Sholto Macpherson, Author at The Latest on Accounting Tech For Future Focused Firms

Behind the IPA and Reckon Deal – Why an Association is Selling Software

August 17, 2018 by Sholto Macpherson

The number of global brands in accounting software – Intuit, Xero, Sage – demonstrates that the product category is important enough to build a direct relationship with users and avoid wholesale strategies. That may be changing with the announcement in Australia last week that Reckon will white label its cloud accounting software and sell it through an accounting association.

Reckon, formerly the Australian distributor for QuickBooks desktop accounting software, was a solid number two in market share behind MYOB – until Xero came along. Reckon One, a cloud accounting software that starts at AU$5 a month and targets micro businesses, has been comprehensively outsold in Australia by Xero and MYOB.

The association is the Institute of Public Accountants, the smallest of the three accounting bodies in Australia, which exclusively caters for accountants assisting the country’s 2 million small businesses.

Reckon One will be promoted to IPA members as IPA Books+. To my knowledge it is the first time an association has white-labelled its own accounting software – at least in cloud accounting.

It raises many interesting questions about the relationship between associations and software companies and how far associations will go in embracing technology to serve their members.

This week I spoke with Sam Allert, CEO of Reckon, and Andrew Conway, CEO of the Institute of Public Accountants, about this deal and what it means.

Digital First: So how did this come about?

Conway: IPA and Reckon have had a strong relationship for a number of years. Reckon has been principal partner at IPA congress for the past four years. In November last year we ran specific workshops at IPA events to get feedback on what members would think if we brought out a branded product.

Allert: We now have a great product out in the market, but now it’s about doing things slightly differently to organisations like Xero, Intuit and MYOB. We think white-labelling is a different opportunity. None of them are doing it right now. We had it as a strategic initiative and were talking to multiple parties to offer it to, but I think it was the IPA and Reckon relationship that made it happen.

Digital First: Why did the IPA decide to go with Reckon One?

Conway: Critically for us it was an alignment of culture, both at a leadership level and organisationally. We have spent a lot of time looking at why the IPA exists, what’s the ultimate social value of the work we do for our members. We landed on that it is to improve the quality of life for small business.

The ultimate aim for both organisations is that we have both commercial objectives to achieve but what is the social impact (of our organisations) for the small business operators out there?

Digital First: Did you get much feedback from members on this idea?

Conway: We are looking at a new model (for software distribution) – using the professional body as a platform. We did roadshows, ran events and countless workshops and engaged with hundreds of members about the product and the offer.

If you have ever said, ‘Why doesn’t my software do this?’, to Sam’s credit he threw the developer team on the table. Now you have a direct interface between the members and the software developers. We have an opportunity for our members to interface directly with the Reckon team – not just a process that is for the past 12 months.

This is an ongoing dialogue at the coalface to make sure the product is fit for purpose.

It is multifaceted in the sense that we have the opportunity for practitioners to be involved in the design and development. It’s not unique but it’s the format of the relationship with a professional body facilitating that. We are assisting in the curation and aggregation (of new features).

Digital First: Every software developer will say they consult with accountants, regardless of whether they’re members of one association or another. How is this special?

Allert: I understand your point. We also go out and talk to multiple small business and practitioners already. But the IPA is a professional body with 35,000 members. We were already talking to them at the conferences.

Yes, we do our normal feedback from product managers and the market as a whole, but we have broken off the design process to tap into IPA members. Our dev team has a design session that we run with the IPA team (to guide our fortnightly sprints). That’s where IPA members will have direct feedback to the product.

Digital First: How do you see the two organisations working on together more generally?

Allert: The IPA already do a lot of professional development for members who attend IPA conferences or webinars. We can incorporate Books+ into their professional development. (We can run sessions showing) what you can do with the product, how you service your clients with it, are you running these analytics or these best practices for quick coding, reporting and bank reconciliation for your clients.

Digital First: Which of you first came up with the idea for a white label?

Allert: When we came up with it at Reckon, we decided to create a white label, not create one for the IPA. It really caught Andrew’s attention and we realised we could do something really unique here. Both the IPA and Reckon will be throwing a lot behind it and watching eagerly to see how it goes.

Digital First: Books+ is identical to Reckon One?

Allert: Everything that is in Books+ is in REckon One. It is a white label product.

Digital First: Will IPA members get the product at a cheaper price?

Allert: We do have the most affordable product in the market by multiples of ten. When we presented to member firms (at a training day), overwhelmingly the feedback was that it was too cheap. That is our strategy.

We are able to support that price because we still have a very profitable organisation. We are getting enough margin in the growth of Reckon One in units that we have enough for this to be sustainable with this market share today but certainly for tomorrow.

Digital First: Won’t this deal give you even less margin on the lowest margin product in the market?

