Xero UK managing director Gary Turner looks at the impact of current and future advances in online accounting for business owners and chartered accountants
There’s no turning back the clock. Rather than charging by the hour, tomorrow’s accountants must become small business advisors who charge based on the value they deliver. In many countries, this unstoppable trend is already underway – and cloud accounting is the catalyst.
Today, clients not only want more but they also want to try new ways of working – using Skype, virtual CFOs, monthly reports, rolling forecasts and more. On top of that, accountants’ costs are creeping up and in many cases, profit per partner is down. For these reasons, practices that rely on compliance work and paying significant amounts of money for desktop software are particularly vulnerable.
For businesses and their advisors, fundamental changes to accounting technology are changing the way we all do business. In looking at their current and future strategies, accountants need to make sure they keep the bigger picture in mind – especially where technology is concerned – as that bigger picture is where the competitive battles of the future will be played out.
Choice and flexibility for small businesses
Nowhere is the boom in function-rich cloud-based software being embraced more keenly than in the UK’s vast small business community. In the critical area of finance, easy-to-use online accounting software is empowering even the smallest micro-business to exercise greater financial control and stay up-to-date with their accounts.
Key to the success of leading online accounting platforms is the fact that the software is much simpler than traditional accounts software. As such, it doesn’t require extensive training to use or carry a hefty upfront cost.
In addition, the business-driven tools and financial connectivity inherent in the technology can also help them to bring down debtor days, stay on top of cash flow and make better business decisions.
Meanwhile, the option to automatically download bank statement data via automatic bank feeds means users no longer need to spend hours adding transaction data manually to benefit from a real-time view of their accounts.
Over the last year, the emergence and growing popularity of online accounting software has fundamentally changed the toolkit available to small businesses and reduced the size that a business needs to be to use such sophisticated technologies. For example, the Xero ecosystem now contains over 250 pre-integrated add-on applications, including CRM, eCommerce and Point of Sale, creating a seamless business operating platform for small business owners.
Changing service delivery for practices
A key driver in the rapid adoption of online accounting has been the support it has received from accountants. In particular, those representing small and micro businesses have seen it as an opportunity to transform the service and value the practice is able to offer to clients as well as extend their range of services, helping them to become more competitive.
From a technology perspective, the battleground has essentially shifted beyond the client software to the accountant’s software requirements.
Rather than spending time transferring client data into desktop software systems, adopting a single ledger model, accountants and their clients benefit from shared access to up-to-date finance data in the cloud. Already, this shared platform approach, or ‘single ledger’ has already proven itself, especially in terms of efficiency gains, successfully challenging the desktop business model.
In future, integrated practice work-flow and reporting systems will make it even harder for incumbents to monetise the accountant, causing greater stress around the industry as long-term relationships are further challenged.
The backdrop to this shift is bigger changes globally across small business and the technology industry. We’re all familiar with the consumer-visible cloud services from Facebook to Google Docs to Expedia. Now all sorts of services are moving to or heavily using the cloud.
New services and features are being invented that truly unlock the power of the Internet for the small business user, benefiting from the commodity solutions of cloud accounting and business workflow. As such, businesses based on or using the cloud are avoiding major IT integration costs and proving nimble, disruptive and highly scalable.
The future of cloud accounting
The future of cloud accounting will be all about going beyond accounting software and what could be achieved under the old desktop paradigm. As an example of where this is heading, this year Xero is fully document-enabling its platform so that users can attach documents and images anywhere within the application.
This essentially means getting beyond the single ledger to storing and sharing the single source of truth behind the numbers. Already, the ability to integrate with document storage solutions such as Box, Google Drive and Dropbox is available for accountants in WorkflowMax Practice manager software.
Banks are also finally starting to get excited about accounting software and are an increasingly important part of the ecosystem. Bank feeds are a standard expectation, although globally many banks are still catching up and the ability to electronically sign-up for feeds has been slow to arrive.
The next impending development will be to enable businesses to make direct payments to bank accounts from within the accounting software. And there’s a whole lot more that the techies are working on behind the scenes.
The impact of the momentous shift to smart phones or tablets should also not be underestimated. As the Android platform matures and its users take advantage of the power on offer, the stage is set for a dramatic shift in the way cloud software is accessed.
For example, the ability to reconcile bank accounts on smart phones, invoice customers on the run using online invoicing and input expenses using smart phone cameras is already here. Put this ‘pocket office’ functionality together and it’s clear to see how the reliance on the physical office can decline sharply for small business users.
Overall, what these changes illustrate is that it’s not just about adding accounting features: there are fundamental changes that are being made to how we use accounting and other software that is changing the way we all do business.
At Xero, we plan to keep adding features at a rapid rate, but will always make sure we keep the bigger picture in mind. That bigger picture is where the competitive battles of the future will be played out.
