The Future of Bookkeeping in 2013

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1 The Future of Bookkeeping in 2013 White Paper Accounts Payable Processing made simple 3W, Foveaux Street, Surry Hills, Sydney, 2010, AUSTRALIA t e partners@invitco.com

2 Introduction & Market Overview From as far back as the 15 th Century bookkeepers have been the first step in creating financial records and preparing financial statements for organisations. Since the time of quill, ink and parchment, bookkeeping has continually evolved to adjust to the ever-changing demands of industry and commerce. Over the years bookkeepers have been at the forefront of utilizing new methodologies and technologies to bring efficiencies to their own organisation, and to their client s organisations. Not too much changed between the 16 th century introduction of a postal service by Henry VIII and the 18 th century introduction of the typewriter, but forward to the tail end of the 20 th century saw the launch of the world s first spreadsheet software VisiCalc saw the introduction of QuickBooks saw the launch of Windows saw the formation of BankLink saw the launch of Hotmail and the widespread use of saw the rebranding of Data-tech to MYOB saw the launch of cloud accounting in Australia with Saasu saw the launch of Xero in Australia and with it came the free use of practice software. Over the last 18 months bookkeepers have started to change the way they offer services to their clients. Less time is spent travelling to remote offices to gather up documents for processing, and less time is being spent entering data. Improvements in 2

3 financial software are making the inputting of data a more intuitive and less time consuming process. Imaging software and changes to legislation is making the storage of documents easier, as well as more convenient and efficient. Bookkeeping businesses overnight have become more efficient, and that has allowed their owners to either strike a much better work-life balance or to bring on more clients, or in most scenarios, a bit of both. Some bookkeepers have felt that the change isn t right for them and those persons and firms have left the industry. But there is no shortage of bookkeepers willing to adopt the new technology and practices, and those bookkeepers are very much alive and running lucrative practices today. But bookkeepers and the bookkeeping sector as a whole are now facing pressure from 2 fronts. Not only has technology started to offer an alternative to some of the traditional services that bookkeepers have offered, but also this last 18 months has seen a threat appear in the form of accountancy firms. The clear blue water that once existed between a bookkeeping service and an accountancy service is being muddied. Accountancy firms are now reaching out to the traditional market of the bookkeeper, offering a fixed price low monthly fee for services at a price that 3 years ago they could only have dreamt of. But the very thing that has allowed the accountancy firms to come back down (so to speak) into the space once occupied solely by bookkeepers can also be the very thing that may preserve bookkeeping practices in the future cloud technology and software as a service (SaaS) 3

4 Software as a Service, via the Cloud Cloud accounting will make the bookkeeping industry far more efficient. The freeing up of bookkeepers time through efficiencies will mean that a bookkeeper can service more clients. That's going to increase productivity rather than put a bookkeeper out of a job. Rob Comelli, CEO Association of Accounting Technicians BOXFREEIT 31 st July 2012 Only 5 years ago, if you were a bookkeeper wanting to use a state of the art financial suite to service your clients you needed to outlay well over 5 figures, and sometimes as much as 6 figures on hardware and software. Cloud computing has all but put an end to that legacy business model by allowing a different delivery model of the software. The introduction of Saasu and Xero, closely followed by QuickBooks online, MYOB Live Accounts and Reckon s soon to be launched offering (to name but a few) have totally transformed the way accountancy software is being distributed and sold. Even large traditional software vendors such as Adobe have moved to the SaaS recurring revenue model, dispensing with the need for a client to outlay $3,000 for design software, instead offering that suite for an ongoing monthly fee of $70 or so. Cloud may be the buzzword, but more fundamental to the change in the bookkeeping and accounting sector is not so much the cloud itself, but what the cloud has allowed bookkeepers and accountants to do and that is to deliver their services as a service, much in the same way as Software as a Service is being delivered. Those Bookkeepers who embrace the cloud and learn about the bigger picture of add-ons will secure good clients and provide efficient service." Melanie Morris, Founding President of the NZ Bookkeepers Association Software vendors are now able to distribute software on a month-to-month basis, for a fixed and recurring fee. And with more and more of these software services interacting and communicating with each other, it is becoming very simple to simply pick and 4

