Majority of accountants are planning to use online accounting software within two years

Over a third of accountants are already using some form of online accounting software and a further third are planning to do so within two years. That’s according to a recent poll conducted during a webinar I participated in recently, hosted by ICAEW and sponsored by Sage.

Like every small business owner, I’m looking for ways to reduce operating expenses and improve my productivity, so I was keen to understand how new online accounting solutions could play a role.

The main speaker was Paul Booth, Technical and Development Manager, IT Facility at ICAEW, so someone who’s clearly got a good insight into the risks and benefits associated with cloud computing in the accountancy field.

Benefits of online accounting software

Cloud computing is really about using someone else’s hardware. That means I can free-up the office space used to house servers straight away. It also means I can reduce my operating costs as I’ll no longer have to pay for the energy to run the server or the related air-conditioning equipment. So, I can start to build a quantifiable business case straight away. But Paul identified a number of other benefits too:

Scalability: online pricing models tend to be more flexible allowing firms like mine to increase or decrease user licence fees to as my business expands, or even when I lose a client and have to make adjustments to accommodate lower receipt levels.

Standardisation: helping to avoid compatibility issues involved when operators are using different versions of software. Cloud solutions ensure my clients and I are using the same version of software. Not to be under-estimated – I speak from personal experience!

Increased efficiency and productivity: many new online accounting products offer improved user interfaces and higher levels of functionality than older software products. For accountants this means that routine data entry tasks can be safely passed back to clients who are motivated with the promise of lower fees. It leaves you free to work on more complex and higher value activities.

How to manage clients with different needs

To me, it seems the transition from on-premises software to online working is well underway. But this presents accountants with a dilemma. Larger clients may resist attempts to adopt online accounting solutions as their internal processes are built around fully featured on-premises accounting packages. On the other hand, many smaller clients will be happy to use online methods, especially if it means they can reduce accountancy fees by doing much of the routine data entry themselves.

That is why Sage has engineered a strategy and product portfolio which allows accountants to migrate towards online operations at their own pace, according to the demands of their client base. It’s something Sage is very sensitive to as Nick Goode, Head of Sage One Europe, pointed out during the webinar.

The Sage approach is to continue the support for accountants using fully featured products like Sage 50 whilst also providing purpose designed online solutions. Sage One is an online product aimed squarely at smaller client firms. Sage even provides a hybrid solution to help manage the gap from small to larger enterprises.

Assessing the risks of online accounting

It’s clear to me that the future is clearly heading towards online operations but many accountants still have justifiable concerns. Paul focussed on four of the big ones:

Security

This is typically an issue about data access as well as data falling into the wrong hands. Accountants need to compare the costs of their current security arrangements to the services provided by today’s online cloud providers.

From what I can see, online vendors provide more sophisticated and reliable levels of security protection than I can provide myself. We should all still seek independent assurances and run periodic checks on vendors as we all have responsibility for the security of our client’s data. But as Paul highlighted, data security is as much about minimising the risk of a breach within my own business as it is about knowing where my clients’ data is physically located.

Many Software as a Service (SaaS) cloud providers use one server to host the data of multiple clients. So unless I pay for a dedicated server, I’ll need to check who else can access my rented server in the cloud.

On top of that, I need to be aware of any potential legal issues relating to the physical location of the server. I’m aware of Safe Harbor and similar agreements. But to be honest, I can’t afford the hassle of a data security dispute just because a server happens to be located in a country which does not adhere to the same standards as the UK and Europe. I’d rather know that the server space I’m renting is physically located in the UK or Europe like they do at Sage.

Lock-in

This is no different to on-premises solutions. Where accounting software is concerned, it’s best to take a long hard look at vendor history, financial strength, management experience and overall reputation in order to make an informed decision.

Many new entrants in the accounting software space appear to offer products with friendly user interfaces and low prices. But I need to judge if they are likely to push rates up the more data I place with them.

So this is an issue about trust. I’m inclined to lean towards vendors with proven reputations and significant investments in technical support. Being able to access people who know the industry, regulations and the intricacies of the software, 24/7 during peak times of the year, is a big plus in my book.

Customisation

Ultimately, every online software solution is a compromise. Most solutions deliver around 80% of all the functionality I need for the price I’m prepared to pay. The cost of customising the solution for that extra 20% of required functionality is just not worth the effort or the cost. It’s cheaper and more efficient for me to change my internal processes instead.

Availability

Where accounting software is concerned, availability is about being able to access the software and data 99.99% of the time. At least that’s what I’ve read I should be able to do. If the power supply to my office fails, the lights go out and my screens go blank. So I’m geared-up to use a mobile broadband connection. I could install an auxiliary power source for when the lights go out, but I can’t justify that option just yet.

At the server end of the cloud, it’s almost certain that the data centre provider has a system of uninterrupted power supplies in place as standard, as well as a system of back-up servers ready to seamlessly step-in should my rented server encounter a problem. So I’m pretty confident on that score.

The hour long webinar was really useful and has helped me to think more seriously about the role online accounting software could play in my business. You can view the webinar on the ICAEW site to see the whole event if you missed it first time around. You may also want to take a closer look at the Sage One online product to understand how it can help improve efficiency within your practice.