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Cloud accounting and an entrepreneurial approach to practice pricing

By Rich Preece*

Cloud accounting is changing the way accountants work. Consider instant access to clients' financial information, mobile working, real-time collaboration, an ability to complete processes in record time ... they all represent major changes in the way we manage the books.

These developments, however, are dividing opinion within the profession, largely down to the lack of agreement on how the cloud impacts on a practice's bottom line. A recent study, for example, by AVN, an industry organisation, asked if cloud had dramatically improved efficiency and profitability: 44% said not true, 39% said partially true, and 17% said completely true.
So what's driving the difference in opinion, can we categorise accountants by their cloud stance and ultimately, can accountants use the cloud to revolutionise their pricing model?

Sceptics
This is a category of accountants that doesn't like the concept and reality of cloud accounting. Security, the barriers of understanding new tech and the overhaul of processes are all so far removed from traditional ways of working that the cloud movement is concerning and to some, terrifying - they'll do everything possible to avoid embracing it.

But cloud computing has become a fixture in almost every sector of business. For example, the International Data Association believes that half of small businesses will be using cloud accounting by 2016 [1] and the Cloud Industry Forum claims that 78 per cent of businesses have adopted at least one cloud service.

This suggests that accountants that bury their head in the sand put themselves at risk of being out of sync with modern business practices.

Commodity concerned
These are accountants that accept the arrival of the cloud but are concerned about its knock-on effect to profitability. If accounts are the expertise, product and commodity that accountants trade with, some say that simplifying it and making it ubiquitous will reduce the function and necessity for an accountant. Also, by streamlining accounts, billable hours are reduced. Added together, these represent a threat to the accountancy's bottom line.

However, accountants that view their trade simply as a commodity are undervaluing their skills and practice. Selling services to a client is about much more than the provision of sheets of numbers. Clients buy a relationship, knowledge and solutions - a consultancy, rather than a number cruncher.

Entrepreneurial
Finally, there are those who are entrepreneurial. This is a category that is excited about cloud accounting and has identified ways to use it to overhaul a practice, boost the bottom line and steal a march on competitors by changing the way they work with clients.

In other words, firms are using cloud accounting and the opportunities it presents to shift to a consultancy-based model, enabled by cloud. It's almost like being a virtual FD. And because of this they are reaping the rewards through greater efficiency, a wider skill set, a deeper role in a client's business and ultimately, profitability.

If accountancies start focusing on the value they can offer clients, cloud accounting presents the accountant with a very big opportunity. Practices will be able to help clients understand their numbers in real-time, make better and more strategic decisions and as the value of the consultancy goes up, so do the value-based fees. This results in higher profits, higher gross recurring fees and more capital value.

An entrepreneurial approach to pricing
In many ways, it's easy to understand each of these perspectives - they reflect the attitudes to embracing any dramatic shift in the way we work. There are always going to be individuals that fear change and favour traditional ways of working. Everyone can probably also think of colleagues that err on the side of caution and will rationalise against change. And then there will also be those who try to get on the front foot through new ways of working.

But the message is clear. Accountants must embrace cloud accounting because it is here to stay, and this gives practices the chance to adopt a new, value-based pricing model. This means getting paid higher prices for doing better work with better clients. This new approach to practice pricing will preserve practices and elevate the status of an accountant within a client's business.

[1] International Data Association report, September 2013

*Rich Preece is VP and country manager at Intuit UK

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