Cheap Accountants

If I’m totally honest pricing is one of the hardest parts of being in business. We run the practice as efficiently as possible to keep costs down for our clients. Clients are now getting more and more price sensitive. But like most other products and services it can be a complete false economy to choose your accountant solely on price and heres why –

Tax planning Whether we give fixed prices* (90% of Do My Books clients are on fixed price) or bill by the hour it comes back to two simple things for accountants: the amount of hours to complete the task and the experience of the individual involved. If an accountant is pricing ‘cheaply’ are they putting in the time to ensure the client isn’t over paying tax? Is the accountant charging enough from each client to allow them selves to take time out each month to read, study and attend training seminars on the latest tax affairs? The other concern is if an accountant has a technical query have they charged enough in the quote to engage a  tax consultant who is an expert in their field? Ultimately ensuring your accountant is well versed in current tax matters and is budgeting for adequate amount of tax planning time is critical.

Management Accounts A huge amount of Irish small businesses and even some medium ones have no idea how much profit they are making on a monthly basis and rely on the end of year statutory accounts for management information. This can lead to poor business decisions, cash flow problems and ultimately business failure. When comparing prices between accountants its important to discuss what management accounts (If any) are included in the price.

Qualification The word accountant is not protected by law in Ireland. So effectively anyone can call themselves an accountant. It goes without saying that you ensure your accountant is a member of a recognised accounting body.

Availability Its important to ask, who will be dealing with your account and working on your accounts in the longer term. A managing partner? A junior? The level of business advice and expertise you will receive can vary considerably from a junior to a 10 year veteran.

This may all seem like common sense but as the recession (Sorry for using that word!) continues small businesses rightly look for value, its just important to remember to compare like with like.

As always if you would like to discuss any of the above please do not hesitate to email me ralph@domybooks.ie or call on 091-442009

UK Bank Feeds – a new way of working

Henry Ford, the pioneer of what we recognise today as Lean Manufacturing, introduced a revolution centred around the elimination of wasteful processes more than a century ago. In his autobiography he explained the essence of it as:

“I believe that the average farmer puts to a really useful purpose only about 5% of the energy he expends. Not only is everything done by hand, but seldom is a thought given to a logical arrangement…his whole idea, when there is extra work to do, is to hire extra men. He thinks of putting money into improvements as an expense. It is waste motion – waste effort – that makes farm prices high and profits low.”

While I wouldn’t suggest that Ford’s farmer is perhaps the best proxy for accounting, take a moment to look around your desk and office. Aside from the odd PC, I’d bet that paper still rules the roost. But more than that, repetitive paper based processes and workflows still dominate the world of accounting and bookkeeping.

We love a challenge

So, in a few weeks we’ll be rolling a new capability to our UK customers which securely imports daily banking transactions straight into Xero. While we’ve had this running for over twelve months for the hundreds of Xero UK customers who bank with HSBC, the UK bank feeds release will enable this ability for most UK banks, credit cards and financial institutions. Around eighty new UK feeds will be added all told.


So, why is this such a big deal for small businesses?

Cash is king. Providing the capability to check your live bank balance and cash transactions from within Xero not only means there’s one less website to visit every morning, it also means that cash based businesses have a fully automated mechanism for loading, analysing and reconciling their cash. Instead of sitting down once a fortnight – if you’re lucky – with a paper bank statment and then repeatedly manually keying, matching, marking and reconciling payments and invoices for each statement line, Xero will will enable you to do a bank rec in minutes every day. Not only do you save time but, critically, you get the benefit of complete, up-to-date visibility of cash.

So, why is this such a big deal for accountants?

Eliminating the need for accounts staff to manually capture, key and reconcile their clients’ accounts not only benefits the clients, but the internal practice efficiencies are multiplied many times over.

Is bank feed data capture a silver bullet, should all my data now come in from my bank statement?

