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Firm of the Future 2018: Reconciled (USA) – app stack and business model

November 6, 2018 by Sholto Macpherson Leave a Comment

Meet the other finalists:

Michael Ly is convinced that the rapid growth of his three-year-old firm to 18 staff is connected, at least in part, to the location of its head office. The firm, Reconciled, is in Burlington, Vermont, a city and state associated with the good life.

Not that all 18 staff live in Vermont. Reconciled has a distributed or remote team that communicates via video (Zoom, Google Meet) and chat (Slack). The work-at-home vibe contributes to a culture that flows through to better customer service, Ly says.

FIRM STATS

Name of Company	Reconciled
Location of Company	Burlington, Vermont USA
How long have you been in business?	3
Number of staff?	18
Number of clients?	100
Staff to client ratio	10
Do you outsource bookkeeping or accounting work?	Yes
What % of your clients are on value pricing/fixed fee?	100
What % of your clients are on cloud accounting software?	100
What % of your clients are on QBO?	100

Digital First: Why do you think you are a finalist?

Michael: The reason that we are a finalist is the Intuit is recognising the work that we have been doing over the past three years. We have 18 people, working in five states, and we have established ourselves as a pioneer in the online bookkeeping space.

We are a distributed virtual team and we leverage all the technology that Intuit has given us as a firm to serve our clients, as well as the app ecosystem.

(Other reasons for our selection include) the team that we have built here at Reconciled and obviously the growth that we have been having as a firm.

Digital First: How are you a pioneer?

Michael: I think we have built a brand that customers can trust. When our customers look at the landscape of what’s being offered to them with cloud based accounting firms they look for a brand story, a trusted brand that they resonate with. They see my story in starting Reconciled and it resonates with their own story as an entrepreneur.

Cloud based accounting firms might be the norm in the rest of the world but it’s not the norm in the US. it’s still a small percentage of firms that are cloud based and distributed.

Digital First: What is it about your brand that makes you trusted?

Michael: I think that they want a genuine, authentic person behind the brand. I moved to Vermont to raise a family and I wanted to find a way to build a business and a legacy for my family while doing it from a small state and city like Burlington, Vermont. Burlington is known for high quality products. When we talk to customers a lot of them say they like that we’re in Burlington, Vermont. Even though we’re not in the same state we resonate with the story and what Vermont represents – high quality products and services, progressive values, as well as a meaningful life.

You hear a lot of stories coming out of Silicon Valley but a lot of entrepreneurs desire the higher quality of life that Vermont has to offer.

Digital First: I don’t know anything about Vermont. What high-quality products does it produce?

Michael: Ben and Jerry’s, a famous ice cream brand. Seventh generation is a high quality cleaning brand. Lake Champlain Chocolates. We also have the highest amount of breweries per capita in the US. We have really high quality alcohol. A number of tech companies have come out of here.

Probably the most famous guy to come out of here is Bernie Sanders. He’s down the street from my house.

Digital First: So your clients are getting a slice of high-quality life by using you as their bookkeeping firm?

Michael: Yes, and they can see that our employees are not hurried or rushed. They work as a distributed team and from home so they are able to enjoy their lifestyle and work. Rather than getting in a car and driving to an office (every day) our employees can invest that time into their families and community. Our clients understand that they are much more fulfilled.

I’ve believed that if I could give quality of life for my team it would resonate out through their services. Because the work that they are doing can be repetitive work – reviewing financials and transactions. It can also be stressful. We built a work environment and we have given them a normal amount of work that a normal human being can do.

I really think our team is happier and fulfilled and that reflects in the way that they communicate with our clients.

Digital First: So culture is a big selling point?

Michael: Yes.

Digital First: Do you provide advisory and software implementation?

Michael: We have a standard software stack for clients. We use Receipt Bank, Bill.com and QuickBooks Online. Then about 25 percent of our bookkeeping clients sign up for advisory services. These would be anywhere from cashflow forecasting, estate planning, helping them raise money with a bank or investors, big debt negotiation and general management and advisory services. We also do app implementation and heavy research in apps when our clients request us to – it could be inventory or supply chain or e-commerce reporting. We demo the apps to the clients and implement the software.

FIRM APPS

What apps do you use for productivity?	G Suite, Slack, Zoom, QBOA Work
What apps do you use for workflow?	QBOA Work and Slack
Tax and Statuory accounts?	QBO
Electronic signatures?	Practice Ignition
Document storage?	Receipt Bank, G Suite, Sharefile
CRM?	Hubspot
Time tracking?	TSheets
Expense management?	Expensify
Credit Control?	N/A
Management reporting?	QBO

Digital First: How do you charge for the R&D?

Michael: Almost all of our work is done on value pricing. We can estimate the amount of time that it will take to do the implementation and the value it will bring to the client.

