Accounting embraces cloud technology

By Robin Roenker

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A study conducted by Intuit found roughly 37 percent of U.S. small businesses utilized cloud computing in 2015. By 2020, the number of cloud-operational small U.S. businesses will surge to 78 percent, the report estimates.

The accounting industry, in particular, has been quick to see the potential benefit of shifting to a cloud-based service platform. Intuit, the California tech company best known for its accounting and tax software like QuickBooks and TurboTax, is – along with other longtime leaders in traditional accounting software such as Thomson Reuters and SAGE – helping push the industry along in its crossover from PC-based software to online, cloud-based options.

Because online models are viewed as a more profitable and efficient means of distribution, tech companies are diverting the majority of their R&D away from on-premise, PC-based software to cloud-based “software-as-service” platforms, Forbes’ Gene Marks reported in 2014.

The writing seems to be on the wall: The future of accounting and financial management services will be cloud-based. Already, an array of cloud-based options are available, including QuickBooks Online, NetSuite, FreshBooks, SAGE Online, Xero, and Intacct, just to name a few.

At small businesses and accounting firms across Kentucky, and nationally, the move away from traditional, PC-based accounting systems to cloud-based solutions is happening. A complete, industry-wide shift will take time, however.

Already, nearly 40 Kentucky municipalities, including Lexington, Berea, Elizabethtown, Florence and others, have adopted Springbook – a leading provider of cloud-based financial solutions for local governments – for online processing of their accounting, payroll, utility billings and other financial services, according to a March 2015 news release by Springbook Software.

And in 2013, 173 Kentucky school districts – the entire state except Jefferson County Public Schools, which planned to migrate later – shifted from their on-premise enterprise resource planning (ERP) systems to a cloud-based system from Tyler Technologies, making Kentucky the largest school system in the United Stated utilizing a cloud-based financial management system, according to a news release announcing the move.

Despite these significant movements to the cloud, many small businesses remain reliant on traditional, PC-based accounting systems. A national survey of small businesses conducted by Software.com found that 43 percent of small business owners were still using on-premise accounting software in 2015. But, interestingly, the same survey found that the number of small businesses using a cloud-based accounting platform had nearly doubled – from 16 percent to 30 percent – in just one year, from 2014 to 2015. Further, 70 percent of respondents in 2015 felt they were “moderately to extremely likely to invest in cloud-based accounting solutions in the future.”

“People are moving in that direction. I think still the overwhelming majority are not there yet, but it’s picking up speed,” said Bob Patterson, a past president of the Kentucky Society of CPAs and founder and managing member of Patterson & Company CPAs in Louisville, which has utilized a fully cloud-based model for its services since the company’s launch five years ago.

Dubbed CloudBOSS, Patterson & Company’s cloud-based platform allows clients to view their financial analytics in real-time.

“From the client standpoint, it’s actually a lot easier, because they don’t have to go through a whole bunch of hurdles to get their information,” Patterson said.

Kris Kemp, tax partner at Myriad CPA Group in Owensboro – which was highlighted in a 2015 Accounting Today story for its successful implementation of QuickBooks online – said that about half of their clients are cloud-based.

“I think it will be awhile before we get to 100 percent, just due to the demographics of where we reside. But the trend is going that way, and it’s not going back,” Kemp said.

Cloud platforms have no borders

For firms like Lexington-based Wheeler Financial Solutions, now in its 12th year, the move toward cloud-based platforms has yielded tangible cost-savings and helped add clients.

“For small firms, like us – we have just six staff members – you kind of have to do that (move toward online, cloud-based services) just to compete these days,” said founder Lafe “Pete” Wheeler.

Moving to a 90 percent paperless, cloud-based accounting system (his company retains paper copies only of essential contracts and key documents) has shrunk Wheeler’s physical office space but expanded his office’s reach.

“When I first got into public accounting, we had a 20-by-20(-foot) room full of file cabinets where we retained hard copies of all the client information. But we just don’t have to do that anymore. We can work now in a much smaller footprint. About six years ago, we moved into our current office space and were able to reduce our office size by 40 percent.”

In addition to the cost savings on rent, Wheeler’s shift toward cloud-based accounting has opened his firm to clients around the country. “It allows us, as a small practice, not to be limited to clients only within our local area. We have clients from San Diego to Savannah, Ga.,” he said.

The hope of expanding their client bases is one key factor motivating Kentucky accounting firms to make the move to cloud-based technologies, agreed Penny Gold, CEO of the Kentucky Society of CPAs.

“I think there’s a real benefit in being able to have a CPA firm without borders,” Gold said. “And some firms are expanding their services into not only multistate but also into nontraditional areas like payroll and business accounting.”

Enabling increased partnership

At Lexington-based Dean Dorton, one of Kentucky’s largest CPA firms, the decision to launch its cloud-based AFO (accounting and financial outsourcing) service line last August came from a desire to streamline efficiency and improve effectiveness for its clients, said Jason Milller, Dean Dorton’s director of business consulting services.