There’s obviously a structure and commercial terms and incentives and targets and things, but they don’t erode margin for us. The opportunity to support small business and get further reach with our product and services far outweighs anything else.

Conway: To pick up on that, it’s the opportunity (to sell Books+) across our practice network as well as in the UK. You’re talking 6,000 practices. Based on a proportion of a total membership it’s one of the highest number of firms of all the bodies.

A report last month from Kate Carnell ombudsman showed that 45 percent of small businesses don’t have cloud accounting software. That’s about a million small business. We are in the shadows of Single Touch Payroll, (and when it comes) into force small business will have no option to have a solution.

Andrew Conway, CEO of the Institute of Public Accountants

We are pleased to be working with reckon in a most collaborative way and takes out (a product) to all these small business that need a solution and need it pretty urgently.

Allert: Single Touch Payroll is a massive change. The ATO has come out and said that 250,000 small business don’t use any pay-as-you-go payroll software. They submit on paper. By next year they need to be compliant (by using online accounting software).

Digital First: Is it an issue for the IPA that it is no longer agnostic when recommending software to members?

Conway: I think it’s a fair question to raise of the professional bodies. Reckon has been the major partner of our congresses for a number of years so this is in some ways no different to having a long-standing relationship with a partner.

This doesn’t mean that the IPA says our members can’t use other software vendors. We say, ‘Here are the options, this is one that we support, it may be right for your clients’. It’s also staying, we have a good, long-standing relationship with the developer of Books+ which we want to present to members. And one that has been developed in partnership for the past six to 12 months.

Digital First: But you are receiving money for only one of those programs?

Conway: Of course, but it’s pretty clear that Reckon has been a major sponsor of the (IPA) congress for a long time. And we don’t give that away for free. The relationship is also crystal clear.

Allert: The incentives also go to the member firms. If they hit a target they will get 50 percent of their IPA membership credited back for other services. If they hit another number they get 100 percent of their membership credited.

So all the commissions are really going back to members. Yes, we have an arrangement where Reckon pays IPA to be a principal partner. But last year at the congress I also got the opportunity to do a presentation and a keynote panel with Andrew.

Digital First: What are the targets for members?

Allert: if they get 50 clients they get a 50 percent rebate, and if they get 100 clients they get a 100 percent rebate.

Digital First: What are the credits for?

Conway: it would be credit for CPD. Sam won’t be doling out $100 bills to firms in cash, it’s more for reinvesting in the practitioner and the firm itself.

Allert: Just back to competitors; we have a partner network of 6,000 Reckon partners who distribute and sell our product. Not for a second do we think they don’t work with competing products. So this is about going out to all those businesses where there is a demand than any financial benefit that firms might get.

Digital First: Books+ will collect a lot of valuable data on SMEs. Are there plans to share the data?

Conway: Our board has just signed off on our strategic plan to go to 2025 with a long-term vision. One of the central themes of that is the digitisation of knowledge management. That’s not just in terms of knowledge in the IPA but how do we do it to provide the best member service? How in an aggregated sense could we look at data feeds to identify themes or identify CPD or provision of services in the mix?

(Data collection is) not the sole driver but it does align with our drivers over time. We have been very open with members in consultation. If we had an (anonymised) data feed to help identify services, members said to us, hands-down, that makes sense.

Allert: With the right data protection, data confidentiality and de-identification and aggregation, there’s the opportunity to leverage that data for IPA members and their clients.

Digital First: Will you offer any integrated services with the Books+ software?

Conway: We can put data feeds into research projects like policy and (to find out) what further support should we provide to members on CPD. How do we make the member experience better, how do we inform policy, and how can we improve the knowledge gaps that will inevitably emerge as the profession continues to evolve?

Digital First: Is this deal just for Australia?

Allert: No. The IPA owns the same member body in the UK, and Reckon One is in the UK. Reckon is very excited to further enhance our reach via the UK.

Conway: When we ran consultation sessions on the small business paper in the UK, the issues were identical to those in Australia. The UK has a great push for making tax digital, and it’s eerily similar to what’s happening with payroll in Australia.

Digital First: What’s happening with Reckon in the UK?

Allert: It’s very, very small. We would have under 1,000 end user clients. We are going the hard yards, using relationships and knocking on doors. It’s very early days for us and that’s one of the reasons we are super excited about the IPA and its UK reach as well.

Image credit: IPA Books+

Hospitality Expenses App InvitBox is Back – As Lightyear

August 7, 2018 by Sholto Macpherson

When Invitbox sold to Intuit in 2013 it was one of the earliest successes from the SMB app ecosystem. Brothers Roger and Chris Gregg had built up their hospitality focused accounts payable app by door knocking pubs and hotels across Australia.

