It was not all that long ago that the thought of doing any kind of accounting, workflow, document management or accounts payable online was met with reservations and security concerns among accountants and their clients.

But time and education, not to mention the broad availability of Software-as-a-Service solutions, and the cost savings benefits, are prompting firms to migrate toward cloud-based accounting. A recent report from tech researcher Gartner Inc. stated that SaaS revenue rose 27 percent year over year, to $6.4 billion - and that figure may double by 2012.

SAAS AND THE CLOUD

The first companies that came into the SaaS or cloud-computing space - such as Salesforce.com, Intacct and NetSuite, to name a few - were commonly referred to as appli­cation service providers, and some confusion still remains as to what difference, if any, there is between SaaS and cloud computing. With SaaS, a provider licenses an application to customers for use as an on-demand service, either through a time subscription or a “pay-as-you-go” model. The SaaS model allows vendors to develop, host and operate software for a customer to use, rather than having them purchase the software.

Cloud computing, or being “in the cloud,” is often synonymous with what SaaS allows a user to do, but it is essentially any Internet-based computing whereby shared resources, software and information are provided to computers and other devices on demand.

The American Institute of CPAs, through its online portal, CPA2Biz, has taken on the task of promoting the use of SaaS/cloud-based accounting at the firm level. In fact, through its Trusted Business Advisor Solutions program, all of the software currently being recommended to CPAs is SaaS-based. These include Intacct for financial management and accounting, Bill.com for accounts payable and billing, and Paychex for payroll.

“It’s easy to leave the CPA out when it comes to technology, and as technology advances we don’t want to see them left out,” said Erik Asgeirsson, president and chief executive of CPA2Biz. “Firms clearly have a choice and we are here to help them navigate [the available technologies]. We are signaling to firms that there is a transition underway and we say they should look at cloud-based technologies, because they can offer higher client retention rates, whether you are a small or large firm.”

Asgeirsson noted that the main reasons CPAs are - or should be - moving to SaaS solutions over on-premise ones include remote collaboration with the client and the ability to conduct client accounting from any location - which can offer new revenue opportunities for accountants in markets they are not presently in.

STAYING COMPETITIVE

For the six-person firm of Mount Prospect, Ill.-based James Matousek, being able to service clients well outside their locale without spending heavily on travel was a difficult option before adopting a SaaS solution. Now, a year later, 25 percent of its clients are located around the country, with one in Hawaii. The firm primarily does tax, payroll and QuickBooks consulting for its clients.

“We use Creative Solutions’ NetClient and Intuit Online Payroll to do our payroll business. We can also have our clients log into QuickBooks through CPAASP.com,” said partner Jody Padar. “If you are a small firm and you don’t keep up with technology, you will lose to the firms who are a bit bigger and who do have it. It’s the one place we can actually compete easily with bigger firms.”

Padar also noted the cost savings over having to buy and maintain servers.

For midsized firms like New York-based N. Cheng & Co. PC, the move to the cloud came relatively early. It has conducted financial management for its base of nonprofit clients using Intacct since 2002. N. Cheng is able to service clients as far away as Cambodia, all in real time, something founding partner Nerou Cheng said they would never be able to do otherwise. “At one time, when we did everything manually, we were losing money and time waiting for invoices and papers to come in [from our clients]. But then we saw opportunity through an outsourced technology [Intacct],” he said. “Outsourcing was a dirty word at one time. With Intacct, it’s all scanned in and no original documents to deal with. We process the invoice and notify by e-mail whoever we want to approve.”

Larger firms such as Boston-based Caturano & Co. run their entire management consulting practice, bookkeeping, and numerous finance-related enterprise resource planning services using SaaS solutions.

Caturano vice president William Kracunas said that the cloud allows the firm to have many more revenue and collaboration options. “We use Intacct for bookkeeping and accounting. A lot of companies don’t like doing internal controls, accounting tech work. We love it, and the cloud allows us to do that,” he said. “For CPA firms that deal with the small to mid-market, the cloud allows bookkeeping and HR functions to be more prevalent. If I can outsource that to SaaS, why hire someone to take care of those services? Someone does need to advise clients, and that’s where the CPA opportunity comes in.”

GOING FORWARD

While many firms claim that SaaS solutions are becoming more widely accepted or at least something that merits serious consideration, even Intacct senior vice president Dan Drucker will admit that there are limits.

“Firms are looking more at how they can get their people more productive. They don’t want to spend on IT, so they are getting rid of non-billable travel,” said Drucker. “The overall comfort level with [having] financial information [online] is increasing. But I don’t think anyone is going to switch their whole practice to the cloud.”

Drucker noted that for larger firms, going with SaaS solutions is a harder sell, as transitioning from the systems already in place may take more time and money.

As for the next growth areas for SaaS, it’s a simple matter of picking a pain point; there will likely be a cloud-based solution built to solve the issue. “Typically what is happening is someone sees the need, develops a point solution for it, and the people with the same pain points adopt it fairly quickly once it is known to work,” said well-known technology consultant Randy Johnston. “I think particularly as there are more complex regulations [on audit trail reporting], you may see more products that are able to do that.”

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