The continuing evolution of cloud accounting software
Like many things, accounting performed on computers has come a long way in the last 50 years, especially recently. While many firms and clients are still using desktops, an increasing number are using those PCs to connect with applications and storage located elsewhere. And the exact location of this “elsewhere” has become less important than knowing that the companies offering these services are respectable, responsible, stable and affordable. Today, more and more firms and their clients are moving from in-house to the cloud, and this trend shows no signs of slowing down. As in past years, we’ve turned to the vendors of cloud accounting solutions for answers and insights.
Where are we going?
One of the first questions we had for the surveyed vendors was where they thought the application was going in the immediate future — the next two or so years.
Toward greater productivity and requiring less human interaction was an answer that we received from many of our respondents. “Over the next few years, we’re going to see more and more aspects of automation, machine learning and AI incorporated into cloud accounting systems. First, we’ll see developments rapidly shortening, and ultimately eliminating the need for going through a monthly close,” said Taylor Macdonald, senior vice president of channel sales for Sage Intacct. “Looking further down the line, we’ll see AI-enabled processes giving customers greater insight into their data, such as a continuous audit.”
Ben Richmond, vice president of business growth at Xero, saw change happening in three interrelated areas, starting wtih increasing automation of the processes. “While there is lots of hype, there is also tangible evidence that this new technology can positively change the way accountants, bookkeepers and small businesses work,” he said.
Richmond also foresees greater collaboration between accounting platforms and financial institutions: “Banks are increasingly looking to partner with innovative financial technology companies in order to meet customer expectations. Small businesses face persistent challenges accessing capital, getting paid on time, and accessing their data. Banks are increasingly receptive to working with tech companies to accelerate innovation and deliver new solutions to these age-old problems.”
He predicts more focus on solving the end-to-end needs of accountants: “As automation technology becomes increasingly prevalent, and data is shared more seamlessly between the core products and services that small business uses, cloud platforms will look to build the final mile of the journey by delivering end-to-end practice management solutions for accounting firms. These solutions will allow firms to fully digitize their practices. Even firms who continue to focus on traditional compliance work will have the opportunity to benefit from the cloud.”
Prashant Ganti, the head of product marketing for Zoho Books, agreed about the collaboration between accounting and financial institutions. He also saw cloud accounting gaining traction in the developing world because of technology-driven compliance being introduced by various governments. Factors such as online tax filing, mandatory record-keeping, and e-invoicing are playing a major role in the adoption of cloud software.
“The ability to easily conduct business on a global basis while simultaneously being able to transact business on a local level will be very important as organizations look for growth internationally,” is also an important area where cloud accounting will grow according to Tom Kelly, senior director of marketing and management at Oracle NetSuite.
Acumatica CFO Nigel LeGresley added, “We see continued momentum as still more companies move to the cloud, of course, and while cloud accounting will be dependent on the speed and completeness of that transition, some changes are already quite evident: simpler, more intuitive user interfaces, the importance of mobility, and the use of machine learning to reduce human error and repetitive manual tasks. Automated and customizable workflows will be critical as the accounting function responds to the increased speed required by a digital business.”
Christina Wiseman, product manager of centralized services and transitions at Thomson Reuters, sees increased functionality and productivity in other areas. “Many existing features will be more heavily used, such as the digitization of previously paper items, electronic notifications, and time clock features. We will start to see more user-friendly deployment of such features and see them used more broadly. For example, taking notifications beyond document sharing and more integrated in workflow. We’ll see much more e-commerce capabilities, in areas such as online bill payment, and merchant solutions. We’ve seen data entry reduced by integration — we’ll see more elimination of data entry by technology such as bank feeds and receipt recognition.”
Speaking of features
We asked our vendor respondents what features they are being asked to add.
“Today’s accountants want a one-stop shop to service all their clients and manage all their employees across their entire firm,” according to Ariege Misherghi, global leader of the accountant segment, small business self-employed group at Intuit. “We’re also finding that accountants are increasingly leveraging third-party apps to serve their clients and want the ability to easily recommend and integrate apps on behalf of their clients.”
Intuit is currently developing new features that will provide even more functionality, she said: “These include Project Profitability — an integration, coming soon, that connects QuickBooks Online, TSheets by QuickBooks and QuickBooks Online Payroll.” Another example, currently under development, is the integration of email with QuickBooks Online Accountant, utilizing AI and natural-language processing.
Sage’s McDonald noted, “Reporting and analytics are a huge focus for many of our customers. They are always looking for ways to streamline the standard reporting processes, while also gaining the ability to dig deeper into their financial data.”
Multi-entity reporting and multi-entity accounting are features that AccountingSuite customers are asking for, according to co-founder and COO Kurt Kunselman, along with customization of the product and the ability to work offline.
“Our currently most widely used features are workflow automation for bill payment, alerts, customized financials, performance analysis, and dashboards. The common features that customers are asking for are dashboards for mobile devices and customizable text notifications. AccountantsWorld is working on implementing those,” said the company’s vice president of marketing, Div Bhansali.
Acumatica’s LeGresly added, “We’re always receiving customer feedback and suggestions about dashboards, reporting, and analytics of ever-increasing sophistication. It seems the appetite for those features is insatiable. Our mobile app is very popular with customers and very complete, and yet we still get requests to improve it even further. Finally, again, integrations and automated workflows are in constant demand.”