No. While every business will benefit from automated bank feeds, it stands that the more cash based your business is the more you will benefit. But we believe that loading and coding with automated bank feeds, coupled with the full accrual accounting capabilities already present within Xero, will eliminate huge amounts of wasteful re-keying of cash movements, as well as providing hyper realtime management reporting that is sourced from the real, current cash position – not what it was weeks ago when you last did a full bank rec – could be transformational for many small businesses.

We are really excited about finally bringing this service comprehensively to the UK market, stay tuned for more insight as we get closer to launch.

The modern practice

Today we’re announcing a new initiative for the accounting industry.

Right now Xero offers client side accounting, as well as accountant side features such as annual reports. We believe the ‘single ledger’ is a fundamental disruption to the accounting software industry because it provides huge efficiencies to the accounting practice and reduces cost dramatically.

Examples of what we’ve already delivered for accountants include Xero Partner Edition, Cashbook and recently Ledger – all these were developed based on partner feedback. We’ve also delivered the first part of Final Accounts (Reporting Codes), and those who’ve seen previews of Xero Final Accounts can’t wait for its release.

As we provide more day-to-day requirements for accountants on the Xero platform, we’ve taken a good look at the other software they use to run their practices. We obviously need to coexist with these products, and used together, there’s a huge impact on productivity. This has lead to the initiative we’re launching today.

The Problem

Frankly, we were shocked at the software used by many accountants to run their practice and the acceptance of it. We’ve seen low quality and very dated solutions which cost tens of thousands of dollars for the software and servers. Further, we don’t believe the roadmaps of the incumbent vendors will take accountants down a desirable path. Under these vendor models, server environments will get more complex and expensive. This is the opposite to what’s happening with the Cloud. Cloud vendors like Xero manage complex applications for you and share the cost among a broader base. The Cloud approach delivers commodity pricing.

Accountants are not technology experts and it’s expensive and at times and mind boggling for them to work out what is the best set of solutions for their practice. We are technology experts. Not just in the small business space, but we have a very good understanding of mid market and enterprise solutions. Obviously we’ve been keeping track of what the big vendors are doing in the Cloud too.

The Challenge

Having taken the time to understand the requirements of our accounting partners, what they need includes: client accounting, final accounts production, tax filing, practice management, document management, customer relationship management, electronic marketing, office productivity, file storage and printing and a website. It’s a big list of applications that need to work together.

Subsequently we’ve formed a view of why the market is – as it is. In reality no one vendor provides all of those things. The accountant’s challenge has been to work out which products are best and pay someone to integrate all of those systems together. Accountants have told us this can be a real headache. What’s more you may have had to suffer bad service, not to mention great expense.

Accounting practices are small businesses themselves, so selling to you and supporting you is tough. Implementation projects tend to be a nightmare and the types of vendors that sell into the market are just not the ‘A’ team.

There is a better way. And it’s much cheaper.

The Solution

Together with a number of our partners we’ve come up with a selection of best of breed products that work well together. And we’ve really thought about how we bring commodity pricing to you – to save you money, not just headaches.

There is no perfect system – yet. But we’ve brought together a suite of technologies and supporting vendors who will commit to work hard for you so you have an integrated set of tools that will make your accounting practice hum.

One of our primary partners in launching this initiative, which we call the Modern Practice, is Microsoft. Microsoft is the largest software company in the world and you’re no doubt already using their products. They have commoditized a number of key services by moving them to the Cloud. This means you won’t have to buy and manage your own servers anymore.

The other missing piece has been web based tax. We’ve thought hard about developing this ourselves, but we also feel tax it is tied closely to practice management, plus it’s country specific. So we’ve decided to work with one of our great partners WorkflowMax, and provide them with some additional capital to develop a tax module. We announced that earlier today.

When can I have this?