In those early years, when cloud accounting software was a relatively new concept, online business apps were also a hard sell. The halo effect of belonging to the Xero and Intuit ecosystem didn’t count as much as sweat equity.

Xero had bought Paycycle and Workflow Max in the years before, there were rumours that it would expand to accounts payable – and Receipt Bank was the leading app. Invitbox’s sale to Intuit was well celebrated.

Roger bought the Carrington pub in Sydney with the proceeds and joined the trade he had serviced. Chris went to work for Intuit helping other ecosystem apps tackle the Australian market.

In the meantime, Intuit kept operating Invitbox for existing customers but chose not to invest in selling it further.

And now the Gregg brothers are back. After taking the smarts from Invitbox, Intuit realised it no longer wanted to support a niche app with 2,000 customers and was looking for a way to retire the app gracefully. Rather than buy back a dated technology platform, Chris and Roger built a new one called Lightyear. It will provide a new home for their old customers when Invitbox is finally shuttered.

This time younger brother Chris gets to be the CEO, and Roger is the president (and still publican).

Digital First: Why are you back?

Chris Gregg: The primary motivation is that the sector is huge and the industry is ripe for adoption. That’s the primary reason. Look at the size of the opportunity – 150 billion bills are processed annually. That’s 3 billion bills in Australia, 1,500 per business. It’s a huge cost and burden to the Australian economy. There’s not an offering in the market catering for mid-tier businesses to automate accounts payable.

Digital First: Isn’t automated AP getting crowded? Obviously Receipt Bank, AutoEntry – and now Xero Expenses and the acquisition of HubDoc. How will you stand out?

Chris Gregg: We don’t want to compete with Receipt Bank, Expensify, and so on in SME expense payment receivables.

We are thinking about building out the supply chain side more and specialising in product based businesses. For example, a Receipt Bank-type client but we specialise with advanced approval workflow. Any business that needs multiple locations and approvers. We will build out integrations to point-of-sale systems to send that data to the accounting software and to the inventory systems and saving the double data entry that goes on.

We will look at purchase order matching and ordering from within the map. We may add ordering capability to sync with the supply chain so they can place orders within Lightyear.

Digital First: This is sounding bigger than hospitality?

Chris Gregg: Yes – hospitality is our first vertical. We will work with the hospitality associations, attend the tradeshows and seed that market.
But if you think about what our product does, the core functionality is applicable to other industries. Healthcare, franchises, retail, construction. If you’re ordering products and you need to get data from the supply chain to the inventory system, who’s going to do that job for you?

Digital First: Where are you at with the new app?

Chris Gregg: We exited the alpha in July and are getting ready for migration. Initially we will will do a soft launch and take on customers from the second half of August, with a launch at Xerocon in Brisbane (Australia). Businesses can sign up for a free trial from two weeks’ time when we go into this soft-launch phase.

Then we will run a phased migration over a couple of months. We had an overwhelming response from Invitbox customers wanting to migrate across, but we need to make sure we can deliver a great customer experience.

Digital First: What did your old customers say when you told them about Lightyear?

The reception has been phenomenal. Pretty much every customer apart from two said it sounds great. Roger and I signed up most of the customers so there’s that trust factor.

Digital First: How big is the team?

Chris Gregg: We will have a full field support and service team in the market. In Australia we have hired two business development managers, one in Brisbane and one in Melbourne. We have four staff in Sydney focused on sales, customers success and onboarding and support.

We will have a team of 13 to 15 people in the UK. Our head of sales is ex-PayPal, we are hiring business development managers in London and support staff in Belfast.

Digital First: Will Lightyear have the same functionality as Invitbox?

It will have the same functionality, one for one, with a few nuances. We are adding OCR extraction to handle scanning paper receipts as well as electronic documents.

Digital First: Any other improvements?

Yes, in three areas. It’s a shitload faster. Lightyear is built on microservices architecture on AWS. The older system was a monolith. Now we have the capacity to scale in terms of more business, but also in scaling our development approach. We run a very lean and agile development team here on an aggressive release cycle and a two weekly cadence.

It’s much more user friendly. We have spent a lot of time speaking to customers, getting feedback from a user experience perspective. We have re-engineered the workflow with a lot of tweaks to make it more intuitive.

But we are also trying to keep consistency from the Invitbox to Lightyear product. We didn’t want to reinvent the wheel for our MVP. There are a lot of subtle changes.

Digital First: And what is the relationship between Intuit and Lightyear?

There’s no connection or ownership to Intuit or commitment in any capacity. It’s a totally separate entity that Roger and I own. On launch we will have integrations with Xero, QuickBooks Online, NetSuite, MYOB and ABcom (a Brisbane-based app that specalises in accounting for hospitality chains such as McDonalds). Customers can send their data to Adept, Pronto, Microsoft Dynamics, Sun Systems, and a few other bespoke systems. Will be building a Sage API for the UK launch.

