I often get asked: “What are other firms doing?” It is an interesting question – is it about strategy in dealing with the client? Or the changing legislative environment – MTD and GDPR? Or is it about the dramatic changes happening in the software industry relevant to accountants? Or does the relationship of clients with their software vendors make accountants vulnerable?
In most cases I can look at the accountant I’m speaking with and understand what they are asking. But I always respond with “what type of firm are you”? Let me explain.
Aussie accountants are quick to embrace change
I love working with accountants and delving into their stories. It is a time of massive change, with more coming. And client expectations are rising – they want to do more, they are more knowledgeable, more business smart, and they want more specialised ‘fundamental’ business advice. But is the average accountant ready to take on that responsibility? Or can they? What tools are there to help them and how are they being educated to provide such an advisory role.
Before chatting about the UK, let’s see what’s happened Down Under and in the US, and whether those experiences are likely to play out here in the UK.
I personally think Australian accountants are now quick to embrace change. Two game changers in thepast 10 years have been Financial Planning and Xero. They were quick to become financial advisers (which has now been legislated to prevent poor advice). Once they worked out Xero was converting clients from under their noses, they quickly chose to get paid to sell Xero to them. But it wasn’t always that way! The incumbents MYOB and Sage Handisoft had the playing field to themselves for many years prior.
I remember talking with a colleague in the software industry (from one of those incumbents) and he was adamant Xero was going to fail and joked about their losses. He couldn’t understand what accountants saw in the product, nor about their plan to build a subscription model based on the value proposition to both the business owner and the accountant. His eyes were targeted only on the accountant. Not only was he wrong, he had missed the point completely.
Impact of Xero’s ‘bottom-up’ go-to-market strategy
It wasn’t the accountant influencing change, it was the end client and their contractor bookkeeper. Xero had gone to the accountant initially in its go-to-market strategy and it didn’t resonate well. The feedback was consistently, “Why should we pay per client, when I can pay for one subscription and put as many clients on our existing bookkeeping system?” and, “I don’t want the client doing the bookkeeping, I want to. You are diminishing my role and my fee base” so in other words … go away.
Xero’s approach moved from top down (i.e. dealing with the accountant to get to the client) to bottom up (dealing with the client and the bookkeeping to get to the accountant). Sharp and ‘Xero friendly’ accountants saw the change coming – the tail was starting to wag the dog. And it did. Birds of a feather flock together. And that is what small business did. They talked about Xero and moved to the accountant that supported Xero. Then Xero played its trump cards – giving the accounting firm practice management for free, and the functionality to do financial statement compilation for free. This struck at the hearts of MYOB and Sage Handisoft.
But what made Xero so appealing to the end client? It was the simple web-based landing page and simple bank feeds. Suddenly the mystic and magic that was once performed by the accountant was gone. It was like the magician’s secrets had been disclosed.
The benefits of cloud software put another nail in the coffin. The client or bookkeeper was now able to work on Xero from wherever, whenever and on whatever device they chose. Real-time transparency to the business owner and the accountant and the rest is history.
Traditionalist, Converter or Millennial?
I wrote a paper last year on Traditionalists, Converters and Millennials:
- Traditionalists are the older practices that don’t like to change their ways and offer a complete service suite including audit.
- Converters have a young partner or director that has been given the authority to drive change and they have converted 15-20% of their client base to cloud based bookkeeping systems and converting more as fast as they can.
- Millennials – well they are small one partner firms where all their clients are using cloud based bookkeeping systems, and work with 40% of their clients for a monthly, fixed fee. Millennials’ clients are also very sticky. Why? Simply because their staff have multiple touch points with their clients all the time. How? Because they have embraced technology and use it. I also call them ‘cafe accountants’ because they meet their clients at the coffee shop.
The rise of the app
This leads to the rise and hype of apps. Apps for this, apps for that, apps are everywhere. And causing great confusion to the conservative accountant who feels bombarded and confused by them. Yet apps are simply software tools that connect through integration (another buzz word) to other software to push and pull data.
‘Entrepreneurial’ Converter / Millennial firms are promoting themselves as App consultants (coming back to the point earlier of adding value) and offer their client fundamental business advice on how to improve their clients systems and processes, and driven to do so by the cloud industry heavy weights Xero and QBO (Intuit QuickBooks). In fact the influence of vendors ‘market place sites’ on their websites is now having a dramatic impact as they fight for dominance, particularly as Xero goes head to head with QBO.
Clash of the titans
How do you upset a giant? Go piddle in their paddling pool! And that’s what Xero has done to QBO in entering US territory. It woke them up, and QBO has been playing catch up ever since and are now playing in Xero’s own playpen offering free practice management, and shadowing them into Xero’s new territories such as South Africa.
Right, back to the UK.
It’s interesting watching the incumbents here in the UK jostling for position, and working out their strategies. CCH, IRIS, Digita, Sage are all now rushing to work with Xero and QBO on integrations.
But where will Xero and QBO be in three years? Where will Sage be? That’s a topic in itself. And the recent news (or fake news) of IRIS being put up for sale by HG Capital was good for gossip.
If it is fake news, it certainly got people chatting about where in the VC cycle IRIS is. Xero’s impact on MYOB in Australia was the reason IRIS acquired Kashflow but has that worked for them? And everyone is piddling in Sage’s paddling pool, surely, they must be fed up sitting in it? Watch this space I am told!
Be part of the change
So what is on the horizon? My thoughts you ask? Just look at the home territories of QBO and Xero – both offer practice management, financial statement compilation and tax return filing…and more. Do you think they will offer it here in the UK, in time for MTD? You can guess my thoughts. Add HG exiting and my imagine starts running wild!
Add something else to your thoughts:the incumbents have gone from protecting their client bases to now opening them up with integrations. So transparency and visibility of client names and information (lucky GDPR is coming in) of the incumbents’ clients to Xero and QBO, and vice versa. Should Xero and QBO release financial statements here, well look at the blood bath that MYOB and Sage Handisoft has endured in Australia. It’s on the cards to happen here.
Where does that leave the UK accountant?
But where does that leave you, the UK accounting firm? What are you doing? Are you promoting cloud bookkeeping systems to your clients and taking a click of the monthly ticket? If so, which one(s). What apps are you promoting? And do you really know how they work? And how are you managing client work and collaboration within your practice?
Here at MyWorkpapers, we are making that the nucleus for how accountants work, and what they work on, in their practice. With client bookkeeping data feeding into us, together with collaboration and workflows in practices makes us the industry leader in Australia, UK and now Germany (through our partner, Datev)
So grab your popcorn, and watch the landscape change in 2018. Be aware of what your competitors are doing, get familiar with the apps making noise, and focus on how you can establish your own new identity and give fundamental business advice
MyWorkpapers is exhibiting at Accountex 2018, stand 526.