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.
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+