Data security concerns that have impeded the uptake of internet-based accounting software are easing, according to new research by Wolters Kluwer subsidiary CCH. However, there is growing concern that the pendulum has swung too far, and poor-quality data captured in these software systems is being used to inform bad strategic decisions. To date, small businesses have been slower than their financial advisers to adopt so-called “cloud-based” accounting platforms that reside off-site, such as Gmail and Google search.
Close to one-third of small business use cloud accounting software, according to a CCH survey published last week, compared with 70 per cent of accountants. The numbers belie a fundamental shift: clients are now pushing accountants to modernise and process data in real-time using products such as Xero, Saasu, MYOB or QuickBooks.
“We’re getting carried away with cloud [software] being the silver bullet, [but] if you put rubbish in you get rubbish out,” Annie Flannagan, founder of book-keeping firm Better Business Basics said.
She fears companies, in a bid to cut costs, are retrenching finance staff and getting receptionists and office managers to do the accounts.
Software not smart enough yet “They’ve been told cloud accounting is so easy they don’t need someone financially literate,” she said.
“But the software is not smart enough yet to recognise a transaction that goes to the balance sheet [a snap shot of assets and liabilities] or the profit and loss statement [what you’re actually making].
“Eighty per cent of jobs we’ve won in the past six months, we’ve reduced the cost of their finance function by automating data entry.
“But if business owners rely solely on the software they’re in trouble.”
The competitive landscape is also looking grim for Xero, Saasu, MYOB and Reckon, according to CCH’s research. Australia’s big four banks are looking to provide their own brand of cloud accounting software for small business customers.
New wave of entrants
In addition to this, a new wave of entrants – including Wave Apps (funded by venture capitalists out of Canada), Fresh Books, and Kashoo – will intensify the competition. This next vanguard is, in many cases, free, and frequently has better functionality than the incumbents.
“Accountants should not align themselves too closely with one vendor in such a rapidly changing landscape,” said CCH Asia Pacific chief executive Russell Evans.
“They should guide [clients], not prescribe,” he said.
Mr Evans said “practice owners need to make a concerted effort to learn and start using the cloud” because it affects the value of practices when they are sold, as well as the ongoing ability to win clients.
The majority of small business accountants use between two and four cloud-based accounting software packages, CCH research shows. One firm surveyed used eight different systems. While younger accountants expect to have to learn to use multiple systems, the use of cloud cuts out at 40 years old on average.