Digital First: What is the deal with Intuit with Invitbox customers, then?

Chris Gregg: Lightyear has agreed to offer an assisted migration from Invitbox to Lightyear in advance of Invitbox shutting down. It’s a win for the customers because they get a continuation of service with an enhanced product, and Intuit has a win in making sure their customers are looked after.

Digital First: … and a pretty major win for you, wouldn’t you say?

Chris Gregg: Well, yes.

Digital First: What is on the roadmap post-migration?

Chris Gregg: There’s a lot lined up. We deliberately want to keep the look and feel consistent initially so the migration is not a shock to users. Then we will start to aggressively build in new feature enhancements.

The first of those will be OCR. We know that today around 90 percent of bills coming to Invitbox are electronic. So we will focus on the electronic component of AP. We also get consistent feedback that there is an element of paper. It’s dying but there is still a need for automatic data extraction from that small segment.

Digital First: I understand it’s a big opportunity, but what got you to come back on a personal level? You already know how hard life can be in the ecosystem.

Chris Gregg: Back in the day we were inexperienced – we had never run a tech company. We could write a book on how to make mistakes. We got to the stage where the money was tight, we were doing funding round after funding round. The space was getting difficult. The talk was about Xero buying Receipt Bank. We evaluated the internal dynamics, the market, the stress levels. [We didn’t sell] because we weren’t having a lot of fun with our customers. We thought that if Xero bought Receipt Bank and then Intuit build it…

Now it’s different circumstances. We are well funded, more experienced and more mature. We have much bigger networks we can tap into around the world.

We’re also doing it in a niche area for self-preservation. If any of the accounting vendors build out a similar solution it will never have the depth for a product based business. It gives us confidence that we can go for 10 to 15 years and the main vendors will never go into that detail.

Corporate life is for certain people and startup life is for other people. We’re in it for startups.

Image credit: Twitter

HubDoc Sells to Xero – The Backstory

August 3, 2018 by Sholto Macpherson

In a surprise move, Xero acquired the Canadian document fetching and processing app HubDoc this week. Xero said it would integrate its fetching technology into the accounting app and continue to operate HubDoc as a standalone product, much as it has done with project management tool WorkflowMax.

It’s an interesting development because of where it puts Receipt Bank, the number one app in the Xero ecosystem. Xero has recently updated Xero Expenses, which shares many functions of the Receipt Bank app, and now it has snapped up one of Receipt Bank’s biggest competitors. (Receipt Bank is beta testing a fetching technology similar to HubDoc’s.)

I spoke with Jamie McDonald, co-founder of HubDoc, on why the acquisition took place and what it means for Xero and HubDoc.

Digital First: What did Xero most want to buy HubDoc? The press release mentioned the document fetching technology right up the top, so I guess that was it?

McDonald: I think the first thing they’re buying is our business, which is a representation of the brand the customer relationships that we have, our team and the growth opportunities there.

The second thing I think is it’s about really overlapping product visions. This idea of HubDoc delivering clean data into the Xero platform to build out a really rich data set. And the idea of delivering an invoice to HubDoc and into Xero, and automatically reconciling bank transactions – I think that is the other big part of it.

Digital First: You mentioned growth opportunities first – is this acquisition about picking up customers in North America to help Xero crack that market?

McDonald: No, I wouldn’t say that. I would say there’s just great momentum behind our business and our brand. Our revenue is growing really fast, our customer base is growing really fast, both in the US, Canada, Australia, and now the UK. So there’s just value in the business and the plan is to continue to operate the brand and run it standalone while we’re considering how to execute on this shared product and a much deeper integration for our customers.

Digital First: How fast are you growing? Can you share customer numbers?

McDonald: We’re not really disclosing any of the numbers as part of the transaction so I’m not going to do that.

Digital First: Ok. Do you think it makes sense to keep the apps standalone or take that fetch technology and add it to Xero?

McDonald: I think it’s an interesting idea [thinking about] what do we actually do at the end of the day? We’re a document ingestion machine or a data extraction machine and then we create a workflow to take that data to automate bookkeeping processes. There’s an interesting debate over where the logical place for that technology lives. Is it integrated deep into the GL over time? Or is there a standalone business? I think the answer might be both.

Digital First: Do you see this acquisition as part of a swing from point applications or best of breed to building a suite under the Xero brand?

McDonald: Yeah, it’s a really good question. I think probably best to ask Steve or anybody else at Xero. I don’t think this is about a roll-up of best of breed apps to build the Microsoft Office for accountants. I think this is one particular horizontal application that’s applicable to every single business on the planet, right?

