Tech guide: A roadmap for technology investment
Accountants have never had so much choice with applications, but which apps will deliver better productivity and help margins? A recent report lifts the lid on what 1300 SME accounting and bookkeeping firms in Australia prefer.
In Brief
- One of the best barometers for application usage is an industry report, the '2022 Accounting Cloud Apps Report', produced by Practice Protect, a data security platform for accounting firms.
- This tech guide takes a look at the trends in the most active software categories for small and medium practices.
- Expense management is a very common application in accounting firms. The 2022 report tracked applications used by 1300 firms and showed that the category is dominated by two players: Dext and Hubdoc.
Ever since accountants swapped the slide rule for the spreadsheet, software has played an instrumental role in determining office productivity. Every firm now faces a dazzling smorgasbord of applications promising to help you deliver accounts and advice more easily than ever before.
The challenge is knowing which apps will deliver the biggest return on your productivity. One of the best barometers for application usage is an industry report, the 2022 Accounting Cloud Apps Report, produced by Practice Protect, a data security platform for accounting firms.
Practice Protect provides each firm with a single sign-on dashboard for all its applications. The software company then collates those applications from its 1300 Australian firms and publishes the results each year.
One of the main reasons I – Sholto Macpherson – produced this report for Practice Protect is because the sample size provides a useful proxy for market share. There are an estimated 13,000 accounting firms in Australia; it gives a strong indication of the applications firms are buying.
Some caveats with this report (see cloud applications at the bottom of the page): The 1300 firms surveyed are all small and medium practices (SMEs) with an average size of 11 staff. Practice Protect is typically used to secure firms that use a number of cloud applications, which creates a bias towards firms that more often use Xero and Xero Practice Manager rather than firms that use desktop software sold by MYOB and Reckon. Firms using Xero are more likely to use cloud apps in the Xero Marketplace to automate their processes. This article will cover trends in the most active software categories for SMEs.
Sign on the glowing line
Accountants have been a little wary of electronic signatures in the past and for good reason. The big four banks have demanded wet signatures for important documents such as company deeds and partnership agreements.
COVID-19 lockdowns changed all that. Electronic signatures became formally recognised in nearly all areas of business out of necessity. And this has spurred firms to invest heavily in e-signature applications.
The number of e-signature apps used by accounting firms nearly doubled from 444 to 783 in the course of 12 months.
Some firms no doubt are using more than one e-signature app to accommodate platforms used by clients. And some firms use one app with their tax application and another for internal documents such as employment agreements.
Adobe Sign is the clear winner here with 371 firms, up from 251 in 2021. Second place is DocuSign with 230 firms, up from 141 in the previous year. Adobe has two home advantages; not only does it produce Adobe Reader for managing pdf documents, it is also the preferred partner for Xero Tax.
Despite the global players’ large customer bases, this category is by no means settled. The two fastest-growing applications are both local.
Annature (70 firms), by the same team that produced NowInfinity, is pitching itself as a low-cost, simplified solution for firms and clients. Annature also has an ID verification service for KYC (know your customer) and AML (anti-money laundering) checks, compliant with the Tax Practitioners Board and Australian Taxation Office (ATO) requirements.
There is also FuseSign (50 firms), part of the FuseWorks suite, which includes useful features specifically for accounting firms. FuseSign and Annature both integrate with a number of practice management platforms.
Putting productivity to practice
One of the most active categories is a catchall of miscellaneous software, Practice Apps. This includes online workpapers, tax-office communications, online portals, document management and process automation. The diverse bunch shows the Australian software scene for accountants is alive and well.
Strong growth in ChangeGPS (188 firms) and AccountKit (95 firms) highlight the interest in productivity ‘toolkits’ that contain templates, registers and calculators. ChangeGPS, which has had a very strong year (up from 112 firms), also offers tax advice and pricing frameworks.
Another group performing strongly are communications tools for handling ATO correspondence. ATOmate (70 firms) and ATO SmartDocs (49 firms) nearly tripled their nascent customer bases.
Arguably the most interesting category to watch is document automation. The practice management software sold by the major accounting software vendors have shown relatively little progress in this area. It has created an opening for new players such as FYI (130 firms) and alongside experienced competitors such as HowNow (105 firms) and SuiteFiles (98 firms).