For accounting firms, decisions need to be made. It’s becoming imperative to stop relying on desktop software and back room servers. This is because of the flexibility, the huge benefits the cloud offers and the cost savings that can be realised.
Conversely, failure to keep pace with change could result in up and coming firms radically overtaking average firms. For this reason, we’re seeing more and more full practice conversions and many bigger accounting firms embarking on major cloud activity.
The case for AI technology adoption in financial back-office roles to improve efficiency
By Tomas Gogar, AI CEO, Rossum
In this era, digital transformation isn’t anything new. Nonetheless, it can still cause a lot of confusion and resistance for some companies, many of which are often slow, unwilling or unable to implement the necessary changes to embrace technology. As a result, entire industries are barely scratching the surface when it comes to shifting to the digital world, and many, from the insurance industry to logistics and delivery are still catching up on the digital transformation.
The banking and financial sector have been notoriously slow in adapting to the online world. They paid the high price for it, giving way to a flurry of incredibly successful new disruptive players, built on cutting edge tech from the ground up. From Transferwise, Revolut or Venmo, to GoCardless, this new generation of fintech companies addressed consumers changing expectations in a way that traditional retails banks simply couldn’t.
To catch up, incumbent players have prioritised the user interfaces, giving the appearance of a digital offering, and oftentimes leaving the back end infrastructure untouched, and hence the processing power, accuracy and speed unaffected. Back-office functions, although they are essential to the smooth running of a business, have seen very little change and as a result, too many people in these functions are still tied up typing information into spreadsheets and software forms – in fact, manual data entry is a prime example of how much resources the offline legacy wastes. Take Accounts Payable for example, invoice data entry in this sector is estimated to eat up roughly 100 human lives worth of time every single day.
With the significant increase in the number of employees working from home due to the global COVID-19 pandemic, the back-office challenges have suddenly come to light, and finally, companies that got away with minimal changes so far, are realising that they need a structural digital overhaul, and fast. We believe the solution to this is artificial intelligence backed software solutions.
Previous technology based solutions essentially did half the job, heavily depending on human fact checking. Consequently, these solutions were actually quite cumbersome and time consuming and costly to implement and maintain, and offered only incremental improvements. Now with AI, automises data processing completely removing the need for human fact checking (and human error!). Additionally, deployment is massively simplified with an average setup time of one week, compared to about 6 months for previous technologies. AI solutions are also highly adaptable to new formats and scenarios, allowing businesses to test them in say one department and to quickly roll out a single unified solution across all functions of the business. Data can be extracted from any invoice layout with no template or rule set-up, saving significant and effort. Rather than trying to change and standardise a highly fragmented environment (there are about as many invoice formats as there are businesses), AI can work with it, and optimise the overall process and offer a unified answer to a fragmented ecosystem.
Taking Accounts Payable as an example again, this is a sector that has relied by and large on Optical Character Recognition (OCR) software solutions in an attempt to remove some of the manual labour involved in reading processing and filing invoices. Although OCR did improve the processes to a certain degree, ultimately these types of solutions still required a long and expensive set up processes and a lot of manual labour to actually capture the data accurately with templates and manual data entry. Now, with AI software, like the one we have created, this is a solution that makes data extraction simple and easy, saving time and man power, as well as building on existing infrastructure. It has the ability to transform this industry.
In conclusion, for a sector that has been slow to adopt digital change, AI is THE technology answer that is finally fixing the invisible pain points that businesses had simply accepted as unremovable. AI applied in this way offers a viable way forward and businesses that were notoriously slow and resistant to embrace the digital transition, incentivised to make a change, may actually end up at the head of the pack. Skipping ‘older tech’ and jumping straight into AI solutions, the best scenario available by far, is indeed the smartest, fastest and most cost effective way to transition into the digital world.
InsurTech is helping to drive the digital evolution of the UK motor retail industry
By Alan Inskip, Tempcover CEO & Founder
If the last nine months have made anything clear, it is that the pandemic has fundamentally changed both buying and driving habits for UK motorists. The latest Tempcover research has revealed that online-only used car sales had increased fifteen-fold during the pandemic among 2,000 survey respondents.
Before lockdown, just 4% of used car sales were fully-digital. The vast majority of those surveyed opted for either a physical purchase (50%) or a digitally-assisted purchase (45%), relying on a combination of digital tools and an in person viewing or road test before buying.
While car sales overall are down on last year’s figures*, one in six (17%) of those surveyed had bought a used car during lockdown, with two thirds (64%) relying on a fully-digital purchase journey. Digitally-assisted purchases counted for one in five (20%) used car sales, while in person sales fell to just 15% – no surprise considering the ongoing social distancing measures.
And when it comes to arranging insurance for their recently-purchased vehicle, our survey participants displayed an equal balance between telephone and online as the preferred method (48% each). Nearly a third of those (28%) said they wait up to ten minutes for their policy to be confirmed, and a further 22% wait as long as 20 minutes to get cover.
