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The modern practice

Today we’re announcing a new initiative for the accounting industry.

Right now Xero offers client side accounting, as well as accountant side features such as annual reports. We believe the ‘single ledger’ is a fundamental disruption to the accounting software industry because it provides huge efficiencies to the accounting practice and reduces cost dramatically.

Examples of what we’ve already delivered for accountants include Xero Partner Edition, Cashbook and recently Ledger – all these were developed based on partner feedback. We’ve also delivered the first part of Final Accounts (Reporting Codes), and those who’ve seen previews of Xero Final Accounts can’t wait for its release.

As we provide more day-to-day requirements for accountants on the Xero platform, we’ve taken a good look at the other software they use to run their practices. We obviously need to coexist with these products, and used together, there’s a huge impact on productivity. This has lead to the initiative we’re launching today.

The Problem

Frankly, we were shocked at the software used by many accountants to run their practice and the acceptance of it. We’ve seen low quality and very dated solutions which cost tens of thousands of dollars for the software and servers. Further, we don’t believe the roadmaps of the incumbent vendors will take accountants down a desirable path. Under these vendor models, server environments will get more complex and expensive. This is the opposite to what’s happening with the Cloud. Cloud vendors like Xero manage complex applications for you and share the cost among a broader base. The Cloud approach delivers commodity pricing.

Accountants are not technology experts and it’s expensive and at times and mind boggling for them to work out what is the best set of solutions for their practice. We are technology experts. Not just in the small business space, but we have a very good understanding of mid market and enterprise solutions. Obviously we’ve been keeping track of what the big vendors are doing in the Cloud too.

The Challenge

Having taken the time to understand the requirements of our accounting partners, what they need includes: client accounting, final accounts production, tax filing, practice management, document management, customer relationship management, electronic marketing, office productivity, file storage and printing and a website. It’s a big list of applications that need to work together.

Subsequently we’ve formed a view of why the market is – as it is. In reality no one vendor provides all of those things. The accountant’s challenge has been to work out which products are best and pay someone to integrate all of those systems together. Accountants have told us this can be a real headache. What’s more you may have had to suffer bad service, not to mention great expense.

Accounting practices are small businesses themselves, so selling to you and supporting you is tough. Implementation projects tend to be a nightmare and the types of vendors that sell into the market are just not the ‘A’ team.

There is a better way. And it’s much cheaper.

The Solution

Together with a number of our partners we’ve come up with a selection of best of breed products that work well together. And we’ve really thought about how we bring commodity pricing to you – to save you money, not just headaches.

There is no perfect system – yet. But we’ve brought together a suite of technologies and supporting vendors who will commit to work hard for you so you have an integrated set of tools that will make your accounting practice hum.

One of our primary partners in launching this initiative, which we call the Modern Practice, is Microsoft. Microsoft is the largest software company in the world and you’re no doubt already using their products. They have commoditized a number of key services by moving them to the Cloud. This means you won’t have to buy and manage your own servers anymore.

The other missing piece has been web based tax. We’ve thought hard about developing this ourselves, but we also feel tax it is tied closely to practice management, plus it’s country specific. So we’ve decided to work with one of our great partners WorkflowMax, and provide them with some additional capital to develop a tax module. We announced that earlier today.

When can I have this?

Most of this is available today and we’re hard at work doing the bits that are missing. But we’re ready for you to start planning and moving straight away. If you are considering changing your server technology to anything else, we suggest you make contact immediately and we will explain why this approach is better. We’re initially starting in New Zealand, but will quickly add the appropriate partners in other countries.

Let us know what you think of this initiative or any questions by commenting here on the blog. You can also help us shape the Modern Practice by joining the conversation on our LinkedIn Group.

http://www.xero.com/modernpractice

 

Read more about Accountants

 

20 comments

Richard Butler
29 September 2010 #

Great initiative, Rod, now Microsoft have viable offering in BPOS there is very little reason left to have a server on site anymore. We sell a great cloud based telephony system as well which is excellent for small businesses and these sort of solutions pretty much give everything a small business might need in the cloud. All we need to do now is get some cheap, fast connectivity in this country and the jigsaw is complete. WorkFlowMax is a great choice we have used them for 2.5 years now and think their product is excellent.

Cheers,

Richard

Michael
29 September 2010 #

Hi guys, very excited about this new initiative. Cloud based computing has evened the playing field for small guys to start their own business. I have been hoping a cloud based tax solution would come along soon. Great work!

Rod Drury
29 September 2010 #

I’ve just started a discussion in the LinkedIn group around file structures for document management. We’re really keen to see some examples of the filing hierarchies you use and any other attributes you’d like to report on.

Or even the sort of queries you’d like to be able to ask to locate documents would be very useful.

Julesaplenty
29 September 2010 #

I just stared using this inventory – I initially set it up to make invoicing easier but now want to track numbers of items bought and sold. I dont seem to be able to put in the number of each item now that ive done a stock check for year end. Can anyone tell me how to input the number of items in to each stock item please.

Leanne Berry
29 September 2010 #

Hi Rod

I am actually presenting at the Australian Bookkeepers Network Conference in October on Technology and my presentation focuses heavily on BPOS – this has been something I have been investigating for a period of time after enquiries and discussions with bookkeepers and consultants about practise management software – I even talked to some developers but the costs were astronomical!

Looking forward to keeping up to date with your initiative and congratulations on recognising this gap in the marketplace

Cheers

Leanne

Charles Verrier
29 September 2010 #

I’ll watch developments here with interest – particularly if you decide to look at compliance products for the UK. A cloud based personal tax product could really shake things up.

