Rising above the cloud: Shaping a bookkeeping business in a software world
The recent ABN Conference yielded some common perspectives on the future of the bookkeeping profession. Chief among them was that the entire profession is going through the biggest shake-up since the (then) government mandated small businesses to take-up accounting software for recording GST. The current ‘shake-up’ also comes in the form of software technology: cloud accounting.
The effects of cloud accounting software on the bookkeeping profession
To date, around 15% of small businesses in Australia have adopted cloud accounting software. This figure is small but growing rapidly. Currently, business owners and operators are motivated to move to ‘the cloud’ by the promise of improved efficiency: the time required to enter, reconcile and use data to achieve statutory compliance can be substantially less with cloud accounting software. In time, however, as software vendors cease to support legacy systems, the motivation will become less of want and more of need.
While the full impact of cloud accounting software is yet to be seen, signs of it are already appearing. The bookkeeper’s ‘bread and butter’ income stream—data processing—is starting to be eroded. Causes of this are:
- Clients are being tempted to enter the data themselves, due to the perception of a new, easy-to-use technology.
- Accountants are invading the data processing space by offering all-in packaged accounting services.
- Offshore processing options are emerging, as clients begin to view data processing as a commodity that can be outsourced to anyone with an internet connection.
Even when the bookkeeper retains the data processing work, the inherent fact that the work takes less time with cloud accounting software (because of features like automatic bank feeds, etc.) equates to a reduction in the bookkeeper’s income stream.
Options for bookkeepers
Staying with traditional bookkeeping services
Bookkeepers who wish to base their business model around traditional bookkeeping services, such as data processing, need to acknowledge the approaching change and potential drop in volume of work. Furthermore, if these bookkeepers wish to maintain or increase their volume of work, they must take action. Some courses of action to consider are:
- increase the number of clients.
- redefine the bookkeeping role. Focus on higher-end functions, such as reconciliation, review, and regular reporting and interpretation.
- re-shape the client’s perception of the service. Upon completion of an assignment, many bookkeepers simply send the client a bill for their bookkeeping time. Consider the client’s perception of this: the only variables contained within the invoice are the unit rate ($/hour) and the volume (number of hours)—but not the quality of the service or even exactly what has been delivered. What about the less tangible aspects of the service, such as providing the client with financial peace of mind, financial education, and more time to do what they should be doing—running the business? Consider communicating to clients what is actually provided and re-shape their perception of the value of the service.
- package services at a fixed price. Taken to its extreme, hourly rate billing actually rewards the inefficient. Take the time to redefine service offerings, focusing on the results delivered, rather than the rate and time taken to deliver them. Once a client understands the full benefits of the service, their decision to engage a bookkeeper will be based on value, not price.
Expanding from traditional bookkeeping services
Bookkeepers who are willing and prepared to embrace change should consider branching out into additional services. These may be fringe services, currently offered, or they may be completely new services.
- Debtor management—good debtor management will pay dividends for a client’s cash flow. Bookkeepers know which clients are poor at collecting their own debts, so why not put together a package for clients to become their go-to person for debtor management?
- Software consulting (cloud)—clients are, or will be shortly, evaluating their cloud options. Consider up-skilling and becoming appropriately accredited, then take the conversation about their cloud options up with clients.
- Software consulting (other)—clients are becoming more aware that their business information solutions need not come from one single product. Increasingly, ‘add-on’ software providers are creating specialised applications, such as inventory management, POS, project management, internet sales, complex payrolls, etc. Many of these add-on solutions interface well with mainstream general ledger packages. Clients need guidance as to which add-on software solution could add value to their business. Once an option is taken up, they will also need training.
- Payroll—payroll has become an increasingly complex minefield for clients to negotiate. This is a service that bookkeepers can offer, which saves clients time and money, and decreases their risk of non-compliance.
- Packaged reporting—in many cases clients have a wealth of information at their fingertips but do not know how to access and interpret it. Computerised accounting systems that have been properly maintained and reconciled are capable of providing the business owner with much useful information about their business and, if properly presented, will assist the client in making better decisions. This is a valuable consulting service that a well-qualified and skilled bookkeeper is able to package up for clients.
Although the full term effects of cloud accounting software are still some years off, signs of it are already appearing; bookkeepers who want to be at the forefront of change need to take action now
|Martin Grunstein at 2014 ABN Conference|
The key point is perhaps best captured in a quote by ABN Conference keynote speaker and customer service expert, Martin Grunstein:
Bookkeepers need to re-examine the long-held view of what they actually do.
The good news is that bookkeepers typically adapt to change well. They are skilled technology users and they run relatively small businesses. These features make them nimble, able to modify their business model quickly to suit changing times. Any bookkeeper who harnesses these strengths in the coming years will thrive in the new cloud accounting world.
Article written by Peter Thorp, Kerrie Jarius and Ben Kelly
Directors of Australian Bookkeepers Association (ABA)