There’s an opportunity to integrate more deeply between what we do, which is kind of a document and data management platform with the GL. It’s all [about] delivering a better customer experience which manifests itself in how quickly can I get my monthly reconciliation work done and how accurately can I get it done for an accounting firm?

Digital First: So the focus of this acquisition is about automating that data collection process, right?

McDonald: I would divide the process into three stages. Data and document ingestion, or how do you get [your documents]? So we built our business around automation of the fetching process. The second step is data extraction and document classification. What type of document am I looking for and how quickly and accurately can I get the relevant metadata out of that document? And then the third thing is workflow tools that can take that data and turn it into entries in a general ledger and facilitate the automated reconciliation process.

Digital First: Canada and particularly Toronto have a global reputation for AI and machine learning (ML). Do you think the acquisition was also about hiring talent in those areas?

McDonald: I think that’s a yes. Obviously it’s hard to hire ML and AI talent everywhere. We have two particularly excellent universities at training and developing that data science talent. I’m super proud of the strides that our team has made in a short amount of time in terms of leveraging machine learning to drive the sales for customers and actually have it in production. The first task that that team has worked on and successfully delivered against is automated data extraction from manually uploaded documents. So when you take a photo of the receipt in your pocket it figures out date, amount, tax, all of that, and pulling it out automatically.

Then there’s a whole bunch of stuff around our automated fetch that we’ve applied some ML techniques to as well.

Digital First: How have you used machine learning to improve your fetch, specifically?

McDonald: I’m not going to talk about that. It’s kind of proprietary.

Digital First: How do you see this affecting your relationship with Intuit? I just checked the Intuit apps marketplace and HubDoc is still in there.

McDonald: I think the easy analogy is if you look at Intuit’s Tsheets acquisition, Tsheets would still be integrated with Xero and continues to serve their joint customers. It’s certainly our plan to do the same. We have nothing but positive things to say about our long relationship with Intuit and we hope to serve our Quickbooks customers for a long time in the future.

Digital First: Xero mentioned global expansion. Which countries are you going to next?

McDonald: The first thing to do is to deliver excellence against the core Xero customer base, which would be in Australia, Canada, the US, and New Zealand. There’s work to do there. The nature of automated fetching is that it takes some work to launch in each market. You have to build the connections. So that’ll come in good time.

Digital First: Are you in the UK yet?

We’re in the UK already, it is one of the markets that we’re serving.

Digital First: What is on your roadmap for HubDoc? What were you working on prior to the acquisition?

McDonald: I think going back to those three core processes. How can we improve our automated intake? That’s our fetch technology. There’s all sorts of innovations in that platform that we’re making that are super exciting. There’s automated data extraction, which is for the stuff that’s emailed in to us or manually uploaded – how do we get data entered instantly and accurately?

And then the third thing is what are the workflow and publishing tools that we can unlock to drive efficiency for our customers, who are the accountants and bookkeepers around the world that we serve.

So that’s the core roadmap, and the layer beneath that is we’re able to execute properly on that for millions of small businesses globally. We believe it unlocks this unique data asset that other people simply don’t have access to. How can we unlock payments, alternative lending, “always on” audit, and recommendations through the data asset that we’re building. The partnership and marriage with Xero will accelerate that.

Digital First: What is “always on” audit?

McDonald: Well, it’s just the idea. What we do is proving that the entry in the GL happened, right? So 10 years ago, that was done with a piece of paper with a logo on it exchanged between two businesses, which might have been an invoice. We think in the future that every transaction inside of a general ledger will have what we call verified data. That might be an image of a receipt, it might be a link to a blockchain or a decentralised ledger which proves the transaction happened.

Imagine if every transaction in the GL had that proof that it happened. Why would an auditor have to wait until six months after the year’s over to review the books and say that they’re valid? Why couldn’t they say at the end of a quarter, at the end of a month, up to today, that all of these transactions inside the GL are valid and the financials are up to date?

That’s aspirational and a lot of vision and we haven’t at all figured out but that’s certainly stuff that we’ve been thinking about on the product team at HubDoc.

Digital First: Is it true that with every Xero acquisition the founders each get a free Tesla?

McDonald: I was hoping for one of those Minis with the Xero logo on it.

Digital First: It would have to be electric. Petrol is so desktop.

McDonald: Yeah, an electric Mini with the Xero logo on it. I love that idea.

Image credit: Youtube

What the Open Data revolution means for you

July 27, 2018 by Sholto Macpherson

A quirky debate on banking data is happening on the sidelines – but with consequences that will radically change how you interact with your major suppliers and potentially your customers.

It all started with the banks. Last year, the treasurer, Scott Morrison, commissioned the Open Banking Review, chaired by Scott Farrell, to find out the most appropriate model for “open banking” in Australia. Open banking essentially means giving customers greater access to and control over their banking data. This has the potential to transform the way in which customers use and benefit from the banking system.

