Cloud-based accounting packages – Is it the future?

I was recently invited to attend the Xero Roadshow. Xero is a cloud-based accounting package and has made significant inroads into the market with over 850 000 subscribers world-wide. One of the interesting points raised by one of the presenters was that the current change in the accounting landscape, not only with changes in technology but the expectations of clients. More importantly, it raised the question, which if traditional accountants or bookkeepers did not embrace these changes, would they have a sustainable business in five or ten years?.

This statement, in my opinion seemed to be over selling the need to embrace change, possibly positioned to garner further support for cloud-based platforms and more specifically Xero. After discussions with some of my other partners and other accountants, it made me realise, that that comment was a 100% correct. These comments seemed to be in-line with another presenter comments that “change is inevitable”. These comments made me wonder about why the differences in cloud accounting packages compared to desktop accounting packages are impacting the accounting landscape, not only from a theoretical perspective but a practical perspective, after all, we are talking about the end of bookkeeping as we know it.

Why are these changes occurring?

The last decade has seen the rise of the Internet of Things (IoT) where everything is connected from your electric car, to your Alexa, to the way you lock your house. More importantly, the rise of large-scale development and accessibility of cloud-based functions (think Dropbox, Google Drive, iCloud). Apart from the development in these areas, a majority of the formal economy have smart phones and tablets which allows access to emails and other functions which previously were only accessible at your desktop computer/laptop. So we have created an environment of accessibility, and with social media coming to the fore, people now expect an instantaneous response from a social perspective and this has moved on into the work environment. These are just some of the factors that have developed the new expectation in the always-on-employee/service provider (where the employee/service provider is required to respond via their smart phone or similar connected device almost instantaneously). Not only has it impacted employees and service providers, personally I believe the biggest changes can be seen in industries that were previously siloed such as accounting, have been forced into transforming into engaging and real-time functions, well if not yet, the drivers are there.

Is business, ‘business-as-usual’?

Business is no longer business-as-usual. Brexit, Trump the future is both unknown and uncertain. It has been said that a majority of the jobs of the future have not even been dreamt up yet or even have a name. An even scarier thought is that people do not know what jobs will be done by humans or by machines (Both physical machines and online automation). It would make sense then the accounting profession is currently at a crossroad moving in the same uncertain direction.

Impacts of business automation in the accounting profession

This is most noticeable on the cloud accounting platforms such as Xero compared to desktop accounting packages. An example is that bank statements are now processed via excel uploads or from direct bank feeds, into the accounting platform. The need for a clerk to spend hours and hours processing bank statements is over. Furthermore, inputted transactions rules and machine learning has meant that the future of the bookkeeping function has changed from a processor to an oversight function. These innovations have had a positive effect on the client engagement by handing the client back the control of his accounting function and limiting duplication. An example is how clients can now send an invoice from their accounting package via an app on their smart phone, and the accountant does not need to re-capture the invoice as it is saved in the cloud.

This evolution has meant that accountants are required to focus on regulatory controls and value added services rather than processing. Unfortunately, many of the traditional accountants and book keepers focused on regulatory controls and processing. This old school thought process has meant that clients would abide by the accountant’s request for documentation and then wait for monthly accounts. This siloed approach meant that companies were not engaged and informed on a real-time basis, which would enable better decision-making environment and could ultimately lead to a healthier business. In the next ten years, clients will need real-time information and access to be successful which unfortunately means that the old-school mindsets of how an accountant operates are dying out.

Cloud-based accounting platforms vs. Desktop accounting platforms

Let us look at some of the positives of cloud and the negatives it overcomes of traditional based desktop software:

 

Benefits of cloud accounting platform
Data is real-time and automatically updated, therefore always accessing the up-to-date version.Automation of functions (bank feeds/rules) allows less human processing and therefore fewer errors.
User permission allows for greater collaboration.Automated backups (stored in the cloud).
Real-time updating allows for reporting to be accurate.Clients have access in real time – less chance of duplication of work (e.g., directly invoicing from platform).
No major installations.

 

Problems with desktop accounting packages
Syncing/updating issues.
Collaboration can be difficult – risk of security breaches.
Reliant on hard storage – e.g physical computer.
Silo’d approach to accounting.

 

From the above tables, we can see the benefits of cloud-based accounting packages compared to desktop packages. Clients want real time, engaged service providers and platforms. This demand will mean that cloud accounting platforms will be the dominant providers to the industry within the next five years. As mentioned, change is inevitable, so it is important to see how cloud accounting will modify the industry for the better and to make sure you are an early adopter on this journey.

The biggest difference will be that the technology allows for accountants to focus on providing their clients with more face to face time, drilling down on the data which means deeper insights and detailed reporting for the client. Accountants can no longer hide behind the mysteries of desktop accounting packages; rather they must embrace the change and become the advisors the clients both want and need.

Louw Cooper Rasool focuses on using technology to drive efficiencies and believes that cloud accounting platforms are the future. LCR strives to find the balance of technological capabilities and human engagement. LCR has realised that cloud is the future and will underpin all of our future strategies. Xero seems to be the market leader and has benefited from the first-mover advantage, and LCR believes their product offering is the superior product in the market.

Please contact us (link to contact us) with any of your accounting and taxation requirements. Email info@louwcooper.co.za or call us directly 021 761 3489.