The idea of online accounting software is clearly not welcomed by some accountants who see it as a threat to the money they make from tax returns.

Often it’s the fear that holds accountants back from exploring how online accounting can change their business. In the US this feels like the prevailing position, while in other parts of the world, especially Australia and New Zealand, accountants are forging ahead.

It’s true that accountants who have embraced online accounting are making less from tax returns and compliance. But they are making much more money by selling more interesting consulting work.

No accountant I’ve met has regretted embracing online accounting. Yes, it requires change, and change can be scary. It can also be an opportunity for personal development and financial success.

I caught up with some great accountants at QuickBooks Connect here in San Francisco and asked them two questions. How has online accounting changed their life as an accountant, and what difference has it made to their clients.

Check out their responses in the video below and hear their stories. I’ve listed them (alphabetically) below; take a look at their websites and how they have restructured their businesses.

Online accounting is not optional; in a matter of years it will be the only way to buy accounting software. Move with the times and enjoy a better way of working. If you stick with only doing tax returns, it’s just going to get harder.

Thanks to:

• Diane Lucas, Direct Management @dianelucasqbo (Australia)
• Josh Zweig, Live CA @LiveCA (Canada)
• Lauretta Finis, Quick Bizness Bookkeeping Solutions @LaurettaBYBB (Australia)
• Michelle Long, Long for Success @LongForSuccess (USA)
• Mike Pinkus, Connect CPA @Connect_CPA (Canada)
• Ryan Lazanis, Xen Accounting @XenAccounting (Canada)
• Stacy Kildal, Tracy K. @StacyKildal (USA)

Peter McCarthy’s clients were facing a problem most people would love to have – how to keep track of their many assets.

While McCarthy’s financial advisory firm had plenty of software tools to track the businesses of its 100 high net-worth clients, calculating their total wealth involved updating a list on a piece of paper or spreadsheet.

“The ability to provide advice depends on the quality of the data you have at your disposal,” says McCarthy. “I wanted to build a tool that the client and adviser could work together on that would make sure the data was alway up to date.”

In 2009 McCarthy sold his company to a subsidiary of IOOF and turned the prototype he had built for the firm into a personal wealth management app called MyProsperity.com.au. The program applies the smarts of today’s online accounting software such as automatic bank feeds and integration with financial services to monitoring lists of assets for individuals.

While Mint.com has enjoyed success in the US, it is the big four banks who have moved most aggressively into personal financial management. This presents a competitive threat to accountants selling advisory services, McCarthy says.

“Accountants want to move into other areas such as wealth management, succession planning, and that’s where the institutions are heading as well,” McCarthy says. “I think it’s those that have the best digital solutions that will thrive.”

MyProsperity.com.au has 1,000 users tracking home loans, bank accounts, superannuation and vehicles. It is also available as a white-label service for accounting firms which can use the software to cross-sell their advisory services.

A user can enter the address of their home or investment properties and get an estimate of their value from property services company RPData. If they want to get a more exact valuation, MyProsperity sends a notification to the accountant to follow through on the inquiry.

The online accounting program takes feeds from various sources to track the changing value of assets. Vehicle valuation service Red Book, which provides pricing to used-car dealers, displays a price for your car depending on year, make and model.

MyProsperity uses Yodlee bank feeds to provide daily or weekly updates of transactions in personal and business bank accounts. Financial data feeds update retail and industry superannuation funds including self-managed super, trust accounts and partnerships.

Price feeds from the Australian Stock Exchange update the value of your share portfolio.

The app automatically categorises expenses and filters any reimbursements for your tax return such as motor vehicle expenses.

MyProsperity is available in three plans; the first is free, the second costs $14.99 a month and adds goal setting and budgets, while the $19 a month plan adds the ability to receive rental statements from investment properties.

Rent collected through MyProsperity is matched against transactions to linked bank accounts. A tax report for each property shows maintenance, land tax and other expenses.

The white-label version for accounting firms replaces the MyProsperity branding with the firm’s name. The app passes leads from clients inquiring about finance, insurance and estate planning to the appropriate section within the firm.

An integration with online SMSF manager Class Super updates funds listed in MyProsperity, and accountants can send updates through MyProsperity back to their Class Super account.

“The aim is to build the accountant’s brand online. Very few have a digital presence, at most they’re using online accounting software which is building the software company’s brand rather than their own,” McCarthy says. “They now have a platform to build their brand as a trusted advisor.”

The white-label service costs $400 a month per accounting practice.

“There’s a window of opportunity for accountants to roll this out to their clients and have them working from their systems rather than from the big financial institutions,” McCarthy says. “The accountants can control that data. And I think that’s really important.”

“Design thinking” is everywhere – even in accounting. We just may not be aware of it.

Design thinking has come to be defined as combining empathy for the context of a problem, creativity in the generation of insights and solutions, and rationality in analysing and fitting various solutions to the problem context.

According to Tim Brown, CEO and president of design and innovation consultancy IDEO, the goal of design thinking is “matching people’s needs with what is technologically feasible and viable as a business strategy”.

Increasingly, businesses are adopting the design thinking philosophy to transform how they operate and how they sell services to customers.

What does this mean for accountants? Accountants are used to communicating financial information in a format the accounting industry prefers, but is it how their clients want to see their data displayed?

Today’s online accounting software providers have continued with the desktop software philosophy of compiling and reporting data by legal entity. However, if you ask most clients, they are not necessarily concerned about whether their trading company or investment trust makes a profit or loss. They want to easily understand two things: (a) the total tax they have to pay, and (b) where did the cash go!

With time and education, business owners can gain an appreciation of the importance of cash driver reporting and how its application can assist with their wealth creation.

As a profession we understand why there are compliance reasons for having data represented by legal structures. However, who is the primary audience for any online accounting output anyway? The financial data collation industry (i.e. accountants, bookkeepers, financial planners, etc.), or the client? Who really owns and pays for the data?

It is my belief that tax should be a data outcome and NOT the driver.

This holistic approach is not a new phenomenon. We see it nearly every day with our internet banking. On the one page you are able to see your business, investment and/or personal banking, potentially spanning across several legal entities and their accounts, and you have the capacity to drill into any account to review transactions.

It’s possible to see a total banking position without any manual additions and/or third party software intervention. Try doing the same with today’s core online accounting programs without having multiple browsers open.

There are plenty of design thinking opportunities to provide a better online accounting program without having to pay for add-on programs.

Who will be the new entrant that designs the Holy Grail of online accounting? Hopefully, one that is designed with the client in mind and also accommodates the compliance reporting as a complementary outcome.

Andrew Broadbent is a FIPA accountant, registered tax agent and owner of Smarter Numbers, an accredited partner with Intuit, Reckon and Xero.

Image credit: Wikipedia