I’d be Happy to contribute on Document Filing structures and use cases for the profession.

Dennis Howlett
29 September 2010 #

My one caveat: tax. It’s been a graveyard for many a software vendor. Far better to leave it to the specialists and shoehorn into their offerings IMO.

Dave
30 September 2010 #

Great concept.

The missing link – I believe Acclipse based out of CHCH already provide an online tax solution.

Jason M Blumer
30 September 2010 #

Dude, love the focus on finding a tax system in the clouds. We are a US-based CPA firm and we are quickly moving files off of our server to the cloud. But the technical tax piece is a nightmare to find. There is no true web app that I know of. So we are resorting to a remote hosted solution.

Figure this out, and you’ve got a partner in the US, Rod!

Adrian Pearson
30 September 2010 #

Great idea in principle Rod, but I worry that getting involved with tax will prove to be Xero’s Vietnam.

And I really don’t see how the cash injected into WorkflowMax can even scratch the surface of the programming work that will need to be done (unless the NZ tax system is much,much simpler than the UK’s).

As a long-term fan of the Xero product, I worry about this “foreign policy” adventure. Keep the troops at home I say.

Jon Stacey
30 September 2010 #

I’ve always seen businesses trying to build the perfect all-singing-all-dancing solution – it never works as there’s always a weakest link. I would stick to what you do best and be open to linking of other best of breeds that you need for the portfolio – was that me just agreeing with Dennis? – I think it was!

Rod Drury
1 October 2010 #

@Adrian and @Jon. Your concerns are exactly why we’ve taken this approach.

Xero is very much sticking to its knitting and building the best accounting system. But as Client-Side and Accountant-Side products come together in the Cloud we need to coexist with other Accountant-Side products. That is why we formed partnerships with who we believe are the best of breed companies and products. We could have built Tax ourselves but it made more sense to take a small investment in WorkFlow Max who already have a great Practice Management system and can build New Zealand Tax. We have more than enough to do on our existing roadmap.

This investment allows WorkFlow Max to extend their team and build Tax. We’ve helped them with the specs and in NZ there is a lot to do but quite achievable and we look forward to demo’ing progress at our conference in February.

Xero already provides accounting data that can be used in other tax systems like MYOB AO, APS, Handisoft and Acclipse.

Part of the commentary we’re seeing I think relates to another key point. The accounting software industry has been conditioned to glacial like progress. There is a large difference in how the incumbents have traditionally built software and the new generation of web companies who take an iterative approach. Xero is a great example of this. While our investment is much more than most smaller start ups it is still orders of magnitude under what the incumbents have spent on software development over the years.

Building complex web applications and the business systems to run them takes passion and energy. Xero and Workflow Max have this and when it all clicks you can make huge progress in a relatively short time.

Hope this allays your concerns.

Rod

Anja O’Connor
5 October 2010 #

It’s not just about Income Tax, a big help would be a tool to file multiple GST returns, coordinated by a workflow program that pulls data from Xero. This could be a good start, not just for accountants, but bookkeepers and company accountants. As Xero keeps proving, there is always a better way. A start has to be made but with the big picture in mind. It’s too easy to sit and leave it at that … and get left behind.

Earl Rudolfo
12 October 2010 #

I’m taking a slightly difference approach to the Best of Breed online solutions for Modern Practice as it relates to small business. I’m utilizing Xero and Zoho Small Business (in reality a small business platform). From there, I’m including other apps to fill the gaps in the integration process.
P.S. – Willing to share ideas and collaborate with others on this project so you can develop and utilize it for your own modern practice

Mark Stewart
15 December 2010 #

It’s a great concept and I love the thought of getting away from a server environment and being able to work from multple locations with effectively a full IT infrastructure available wherever there is a workstation or laptop.

Are there any plans to introduce content resources for accountants within the Modern Practice environment along the lines of Business Fitness?

Also, while having “best of breed” may appeal, there is also merit in having options. I assume you will be allowing other providers to continue offering alternatives for providing the individual add on components?

Rod Drury
15 December 2010 #

@Mark Yes, Sharepoint provides an ideal repository for value added content from accounting process specialists like Business Fitness or CountGPS.

And yes, we expect other providers to link in or provide alternatives for parts of what we are putting up here. Makes sense for all of us to be open and ensure that we each provide the best offering we can. The small business sector is so large we don’t expect a single vendor to be able to suit the entire market.

David Russell
20 May 2011 #

After a presentation on the modern practise was left confused as to the storage location of various forms of data ie tax returns, workpapers, e-mails and output from MS products. The sharepoint solution from office 365 has to be the only place to store all data

Richard Phillips
22 May 2011 #

@David – With the Modern Practice made up of a group of solutions that work together, the data is stored depending on where it is generated. It makes sense to store items like tax returns in practice management, and other items like email, Microsoft Office outputs etc in PracticePoint (the SharePoint template). You’re right in that a good catch-all for storage is PracticePoint. That said, the beauty of the web and bringing these best of breed solutions together, means we can continually build out the integration points between each solution to make relevant data available in the right places – despite its native storage location. A good working example of this is the client data in WorkflowMax (practice management) that seamlessly sync’s with the customer marketing lists in e360. We’re also looking at other integrations first up like having a hyperlink in WorkflowMax for documents that relate to a particular job that are stored in PracticePoint. Keen to get your thoughts on other obvious places where we can surface key data as well.

[...] Xero released an article title The Modern Practice (article here http://blog.xero.com/2010/09/the-modern-practice/ ). The article talks about the need for cost effective solutions for accountants to make running [...]

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