Why a powerhouse UK firm switched to online accounting

Accountant & Bookkeeper Guides

5 min read

A 150-year-old firm has moved more than 4,000 clients to online accounting. Armstrong Watson were already one of the biggest accounting firms in the UK – so why did they change?

Grant Smith – Partner, Armstrong Watson

This guide is brought to you by Xero and our Xero partner, Grant Smith, because we share a passion for helping practices everywhere thrive.

Why we chose accounting automation

A lot of businesses are stretched by tax and compliance paperwork. We wanted to help make it less complex for them, reduce their workload, and lower stress by setting up online bookkeeping and accounting software.

An automated accounting system made sense because it would:

  • retrieve data directly from the business bank account, so business owners don’t have to enter it into their accounts themselves

  • update every day, so businesses can stay on top of reconciling transactions and always know their cash flow situation

Online accounting software also integrates with forecasting and benchmarking tools, which allow us, the accountants, to show businesses where they’re headed.

We’d put a few hundred clients onto Xero a while back and we could see how much more efficiently those businesses ran. So when Her Majesty’s Revenue & Customs (HMRC) floated the idea of Making tax digital – which would require businesses to submit quarterly tax returns – we decided it was time to act. By getting everyone onto an online accounting service, we’d be better able to deal with that extra reporting, and manage submissions to HMRC.

Better accountancy services for small businesses

Many sole traders and small businesses view tax season as a burden and they use their accountant to help them get through it. In many cases, that’s the extent of the client-accountant relationship.

Those businesses come away from the tax season exhausted, but they have a fresh set of accurate numbers that show how the business is doing. It’s perhaps the one time in the year they really know. Unfortunately they have to keep looking back to that reference point all year – even as the data gets older and less relevant.

When you set up an online accounting system for a small business, those owners get a fresh set of accurate numbers every day – not just once a year. They’re more in touch with the business, which allows us to:

  • constantly review the numbers and suggest ways of improving business performance

  • use forecasting apps to show the business where they’re headed

What do clients think of switching?

The client feedback was almost immediately positive. Businesses in a pilot group said things like:

  • the management reports are so much nicer and easier to understand

  • we can see our financials more clearly and identify areas to grow our business

  • we're relieved that we don’t have to worry about Making Tax Digital

It lets us remain a cost-effective accountancy service for small businesses – one that can handle quarterly tax reporting, without requiring them to spend a lot more money. That’s why we switched to online software. Hopefully our clients view that as a sign we’re looking out for them.

And because bookkeeping and accounting will become so much simpler for them, we hope they’ll refer new business our way.

Business owners who use automated accounting through Armstrong Watson stand in stairwell. Painting of business owner in foreground was commissioned by the accounting practice.

Armstrong Watson recently celebrated their clients by commissioning paintings of them all.

Making businesses more valuable

While most small business owners like the automation side of cloud accounting, they don’t yet see how it will add value to their business – but it will.

Should they sell the business, for example, potential buyers will be able to examine their financials in detail and see how they make money. Plus online accounting syncs with add-on apps that make the whole business more efficient. There’s compatible software for things like:

  • stock management

  • point-of-sale processing

  • job costing and project management

  • time recording

  • invoice scanning

There’s a lot that businesses can do once they get going on the automated accounting pathway.

Managing change at our firm

We’re a 150-year-old firm that’s served some local family businesses for generations. To celebrate our 150 years, we commissioned portraits of those long-standing clients. It seems old school to some and, from the outside looking in, we’re probably not a candidate for accounting automation.

But we’ve seen this change coming for a while. The next generation of owners in these family businesses know there’s smart, high-tech accounting software out there for small business. They expect to use it. It was an obvious move for us, so we came up with an ambitious transition plan for staff and clients.

Training staff

We had nearly nearly 200 staff members and partners attend a training program across three days, to ensure everyone:

  • had the skill to be competent users

  • felt comfortable with the software

  • used it consistently, right across the firm

There was a tailor-made assessment at the end, and all of our team had to pass it. We’ve also got a bank of educational material to help reinforce our new way of working.

Transferring client data

To get clients onto the new system, we wrote a wizard that took the balances from their old software and dropped them into Xero.

That made the transition relatively simple for our staff. They created an account for each client, let the wizard do its work, and then checked back to ensure the balances matched. It took about 20 minutes per client and we finished the job in a few months.

Modern accounting services for small businesses

As digital natives assume ownership of businesses, they’ll expect online accounting services. So even if we have some clients who aren’t yet interested in cloud accounting, we know their successors will be. It’s our responsibility to make sure today’s clients are prepared for that reality.

Accounting automation will save them time on tax and compliance – so it’s not like it’s a hard sell.

So long as the switch is well managed, it can be a painless conversion for a firm of any size. We spent months on the planning to make sure it was only a few months in the execution. And now we can deliver outstanding accounting services to all our small business clients.