Both small businesses and accounting and bookkeeping practices moved in hordes to cloud accounting technologies, signaling a shift in thinking that places mobility, scalability and interactivity as business priorities. A study we conducted in the latter part of 2014 revealed 14 per cent of Australian small businesses were using cloud accounting software to manage their accounts, and a further 46 per cent were looking to convert within the next 12 months. That’s a pretty exciting growth prospect!
As the early adopters spill over into the early majority, convert the late majority and then onto the laggards, I thought it would be useful, exciting and interesting to outline some of the things that accountants and bookkeepers are likely to encounter in the Year of the Sheep.
Who came first? The small business or their accountant? One of the most exciting things I see happening in the cloud accounting space is the constant flickering between the chicken and the egg — which user group is building up the other one? We’ve seen a huge adoption of cloud accounting by both small businesses and their accountants and bookkeepers and it is fascinating to watch which one is leading the other.
I think this phenomenon will continue this year. As more and more small businesses make the switch to cloud accounting software in search of increased mobility and scalability, an increasing number of accountants and bookkeepers will make the switch to service this demand. At the same time, as more and more practices make the switch, they too will bring with them their existing small business clients who have not already taken the leap of faith.
For me, what this boils down to is that the benefits associated with cloud technologies make it naturally viral — a community of self-advocating customers that convert the masses has been set loose.
The era of connected advisory
One of the greatest benefits of cloud accounting is the real-time data at the fingertips of accountants and bookkeepers and their clients — gone are the days that small businesses would dread their annual interactions with their tax accountants. They are now interacting with their business advisors on a regular basis to fine-tune their bottom line and maximise growth.
Using Xero as an example, practices can quickly see the financial position — in essence a statement of cashflows — for each client in real-time. Clicking through the overview dashboard for each client, practices can see the bank account balance, invoices owing to the business, expenses outstanding and paid by the business, and total cash in and out.
Having the capacity to examine the financial position of each one of your clients on a needs basis — rather than at six-month intervals — means that you are able to add value and insight to each business and help them perform better today. Practices can now spot a significant cashflow issue as they arise or make more informed decisions as to when the best time of the week/month/quarter is to pay debtors. Because of the availability of data, practices can even A/B test specific elements within the business over a two-week period, rather than committing to significant structural changes for six months.
Ultimately, today’s practices are becoming increasingly valuable to their clients as they move beyond the era of infrequent consultation and into the era of connected advisory.
The information contained in this article is general in nature and does not take into account your personal situation or your business circumstances. You should consider whether the information is suitable to your needs, and where appropriate, seek professional advice from an accountant or other qualified professional.
James Solomons is head of accounting at small business software provider Xero. He is a director and co-founder of Aptus Accounting & Advisory, a connected and progressive accounting business and with over 15 years’ experience in Public Practice, his industry knowledge makes certain that Xero understands the needs of its accounting partners and direction of the accounting industry.