Online Accounting: Transforming Efficiency

Transforming Efficiency

Accountancy practices are beginning to embark upon a significant change in the quality and depth of services offered to customers, extending beyond statutory reporting to offer business guidance and financial planning. But how many firms are following their own advice? How many have proactively embraced good business practices – from in depth assessment of the cost of new business to the creation of a robust IT strategy?

Sadly, few. Too many accountancy practices are still using outdated operating models. Yet why should a client follow the lead of an accountancy practice that is patently operating an inefficient model? Accountancy firms need to shine the spotlight on the internal cost base and adopt a proactive attitude to consolidation and best practice. This will not only radically reduce costs but also provide a platform for real time client collaboration and the delivery of new revenue generating services.

Escalating Costs

The past five years have seen a change in fortunes for many accountancy practices. The commoditisation of book-keeping services, combined with a government driven reduction in the number of individuals requiring audit and tax services, has resulted insignificant pressure on fees. At the same time underlying costs have increased. And one of the most insidious costs is technology.

With the need to replicate the book-keeping solutions used by the client base, accounting practices are now home to multiple servers running multiple different software packages and, even worse, multiple versions. This has fast become a complex model. Firms need to continually manage upgrades and ensure the infrastructure can cope with the ever increasing resource demands of updated software.

In addition, these organisations have to undertake complex data transfer activities, both internally and with clients, and ensure staff are trained in many different packages. These costs are significant. Sadly they are also rarely well understood.

How many firms are tracking the number of different accounting systems and versions in use across the practice? How many are routinely counting the cost in licences, infrastructure and training? Considering the cost of data storage and back-up? Or proactively assessing the risk of system failure? Indeed, how many are including these potential IT costs when assessing the potential profitability of new business?

Consolidation and Best Practice

Accountancy practices know that the provision of new and innovative services is essential to remain competitive and drive new revenue streams. But given the new competitive landscape and spiralling costs, any innovation will be worthless unless supported by a new strategic approach towards improving internal efficiency and better financial management.

So what is the alternative? Clearly consolidation of these multiple software solutions is critical if accountancy firms are to gain control over this escalating cost base. But there is also another key question: should accountancy firms really be undertaking this management of a complex and expensive IT infrastructure?

It is not the core competence of practices. Rather than a mass of incompatible locally installed (on premise) book-keeping systems, is there not an argument for consolidating onto a single, cloud based solution? Certainly growing numbers of accountancy firms are exploring the benefits of cloud based accounting solutions to facilitate better client collaboration and the delivery of new services based on real time information. Most, however, are approaching this model as just one more route to market rather than the underpinning strategy for a fundamental change in cost base and client services.

Transforming Efficiency

Moving from multiple, diverse locally installed solutions to a single, cloud-based book-keeping engine enables accountancy firms to completely eradicate the cost and resources associated with managing an internal IT infrastructure, from day to day support to capacity planning. There is no need to worry about version control, because under the cloud model the business is automatically upgraded to the latest version. Data is regularly backed up and stored according to the latest European legislation.

There are no concerns regarding updating security, improving resilience or introducing disaster recovery – all is handled by the third party provider across multiple data centre locations. Furthermore, these solutions can be easily integrated with other applications, both cloud based and locally installed, providing an excellent platform for streamlining operations and improving efficiency. The cost benefits are significant. The scalability of the business is transformed – with some firms exploiting the improved efficiency to handle twice as many clients with the same number of employees. The model is clearly compelling.

Evolving Model

Yet there is resistance. How can an accountancy firm make that move when the IT resources required in-house are dictated by the client base? If clients are using a book-keeping package to undertake financials, the accountancy practice must surely do the same? Simply demanding that all clients move to the same software package and version to make life easier for the accounting practice is not going to work.

Indeed, the fact that most clients see little value in upgrading to even the latest version of the book-keeping or financial software continues to add to the problem, creating an ever growing list of packages and versions to support and understand. But this simply underlines the outdated nature of the current client/accountancy relationship: why should a client spend money on new financial software when there is no additional value? Statutory reports, VAT and audit services will still be delivered as usual – after the fact.

Given the alternatives, the traditional model has huge limitations. Why does the client have to invest in expensive equipment or worry about book-keeping software licences that increase upwards of 7.5% year on year? Especially when there is no year on year additional value on offer?

Frankly, why has the software component of financial management come to dominate rather than the financial information and the way it is used to drive business performance? Effective book-keeping, accountancy and financial management are not about software. They are about real time information. About providing a platform for real time collaboration and enabling the delivery of added value services that will improve revenue streams and rebuild customer relationships. About using immediate access to client information to flag potential problems before they arise – such as a risk the business will not have the required cash to pay the VAT bill.

Take Control

By continuing to allow clients to dictate software requirements, accountancy firms are effectively closing the door on any opportunity to innovate, collaborate or change the service model. At the same time, innovative new market entrants that adopted the online model from day one are leveraging a vastly reduced cost base, scalable business model and real time information provision to achieve top 100 status within years.

The choice is stark. Continue with the same inefficient IT model with escalating costs and an inability to innovate and slowly watch the customer base decline. Or change. Moving to a single cloud based book-keeping solution that can integrate with other solutions easily enables accountancy practices to consolidate, streamline and eradicate unnecessary IT costs. But it also provides an opportunity to transform the client relationship and service delivery and emphasise the value of the services, experience and expertise the practice can provide.

These new services are essential; but they cannot be delivered unless firms transform the internal cost base. Accountants need to take their own advice, lead from the front, adopt good business practice and take a far more proactive approach to IT strategy and innovation. With the online model set to dominate within three years, don’t wait too long to make the decision.

Barbara Kroll

Barbara Kroll is the Managing Director of Twinfield UK, a brand of the Wolters Kluwer Group. Prior to her appointment at Twinfield UK, Barbara was the Segment Vice President for Wolters Kluwer Tax & Accounting in Europe. Previously, she had roles as Vice President in Wolters Kluwer’s Corporate Strategy Group and Director of Online at McGraw-Hill Construction, both in New York. Barbara started her career as a strategy consultant with L.E.K Consulting in London and Chicago. She holds an MBA from the Harvard Business School, an MSc from the London School of Economics, and an MA in Economics from Cambridge University.