Cloud-based accounting firms add five times the number of clients of traditional firms, a survey of more than 700 accountants and bookkeepers has found. Our new research has uncovered that firms with a higher percentage of clients using cloud accounting software have a higher year-over-year (YoY) revenue growth.
Accounting professionals who are already all-in on the cloud may not be aware of how well they’re tracking in comparison to traditional firms. For practices still on desktop software, the results serve as a reminder of what could be.
As further indicated by the research, cloud-based firms show no sign of slowing when it comes to revenue growth. Here’s how cloud practices stack up against traditional firms.
How cloud practices and traditional firms compare
Cloud accounting software automates manual processes and gives accountants back time in their day to focus on more than just the day-to-day numbers for their clients. With this free time, cloud practices are able to add more clients, as evidenced by the survey results. Quicker data entry also means more time to focus on the important advisory services for clients, which is leading a lot of cloud practices to switch to value-priced billing – often meaning a higher return from each client.
Xero’s survey found that cloud practices on average take home more per client than traditional firms. Cloud firms earn $7,070 versus $4,476 average annual revenue per client
Firms with nearly 100 percent of their clients on cloud accounting software had a year-over-year revenue increase of 15.5 percent, compared to traditional firms who had growth of 3.9 percent. In addition to adding more clients than traditional firms,
The results are reflective of the ever-evolving nature of technology, those who are willing to adapt to advancements in cloud technology reap the rewards by keeping pace and growing faster.
Making the switch
For traditional firms wanting to take advantage of the growth potential moving to the cloud offers, the transition can seem like a daunting task. Truthfully, it doesn’t happen overnight – it takes careful planning combined with access to the right resources. A successful plan will include key milestones along your cloud transition journey so you can ensure you’re always moving forward.
Appointing team members dedicated to the respective roles of converting clients and taking care of the day-to-day will help ease the transition. So too will going in knowing that adding new clients will need to be re-prioritized in the short-term so you can focus on executing your cloud strategy. Setting this expectation from the beginning will allow the focus to shift to the development of a new firm infrastructure.
A diverse accounting firm is a successful one. The largest generation in the workforce, millennials, are a key piece of the cloud accounting practice puzzle. Adept at new technology by nature, millennial employees will generally help with those pain points when it comes to onboarding staff to cloud accounting software.
As the proportion of clients on the cloud shifts to the majority, it then becomes necessary to rethink billing. With a lot of the time-heavy work in desktop accounting software now automated, value pricing is far more reflective of the substance of the work – as opposed to billing hourly. It gives clients a price they can expect to be billed every month.
While in the near-term, making the switch to going all-in on cloud technology may seem daunting, as you progress down the journey of becoming a cloud advisor, the benefits of growing a more profitable firm should start to flow.