Why banking? Well, there is a Royal Commission that may as well be called, “Why Banks Behave Badly”. And it’s not just a phenomenon in Australia.

Governments globally are trying to level the playing field between banks and consumers. The former have too much power over what people buy and what they know about the products they are buying.

Open banking seeks to change this. Consumers will be able to switch banks from one day to the next, says Steve Millward, chief analytics officer at Data Republic.

“There’s a lot of friction moving from one bank to another. In the future it will be a lot simpler,” Millward says. “All payments, credit cards, direct debits and mortgages will move over instantly. It will be as easy as switching from Just Jeans to General Pants.”

Certified organisations will also have access to banking data, but only if a consumer explicitly allows it. Usually this will be for some benefit to the consumer. In theory, a bank could exchange transactional data with other banks and create its own accounting software for small businesses.

It also makes it much easier for non-bank brands to add banking products. UK supermarket chain Tesco went from struggling to number one in its category in five years, winning immense loyalty from customers.

It expanded into selling credit cards, insurance and loans, using grocery data to know when someone was about to move house, for example.

In Australia, Coles has done something similar on a smaller scale.

There is a clear trend of creating money from customer relationships – the more trust a company enjoys, the more products it can sell. Understanding your customer is the key to a good relationship, and the best way to gain that understanding is through analysing data, Millward says.

“Data is going to become a battleground for business,” he says.

Accountants need to take note – customer experience is the best way to keep clients and turn them into strong referrers. There is no better salesperson than a happy (and vocal) customer.

The bigger point is that this federal review is only the first of several. The government intends to liberate data from other commoditised industries. “After us comes electricity, telco and other utilities,” says Jeff Mentiplay, head of data innovation and partnerships at ANZ, referring to the open banking review.

So what happens when consumers and businesses know far more about their own data and the products sold to them? They will be able to make better buying decisions – either for a cheaper service or a more valuable one.

The Cambridge Analytica-Facebook debacle exposed the consequences of Facebook’s business model. The way it was treating users’ data was morally unacceptable to its users.

Your business clients are about to become much savvier about the use of their own data. They will also expect far greater transparency with suppliers. After all, if this legislation is powerful enough to force banks to give apples-to-apples comparisons for their products, surely it will set expectations for other suppliers.

It is worth thinking now about how you use data in your business – and what you can share with customers. A SWOT review will tell you where the risks are from data leaks and breaches of trust, but also reveal the opportunities.

Cleverly used data can deliver a way to “surprise and delight” your customers, as the saying goes. Work out a strategy to deepen that trust and the sales will follow of their own accord.

An edited version of this column appeared in CRN magazine.

CCH Opens iFirm to Xero Tax, MYOB and Microsoft Power BI

July 20, 2018 by Sholto Macpherson

In a sign of the times, CCH iFirm is adding connections to other vendors’ accounting software in a bid to improve efficiency for accounting firms. While accounting software for SMEs has long used API connections to integrate with hundreds of other business apps, practice software has tended to stay within its walled garden.

Xero and then Intuit were the first to open up their free practice management tools to third-party apps for notifications. But both tools are only suitable for very small firms. In Australia, iFirm is the cloud suite with the most potential to fit firms with hundreds of employees.

It’s a great move by Wolters Kluwer and one that couldn’t have come at a better time.

The dramatic statements revealed during MYOB’s aborted acquisition of Reckon APS showed that the two companies are years away from developing a full-blown cloud practice suite.

CCH iFirm, made by Wolters Kluwer, positions itself as next-in-line for the throne. It includes an online tax module, which neither MYOB nor Reckon have matched.

However, iFirm has lacked a major drawcard – a tightly integrated, cloud accounting app for SMEs. Xero’s rapid accumulation of market share has encouraged firms to consider the free Xero Practice Manager before iFirm. The software company could capitalise on this winning streak by expanding its practice tools to firms of all sizes – but it’s not interested.

Xero stated to the Australian Competition and Consumer Commission that it didn’t want to invest in making software for firms with more than 20 staff.

There are two interesting aspects to this development. How deeply is Xero prepared to integrate with iFirm? Initially the connection is just to Xero Tax; will it eventually connect client files to another vendor’s practice suite?

And then there’s the Microsoft Power BI integration. What exactly can you do with a BI tool when it is natively integrated with your practice software?

In this edited transcript, Russell Evans (CEO of Wolters Kluwer Asia Pacific) and Daniel Wyner (regional director) give a frank assessment of the market and where they intend to take integrations for iFirm.