The firm’s client accounting group was using “a mishmash of tools and different ways to deliver services. We were on 10 different versions of QuickBooks,” Miller said. “We’d have some clients where we’d do QuickBooks at their office, and we’d have some where we’d do it at our office, and we had some where it was a combination of both, where we were passing files back and forth. We had people on Peachtree or Great Plains or MAS 90 (other mainstream financial management software).

“I looked at that and thought, ‘We’ve got to change this to figure out how to, first, leverage technology to provide a better product to our client and, second, drive efficiency so we can control the cost, for our clients and ourselves,’ ” Miller said.

The resulting AFO service, powered by Intacct, a cloud-based accounting platform, allows Dean Dorton to provide clients with customizable online “dashboards” that enable them to view real-time financial details from their smart phone, tablet or laptop – wherever they are, any time of day. Patterson’s CloudBOSS system, Wheeler Financial Solution’s SAGE Online-based system and, of course, Myriad’s QuickBooks Online system also offer real-time, ease-of-access to financial data via mobile devices or PCs.

Traditional PC-based accounting software is installed only on a company bookkeeper’s computer, limiting access to who could view it and how it could be viewed. New cloud-based dashboards allow multiple users at a given client’s firm – from the CEO to the controller to the sales manager – simultaneous online access to real-time data about the company’s financial status.

“Historically, we would produce a packet of monthly financials for a client. A lot of times, even with a well-run company, it might be 10-15 days after the end of the month that you would receive those financials. And a lot of clients would just put them in a drawer and do nothing with them,” Miller said.

“We believe the power of these dashboards is to design them in such a way that it’s information clients are interested in, and that they can understand easily. By doing it in a visual format, we think that tears down a few of the (communication) walls, and they are more inclined to look at it.”

Since key financials vary, dashboard components do, too.

“We can customize the key pieces of information our clients want to see – whether that’s sales, revenues, cash accounts, bank account balances, or other things,” he said. “We propose to them what we think their key performance indicators are and put those in the dashboard. Those appear (to the clients) graphically, with the ability to drill down to real-time data.”

A popular feature of the cloud-based system is the ability for clients’ employees to snap simple smartphone photos of business travel expense receipts – which then upload via app into the company accounting system – saving the headache of keeping paper receipts and filling out hard-copy travel justifications at the end of each month, Miller said.

Kentucky accounting firms that have made the leap to cloud-based offerings say the move has increased communication flow with their clients, enabling them to build better relationships and partner more in the financial success of their customers.

“In our opinion it actually increases our communication with our clients, because we typically have more conversations with our clients,” said Myriad Group’s Kemp. “It’s just that they now don’t last as long: They’re quick, just ‘Hey we need this info, can you provide it in this manner’ type calls. It’s actually increased the efficiency on both ends.”

And, the real-time nature of the cloud-based platform allows accountants to take a more active role in their clients’ business.

“Clients pay us to do a service. It’s not just to provide them with a tax return or a financial statement; it’s to try to maximize their profitability. So with this type of technology, it provides a better opportunity to do that rather than an after-the-fact ‘Here’s how you did.’ We can catch trends developing before they get too far along and try to make corrections, or find errors before they get too far down the road,” Wheeler said.

Achieving comfort with security

But is it safe? Given near-daily reports of hacking and security breaches at major American corporations, that’s one of the first questions potential clients ask when their CPA suggests the leap to cloud-based accounting services.

It was for Patterson as he considered launching his cloud-based firm.

“Initially in my mind, security was an issue,” he said. “However, there have been all types of studies done that say actually cloud-based is more secure (than on-site software systems) because if I had a server on premises, someone could come in and steal the whole box, or the building could burn down, and I’ve lost everything. That really convinced me (of the merits of going cloud-based).”

Wheeler noted that at a local level, financial management firms must implement online safety protocols, including double-firewalls and encryption, which are then compounded by the even-more-enhanced protocols put in place by national host platforms like SAGE, Intacct or QuickBooks.

Miller agreed.

“While somebody may think that their stuff may be safer on a server in their closet, in most cases it’s not, because they’re not putting forth the right level of (update) patching and security defenses that a company like Intacct has to put into their annual security assessment,” he said. “They have third-party firms come in and access their security, so they comply with SSAE16 standards, and they do a statement of assessment of their (safety)Doug-Barr controls and provide an independent report. And we can get those reports for our clients, to give them the peace of mind that Intacct is doing what they say they’re doing to safeguard their information.”

Once clients are convinced of the safety of the switch, they’re typically pleased and surprised by the increased accessibility and data analytics the cloud-based platform provides, Miller said.

Ultimately, the shift to cloud systems will enable accountants to enhance the services they provide their clients, Miller said. “Anyone can process transactions. The power is in doing it efficiently and providing the information back in such a way that it makes a positive impact on our clients’ business.”


Robin Roenker is a correspondent for The Lane Report. She can be reached at [email protected]

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