“Customers are looking for increased user-friendly application of features that may already exist within applications and for more seamless workstreams between their applications,” said Thomson Reuters’ Wiseman. “What does that look like? Mobile apps, online bill payment, bank feeds, easy-to-understand metrics ... and notifications of required actions.”
Taking off vertically
Vendors also expect to experience significant growth in offering vertical solutions in the cloud. “It has always been a focus for Sage Intacct to not just engage with vertical markets, but micro-vertical markets. By zeroing in on a particular micro-vertical, we are able to consistently meet the needs of companies in that category,” Macdonald commented.
According to Oracle NetSuite’s Kelly, targeting verticals is and will continue to be a focus for the company: “NetSuite started by focusing on industries where companies were broadly similar. As we have moved forward, we now provide offerings for key verticals. We are going more in depth within verticals, or what we call micro-verticals, narrower categories with more specific needs.”
Not every vendor we surveyed believes that vertical applications will experience explosive growth. According to Xero’s Richmond, “I do not believe that this will be a major area of focus for the major cloud accounting platform companies. That’s because one of the core benefits of building a platform — as opposed to a specific set of products or services — is that customers have the ability to integrate the vertical-specific applications of their choice. In other words, cloud platforms can serve the broadest possible number of customers by ensuring the core platform meets needs across all verticals, as opposed to delivering a tailored experience for a specific set of industries.”
Can’t we all just work together?
We asked our vendors how they saw cloud accounting developing in terms of working with other applications.
Thomson Reuters’ Wiseman told us, “One of the benefits of the cloud is the promise of integrating previously disparate systems. As firms fully embrace cloud accounting, they’ll see integration growing in two ways. First, as they re-evaluate their current systems, they will look at cloud offerings with the expectation that they can combine many of their previously separate functions within applications that handle multiple functions ... . Second, APIs will continue to grow, allowing previously separated software to work together more efficiently.”
“There are a couple different ways cloud accounting can integrate with other apps,” Zoho’s Ganti said. “The ‘Zoho way’ is to develop software wherein all business applications and the accounting solution are part of the same bundle. This integration is out of the box, and businesses can just log in and get started. Zoho also works with all external vendors even though we provide a full suite ourselves. The other way is for the accounting system to work within an ecosystem. In this case, the user has to purchase the individual applications and set up the integrations.”
“There are two forces at work here,” said Oracle NetSuite’s Kelly. “In the case of true accounting, like revenue recognition or fixed assets, I expect to see these capabilities be part of the core of cloud-based accounting systems. Operationally, for example, a mobile workforce like plumbing or other services that are performed at the customers’ place of business, I expect best-of-breed applications to continue to grow. That said, it will be important to ensure customers are connected to key applications in the markets that they serve or are seeking to serve.”
Working on the blockchain gang
Asked the direction accounting technology will take in the next five or so years, one frequent answer from vendors was that it would incorporate blockchain. “We’re confident blockchain will have a major impact on accounting in the years ahead, but the reality is that it is virtually impossible to predict whether that impact will be felt within the next couple of years, or across a longer time frame,” Bhansali said.
Oracle NetSuite’s Kelly also doesn’t see that quick of an incorporation. “Blockchain is beginning to have an impact, but I do not see it happening as quickly and pervasively as AI,” he said. “Artificial intelligence and machine learning will have a big impact on accounting and finance, and cloud accounting suites must offer this functionality. Many bookkeeping tasks are already being impacted by AI, such as accounts payable and automated data entry and soon payroll, taxation and auditing will be performed by AI.”
AccountingSuite’s Kunselman views blockchain as increasingly important, but just one area where cloud accounting will move. “Blockchain accounting and supply chain will become add-ons for many of these cloud applications. The model will be cloud accounting with ‘sync’ function, a desktop app, a mobile app that looks the same, and the ability to move to private cloud and on-premise in a smooth process for growth purposes. Also, users will be able to back up their account to a digital backup hardware tool such as a USB drive or whatever the next generation is out there. Also, to take it up a notch, cloud accounting will be able to connect with 3D printers for advanced small businesses. Lastly, we will finally get to the collaborative supply chain as the security protocols for applications are enhanced.”
Zoho’s Ganti also had a few thoughts on the topic: “Cloud accounting will move to mid-markets and enterprises. In a few key emerging markets, ‘cloud’ will no longer be a buzzword. Conversational interfaces and machine learning are going to change the way we do accounting. Businesses that have their cloud accounting unified with other systems will realize operational efficiencies. And accounting and banking will start converging. Cloud accounting will be a key success factor in the SME finance business.”
Xero’s Richmond, meanwhile, sees cloud accounting becoming ever more mainstream: “I believe that one of the big trends we will see over the coming years is consolidation across the industry as cloud accounting becomes the default way practices are run. We’ll increasingly see traditional firms looking to partner with, or acquire, upstart cloud-based firms. On the one hand, this will be a defensive move. Traditional firms will understand that they are no longer the default destination for talent because cloud tools provide a much lower barrier to entry, making it possible for an ambitious accountant to start a new practice with little more than a laptop. On the other hand, it will be a proactive move, as firms see that adopting cloud tools is essential to their long-term success.”
Oracle NetSuite’s Kelly echoed some of these sentiments: “At some point the word ‘cloud’ will be removed from ‘cloud accounting.’ As more and more organizations holistically embrace the cloud there will no longer be a distinction of on-premise versus cloud — the result will be cloud-only!”