions held over two days mention or relate to cloud computing.
Read on for an edited transcript of the interview.
BoxFreeIT: Your programme includes many sessions on cloud. Is now the time for the cloud?
David Smith: There’s clearly much more momentum around this whole cloud computing piece. It’s fair to say that the concept is resonating more with firms now than it ever has. I like to rephrase it. I talk to firms about the benefits of a shared ledger with the client, and I play the technology down a bit.
But it is also fair to say that a large number of firms are still sitting on their hands a little bit to see how the market pans out.
BoxFreeIT: What are they worried about?
Smith: There’s a fair acceptance that (the cloud) is where the world is going to end up but they are still wanting to know where are the two major players’ positions going to be on this.
It’s also fair to say that the market understanding of Xero has increased dramatically and a large number of firms are running Xero pilots. Compared to a year ago Xero is clearly the player with market momentum at the moment. They are making headway but it’s limited to an extent because firms are waiting to see where MYOB and Reckon will end up.
It clearly is in the minds of every firm that the concept of sharing the data with the client is going to be industry changing. It allows firms to give totally different services – they can be external CFOs.
Some of the larger firms in particular are making some fairly big strategic decisions on how do they actually change what their service offering is now that this real-time data is available.
This in my mind is something much more interesting. What does this mean to my business model and my relationship with the client and how will that change?
BoxFreeIT: What type of services will they offer?
Smith: I know one firm which is interrogating their client ledger once a week and ringing up the client and saying you’re not hitting your gross margins what’s going on? The client’s not even asking for it. Another might notice that debtors are blowing out and rings up the client to ask do you need help chasing your debtors?
Instead of waiting for firms to be reactive they are providing proactive advice. That is really interesting.
BoxFreeIT: How much will this change the accounting profession?
Smith: I keep saying to accountants this is the biggest change in the industry since 1985 with the computerised tax return. It will completely transform the efficiency of the basic accounting compliance process. It also has the ability to transform the relationship between the accountant and their client.
It’s not just about cloud accounting. The huge issue is automated bank feeds and automated coding and transactions so we’re eliminating large swathes of data entry and improving accuracy.
It’s interesting how many technologies are colliding. Because most business customers pay their customers by electronic funds transfer (EFT) you are getting much more description from the bank so the accounting systems can code more efficiently and accurately.
It’s a collision between automated bank feeds, EFT and cloud accounting which makes them far more efficient and accurate. Some firms are saying don’t pay with your credit card, pay with EFT because we get automated coding with the transaction.
I also think the concept of add-on solutions is a very smart move. Creating an app store around their product allows Xero to broaden their functionality without having to write a line of code, it is a very smart thing to do.
BoxFreeIT: Will accountants recommend these add-on solutions for Xero and Saasu?
Smith: Accountants aren’t wildly enthusiastic about recommending their side products. As soon as a client wants to talk about a specific product for a specific purpose they will push them to Xero. Some firms will (recommend cloud sofware) but they will be firms with the expertise. But the vast majority will shy away because they don’t want to be in the gun if something goes wrong.
The issue with those cloud apps is that an app might not work the way the business wants it to work. The clients are probably not willing to pay the accountant to learn that level of detail and the accountants often don’t have the level of expertise.
The ATSA conference will be held on 8-9 October at the Sydney Exhibition and Convention Centre. You can register for the conference here.