The benefits of having your financial statements prepared sooner are numerous. Whether it is managing cash flows, meeting banking covenants, understanding how a business has truly traded, or assisting with forecast preparations.
Less time taken preparing accounts also leaves an accountant with time to spend more time on understanding the client business and providing insightful advice, enter the age of the Virtual CFO, for even small SME's. Access to the information online also means that this advice is based on real-time information. On-line access has the added benefit of encouraging greater collaboration between businesses and their advisors which in turn leads to better governance. It is well documented that good governance is crucial to the SME sector. So while there is still a need for great people on your board, that are willing to challenge and bring their experience to bear, technology is playing an increasingly important role in assisting more effective governance.
When we look at the typical suburban Accounting Practice, which are SME's, they are mostly "back in the dark ages". The concept of "eating ones own cooking" is a truism..
Many accounting practices, don't use online accounting services for their own practice client billing. In the rare case, when they do, this system is not linked or integrated with the Practice Management, or even their SMSF Administration system, so each exists as independent islands.. never to communicate or share data.
And yes each of these separate applications has their own fees..
The fact ... a typical suburban accounting practice, has many of the same drivers as their client companies.
The New Practice
The changes to the accounting landscape, by the arrival of cloud technology, cannot be underestimated. Cloud accounting, championed by a wide range of technology providers, does away with the old business model, and has the capability to make a range of existing accounting services obsolete, especially the low value services..
This change, is normal, and no different to the demise of the typist, travel agent, or corner shop in recent years.
The economics
With a Cloud based solution, the practice is purchasing the utilisation of a fully hosted and managed Practice Management service, via an online service provider. There is no software updates, no power outages, and no initial capital expenditure, and it’s all paid by a single yearly fee.
We have found the usual decision point for change, comes when a practice receives the quote for the "upgrade of existing servers", or the partner looks at the "current fees" being paid to older desktop Practice Management Software, which typically have not been updated in years.
A modern Cloud based Practice Management solution, can be as little as
$2000 per year for up to 25 employees... this is probably less than the cost of electricity, to run the existing servers.
The costs
At the same time, the focus on costs is creating more outsourcing of work to locations around the world.
We are seeing a lot of practices off-shoring work, especially SMSF related activities, to places like the Philippines, Malaysia, India. These countries are creating centres of excellence, with highly qualified staff and pushing the mundane work into even lower cost jurisdictions.
Over the last couple of years we have seen more of the higher value activity, such as SMSF compliance, also being pushed into those low cost jurisdictions. Previously it was processing work like invoicing, data entry, very much back office functions and data gathering, but we’re now seeing more value add, more strategic work, work that needs a better knowledge of accounting or tax rules.
We see this as an
interim stage, the true Cloud Practice replaces routine work with automation, and concentrates its staff on high value add, activities like virtual CFO's ect..
The recent privacy laws on 'cross-border disclosure of personal information' while they do not prohibit outsourcing to overseas countries, simply make it a more onerous task, for any Australian Practice; as the Practice is now responsible for the client data if it is "disclosed" overseas.
See
Does your data still call Australia Home
The Agile Practice
Because it is accessed online, the software is Mac or PC, mobile phone, tablets of almost any type compatible, well almost all.
There’s unlimited data storage, as the practice information is not held on the internal network. As a result, the business is not constrained to the storage, or memory on its desktop computer; as data is securely held in the cloud. And most importantly, it can be
securely accessed from anywhere. This provides convenience and enhanced business agility. The only thing the firm, or any of its employees need is an internet connection, anywhere, anytime.
This approach gives a practice, the flexibility to adapt very quickly to the changing needs of an organisation, or the accounting market in general. We see a future that for some client companies, it allows the Practice to better embed themselves into the client organisation, this is our vision of the next generation "in-sourced" accounting practice.
The level of compliance work, as a proportion of a practice business will reduce. What is holding many Australian firms back from the cloud are fears of security, with sensitive data moving out of a company’s local premise into "the cloud". Many worry, with good reason, that the information might be accessed by un-authorised individuals.
An example, is practices using insecure, USA located, free services to transfer client files...
This, in turn, creates great concern over practice governance, risk and controls.
Many of the more recent providers, are starting to ensure only authorised individuals can access data in the cloud, but many of these are located outside of Australia; Xero accounting and their WFM, is an obvious example. This is a bit like allowing anyone to logon to your internal system today, one needs to be sure your provider has a lot of Cloud operational experience, most of these providers did not even exist a few years ago. VillageMall has been providing Cloud based services since 1999..
To address these concerns, the leading software cloud providers, offer a practice" the option" of a cost effective 'Private Cloud' solution, where the practice retains ownership and control of the Cloud Practice, in a manner similar to their existing on-site services.
Today, there is simply no reason, that Client or Practice data, should leave the legal jurisdiction of Australia.
There is no compelling reason, that a Cloud solution, should require a fundamental change to your existing on-site compliance environment today, you simply don't need the hassles..
The barriers
One of the biggest hurdles to moving a Practice to the Cloud has been ATO tax form support, most cloud based practice solutions have been short of delivery in this area, it is "always next year".
But in 2014, this barrier has been removed by the Industry leading solution providers.
The old world Desktop Software Lockin
One would hope that a practice would move towards being "completely paperless", so that the many associated efficiencies can be realised, and also move to a subscription-based service offering.
Within the next few years, all practices will be able to jettison the license fees for there "old world" (
read way to expensive...) software; they’re locked in at the moment. It’s all about timing the escape from the locking contracts, and additionally offers a practice the ability to move from one software support product to another more nimbly.
Compliance
There is a wide range of privacy,and compliance issues being faced by a practice.
At a minimum the following should be addressed by all Practice Management Solutions:
- Integrated, secure (100% Encrypted, and located in Australia) Records Management System.
- Registered against Taxation Ruling TR 2005/9 requirements
- Storage designed to meet Australian Privacy principle APP 8 (March 2014)
- Corporations Act in s286(1)
- X509 Signed Digital Timestamp, to meet legal filing date, and integrity requirements
- Implements an out-of-box "Standard Business Classification Scheme"
The Future practice
The key to the new cloud practice is the "automation" of low value process intensive tasks..
At VillageMall, within our Practice Manager, we are getting close to a total automation of Activity Statements, via our unique Cloud SBR Tax modules.
The actual process..
1. Setup the client record with ABN and check Activity Statement
2. On the first week of each month, our Automation robot, will use the Practice Device Auskey, to pre-fill the Client Activity Statement, from all of the clients enabled above, and the ATO has generated a AS for this period.
3. The automation robot will also create a Practice Job, using the Practice specific job template, and mark it as active, plus set the due date to match the data extracted from the ATO Activity Statement.
4. The Job is assigned to a staff member (manual bit)
5. Staff member reviews the ATO pre-filled form, and fills the form from the linked client Xero accounting package, yes just a single click (the high value bit)
6. Subject to authorisation, the Activity Statement can be submitted directly to the ATO in real-time.
7. Job is closed and Client invoice generated from job details, directly inside Practice Xero account.
It done..
Note, that Staff do not need to leave the Practice Manager application, everything comes to the staff member as they need it. Also they do not need access to the Practice Xero accounting system at all.
The Future is here Today..
See
Practice Manager for details.
