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Accounting Tech Archives - Page 3 of 216 - The Latest on Accounting Tech For Future Focused Firms

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

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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:

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

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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.

Testing the Limits of Xero for Businesses With Higher Transaction Volumes

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Xero has long had a “soft” limit of 1,000 transactions a month. In the past, when a business exceeded this number, Xero could become slow to respond and take a long time to generate reports.

But how strict is that 1,000-transaction limit today? Has the shift to Amazon’s elastic cloud given Xero a longer life for growing businesses? Tim Richardson from Growthpath put Xero through its paces to find out.

There are questions about how well Xero performs under higher loads. After discussions with Xero and based on our own experience, we believe that businesses can interpret the limit of 1,000 invoices a month as advisory. This limit does not form part of the terms of service.

Xero has given a more concrete indication of where its actual limits lie. In January 2017, Xero published some small changes to the API limit, and these limits, which are enforced, allow a much higher load than Xero’s advisory limits (5,000 API calls in a rolling 24 hour period). Hence, stress testing is relevant because you will reach the practical limits of Xero before you exceed the API limits. Exactly what are those practical limits?

Our first concern was for medium-sized wholesalers so we put together a likely scenario to see how Xero would perform. Our testing shows that Xero performs well at much higher transaction volumes than advertised. The first test results are based on three years of 2,500 transaction rows per month with matching payments uploaded via a bank CSV. The second test run was much larger.

For a medium sized wholesaler, we assume that Xero is the backend to a cloud-based inventory package such as Unleashed or Trade Gecko so we did not use Xero’s inventory module.

Compared with a B2C (retail) business, a wholesaler has fewer customers and fewer invoices, but those invoices have many more lines. Most sales are on credit so reconciliation of bank feeds is important.

We carried out the initial testing in June 2015 with a standard Xero trial account and have tested the limits for clients post-AWS. One client, a games collectibles e-commerce business, sends out 5,000 invoices a month on Xero with minimal impact on performance. The tests run on a MacBook with Firefox and Chrome browsers. Data is imported with CSV files, with some browser automation for bank recs and document approvals using Python & Splinter. We also perform some uploads via the API mainly to load Xero for testing.

 

How does load affect Xero?

There are two patterns of use a system can see.

  1. Offline use, where a user is doing reports and inquiries while there is little or no live transaction entry, and
  2. Transactional use, when a user or API is entering sales into Xero

The back ends of modern computer systems can handle massive amounts of data very easily, so it is actually surprising to hear that cloud systems hit performance problems at fairly low levels of transactions.

The first phase of testing looks at how the size of data in a Xero file affects reporting. Because we loaded the data in a flat-file before testing began, the testing activities described below only reflect the use of the file at that time. This is like a business doing reporting after hours when there are no orders being entered, for example. Therefore, this testing looks for the impact of historical data on reporting and searching performance.

Testing showed that performance problems will come more from simultaneous load on the system rather than the volume of historical transactions. Even with transaction volumes 10 times what Xero indicates as the upper limit, Xero shows no ill-effects due to transaction history. However, the performance impact of transaction entry is greater.

Note that this is different to MYOB AccountRight desktop software, which suffers serious performance problems with high volumes of historical data. That limit is very low due to MYOB’s rudimentary database. MYOB’s desktop software also doesn’t perform well under transaction entry. The transaction volume entered here would severely stress MYOB.

 

Real-Life Limits on Simultaneous Users

Xero has no limit on the number of users. However, we discovered in our testing that simultaneous entry of invoices causes problems. Xero assigns a next invoice number when a user starts entering an invoice. This number is not reserved, so if another user starts a new invoice, it will get the same number.

In fact, five users keying in invoices would all get the same number; a number is only reserved when an invoice is saved (including saving as a draft, as well as sending it straight to approval). Xero attempts to fix duplicate numbers when the invoice is saved, but this approach doesn’t work very well. Our testing shows that with more than two users entering invoices at the same time, Xero overwrites invoices. This is actually the first real problem our testing showed while investigating Xero at higher loads. It’s a bad bug.

