How cloud accounting software is changing the business model of accounting firms

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1 How cloud accounting software is changing the business model of accounting firms The benefits of switching to cloud accounting software are numerous for accountancy firms Additionally, this technology is changing the business model of accounting practices. Up until relatively recently the accounting industry had a rather stuffy image consisting of firms holding thousands of physical client files, charging high fees for bookkeeping and relying on legacy clients to generate fees.

2 Cloud software like Clear Books has enabled a new generation of accounting firms to emerge who are thinking more entrepreneurially. Common features of such firms are that they have no set physical location, outsource services which are not part of their core competencies and utilise the power of the internet and social media to be proactive in winning new business. Franchise One model, which has prospered with the rise of cloud accounting, is that of the franchise. CheapAccounting. co.uk was started by Elaine Clark in 2007, and first developed its franchise arm in The company now has in excess of 2,500 clients and 24 franchisees across the UK. Clark was motivated to pivot to a franchise model as she saw a huge opportunity to work with clients in whatever location by using technology to deliver professional accountancy service[s] at an affordable fee. The name Cheap Accounting, was derived from a desire to be both eye catching and search engine friendly. The process to become a franchisee of CheapAccounting.co.uk is rigorous. Clark interviews prospects personally, and all applicants have to be a member of a recognized accountancy body such as AAT, ICAEW, CIMA or ACCA. Once franchisees are accepted they are put on a training course. This is taught with the expectation that not all new franchisees will be familiar with cloud systems. In addition, new franchisees are given one-to-one mentoring sessions, based on their needs and respective backgrounds. Clark says, all of our franchisees are different and we do not believe that having a one size fits all training programme would be beneficial to use or the franchisee.

3 Rasa McClure, one of CheapAccounting.co.uk s franchisees, chose to purchase a franchise with the company due to her desire to access marketing skills and establish a firm from scratch. Despite access to marketing know-how being an obvious benefit of franchising, Clark does not believe that this function is any more or less important for more traditional accounting firms. Other practices need to keep staff fully utilised and hopefully recruit new staff as they expand and grow. No business stands still. She says, Marketing allows us to move forward [by] recruiting more franchisees. Other practices need to keep staff fully utilised and hopefully recruit new staff as they expand and grow. No business stands still. Whilst Clark does not believe that cloud accountancy software exclusively facilitates the smooth running of a franchised accountancy firm, she thinks that systems such as Clear Books are essential for online accountancy practices. In the future Clark believes that cloud accounting systems will become the backbone of accounting practices, in a similar way to how online filing has been adopted over the last few years. She says, practices that are able to adapt and change their models will survive but I expect to see some [firms] go by the wayside who are unable to accept a technologically driven business model. Outsourcing Cloud accounting software makes it easier for accounting firms to outsource parts of their work by enabling partners to access data from anywhere with an internet connection, without the burden of transferring data back and forth. One firm, which has done this successfully, is Adroit Accountax. The company outsources admin-based services such as book keeping, client engagement letters and VAT registrations. Mahin Khawaja, director of Adroit Accountax says, Without online accounting software outsourcing is difficult and complex.

4 She believes that cloud software such as Clear Books is symbolic of the modernisation of the accounting industry, and that as a result this enhances the image of accountancy practices. Adroit chose to integrate Clear Books into their outsourcing model due to it enabling data to be updated in real time and its ability to make accurate information available on demand to clients. Alongside Clear Books, other pieces of software allow Adroit to integrate outsourcing into their business, including using document transfer software and a Virtual Private Network (VPN). These help the company to communicate and share data with their outsourcing partners. Khawaja lists competitiveness in price, and the firm s ability to do more constructive consultative work as being key attributes of adopting an outsourcing policy. She believes that we are now seeing a shift in the industry with more accounting firms utilising outsourcing services. Accountants want to evolve like everyone else, with more online accounting systems, better connectivity than we had 20 years ago, and [the] ability to work remotely all [being] contributing factors. In spite of this, outsourcing still carries an element of risk. If outsourcing partners do not complete work to a high standard within a set time period, this can reflect badly on the accountancy firm commissioning the work. Adroit mitigates this risk by issuing strict Service Level Agreements with outsourcing partners they work with. Khawaja says, Our client has an expectation from us for delivering accounts, VAT and management accounts within [a] certain period of time [this also applies] to our outsourcing partner. We receive advance warning [from them] if there is any delay so we can let the client know.

5 The mobile firm Alongside adoption of cloud accounting software, choosing to have no set physical location for an office is another way of reducing costs. As software like Clear Books keeps all client accounting data in the cloud, this makes it easier than ever before to work remotely. Barnes & Scott is a forward thinking accountancy practice set up by Tasnim Mustafa. When starting up the company, Mustafa thought it made sense to work from home and share workspaces in order to minimise the company s overheads. Mustafa splits his time working fifty per cent of the time in shared working spaces, twenty five per cent meeting clients and twenty five percent working from home. He believes that it is still vital to meet clients face to face in order to establish a relationship with them. Barnes & Scott s general onboarding process for new clients includes conducting a meeting in which key engagement procedures are run over. In addition, clients are given training on Clear Books. This is then followed up at the year end with a meeting to run through key business and tax planning information. He chose to adopt Clear Books due its speed and ease of use when collaborating with clients. Currently the business has a presence at Central Working s Shoreditch space. Mustafa lists winning new clients as one of the key benefits from spending time at the shared working space. He says, [Central Working] are really good at encouraging you to meet others and talk about what you do Sitting in a co-working space with one hundred other startups helps. Mustafa stresses that in some instances it is not always necessary to meet face to face for one off engagements. He says that specialist tax work such as SEIS applications can be completed over the phone. In spite of the many pros, there are some downside to working remotely. These include managing and communicating with your team. Tasnim says, building and motivating staff is much harder It takes much more effort to schedule a phone call when you want to speak to somebody rather than just have a quick chat when you are sitting next to each other in an office.