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Integrations with Xero

Russell Evans: What we’re hearing from particularly small and medium sized firms is that they’re looking for real efficiency gains in workflow. Let’s assume (firms are) moving toward fixed price engagements, if you’re only getting two and a half thousand for a job that you used to get 4000 for, that’s all about hours on the job. Now, given that Xero have captured a good slice of the market in the small and medium firms with their tax product, it makes sense for us to support our clients who want end-to-end efficiency. Xero Ledger into Xero Tax and running the job on iFirm practice management. We’re just starting to do that now. Initial indications are it’s going to be a winner for the market and therefore good for us.

Digital First: What exactly are you launching?

Daniel Wyner: Effectively it is an API connection. From within iFirm’s practice management screen, you will see the client database from Xero Tax. You can also launch that client’s tax return from within iFirm’s practice management screen. It will also show the relevant meta tax to say that a return has either been filed or lodged, signed, etc. You don’t want to be flicking between different products to see the status of what’s going on, so we’ve managed that workflow entirely within iFirm’s practice management solution.

Digital First: That sounds great.

Daniel Wyner: You can assign your staff to whoever needs to do the job, add all the necessary checklist programmes, procedures, jump out to Xero Tax and do your tax return by launching it from within CCH iFirm. That’s phase one. Phase two, which will come Q4 in Q1 next year, will be adding CCH iQ to Xero Tax. The myth that “I need to be with one provider” from the desktop days has been blown away. We want to facilitate whatever the practices want to do.

Digital First: Will there be deep links from workflow screens in iFirm to the Xero client files themselves?

Daniel Wyner: Just Xero tax.

Digital First: Do you think you’ll get to a point where you have deep links to say, Xero, QBO, MYOB? If you click on the file and just open that client’s cloud files – is that the vision?

Daniel Wyner: I think anything is possible. It comes down to us proving out that this is the right workflow and that value proposition. There’s no reason why we wouldn’t.

Russell Evans: It also comes back to the use case. There’s a lot of collaboration at the moment between the accountant and the general ledger. Rather than waiting for the end of the year to do the adjustments in June or waiting for a tax trigger, accountants are using it on a monthly basis.

When MYOB come to market with a cloud tax product, and accountants want an end to end MYOB ledger and MYOB Tax plugging into iFirm practice manager, if our clients start banging on the door and saying “We want to operate support in that open environment,” we’d absolutely be behind that as well.

Digital First: What’s the reason for not pushing the Xero integration globally? Is that an internal decision as opposed to a technical one?

Daniel Wyner: We’ve only focused our discussions with Xero locally and therefore it’s really been focused on the Australian market.

Russell Evans: I think it’s also a maturity curve decision as well. Look at the proportion of small businesses that have made the shift into a cloud based accounting application. Australia and New Zealand are a long way ahead of other markets, so therefore the customers that we’ve been engaging with have been far more vocal about that desire to work in an open environment, to be able to plug in different applications for greater efficiency.

Russell Evans: There is an intensity in our conversations (with firms). This is a kind of anecdotal number, 60% of accountants have a copy of the Australian master tax guide on their desk. Over the last six years we’ve had a very strong focus on digitising the master tax guide and getting it into the market and we’ve done that with CCH iKnow. Last year we plugged iKnow into Xero Tax. Our quest is really to provide accounting firms across the region with a digital experience. Plugging into providers like Xero makes sense for us because then we’re still relevant to accountants.

Digital First: What were the engagement stats like for iKnow with Xero Tax? That integration has been out about a year?

Daniel Wyner: I don’t know the numbers off the top of my head, but a significant number of firms have signed up to either a paid subscription or a premium offer. It’s well over the hundred mark. The next phase is making it far more actionable. That’s where IQ comes into the piece.

Digital First: You’re saying 100 firms? That doesn’t seem like a lot –

Daniel Wyner: It’s in the hundreds, I just don’t know.

Digital First: Okay. Enough proof to turn around and invest more in integrating CCH iFirm more closely with Xero. Are you intending to do that with any of the other products, like QuickBooks Online?

Daniel Wyner: Yes. We’ve had conversations with multiple providers about where we could look at that. Say accountants (use iFirm and) run their books on Xero or QuickBooks. At the moment you can run (your firm on iFirm and use Xero for the firm’s accounts). That integration’s been there since well before we acquired iFirm because of the old days of Acclipse and Xero starting out together.

Digital First: Clearly there’s overlap here between Xero Practice Manager and iFirm. What size firms are you targeting?

Daniel Wyner: When you’re over five staff, firms have a willingness to spend a little bit more money because they know that it’ll be something a little more sophisticated. Up to that 50 user mark, the politics within a firm, the number of partners and so forth, it’s an easy decision making circle. They can drive the change management. Changing the practice management solution, which is at the heart of a firm, it’s no small undertaking at all. Our data historically have suggested firms stay on a solution for about eight to ten years because they don’t want to go through that change management.