Digital First: You must have multi-skilled people to cover that range of apps?

Michael: We have technicians who understand not just the bookkeeping side but understand the apps. We designate our team specialists; they choose one or two specialty areas in their research. We have a person that is into e-commerce related apps, another on sales tax for multi-state sales tax reporting, we have somebody on our team who is a blockchain expert and a cannabis expert. There are a variety of different areas and we let our team members choose what are they want to specialise in.

Digital First: Isn’t that a strategic decision about which industries to go after? Why let teammates choose?

Michael: We have been able to define our strengths and skillset. We target e-commerce companies, digital marketing agencies, breweries, distilleries and wineries, so we have a few areas of expertise. We also actively work with cannabis companies. There are only a few accounting firms that will work with cannabis companies because cannabis isn’t federally legal on the hemp side. Some firms are avoiding working with them until it is federally legalised.

(It’s the same with blockchain.) Not many accounting firms understand the nuances and questions that blockchain companies have to deal with.

Digital First: What are those nuances and questions?

Michael: Some of the questions that come up – are smart contracts legal in the state I’m operating in? Will they be acceptable in a court of law? In an open blockchain who are the owners and partners of the company if you have miners that participate in creating a blockchain and making the blockchain bigger? Are miners considered partners or owners?

Do people exchanging coins on your blockchain receive 1089 forms or are they considered contractors? Should you do a coin offering or not and what are the tax implications?

Digital First: Do you have a larger R&D budget or training budget?

Michael: We require all our bookkeepers to receive their certifications before they can start working with the client. That usually takes them a week or two to finish them and start getting familiar with all the internal apps. We use Slack internally to do efficient communications as a team. Often we’re the first company that introduces them to tools like Slack or Zoom or Google Meet.

Digital First: Are you using QuickBooks Online Accountant and Slack?

Michael: We’re probably one of the largest firms using that integration. We have a private slack channel for every client that we’re working on. We can integrate QBOA’s work tab with that. It’s been very helpful as a reminder and a pulse of where bookkeepers are at with their work.

MYOB Doubles Down on Supplier Feeds: Accountech.Live 18

October 26, 2018 by Sholto Macpherson Leave a Comment

Banks feeds were the killer feature that fuelled the rapid rise of cloud accounting software. But the bank rec is not fully automated yet. MYOB says it knows what will take it another big step closer – detailed supplier feeds.

MYOB is investing in higher quality, direct feeds to plumbing distributors Reece and TradeLink and office king OfficeWorks, with line item detail flowing directly into AccountRight and Essentials.

The idea is to create a “holistic” approach to expense management, says MYOB product manager Dale Dixon.

“We found that customers struggled to keep track of expenses on the job,” Dixon said. “The Reece integration brings in the (item) lines of what they purchased and also allocates to the job in the system.”

MYOB AccountRight can switch on tracking for reimbursables in each job. Tradies give a purchase order number at the point of sale which is added to the invoice. Then when the tradie invoices the customer the software automatically adds a selection or all expenses.

“In the past you got your paper copy of your statement and worked out which ones you have invoices for that work. Now you can integrate it end to end,” Dixon says.

MYOB is not the first to add feeds to major suppliers (Xero has OfficeWorks and Reece already) but it is the first to add line item detail. This one change will make a huge difference to the speed of bank reconciliation, says Dixon.

“We are working with a bunch of suppliers to automate those feeds. It’s not just about getting the bill in the system, it’s about automating the workflow,” Dixon adds.

The supplier feeds are one part of MYOB’s push to improve data processing. It has also switched from billsapp@myob.com.au to a unique email address for forwarding invoices to an “in tray”, similar to Xero’s Inbox.

Now a company can hand out the unique email to suppliers so they can send bills directly to the accounting software, or multiple staff within a company can forward invoices they have received.

MYOB Essentials can also store receipts as well as bills by attaching them to transactions in the bank reconciliation screen, Dixon says.

You can hear more about MYOB’s plans at Accountech.Live, November 13-14 at the Melbourne Convention and Exhibition Centre. Register for free now.

Session: The next killer feature in accounting? Holistic expense management

Presenter: Simon Dennis, head of partnerships at MYOB

When: 10:05am – 10:35am, Tuesday 13 November

Image credit: MYOB

Accounting goes niche with Rounded app: Accountech.Live 18

October 18, 2018 by Sholto Macpherson Leave a Comment

Just when you thought there couldn’t be room for a new accounting software company, another appears. This time it’s going niche, and it is chasing the boom in self-employed or sole traders.

The first wave of these apps include famous brands such as FreshBooks in Canada and FreeAgent in the UK. Intuit is pushing the mobile-based QuickBooks Self-Employed in the US, the UK and Australia, among other countries. In an astonishing announcement, Saasu revealed earlier this year that it was winding back its SME efforts to focus on micro-businesses.