We did not find a workaround for this. It is possible to manually enter invoice numbers but it would require each user to have a pool of numbers to use. Each user would need to manually keep track of the next number. A number is reserved when you save and continue editing, but this only works if you can guarantee that only one user does that at any given time.

In summary, Xero is not ready for multiple users doing order entry via the browser. Possibly it would be ok with two, but more than that is asking for trouble (i.e. lost orders).

 

Load Scenario 1: Medium sized wholesaler ($3m to $5m)

Period: three years
No. of sales invoices: 2,520 (70 invoices a month)
Lines per invoice: 20
No. of transactions/month: ~2,500
GST: Yes
No. of customers: 5
Bank statement: One receipt per invoice, auto-matched

This profile may not represent every “$5m wholesaler” but it is about right. Each month contains about 2500 transactions (invoices lines and bank feed). In our test environment we did not include accounts payable and payroll so it misses transaction volume in these areas. However, a business which is scaling up is likely to more likely to see transaction volume growth in the area of sales.

There are no inventory transactions in this scenario because they are managed in the supply chain front end. If you are using Xero for detailed inventory transactions our test scenario may not be accurate.

For this test, transactions were loaded via CSV (so we did not stress test the API). The files were loaded one per year (so one file of invoices, and one bank statement). Each file took only a few minutes to upload and approve the resulting draft invoices. The bank statements also loaded very quickly. The upload was designed so that Xero would immediately recognise matches (each invoice totalled to a unique amount, matching receipts on the bank statement).

However, there is no way to automatically approve the suggested matches as it is not done via the API. This was done with a script which automated the browser interface, simulating a human clicking the “OK” buttons.

 Action tested Results
Manual entry of a sale Quite fast. Saving the invoice took three seconds. It is about the same as an empty database.
Manual entry of a journal Less than three seconds. This is a normal performance
View contact record and then sales per contact. Drill down to an invoice Fast as normal
12 month P&L A few seconds
GST Reconciliation Report Less than five seconds for an entire year

After this transaction load, Xero performs normally. There is no evidence of any slow-down in reporting or transaction entry.

 

Load scenario 2: Larger wholesaler ($10m to $15m)

Period: three years
No. of sales invoices: 7,200 (200 invoices a month)
Lines per sales invoice: 25
No. of supplier invoices: 7,200 (200 invoices a month)
Lines per supplier invoice: 5
No. of transactions/month: ~6,500
GST: Yes
No. of customers: 50
Bank statement: One receipt per invoice (for both AR and AP, auto-matched)

These tests were carried out as the only user on the system, when no processing was taking place (the ‘offline’ mode). Therefore these tests show the impact of the historical data loaded but not the impact of those transactions actually being entered live (the “simultaneous user” impact).

Summary: in this test database, which ended up with even more data than indicated here, offline performance was fine. Reporting, inquiries and order entry were fine, virtually indistinguishable from the smaller test set. The sheer historical volume of data is unlikely Xero.

 Action tested Results
Manual entry of a sale  It is about the same as an empty database
Manual entry of a journal Less than three seconds. This is a normal performance
View contact record and then sales per contact. Drill down to an invoice As fast as normal
!2 month P&L Less than three seconds (even with one other busy session). Normal.
GST Reconciliation Report Less than five seconds for an entire year. For three years, still only a few seconds.

 

Evidence of a CPU bottleneck

While one session was importing invoices, an interactive session creating a new sales order faced a 45-second wait to save an invoice so performance was really suffering. This is a very intensive action.

However, while one browser session was interactively approving draft invoices, another session entering invoices experienced typical performance. New invoices were consistently saved in less than five seconds.

 

Using the Xero API to load invoices while entering invoices and running reports

We decided to upload invoices via the API using Python 3.5 (using the PyXero library). The Xero API is limited to 5,000 calls a day (according to documentation), but each API call makes more than one invoice.

