Accountancy is moving online
Accounting professionals are often divided when it comes to the cloud. More and more accounting firms are moving to the cloud – that's because they understand the benefits such as better mobility and easier collaboration with clients. These are vital when you're trying to build a successful practice that will thrive in the long term.
Most accounting professionals believe that the cloud is the future. However, nearly everyone also agrees that there's no clear best practice guide for moving a firm and its clients to the cloud.
It's not easy to go from being a traditional accounting practice to becoming a modern firm that enjoys the productivity-boosting benefits of the cloud. You’re not just shifting your clients and software to an online environment – you’re also reinventing the way you work and engage with those clients.
It's true that your business will be more efficient once you’re up and running in the cloud, but you'll need to get there first. The migration process will be slightly different for each firm, but in this guide we'll cover the main steps involved.
What is cloud accounting?
You're probably already using cloud technology every day, whether you realise it or not.
For example, perhaps you share files using Dropbox or ShareFile, or maybe you use online office software like Google Apps or Microsoft 365. Any system that lets you access your data remotely is a type of cloud system.
Cloud accounting software works in a similar way. You use it just like normal accounting software, but with one important difference. Your clients' accounts data isn't stored on your own computer, where it could be lost, stolen or accidentally deleted. Instead it's stored remotely on secure servers.
This means you can access it from anywhere at any time – from a laptop, smartphone or tablet. It means your IT costs are reduced too, and you'll always have the latest, most secure version of the software.
Cloud accounting can increase your revenue
Cloud accounting can make your business more efficient. It lets you provide basic accounting services more easily – and cheaply. This means your staff can spend more of their time on lucrative work such as advisory services, consulting and new business development.
Companies using a fixed-fee pricing model tend to benefit the most when moving to the cloud. That's because they cut the time spent on traditional services like bookkeeping, accounting and tax preparation. They can then take on additional clients and projects, using the same number of staff.
All of this can strengthen your position as your clients' most trusted financial and business management advisor. In fact you can become a virtual CFO. Instead of simply preparing financial reports and fixing data errors – you can:
- explain what the numbers actually mean
- provide financial guidance
- advise on business decisions
- prepare growth strategies
- identify problems
This type of advisory service is beneficial to small businesses – and that means higher profits for you. To move your practice to the cloud, read our three key steps outlined below.
Step 1: Start using cloud solutions
The best way to learn any new technology is with hands-on experience, and cloud accounting is no exception. A good way to test cloud accounting software is with a copy of your firm’s internal accounts. You already know what to expect from the data, so you will quickly be able to see if the numbers add up.
Good cloud accounting software will let you set up a free trial. Enter your data into the trial account and check that the software handles basic accounting properly. Then you can compare the cloud software to your existing accounting system.
Look for any major differences between the two systems, including ease of use, workflow and terminology. Start by doing a basic run-through and ask yourself questions like:
- What’s different?
- What’s new?
- Can I do everything I did in the old software?
- Do I have to do things in a different way? If so, is it easier or harder?
- Are there any shortcuts I can take to simplify my work?
- What tools are available to automate repetitive tasks?
Understand the benefits
Once you've got to grips with the basics of the software, you can evaluate it on a deeper level and think about how you’ll use it. Consider questions like:
- Which of my clients would this software be suitable for?
- Which clients would not be suitable – and why?
- Can this technology be used to improve client relationships?
- Can I work more closely with my clients using this software?
- Will it empower my clients to take a more active role in managing their accounts?
Remember that new software can't be learned overnight. But introducing more effective and productive processes will be a big win for your practice – so keep an open mind.
Step 2: Identify ideal clients
Once you're comfortable using cloud accounting software, you can roll it out to some of your clients. Choose carefully, to keep the migration process as simple and straightforward as possible. As a guide, you could consider clients that meet the following criteria:
- Business profile: Less than two years of operation, tech-savvy, fewer than 10 employees
- Tech usage: Microsoft 365, Google Apps, Dropbox, smartphone, tablets, other cloud solutions
- Industries: Professional services, creative agencies, online companies, building trades, owner/drivers
- Clients to avoid: Substantial inventory, multiple software integrations, heavy transactional volume
Small businesses such as the self-employed are well-suited to a cloud pilot program, because the migration process should be quite straightforward. Young, tech-savvy companies that use mobile technology are also good candidates. That's because they probably already understand the benefits of cloud computing. Professional, creative and online companies often meet both of these criteria, making them ideal clients for the first move to the cloud.
But clients that have substantial inventory, complex software integrations or high transactional volumes should be avoided. Moving such clients to the cloud will be a more complex process. It's easier to do it once you're completely confident with your chosen cloud accounting software.
If none of your clients seem suitable, consider your most cost-conscious customers. You can pitch a cloud-based system to them as an economical alternative to a desktop product, since they’ll be paying a small monthly subscription. You could even bundle the cost of the subscription and your fees into monthly invoices. That way they won't receive big bills at various times throughout the year.
The cloud can even help you keep clients that you were thinking of releasing. Sometimes it’s necessary to part ways with a client in the interests of profitability or time – or even your own sanity. But the cloud could end up being the key factor that saves and enhances the relationship.
Timing is everything
Another way to simplify cloud migration is to choose the right time. Most clients prefer to start fresh in a new accounting system at the start of the fiscal year. This makes life easy for the client, but you should start the setup and preparation process a month or two earlier.
Remember, cloud software can simplify data entry by linking into automated bank feeds. So as the fiscal new year approaches, you can continue to enter data into the old system while the cloud system updates itself in the background. This will save you time, letting you start the transition to the cloud without doubling your workload.
You could also migrate a client to the cloud after a major data cleanup or reconciliation – usually at the end of a month or quarter. You’ll have accurate and clean data flowing from the old system into the new. That will make it easier to prepare the data for the transition.
Step 3: Set up, convert and learn
As you move your first group of clients to the cloud, make sure you evaluate what works and what doesn't. Try to learn from the transition process and decide what your next course of action should be. Ask yourself the following questions:
- What worked and what didn’t? Why?
- What features did my clients use? What did they value?
- What features did my clients ignore? What did they struggle with?
- Where were efficiencies gained? How can I make better use of these?
- How can I become my client’s trusted advisor?
You should also think about your role in the migration process. Specifically, did you:
- Handle the process well?
- Communicate effectively?
- Work collaboratively with your clients?
- Train your clients well, so they were using the new solution from the start?
And finally, don't forget to ask the client what they gained from moving to the cloud:
- Do they like the software and find it effective?
- Do they feel more engaged with you?
- Do they feel empowered to take a more active role in their finances?
- Do they have better access to useful accounting workflows?
Refine the migration process
Every client you move to the cloud will teach you more about the process, so take the time to reflect on what happened. This will help you refine and improve the migration process for future clients. And it will help you make the most of the benefits that cloud accounting software can offer.
Once you and your initial clients feel comfortable working in the cloud, you can start moving other clients over. If you follow the steps outlined here and use what you've learned, the process should become easier each time.
Disclaimer: Xero does not provide accounting, tax, business or legal advice. This guide has been provided for information purposes only. You should consult your own professional advisors for advice directly relating to your business or before taking action in relation to any of the provided content.