Finance
Ledgers in the clouds
Money in, money out – it’s the basic function of any commercial operation. To manage the whole process, accounting software (or ‘solutions’) is an absolute must. Although, surprisingly in this day and age, many Kiwi businesses still struggle on with ‘pen and paper’ or spreadsheets.
Considering today’s small monthly fees, confusing compliance requirements, no-stress cloud delivery and groundbreaking new technologies – why wouldn’t you opt for one of the many proven accounting solutions on offer? The easier you make the whole accounting process, the lower the stress levels and the more profitable the ‘bottom line’.
 
If you’re new to business, there’re issues surrounding accounting solutions that you should be aware of. 
Scott Gardiner, New Zealand sales manager, business division for MYOB, points out that the rapid growth of new technology has resulted in “an incredible improvement in accessibility”.
Products once the preserve of only the largest businesses are now available for all size enterprises, at a fraction of the cost.
Product selection is all about your business’s needs and advice is essential.
 
Gardiner’s tips for those starting out? Firstly, cost. If subscribing to a cloud product in particular, shop around for the best monthly rate. Ask if you’re getting everything you need, including add-ons, for just the one fee.
Secondly, accessibility. Do you have the choice of anywhere, anytime access? 
Thirdly, ease of use is paramount. Does the solution offer good visibility of your key performance measures such as cashflow and debtors?
And number four? Support; is there phone support to help you through any questions or teething problems? “A good cloud system should allow you to collaborate with your accountant or business advisor,” says Gardiner. “So during the vital start-up stage you can get real-time advice and pick up any problems or errors early.”
Victoria Crone, NZ managing director at Xero, suggests business owners make a list of ‘must-haves’ and ‘nice to haves’ when comparing the different accounting software products. “Not all cloud solutions are equal.”
 
Ownership and control can be a particular area of concern, she says. “Check the terms of use and understand them; make sure you know who controls your precious business data. You really don’t want any risk of it being seized or shut down.”
Find out where your cloud file is stored, adds Crone. “The IRD must give approval for accounting records to be held overseas, so ensure your provider has that approval.”
Ask if the software provides a true single ledger too. “With a single ledger you can share your data with your business advisors and all work off the same up-to-date information.”
 
At Reckon NZ, channel manager Christian Taylor agrees that the ‘single ledger’ shared between end-user clients and their accountant is now becoming a reality and offers efficiencies for everyone concerned. He also highlights the change to reporting requirements in this country.
“SMEs are no longer obligated to produce complex financial statements in keeping with the External Reporting Board (XRB) standards; rather businesses are simply required to meet the IRD minimum tax reporting standards and produce special purpose accounts for the bank.” 
 
Taylor says this provides obvious time and cost savings and the opportunity for small businesses to better use that time with their accountant.
Key advice from MoneyWorks CEO Grant Cowie is to have a ‘plan B’ for recovery of your accounting data. “Never assume that your cloud provider will be there forever or that your cloud based data is safe. Always keep a local copy of your source documents, and if possible your actual accounting file. 
 
“A good example of this is a new customer of ours who had an issue with their previous cloud based accounting software when the data became corrupted. The only solution was to manually rekey. With no backup system to restore from an earlier version this was extremely inconvenient. It was also compounded because the client was using auto bank feeds and hadn’t been receiving bank statements from the bank. Thankfully the bank’s online banking allowed them to download their last year of transactions electronically, which could then be simply imported into MoneyWorks with no rekeying.”
 
Accredo channel manager Kevin Carberry offers a key observation from the overall accounting marketplace in the past 12 months, and that’s the drive from B2B suppliers generally to require their customers to talk to them electronically. The issue is that data needs to be keyed in – an overhead neither side is keen to take on. In such a small market New Zealand’s larger customers can particularly call the shots, suggests Carberry, and smaller companies are being forced into wearing the cost. 
There are thousands of invoices generated every day. Having your accounting software able to talk to other suppliers, customers or third parties is becoming much more important. “So why not get your suppliers just to provide you with invoices electronically that you can import into your system?” Carberry asks. “The cost savings are massive.”
 
In the same vein, there is a trend to move data entry as far forward as possible within companies, he adds. “Removing those [back office] staff whose job traditionally has basically been to just translate information.”
 
Accounting systems can’t always speak the same language in a multi-supplier/multi-customer relationship, necessitating what Carberry calls a ‘rise of the translater’ – “third-party integrators who take data from one system, translate it and feed it back out in another format – clipping the ticket on the way.” 
Compatibility with all the companies you deal with is paramount, and must be taken into account when deciding on a software provider. Accredo, as an example, builds its software in such a way that it can be exported in whatever format people want, he explains.
 
 
Different delivery, different models
In 2014 it’s almost universally accepted that cloud applications deliver a whole new customer experience, and a number of benefits. Accounting solution providers that pre-date the cloud era have had to quickly adapt and catch up. Today there’re very few that don’t offer a cloud delivery option. The model has changed from a ‘one size fits all’ out-of-a-box product to customised cloud-based solutions that work together.
 
“The proliferation of add-ons has greatly enhanced the functionality of the core product. For a relatively modest monthly fee, companies and firms can now access the sort of software that in a desktop world would have cost tens of thousands of dollars and was only accessible to large commercial players,” says Xero’s Victoria Crone.
Xero now has more than 350 add-on partners. “This means we can provide a vast suite of services on top of our accounting software, from CRM to POS and payroll.”
Along with the uptake of cloud have come mobile applications. The demand for mobile business solutions will only continue to increase as smartphones and tablets replace desktops and business owners choose to manage their organisations anytime and anywhere. 
 