Initially we loaded 100 invoices per call as Drafts, but this was too quick for our purposes. We wanted to do some manual interactions with Xero in the browser while the load was occurring. So we reduced it to five invoices per time: the time taken for API calls is more related to making a call than what you do with it, so it’s more efficient to load 100 invoices per time than 20 calls of five each.

The invoices were the same 25-line invoices as above. Incidentally we observed that the API also performs well despite a very large volume of history in the Xero file. With decent design the API limit of 5,000 calls can actually support a very high number of transactions. Before the Jan 2017 update the limit was 1,000 a day. We considered that sufficient if used wisely so the new limit is more than enough.

While this import was running we tried reporting and invoice entry. We found the performance to be acceptable and close to normal. There were occasions were steps became slow, but we couldn’t reliably repeat this.

 

Conclusions and workarounds

While this testing was quite rigorous it was not real world testing. Apart from the bug which makes multi-user entry of invoices at risk of data loss, the performance was much better than we expected. We stuck to wholesaler-type scenarios where transaction volume appears as invoices with quite a few lines but a relatively small number of customers (well within the 5,000 customer limit suggested by Xero). The total transaction volume was much, much higher than the limits Xero recommends and performance was good.

There are real world reports of Xero performing poorly under higher load. We would like to investigate those. We predict that these problems are likely to be in businesses with many customers and a constant stream of invoice load, perhaps via the API which is sending invoices in real time in batches of one.

The most common workaround for poor transactional performance is to buffer entry via a separate system. A retailer will usually have a point-of-sale system which records the high volume of transactions and sends only summary records to the finance system. A wholesaler may use a cloud inventory system such as Unleashed to capture the details of sales and inventory transactions.

The Australian cloud online store Neto, for example, supports (out of the box) two solutions. Firstly, it supports businesses which are using Unleashed to manage stock by sending orders there. If Neto is directly connected to Xero it offers a batching option where it consolidates invoices prior to transferring them to Xero.

If you are thinking of changing to Xero and are concerned about whether it will handle your business, please get in touch with us. We will design a test scenario matching your business and we can explore how Xero performs.

A version of this story first appeared on Growthpath.com.au

Accountants Need to Manage Apps for Clients, Says Intuit

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An unstoppable trend is pushing accountants into the job of setting up and managing apps that connect to cloud accounting software. Rich Preece, VP and leader of Intuit’s accountant segment, made the call at Australia’s QuickBooks Connect, which swept into Sydney last week.

Here’s the rationale: To automate the legwork in accounting, accountants need businesses to use apps to collect and categorise their data more efficiently. The most obvious category is expense management (think Receipt Bank, Concur, Expensify, etc.) but also for time sheets, rostering and so on.

Businesses will baulk at setting up and paying for these apps if they have to do it themselves. They are more likely to give it a go if the accountant does it all for them, for an increased monthly fee.

The implications are enormous. Few traditional firms would want to look at any software that wasn’t accounting. Even cloud-minded firms limit the number of apps they deal with out of necessity; the ecosystems for Xero and Intuit contain several hundred programs.

It will likely mean firms will need to hire an in-house app expert to do set up and train staff in how to manage the apps. The longer term upside is that jobs should be more profitable, as these ecosystem apps will contain source data that accountants usually waste many hours a year chasing. It also opens the door to advisory services such as business process automation and workflow management.

Intuit is adding more tools to its practice software that will help accountants recommend apps. Accountants can also use QuickBooks Online Accountant to provide unified billing for QuickBooks and ecosystem apps. Accountants who sign up clients through QBOA get a sizeable discount on the sticker price for those apps which they can choose to pass onto the client.

Other interesting tidbits: Intuit’s direct-to-consumer model works in Australia and other countries just as well as in the US, where it built an 80%+ market share; Intuit will more than likely make business and personal loans to self-employed as well as businesses through QuickBooks Capital; and the business case for accountants to take on QuickBooks Online Self Employed clients is, well, still a little shaky, despite a swelling market.