5 choose the services and functionality wanted, paying for no more and no less than you need. Bookkeepers can get the benefit of billions of dollars of software development and technology for a low monthly fee, or fees. Accounts Payable automation, debtor management, inventory systems, Point of Sale Systems, automatic bank reconciliation, accounting software, reporting suites. The list is endless. But it s not all good news because access to this software and services is no longer only available to the chosen few, to accountants and bookkeepers. It is available online, 24/7 to anyone with a credit card. And the new wave of software is simplifying and demystifying administration and bookkeeping services to a large degree. These automation tools are allowing businesses that once employed one or more persons in an accounts team (payable and receivable) to make those positions redundant or reallocate those persons to other business units. But businesses still do need someone to look after those functions for them, but with this new wave of automation the requirement to have a full time employee is no longer there. Similarly, having someone come in one day a week doesn t provide them the timely information that they require. The question now being asked by businesses is whether they want to deal with the hassle of tying all these services together, or perhaps avail of the services of a specialist to do that for them. Businesses need to focus on revenue generation, not management of financial software suites and services. They still need the services of bookkeeping administrators, but the skill set of the traditional bookkeeper needs to evolve and grow in order to provide the new range of skills that businesses will require. 5

6 The future for the Bookkeeping Administrator professional One question being asked by bookkeepers is how many of these specialist roles will exist in the changing economy. The answer to a degree is down to the decisions and direction that bookkeepers choose to take now. Bookkeeping has always been so much more than data-entry, reconciling bank statement and balancing ledgers. Yet it is these aspects of the role that took the most time, and thereby created the most billable hours. Now, with the near-automatic bank and journal reconciliation designed into accountancy software suites, and with the creation of technology such as that used by services such as invitbox which automatically extracts data from supplier bills, these billable hours are about to diminish before eventually disappearing forever. But similarly, all those mundane hours spent entering and balancing data that didn t add value to the client s business will vanish too. Bookkeeping Administrators now have an opportunity to create a suite of professional services that will deliver real value to their clients. For instance, what value might a client see in never having to handle a paper bill again? Or what value in having immediate price checks done on all their negotiated pricing the moment the bill from the supplier is received ensuring that they are not being overcharged? Or what value to the business owner to have all their supplier bills in an online filingcabinet accessible from anywhere at anytime? Or what value in having their creditor listing up to date daily, allowing them to avail of early settlement discounts offered by suppliers? Or equally, what value might a client see in getting detailed daily or weekly reports on 6

7 purchases on a line-by-line, item-by-item basis? Or having an up to date debtor ledger? Daily? Or having rosters sent out to staff s mobile phones? With add-ons such as those available on the Xero and Saasu eco-systems, Bookkeeping Administrators can now provide an outsourced administrative service to clients, for a fixed price, safe in the knowledge that each month their costs will be consistent. No bill shock for the client, and better cash flow budgeting for the Bookkeeping Administrator is a win-win scenario. By reducing the number of hours a bookkeeper spends on each client, they are able to take on more clients. And by selling professional services that are seen by the client as delivering more value and efficiencies, profitability increases too. Having a much wider client base firstly lessens the impact of loosing a client, but of even more value to the bookkeeping administrator is the ability to on-sell other professional services to that wider client base. For instance, a bookkeeper using invitbox can process up to10,000 supplier bills per week. With the average business in Australia receiving around 35 bills per week that means a single bookkeeper has the capacity to service 285 businesses, at least from an Accounts Payable data entry perspective. Very often a bookkeeper knows more about the financial position of a business than the business owners themselves, but that information is not communicated back to the business owner because it is either processed the month after the actual event (meaning to a degree the information is dated), or due to time constraints (meaning it is simply not communicated at all). How much more valuable would a Bookkeeping Administrator be to the business owner if they were providing insightful and timely information that allowed the business owner to better understand and run their business? 7

8 Bookkeepers are uniquely placed to become integral parts of the SME landscape by becoming Bookkeeping Administrative professionals. By offering advice to clients there will naturally be comparisons drawn with the services offered by accountancy firms. But with accountancy firms already crossing over the clear blue water, it s only natural that bookkeepers would look to protect their market and client base. All bookkeepers are well placed to make this change, but there is realistically only room for some of them to do so. Technological automation over the last 30 years has resulted in job losses in many sectors, but it has also provided new opportunities. The bookkeeping sector is no different to 35mm film manufacturing sector 15 years ago. In the face of digital camera technology and technological advancements Kodak, the once highly profitable market leader, was swallowed up by faster moving and more dynamic players who knew there was a better way. Don t be a Kodak. The future of bookkeepers will be more focused on managing data flow, not data entry. Those who are paying attention will seize the opportunities that are emerging and start moving toward becoming a trusted business adviser now, who cannot be replaced by automation! If you are one who resists change, don t despair. There is a sparkle of sunshine here. You can choose to serve the clients who want to keep doing their bookkeeping the way they ve always done it. But just realize that this market will continue to shrink (and their business profits will likely slip as well). But they will appreciate you for not forcing them to go online." Gabrielle Fontaine, The Freelance Bookkeeper 8