Reckon’s Christian Taylor says there’s a general feeling that smaller, targeted apps will continue to grow in popularity on mobile devices over more comprehensive enterprise applications. “This indicates to us that our clients require streamlined access to key information on their mobile devices, regardless of where the actual processing takes place. This is a large fundamental shift from more traditional applications and vehicles with which to access them on mobile devices.”
 
Of course, mention ‘cloud’ and concerns about data security and Internet connectivity comes up. But MYOB’s Gardiner reminds us that any reputable cloud software provider offers more security than many businesses that choose to store business information on their own server.
“Cloud storage means data can be backed up across multiple, world-class data centres, with an array of fail-safes and backups in place,” he says.
“The security systems offered by reputable providers are far more comprehensive than most businesses can afford. In addition, they are constantly monitored and updated.”
 
Along with cloud adoption, there has also been a trend around the growth of the subscription model. Of course Xero has witnessed (and to a large extent driven) this. 
But the debate between the subscription and ownership models, and which is most cost effective, is not over yet. 
Crone believes business owners would rather avoid a capital outlay and choose a model that allows them to pay as they go. “However, with that subscription model comes a challenge for software providers to keep that customer coming back for more month after month, year after year. That’s where providing a superior online customer experience becomes imperative.” 
 
Other providers sound a caution regarding the subscription model. Accredo’s Carberry is of the view that leasing software can be expensive over time and he thinks many businesses are better off in the long term buying. Bottom line: consider what functionality you’re getting and what, if any, add-ons you’ll be paying for; what will the monthly fees amount to over say a five year period?
 
Accomplish MD Grant Hewson reminds business owners that they can still choose between PC-based and online options. It’s important to learn the pros and cons of both, he says.
 
 
Advice for start-ups
For brand new business owners MoneyWorks’ Grant Cowie says it’s imperative to select an accounting solution that has a growth path. “Regardless of your system, have your accounts properly set up from the outset; they’re fundamental and need to be maintained from day one. Keep them under your ownership and control. If you are using a cloud service sign up with it yourself to avoid being held hostage in the future. Don’t rely on automated bank feeds, and download and keep a copy of your bank statements. You never know when the IRD will want them! 
 
“And set up a separate bank account for the business. Don’t mingle personal and business funds.”
Accomplish’s Grant Hewson offers these tips for start-ups:
  • Consider the track record/heritage of the provider. Do they have a proven product?
  • Think about whether you need an online solution or PC based. If you are unsure of the differences talk to a major provider.
  • If considering an online solution enquire about additional charges for any companies or add-ins required to have a full software solution.
  • If selecting online, ensure you can back up your own data to establish a ‘restore point’ in case there is a data entry problem. All online providers will provide a total system backup, but most will not provide a backup of your data that you can then restore to.
  • Ascertain the cost to set up the software and for staff training. 
  • If a provider cannot have a balanced conversation (i.e. listen to what you actually want/need) and outline the pros/cons of their solution – forget them.
  • Investigate the quality/availability of support. Problems at 7pm feel very different if you can pick up the phone for help – versus sending an email with a promise of an answer 24 hours later.
 
“Understand the amount of input you want to have each month in ‘doing the books’,” suggests Hewson. “Most business owners are more than capable of completing transactional and GST work; leaving the important work (balance sheet, depreciation, etc) to the professional accountant.”
 
Hewson’s noticed a marked swing towards personal service. “We’ve had a number of clients come to us, in some cases come back to us, as a result of being disillusioned about the level of support available from some of the current providers who may offer, for example, only email support with a 24 to 48 hour response time. 
“Business owners doing their books in the evening before GST is due highly appreciate the opportunity to pick up the phone, maybe at 8pm, and receive assistance. Some new software solutions have not been in the market long enough to be robust and provide a reliable complete solution for customers.”
 
The advice for start-ups from Accredo’s Carberry is to “either choose a solution that will grow with you, or choose one you can get out of”.
“There’s a kind of dividing line between the compliance product and the business management product. You want to choose the latter, because that’s the product that will grow with you,” he says.
 
Carberry believes not having a browser-based application isn’t necessarily a disadvantage either. There’s less limitations on the UI, he says, and more scope for customisation. So, when weighing up cloud accounting options, decide whether you want it running inside the browser or via a trusted desktop connection. 
 
 
Advice for grown-ups
For established businesses, the same basic questions apply – features that save you time should be considered carefully.
“If you’re an employer, a provider that can offer a range of payroll solutions is likely to be important,” says MYOB’s Scott Gardiner. “As one of your largest investments and a key area of compliance, it will be important to select a reputable provider with a strong understanding of the local employment market and the compliance regime.
“In particular, it is useful to look for a provider that has developed an accounting and payroll solution together from the ground up, designed specifically for the 
local market.
 
“Additionally, as you are likely to need more than one member of the team working on your accounts, understanding multiple user costs and accessibility should also be a consideration.
 
“Depending on the type of business you run, you may also need a wide range of additional features, such as inventory management, multi-currency payments, and point-of-sale integration. Whether these features are all available in the one product, and how seamlessly your front-of-house and back office can work together will be a vital component of a successful upgrade,” says Gardiner.
 
“Ultimately, you’ll want good quality information at your fingertips. The quality of the reporting and the deep insights you can gain into the performance of your business can make a major difference to the success of your operation.
 
Glenn Baker is editor of NZBusiness.
 
 
Publishing Information
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