 

Digital First: Why do you want to incentivise accountants to do the billing for the clients’ apps in the ecosystem, as opposed to the client paying for the apps separately?

Rich Preece: Well actually, it’s not so much us as the accountant. The accountant is saying to us:

“I’ve got a relationship with a business owner and I charge him $300 a month (for) QuickBooks and I do his taxes and a number of other things. The problem is, I need him to use Practice Ignition and Expensify. And so now I’ve got to say to my client, ‘Hey, I’m still going to charge you $300 a month but I need you to go buy these two things, and I need you to be the master admin and I need you to provision it, and I’d love to help but I actually can’t do any of that.’”

It just doesn’t work that way. And then the accountant says, what I’d rather do is say, “Look Mr Business Owner, for $400 a month I can actually help you with your expenses and I’m going to plug in a product called Expensify and Practice Ignition which I think you should have. So we’re just going to move to $400 and you don’t have to do anything, by the way. I’m going to set it up and manage the whole thing.”

That’s literally the talk track that accountants have said to us for 18 months and so that’s what we built. And frankly the fact that you get a discount. There’s a reason I don’t start with the discount, it is really the cherry on the cake.

We said to the apps, “Look If we’re going to build this and you want to participate, you’ve got to give the accounting professional a better price than you would give the small business.”

 

Digital First: So, then logically you feel like tech skills of some sort will become essential for accountants? If you’re setting up Practice Ignition or if you’re setting up Expensify, and so on.

Rich Preece: Well, you know I think so. This is the reality of the cloud adviser versus the accountants and bookkeepers. Imagine you and I are both accountants and you provide a service where there’s two or three apps that I need and you’ll take care of it for the small business. And I provide a service where I don’t take care of (the apps). If I’m that small business, I’m probably going to work with you versus me. I just think that’s a reality.

The last thing we want is to have an accounting professional feel like now they have to be a technical expert and write lines of code. That’s not where any of this is going. But if we can make it easy we will need to put the control in the hands of accounting professionals. And if an accountant says, “That’s not for me,” I feel like over time they’ll probably become less effective in their own industry.

 

Digital First: I hear Intuit is putting a lot of money into TV advertising, and people are wondering how effective that is. Intuit has a dominant share in the US built on direct sales to SMBs. But in Australia the accounting software companies have sold through accountants. Does the direct model work in Australia, UK, France, Brazil?

Rich Preece: It does. I’ll start by saying yes we’ve increased money on spend and it’s in two areas. One is the “Backing you” campaign which has been really successful for us in the US. It’s because A, it truly is the message we want to send and then B, because it’s been well received. We wouldn’t spend more unless ultimately there’s a business model there. We’ve been increasing our investment, but it’s with a good return.

The second area where we’ve been increasing our investment in terms of marketing is on the Intuit brand itself. There are benefits to having the Intuit brand and one of those is attracting talent. So in the US you’re quite right when you say most of our customers historically – and still – come direct. If we’re friends and I’m opening up a small business, I say to you, “What do you use?” And chances are you use QuickBooks, so before I ever get to my accountant or bookkeeper I’m already going to the website and probably buying. 

Outside the US it’s far more balanced; it’s roughly the same in terms of accountants and bookkeepers and direct. The competitors that you mentioned have always been more so on the accountants and the bookkeepers, and I do think it’s because it’s a channel. I think the definition of a channel is, the more somebody buys, the less they pay. Whereas if you look at us it’s like a wholesale billing with a discount.

Digital First: So, the short answer is selling accounting software direct works globally, full stop.

Rich Preece: It does. And then at the same time obviously I would say accountants and bookkeepers are critically important.

 

Digital First: Why is Intuit making such a big deal about QuickBooks Online Self Employed, given that it must have the lowest ARPU (average revenue per user) of all your products? Where’s the payoff for Intuit, and where’s the payoff for accountants and bookkeepers?