Most of this is available today and we’re hard at work doing the bits that are missing. But we’re ready for you to start planning and moving straight away. If you are considering changing your server technology to anything else, we suggest you make contact immediately and we will explain why this approach is better. We’re initially starting in New Zealand, but will quickly add the appropriate partners in other countries.

Let us know what you think of this initiative or any questions by commenting here on the blog. You can also help us shape the Modern Practice by joining the conversation on our LinkedIn Group.

http://www.xero.com/modernpractice

Life changing technology for UK accountants

I’ve just spent a fortnight in the UK and by all accounts the UK economy isn’t in great shape. The Government is drastically cutting spending, which is creating much debate and idea generation over how to cut costs. Such ideas verge on the ridiculous at times. For example local councils are turning off street lights to save money. But whatever transpires, all public organisations will have to become more efficient and that’s going to involve technology and using the internet to interface with customers. UK citizens are adapting and changing.

Two interesting examples of this new ‘forced’ innovation are:

1.  Cheques will be gone in 2012 so everyone will have to use internet banking and payment gateways like PayPal to make payments.

2. Greater numbers of HMRC and Companies House filings must be made online, and from April 2011 some of them in the new iXBRL format.

All the accountants I spoke with are feeling pricing pressure on their core compliance work and are very interested in how to build efficiency into the processes so they can stay price competitive. This is no different from the situation in Australia and New Zealand. The reality is core compliance work is becoming commoditised and low cost operators are pushing the pricing for this work down. In order for the accounting firm to stay alive, it must evolve. The successful firm of the future will have higher touch points with its clients, bundled offerings, fixed fees and it’ll engage in more management accounting and general business advisory work.  At last the compliance and tax return monkey will be gone.

Electronic bank statement data capture (or ‘bank feeds’ as we call it) will be the single biggest technology improvement at a business level that accounting firms in the UK have seen since PCs hit our desks.

With Xero your clients’ bank statement data arrives automatically into their Xero accounting system every day. There’s no need to enter the date, amount or payee for every single bank statement transaction line. All you need to do is code the transaction to the correct ledger and decide on VAT. At Xero we’ve added a lot of additional functionality around the front-end data processing, so this process is incredibly fast. If you compare the way Xero works with traditional desktop software, the accounting firm stands to save more than 50% of the processing time. If processing is about 50% of the whole job, then the firm will save about 25% of the total time. In fact I spoke to an accountant in Bath who uses Xero bank feeds and he told me the time saving on transaction processing were “ridiculously high”.

Time saving and improved efficiency are fantastic because they create faster throughput, which means improved cashflow. But they will not result in short term bottom line profit improvement, because most accounting firms have relatively fixed salary costs. What will probably happen is you’ll recruit fewer new team members over time, so in effect the longer term bottom line will improve. The other thing is Xero’s bank feeds create ‘spare’ time for a firm. What you do with your spare time is the key to keeping your clients.

As an example, when completing the VAT, bank feeds within Xero enable the accountant to complete a management report as well. The VAT and Management Report with supporting work papers can be completed in about 1-2 hours. In the new world, where every person in business must know their cash position daily, the accountant is mission critical to the success of that business. So more frequent management reporting will be the new staple of accounting firms.

While the economic position for the people of the UK is ‘pants’, the Brits are a resilient bunch and will tough it out. The good news is the highly innovative new companies of tomorrow, which will help the UK grow again, are just getting warmed up.

100% Xero

Chris Reid‘s practice first dipped its toes in the world of online accounting a while back when instead of following their default route of advocating Sage, he managed to persuade his staff and a small group his clients to try out Xero.

Last month Chris informed Sage that he would not be renewing his Sage Accountant Partner programme membership next March, and his team is now finishing off the process of flipping all his clients across to Xero.

Chris is a smart accountant running a forward looking, progressive practice. As well as gaining the efficiencies of servicing all his clients online, he’s also seen a significant uptick in new client enquiries since he modified his Xero Partner Directory entry to reflect his practice’s now total focus on Xero.

Smart indeed.