Case Studies: Online accounting in 2018
If operating totally in the cloud is an option accessible to both an accounting firm and its clients, online accounting software can make firm operations efficient and attractive to new clients. It provides the option of a more remote, but more immediate, relationship, which fits into certain business owners’ fast-paced schedules and desire for constant access to information.
Below are the experiences of two firms with accounting systems that are fully online.
Product: QuickBooks Online
Firm: Reconciled It
Staff users: 3
Start date: 2015
Cost: Free, because the firm uses QBO as a ProAdvisor firm
On record: CEO Michael Ly
About the firm: Reconciled It is an online bookkeeping and CFO advisory practice based in Burlington, Vt., that serves entrepreneurs and small businesses.
Objective: When Michael Ly started Reconciled It in 2015, he selected QuickBooks Online as the platform of choice for both his clients and users internally. He wanted to be very familiar with whatever software he was providing his clients so he could be of effective support. And the main reason he selected QBO was because at the time Intuit had just performed a “major upgrade to the design and user interface to what it looks like today. ... With Intuit being a really large company, it showed Intuit was able to move quickly and they really cared about user experience.”
Implementation: “Implementation was fairly easy,” Ly recalled. “You first go on the website and sign up for an account, and they give you a trial period to try out the system. After that initial trial period, if you have any questions, they make it really easy to ask. The system itself provides directions on what to do first, if you’ve never used it before.”
Advantages: One of the main highlights of the platform for Ly is the direct connection to bank accounts and credit card feeds, which makes recoding transactions easy. “You can decide whether to automatically post transactions that are coming down from bank and credit card connections, or manually do those. That was a big highlight. It’s automated, so you know the particular vendors you go to will always go to same category. We would do it manually if there are one-off transactions.”
Secondly, the ability to invoice customers and receive payments online was an advantage to Ly. “Before that, the only option I had was to send them a manual invoice by e-mail and wait for the check to come in the mail.”
Challenges: “QBO doesn’t have the ability to do really granular customer-based or project-based reporting, to see which projects/customers were least or most profitable for you as a company,” Ly said. “Intuit’s received a lot of feedback from us or companies like us, and are responding and creating customer-specific income statement reports so we can start tracking profitability. They started beta-testing that project feature last year so we’ve been utilizing it.”
As a QuickBooks-aligned accounting practice, Reconciled It has a representative it can reach out to for any challenges or questions, and the firm’s clients can reach out to Reconciled It as the ProAdvisor, or the online center.
Firm growth: “QuickBooks Online helped us very quickly solve a major pain point that most businesses have, which is what accounting software to use to track internal expenses,” Ly said. “That’s a common problem our clients have — deciding on what to use, and having a system that’s user-friendly, and one that allows them to get the reports they need but also to make business decisions. Because we standardize ourselves around this, it helps our clients understand that we could support their needs.”
THE STARTUP PARTNER
Firm: Upsourced Accounting
Staff users: 8
Start date: 2012
Cost: Standard is $29 per month per client, with changes based on client size
On record: Principal Ryan Watson
About the firm: Upsourced Accounting is a management accounting firm that works with its clients on an ongoing basis as outsourced controllers and CFOs. Based in Columbus, Ohio, the firm serves venture-backed tech startups, and scaling digital and creative agencies.
Objective: Ryan Watson founded Upsourced Accounting in 2012, around the time that Xero was just introducing its online accounting software in the United States. Watson and his co-founders are former Deloitte auditors, and when they were introduced to Xero, they saw an opportunity to build a firm around the concept of automated accounting in the cloud. “Columbus is not a burgeoning tech hub compared to San Francisco,” Watson said. “So we weren’t about to build a standalone practice focused on that vertical. But if we’re going to focus on outsourced accounting, we have to focus on verticals we know well. So we have to be willing to work with clients that aren’t necessarily in our backyard. Having a system available anywhere, any time, was table stakes. At the time, Xero was the only real option.”
Because the firm’s focus is around helping managers and CEOs make decisions based on accounting information, it needed a platform that would automate 50 to 70 percent of the traditional bookkeeping tasks so it could spend time adding value in a way clients could afford, Watson added. Xero fit the bill.
Implementation: “We had to implement Xero for clients,” Watson said. “From a technical perspective, it’s just data migration, and Xero has solutions that’ll do that for you.”
It was the psychological perspective of getting clients to move from one software to another that had Watson and his team worried: “But the reality was that almost none of my clients pushed back on the idea. At the end of the day, they’re not buying Xero, they’re buying us. If this is the thing that allows us to do what we say we can do, they’re in.”
Advantages: Fundamentally, Watson explained, Xero is organized in a “hub-and-spoke” model. “It’s got a really solid GL, has an API that really works well with a lot of solutions, and the way in which it integrates with other tools is seamless. It lets us build a very tailored solution for each client’s situation.”
Secondly, the firm likes having its clients able to access Xero whenever they want to pull a report or reconcile a transaction. Xero makes it easy for clients by using colloquial language that’s not intimidating, Watson said: Receivables are called “sales,” accounts receivable is “invoices owed to me,” and accounts payable is “bills you need to pay.”
Finally, Xero has a robust community of “like-minded, modern practitioners that are well-engaged,” Watson said. “I talk to other Xero practitioners on a daily basis. There’s a Xero Facebook group that’s super active; and we have monthly meetups called Xero hours in some cities, and those have their own Facebook groups. I’ve got a few folks that I’ve met in those various venues that I have a Slack channel with.”
Challenges: “I mentioned the idea of the hub-and-spoke model as a point of strength, but obviously the double edge to that sword is there are things that are not available out of box that I need, such as job costing, payroll or payments,” Watson said. To solve this issue, Watson uses third-party APIs. “At the same time, Xero hears people like me loud and clear when we say we need job costing,” he added. (Xero introduced Projects in December, which includes job-costing capabilities.)
If a practitioner has an issue or suggestion, they can submit a comment via the Xero website, and practitioners have accountant managers who “check in often,” Watson said.
Firm growth: In the early days of the firm, Upsourced Accounting was listed as a partner on Xero’s partner directory, which helped the firm grow quickly. Watson said that more than 75 percent of clients found the firm through Xero. Now, Xero helps the firm grow more indirectly. “The accounting stack we’ve built around Xero lends an element of scale to a traditionally service-heavy industry that we wouldn’t have if not for the technology. It allows us to onboard and service clients repeatedly pretty quickly. It ends up being a process game, and one we wouldn’t be able to win if not for the technology.”