And now there is the Rounded app. Rounded has clocked up 1,500 active users in two and a half years and recently added an accountant portal for managing multiple accounts. It is one of the newest apps exhibiting at the Accountech.Live expo in Melbourne on November 13-14.

DigitalFirst.com caught up with Oliver Garside, co-founder and COO, to find out a little more about Australia’s latest accounting app.

DigitalFirst: Australia surely has more accounting software per capita than anywhere else. Why would you want to launch here?

Oliver Garside: The founder was a career freelancer, he worked as a graphic designer and filmmaker. He found that the options for managing a freelance business were not hitting the mark. He found it too complex, too expensive, and it didn’t deal with GST and BAS particularly well. So he solved his own problem and the feedback he got was that there was a broader application.

We are focused on Australia but it’s not going to be forever. We want to offer it in other markets as well. What makes this special is the focus on the use case. A lot of the more established solutions are really built for small business and offer a level of complexity and cost that freelancers and sole trader and self-employed don’t really need. One of the consistent bits of feedback is the design and simplicity and ease of use. It’s set up on a freelance use case and not a small business use case.

DigitalFirst.com: What are the differences between those use cases?

Garside: We don’t offer payroll. We can’t support anyone that has employees. That would be the main thing.

We also don’t have a general ledger or balance sheet. We have done a huge amount of work to use what you’d call friendlier terminology. Instead of a chart of accounts we have expenses. It’s just about making this as effective and un-intimidating as we can but still facilitating our customers in knowing exactly where they are at in their business at all times.

It is also producing professional invoices, which is huge, and using automation to give them time back in the day.

And when it comes to tax time it’s about connecting with the bookkeeper to remove the strife from going through the tax period. Our customers are organised much more effectively when it comes to tax requirements.

Left to Right: Grant McCall (Founder and Chief Product Designer), Nicholas Beames (Co-Founder & CEO), Oliver Garside (Co-Founder & COO)

Why did you personally join Rounded in 2016, when Xero was already growing so quickly?

Great question, especially when I had no interest in accounting. The first thing was how easy it was for me with no accounting experience to get how Rounded works. The beautiful design instantly appealed to me.

The other thing was that I felt the shift in the way that the world works. All the usual phrases like “future of work” and “gig economy”. That all boils down to the internet supporting people to work in a different way.

That freedom incents people to try different ways of working. Freshbooks isn’t built to deal with BAS or GST effectively. We felt we had identified a growing niche that didn’t need the cost or complexity of Xero or QuickBooks Online (QBO) but wanted effective, fit for purpose software. And I still think that is the philosophy that will make our business successful and has made it so successful today.

Funding and users

DigitalFirst: Have you taken on venture capital?

Oliver Garside: No, we haven’t had venture capital. We received a little bit of funding from an investor at beginning of the year but predominantly we are self funded.

And we are scalable in terms of development. So we do one deployment and it updates our three apps at the same time (browser, iOS and Android). We really make sure there is a consistent UX.

DigitalFirst: How many users do you have?

Oliver Garside: We have 1,500 active users right now and a few thousand people have downloaded the mobile app and had a look.

We have such a diverse range of customers. The thing that connects them all is that they are all sole traders. Musicians, journalists, tradies, small cafes and retail outlets, a variety of professional services such as doctors, dentists, consultants, architects.

Intuit is after the exact same market with QuickBooks Self-Employed. It is already selling heavily in multiple countries including Australia. What are your thoughts on that app?

We get a lot of customers that come to us from QBSE because their experience isn’t what they want it to be.

We think our app is better, of course. But we are at the opposite end of scale to QuickBooks we try not to lose too much sleep. All we can do is stand behind the experience that we provide.

We can’t position ourselves as the cheapest app in the market. Every now and then we lose out to $5 a month (QBSE’s discounted price) with new business but a significant number come back.

We take so much care over the design of the app and so much effort in the customer support they find that they are more than satisfied with the value the app provides. That’s the only thing that we can control and the one we focus it on.

Bank feeds and automation

DigitalFirst: What are you using for feeds?

Oliver Garside: We are using Proviso, they are used by Illion, previously Dun and Bradstreet Australia. They provide bank feed technology to lenders to make credit decisions based on personal loans, mortgages, and that kind of thing.

DigitalFirst: Why go with Illion and not Yodlee?

Oliver Garside: The price and the ease of integrating the API. We can offer 140 banks and institutions including credit cards. Feeds are hugely complex but a massive part of everything we offer. It’s pretty much impossible to have any credible accounting software these days without them.

DigitalFirst: You mentioned automation earlier. What have you built?