Azure Migration and Stability Issues

Digital First: I did hear some stability issues with iFirm over the past 12 months. I was wondering what the story was with that and if it’s been resolved.

Russell Evans: Yes. So in July last year we moved from our own data centres into the Microsoft Azure environment. We did a huge amount of pre-planning around that and we thought we’d anticipated everything. But some part of the transition didn’t go according to plan and as a result some customers experienced latency issues and performance issues. We’ve thrown everything at that and we’ve now stabilised that platform.

Digital First: Okay.

Russell Evans: And look, we’ve been very open with our customers. We’ve understood the frustration that’s caused to them. We’re past that now.

Digital First: Why did you move to Azure?

Daniel Wyner: It’s as much about scalability as different times of the year. In peak tax periods we have to scale the service up and down. We needed to have more of that flexibility Azure can give us. There are global Azure support teams that now manage “around the sun” everything that goes on on that platform. The relationships we have with Microsoft and to leverage that platform enables us to do some really great things for the client.

Power BI and Deeper Reporting

Digital First: Like what?

Daniel Wyner: One of the things that we’re focusing on for the back half of this year would be really tight integration with Microsoft Power BI over practice management data. Now that we’re in the Azure environment we can leverage off their technology stack. Microsoft is spending millions of dollars on making that a great tool that allows you to plan utilisation. Why would we waste our time trying to compete with that?

The biggest reason why bigger firms hold back (from moving to iFirm) is that they’re used to having the flexibility of slicing and dicing the data.

If you look at the legacy platforms they’ve got that ability to pull their own reports. We haven’t gone down that path until now. We give firms the ability to export data as and when required, but with (Power BI they can) work out how they want to build their own dashboard.

Digital First: When will this Power BI integration be ready?

Russell Evans: In Q4.

Daniel Wyner: Yes – that’s Power BI connecting to the practice management dataset, not to build it out for their clients’ data.

Digital First: What can you do with it?

Daniel Wyner: I can dig in to see the types of jobs that make me more profit, and the ability to manage workflow. The bigger firms are wanting to manage their staff more around KPI management. Power BI can give them a custom report about how they want to run their businesses.

Digital First: What’s the largest firm on iFirm?

Daniel Wyner: I think it’s about 160 users.

Digital First: Okay. Would you go bigger than that?

Daniel Wyner: At the moment, probably not.

Digital First: Why?

Daniel Wyner: The main reason would be that reporting.

Russell Evans: The more complex firms need to slice and dice their performance by partner, by director, by manager, by team member across different lines of business. At the moment iFirm isn’t designed to do that. By Q4 we’ll be able to support that.

Digital First: Will you launch a marketing campaign to sell iFirm to larger firms?

Russell Evans: Yeah, and look, I think we’ll be very successful demonstrating tangible business benefits in the connection with Xero. Then if we see the opportunity to roll out the Microsoft BI platform with a really strong offering for those firms with 100 to 300 staff, there’s nothing to stop us moving to that space.

MYOB, CCH iQ and Document Management in the Cloud

Digital First: What other integrations are you working on with competitors?

Daniel Wyner: Firms are saying to us CCH iQ’s great but to change their tax product is not a small undertaking, in particular for some of these bigger firms. So we’ve rolled out integration of the iQ functionality into the MYOB Accountants Enterprise database. Every time you lodge a tax return it is populated into the iQ database. We’re seeing some really nice results. Firms can move into compliance advisory without having to lift up their entire tax process onto a new platform.

Another thing we rolled out right at the beginning of this year which has taken off better than we initially thought is a cloud-based document management solution on Office 365, tightly integrated into iFirm as well.

Digital First: Has it done well?

Russell Evans: Can’t give you customer numbers, but I will tell you it’s going gangbusters. It has really exceeded our expectations.

Digital First: Why do you think that is?

Daniel Wyner: I don’t believe there has been a credible, fully functional cloud solution. MYOB document management solution had the full Sequel type functionality that depended on the way that you viewed it, it’s got folder structure and so forth. That functionality has not been available in the cloud until more recently. And there is the adoption of Office 365 by more and more firms. You have tight integration with email management and link all your emails to the relevant clients, with filtering and full mail merge functionality so that your engagement letters are automatically captured and sent out the right way.

Digital First: Would you say you have reached feature parity with MYOB Accountants Enterprise or Reckon APS yet? If not now, when?

Daniel Wyner: I don’t know that we’ll ever have feature parity because just replacing what is currently there on desktop is not the smart way of doing it. We want to look at what’s available and what the user needs and how we can facilitate a quicker outcome.

We can say, “You may be used to clicking these three times to get this type of report, but why do you need that report? You can make the same decision with a dashboard.”

Digital First: It is more use-case parity, isn’t it?

Daniel Wyner: Yes, that’s right.

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