The document and process automation in these platforms targets the low-level admin that just destroys billable time in any practice. Particularly when combined with Microsoft 365 and Outlook. Accountants who invest the time to familiarise themselves and their staff on automating these processes can get a good return on their software investment.
“Another group performing strongly are communications tools for handling ATO correspondence.”
Manage jobs, manage the practice
One of the biggest reveals in this report is the relative shares of cloud-based practice management software. Karbon (199 firms) and Wolters Kluwer CCH iFirm (160 firms) have built substantial bases despite the allure of Xero’s free alternative, Xero Practice Manager.
The two vendors added 31 and nine firms respectively within this dataset of 1300 firms in the past 12 months.
Included in this category are project management apps such as Trello and Asana. Surprisingly, these apps have user bases as big as Wolters Kluwer. This is most likely due to firms needing a solution for managing non-accounting workflows such as marketing projects.
Anecdotally, most of the firms in this report use Xero Practice Manager. However, because XPM shares the same login credentials as Xero, it isn’t possible to determine which firms are using Xero Practice Manager as well as Xero.
Reaching the market
Marketing and accounting are not natural bedfellows. So it is a little surprising to see email marketing and customer relationship management (CRM) growing so strongly (644, up from 401).
This is one of the few categories dominated by a single application. Mailchimp soared from 260 firms to 329, confirming its title as the default choice in this segment. This is despite the availability of an equally competent local competitor in Campaign Monitor, meandering with 15 firms.
The reversal in fortunes for Dext and Hubdoc is most likely due to Xero’s inclusion of the latter for free with the standard Xero subscription. Xero bought Hubdoc in 2018 and offering it free is clearly a winning proposition. This is despite the fact that Dext is considered to be a technically superior platform for core expense management. (Hubdoc’s signature feature is its automation that ‘fetches’ statements from supplier portals.)
Dext now sells three products. Dext Prepare (the former Receipt Bank) for expense management; Dext Commerce for auto-fetching sales transactions; and Dext Precision (formerly Xavier, an acquisition) which spots errors in accounting data.
Intuit QuickBooks and MYOB Business, like Xero, include some level of native expense management. Over time, this function will probably become just another module in accounting software.
The fastest path to a return
Pick a function in your practice and there is an app for it. So which function do you start with and how do you get started?
The ever-present problem for so many SME practices is lack of bandwidth. With firms struggling to find talent, the last thing staff want is a non-billable project added to their to-do list. Busy people have a natural reluctance for change as it creates friction that they just don’t need.
Software adoption is really only successful when someone in the business is willing to champion it. This means testing competing applications, experimenting with local data and processes, and measuring the results. If you have an employee with an inclination for technology, assigning them a couple of hours on a Friday to improve the business could be enough to test the waters. Finding a peer group to discuss results can also drive enthusiasm and accelerate decisions.
The technology is out there to build a better firm. But it takes time and commitment to turn that technology into a productivity dividend.
“The ever-present problem for so many small and medium practices is lack of bandwidth.”
Why only count cloud applications?
A limitation of the Practice Protect report is that it only counts cloud applications. This is because accountants only need Practice Protect’s single sign-on dashboard to launch cloud apps. They can launch desktop applications directly on their PC.
There are a number of software companies which are underrepresented in this report due to this limitation. Incumbents such as MYOB, Reckon and BGL still have plenty of firms using desktop applications for practice management, tax and specialist applications. However, the percentage of cloud applications is rising quickly and desktop applications are on the decline.
One reason for this change in delivery is convenience (for the customer and vendor). When software companies switched from a CD to software through your browser, it removed the hurdle of distribution. A software company just needs to set-up a website with a login page for users to access its application.
It also removes the hurdle of compatibility. Most desktop software in accounting is written only for Windows. Cloud applications run in a browser on PC or Mac computers.
Over time, most applications will be written for browsers first, even if they store some data locally on the desktop hard drive.
Read more:
To download the 2022 Accounting Cloud Apps Report written by Sholto Macpherson go to: bit.ly/apps-report