Rich Preece: The first answer is yes, it is a lower ARPU, typically it is $7 to $10 a month. At the moment it doesn’t have an app ecosystem. The reason why we’re so excited is if you look at that gig economy, it’s huge and exploding. And so we believe that we have to build solutions for those people. Now it is obviously a thin slice of the functionality that QBO has. SE allows you to understand what is a personal expense and what is a business expense.

The monetization strategy is that some of those folks will continue to grow (to the point) where they do need a different version of QuickBooks. Like an Uber driver that ends up with two or three cars. They actually grow into a small business from someone that’s self employed. So that’s one strategy.

As you might imagine, we’ll look to set up APIs into Self-Employed. That’s absolutely something that will be worked on. We’ll look to take pieces of QBO and add it on, so maybe you’re a self employed person that just needs inventory. And then separately for monetization model it’s sort of like building those pieces around a bit more bespoke.

 

Digital First: But what about things like QuickBooks Capital and lending to self-employed?

Rich Preece: While it’s not going to happen short term, we would absolutely open that up to Self-Employed customers as well.

 

Digital First: For business loans or personal loans or both?

Rich Preece: Well at the moment we would think about it for business because that’s where we specialise and we have no intention right now for personal loans. But QuickBooks Capital continues to be very, very successful and we are very excited and bullish about it.

 

Digital First: Can you give me stats on that?

Rich Preece: What we learnt very quickly was 70 percent of the people that we were approving had already been declined somewhere else. So that was very good. Then banks like Bank of America were offering lower rates based on QuickBooks data than they were to their own customers. In the last 18 months we started to put our own balance sheet on the platform and we tried to lend it to people that were not going to get approved by anybody else. Again, based on QuickBooks data; we’re not just throwing money at people. There’s an algorithm that sits beneath this.

And what you’re looking for is default rates to train the algorithm. And one of the biggest challenges that we’ve had is those low default rates. We keep loosening a little bit to who we lend to based on what we’re looking at. It’s been very successful in getting many, many millions of dollars into the hands of small businesses on a very regular basis.

 

Digital First: What is the default rate?

Rich Preece: Well I doubt we’ve announced the default rate. One of the biggest things the team is always talking about is, you need people to default to help the algorithm get smarter on who not to lend to. And that’s been one of the biggest problems. It’s a very low default. It’s a wonderful problem to have, in a strange way.

 

Digital First: Lend to me, I’ll default for you.

Rich Preece: The second question was the importance of QuickBooks Online Self-Employed (QBO SE) to accountants. That’s a really good question. When we first conceived and launched Self-Employed, the reason why we didn’t integrate with the QuickBooks Online Accountant (QBOA) was because we hypothesised that accountants wouldn’t be hugely interested in QBO SE clients, and that these clients wouldn’t be hugely interested in accountants and bookkeepers. One of the surprises we had was Self-Employed folks were asking us to connect them to accountants and bookkeepers on the matchmaking platform at the same rate as small businesses. So then we knew that on the one side of the equation, they actually did need an accountant and bookkeeper, but obviously they didn’t often have the ability to pay quite as much. And on the other side, accountants often said I’m not sure I want this client because they can’t pay quite as much.

So first of all we decided to start integrating (QBO SE into QBOA) for those who wanted to work together. Then we started to see accountants in the US carve off one or two employees and have them manage Self-Employed clients under a different business model. A number of firms in the US spend a limited amount of money advertising to self-employed, whether it’s Uber drivers, folks who sell things on Etsy, whoever it might be. They attract people to a free webinar, literally 100 people a month, and the accountant says, “For 30, 40, 50 dollars a month I will be your accountant or bookkeeper, I will provide you with a copy of QBOSE, and every month there is a webinar which you will attend in a group and I will share the most important things in terms of tax deductions for Self-Employed, we’ll answer a few questions. And then at the end of the year you’ll have a one hour face to face consultation with a tax professional at my firm.” And what they’ve found is, if you can start to get 100, 200, 300 folks, this thing can start to become a division of your accounting firm. That actually has some healthy margins to it.