Oliver Garside: We will be rolling out some new automation features by the end of the year. We have a bigger development project due 1 January focusing on key areas of automation. One would be auto-categorization of expenses. If you have a regular direct debit that comes to your bank feeds that we can auto-categorise it.

DigitalFirst: Do you create the bank rule manually?

Oliver Garside: We will be able to use some AI in some instances. We are doing some work in the background doing some big data analysis of users’ records and building a list of the top 100 organisations for expenses. The more common ones we will use auto-created rules.

Everyone also has transactions that they categorise in their own way. So we will let people create their own rules as well.

DigitalFirst: Are these in-house AI skills? How can you afford that when you’re bootstrapping?

Oliver Garside: We are lucky that the people involved in the company from the beginning are some of the best engineers I’ve ever seen. We have a culture in the business that if you don’t know how to do something then learn how to do it. Everyone in our team works very, very hard to make this as good as it can be. We think we can do it.

DigitalFirst: What are the automations you have so far?

Oliver Garside: Recurring expenses, recurring invoices, a whole suite of smart reminders for when invoices have been paid and when they are overdue, and sending reminders to clients. It’s about making sure that things don’t fall through the gaps, especially when you have multiple invoices out at one time.

We have a stack of notifications as well. It helps our users keep on top of what’s happening in their business. When a BAS is overdue, that sort of ting. Our BAS is compiled on the fly. When our users submit a BAS at the end of the quarter it takes 30 seconds to pop into the ATO portal. It’s one of the features our users love the most.

Image credit: Rounded.com.au

Cloud Power – Testing the Limits of Accounting Software: Accountech.Live 18

October 12, 2018 by Sholto Macpherson Leave a Comment

A funny thing happened on the way to the cloud. Small business accounting software became a lot more powerful.

The traditional line between desktop accounting software and ERP was pretty well defined. Sales guys had a solid list of advantages for ERPs – more customisable, scalable and could consolidate data in the business.

But now technology consultants are replacing smaller ERPs with QuickBooks Online and Xero, augmented with ecosystem apps.

Featured sessions:

How to keep your best SME clients by avoiding ERPs – Wed, 2.40 pm – 3.10 pm, Pink room
Testing the outer limits of accounting software – how big can you go?
Big clients slowing down their software? Workarounds for QBO and Xero

Exploring the boundary between accounting software and ERP is a major theme at Accountech.Live, an expo in Melbourne on November 13-14.

Matt Paff, CEO of Value Adders, recently surprised an NGO in Sydney that was expecting to pay more than $10,000 a year to replace an aging ERP. Matt rolled out QBO and to the astonishment of the NGO’s CEO, it did everything they needed.

Matt Paff will be sharing this case study at Accountech.Live and explaining how the cloud has reset the parameters for small business accounting software. You can also catch a preview of Paff’s session next week – just tune into this 30-minute, informal webinar at 12.30pm AEDT (GMT+11) on Thursday 18 October.

There is an obvious follow-on question. Where exactly is the boundary between small business accounting software and ERP in the cloud?

Accountech.Live has two excellent presenters working on the answer. Inbal Steinberg from Convertworx and Tim Richardson from GrowthPath will be sharing the results of experiments with DigitalFirst.com to identify the limitations of Xero and QBO. You may have already run into those limitations with your larger clients.

“People perceive these cloud solutions as these huge things running on AWS and servicing hundreds of thousands of users so they don’t even think there could be limitations to the software,” Steinberg says. “You have to be aware of these limitations and know how to get around their them.”

Every accountant and bookkeeper should know where the current boundaries are for the accounting software they recommend. Xero does publicise a maximum 1,000 invoice-limit but only in vague terms, and it’s clear that the contents of those invoices affect Xero’s performance.

“We all know Xero users who have 2,000 or 3,000 invoices a month and it still worked. And we know someone who has 100 invoices a month with 100 lines in each invoice and Xero doesn’t work,” Steinberg says.

So how many invoices, and what type of invoices, can Xero and QBO take? When do they start to struggle? Come along to this session to find out. “The last thing you want is to get a client on a platform and for it to time out on them,” Steinberg says.

The session Testing the outer limits of accounting software – how big can you go? will outline ways of squeezing more out of your software before needing to move to ERP. But if you really want to know the nuts and bolts of these techniques then Steinberg returns to give you the low down.

Big clients slowing down their software? Workarounds for QBO and Xero is a breakdown of the inventory apps and programming techniques consultants use to save SMEs overspending on ERPs. Eventually an ERP is not just inevitable but the right choice for an SME. Come along to find out the tell-tale signs that it’s time for the Big Upgrade.

If you haven’t already register here for Accountech.Live and check out the rest of the agenda.

What the Open Data revolution means for you

July 27, 2018 by Sholto Macpherson Leave a Comment

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.