The switch to digital insurance, driven by InsurTech
In the midst of rapid and significant market changes, many traditional insurers have lacked the agility and flexibility to adapt accordingly. InsurTech can provide immense value in bridging that gap, as the digital solutions are entirely scalable, with the flexibility to substantially increase in size and across multiple geographies, with minimal disruption.
The ongoing decline of physical transactions in the motor retail industry is a perfect example of how InsurTech is adding value. Several national blue-chip dealerships, with both physical and digital showroom floors, are already streamlining their online purchase process by offering temporary driveaway insurance policies to cover the vehicle for a fixed-term, usually between five to seven days, as part of the purchase journey.
The entirely online one-step user experience is the first of its kind in the traditionally outdated and inflexible driveaway insurance industry and it is dramatically simplifying the process of how insurance is purchased and consumed. Due to the flexibility and agility of the digital solution, each retailer has its own unique URL, where the customer can obtain a simple single-cost policy in just 90 seconds through an entirely digital process, which fits in line with the evolving consumer purchase trends.
For the dealers, this technology means more efficient stock clearance times and greater profitability. For the buyers, it takes the stress out of searching for annual insurance on the spot, and provides the driver with near instant cover so that they can immediately drive their new car, while giving them the opportunity to thoroughly research the best annual policy to suit their needs. An added benefit is there’s no risk to any existing No Claims Discount, as it’s a separate and standalone policy.
While there is a chance these trends will reverse to some extent post pandemic, it is clear that the consumer appetite for digital purchase and consumption is here to stay, and InsurTech will continue to lead the way in making motor insurance more easily-accessible across digital platforms, while offering consumers the best value for money.
Five ways enterprises are using the public cloud
By Michael Chalmers, MD EMEA at Contino
The public cloud is the most significant enabler in a generation. It’s causing a massive shift in how businesses are operating and tearing apart previous business models.
Amid challenging economic times, it’s inevitable that spending within IT is dropping. However, the cloud is the only segment that is still growing. The public cloud is increasingly becoming a central element of enterprise IT.
Contino asked 250 IT decision-makers at enterprise companies across Europe, USA and APAC within companies of over 5,000 employees about their views on the state of the public cloud within their organisation at the beginning of 2020. Nearly all of them (99%) saw a significant technical benefit compared with on-premises.
Here are some other ways public cloud is being used by enterprises:
- Widely, albeit not yet business wide.
A whopping 77% of enterprises are using the public cloud in some capacity. Overall, 50% of businesses are utilising a hybrid cloud, 22% single private cloud, 20% multi-cloud, 7% single public cloud and only 1% are using only on-premises.
But only 13% of businesses have a fully-fledged public cloud program. The largest set of respondents (42%) have multiple apps/projects deployed in the cloud. 24% were still working on initial proofs-of-concept, and 18% were in the planning stages.
83% of respondents said they want to grow their cloud program. Almost half (48%) do wish to grow, but with caution, while 36% want to move as quickly as possible.
Only 4% plan to revert to on-premises but are in no rush to do so.
- To enhance security and compliance versus on-premises, although these are still also seen as barriers to adoption.
A massive 64% of respondents stated they find this more secure than on-premises, and only 7% see it to be less secure. 72% found it easier to stay compliant with business data in the cloud versus only 4% who found it harder. However, 48% cited that their biggest barrier for not using the cloud was security, and 37% stated the need to remain compliant was the most prevalent blocker.
Other challenges also posed a barrier: a lack of skills, the cost to purchase and cloud-native operating models not working with existing investments made up 29-32% of responses.
19% stated that lack of leadership buy-in is the biggest barrier, reflecting that a significant number of IT departments have a need for this solution but have not been provided with the support to do so. However, relatively speaking, this was one of the least-cited barriers.
- For improved efficiency, scalability and agility, but vendor lock-in is still a major concern.
The top three cited technical benefits of public cloud were better efficiency, agility and scalability versus on-premises. However, 63% of IT professionals were ‘somewhat’ or ‘very much’ afraid of the commitment that can come with investing in the cloud. This is another major barrier that is preventing businesses from migrating to the cloud.
Only 23% are not afraid of being locked in and a meagre 5% have no fear at all. However, the fact that 77% of businesses are using the cloud shows any risk of being locked in is outweighed by the benefits of the cloud.
- To align IT with the business.
This is by far the most cited business benefit of the public cloud. 100% of those surveyed witnessed varied business benefits versus on-premises. Other major benefits include the ability to focus on new revenues (43%), accelerated time-to-market (43%), and increased ROI (40%).
- To accelerate innovation and increases cost-effectiveness.
Innovating in the cloud was quicker for 81% of respondents. What’s more, not one person surveyed said the cloud slowed down their innovation. 79% have saved money with the cloud and only 5% have found it more of an expense than on-premises.
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