And so this is in its early stages and we just have a few of the firms in the US who are ProAdvisors who have started to kind of do this, off their own bat. We haven’t been doing anything to help them particularly. But I personally find it interesting and I would love to see whether it’s Australia or other country’s folks testing that or other business models, because ultimately the short answer to your question is, they have to create a slightly different business model but its scale, I think, is quite interesting, particularly when you think about the growth in a segment.

 

Digital First: It just feels very unlikely to me that many accountants will want to do that. Maybe it’s an H&R Block model or something like that because those numbers, when you look at the margins you’re going to make on that compared to a regular business… Just booking 200 one hour meetings a year for that amount of money net a year, which is maximum $600.

Rich Preece: My personal thought is, particularly as I look at the number of self-employed, accountants and bookkeepers who lean into it are likely going to be rewarded. If you’re an accounting firm today in Sydney who advertises that you specialise for these people, you probably don’t have a huge amount of competition. If you can figure out this model, and maybe it’s 60 bucks a month, you figure out the right price point, because in the future it will be competitive.

Image credit: Intuit

MYOB Launches AI-Powered Reporting with Advice in Plain English

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MYOB has added a breakthrough feature with MYOB Advisor, an algorithm-driven feature that automatically adds explanations and suggestions to financial reports.

Included in MYOB AccountRight Live and MYOB Essentials, MYOB Adviser generates a 15-page, monthly management report in seconds.

It includes sections on sales, revenue (year-to-date and cumulative), top customers by revenue, cashflow summary and at bank, expense report with cost of sales and operating expenses, and accounts receivable with top debtors.

The real magic is in the use of algorithms to insert plain-English explanations in each section of the report. A business owner can pick up the report and understand instantly how each part of the business is performing.

MYOB Adviser inserts two types of advice. The first is the explanation, in black font, describing the story behind the numbers in each section. The app uses an algorithm to analyse the numbers in the report and generates an appropriate explanation from its internal “natural language” library.

The second type is more proactive. This advice, framed in a purple border, sometimes makes an observation, such as:

“The decrease in sales this month has contributed to the decrease in overall net operating profit from last month. We know this is due to seasonal factors so not a cause for concern.”

Or it will make a suggestion to the business owner. For example:

“Even though your cash balance is increasing at a healthy rate, it could be appreciably better if accounts receivable was under control.”

An accountant or bookkeeper can manually edit both boxes to include their own observations or delete the auto-generated text.

Examples of the two types of advice generated by MYOB Advisor.

 

If you would like  a sample report from MYOB Advisor that shows the natural-language algorithm at work please leave a comment below. Update: MYOB will send a better version of the report by Friday. So leave a comment and I’ll send it to you then. 

 

Where it fits

MYOB Advisor is a key element of MYOB’s “connected practice” concept. By turning data into written sentences that simply explain business performance, accountants and bookkeepers can use the reports as a prompt to speak with clients.

The management report becomes a reason to meet with the client once a month to review progress, spot issues and adjust forecasts.

MYOB Advisor is in a pilot program with general release set for mid-2018.

“With MYOB Advisor we’re looking to use it as a way to stay involved on an ongoing basis – not just reporting at year end,” Jason Seidel of Galpins Accountants, Auditors & Business Consultants, who is involved in the beta, said in the press release. “It turns the conversation into a live analysis rather than a retrospective analysis looking at tax information, for example.”

Seidel said the reporting tool could engage staff who are tired of compliance work.  

“Instead of doing monotonous tax returns, staff are freed up to use their skills more. They (can use the report) to pick up issues and bring them to the partners’ attention or to surface them directly with clients.”

Image credit: MYOB

About D1

Digital First covers news and opinions on accounting technology and is read by tech-savvy accountants who understand the importance of technology in establishing competitive advantage.
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