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Cloud Accounting in 2015 – where are we at and where is it going?

The world of cloud accounting software has already seen much activity in 2015. Both MYOB and Xero have hosted road shows around Australia drawing in 8000-9000 registrants each, and using the opportunity to show case their products and promote future directions.

MYOB especially has reason to be confident in 2015. It can now provide cloud accounting software solutions for a range of businesses from the micro end of the small business market up to larger enterprises looking for an ERP solution. Last year MYOB Essentials was rebadged and relaunched from  MYOB Live Accounts, the AccountRightLive range – the desktop product that can be synched and run in the cloud – is now stable, and more recently MYOB Advanced– the recently acquired cloud based ERP solution from Accumatica was also launched. So although these products are not scaleable; as a company, MYOB can deliver cloud accounting software across the range meaning for the first time for many years it is operating on the front foot.

Xero too has reason to be happy – as well as the usual numbers: exponential increase in number of customers, large numbers of product releases during the past year, increasing number of add-on products available in its ecosystems, Xero finally was able to announce the imminent release of the inventory module thus providing the long awaited missing piece of the jigsaw puzzle. This not only provides additional product credibility but also will remove the one feature that was missing when comparing Xero with competitor products such as QuickBooks Online and Saasu. Xero announced a heap of other functionality releases at the road show thereby promising that the path would be forward and up in 2015.

Intuit looks to be quietly beavering away in the background, consolidating its position. It too released the missing piece of its jigsaw puzzle in December last year when ABA file functionality was made available. (It had always been available in its Payroll module but not for Suppliers). Recent announcements have concentrated on additional functionality being provided for Accountants rather than end users which aligns with Intuit’s traditional marketing model via accountants. So the better the tools for the accountant, the more likely they are to adopt and recommend the product. No major end user enhancements have been announced for 2015 but we can expect consolidation of position and product during 2015.

Reckon is the one cloud accounting software supplier with not so much to be confident about. By its own admission, take up of its entry level browser-based product Reckon One has been disappointing. This lack lustre performance has been attributed largely to the lack of a Payroll module which is logical as the product can only appeal to the sole operator with no immediate intention to hire staff. Current timelines indicate that Payroll should be available by the end of the financial year and it remains to be seen if this will reverse the disappointing uptake. Reckon also suffered badly last year with major access disruption when Version 2 of Reckon Accounts Hosted was released, whilst that has stabilised outages continue to plague the product. In a world where 24/7 access is the accepted norm, this has severely affected consumer confidence and loyalty. Reckon badly needs a good 2015 but there are no guarantees at the moment.

So how do the various products measure up at the start of 2015?

I like the rebadged MYOB Essentials, it is a neat, concise and easy to use piece of software. With Bank Link embedded in the product it provides key useability features on automation of bank data. It is priced reasonably at $29 per month without payroll and $40 per month with. However it lacks a number of key features that we see in Xero and QBO including:

  • No ABA files for either Payroll or Suppliers.
  • No User Roles to specify function access.
  • No Classes (QBO) or Tracking Categories (Xero).
  • Limited user control over posting payroll into the accounts.
  • No foreign currency capability for Customers or Suppliers.
  • No Inventory – (Xero’s inventory module  is scheduled for release in a few weeks).

So it is still positioned very much at the micro end of the market but is easy and intuitive for a first time user with no accounting experience.

Xero continues to delight. The company walks the talk of Customer Engagement and User Experience. It has a great employee portal, and the auto superannuation payments removes the greatest admin hassle of every small business employer. (I recommend the premium option of Xero even to employers with just one employee – the extra $10 per month payment is worth its weight in gold). It is packed with many added extras such as Files, the online B2B customer/supplier invoicing and many other features that support business operations. The product is possibly less intuitive to the first time user and reporting still has a way to go but I still admire the company’s visionary focus – it really does create the answer before the problem is articulated.

QBO is about to lose its competitive edge over Xero when Xero releases its inventory module. QBO came fairly late to the Australian marketplace, Xero had already achieved incumbency and Intuit had to search out the second wave of accountants and customers that hadn’t climbed on the Xero bandwagon. The exact figures for Australian customers is not known but in their latest press release, Intuit announced out of 841,000 global paying customers, 127,000 were outside the US. The majority of these are likely to be in Canada, followed by UK, Australia and India. Xero has said it is close to 200,000 paying customers in Australia alone so Intuit certainly some challenges to close this gap in here. During 2014 however, a lot of effort went into the Australian version of the product so that many annoying small glitches were ironed out especially in the areas of bank feeds and GST. The final icing on the cake came with the release of ABA files in December. With increased numbers of staff and improved functionality, Intuit is looking good for 2015 – we just need to see it notch up some runs.

Reckon One is somewhat mystifying – as previously noted, it lacks the key Payroll module yet at the same time has a time and expense module which tracks billable and unbillable time and expenses against clients and projects, it also has a full blown budgets module so it is a mix of in depth features and omissions. It does however have the most illuminating Dashboard which is visually appealing, uncluttered and with widgets that are user definable and relevant. (This feature has been announced for Xero in 2015)  From a pricing perspective it is competitive but a little difficult to compare as payments vary depending on specific functionality selected. It remains to be seen whether Reckon One will become a valid software solution option in 2015.

The end game is of course to retain existing customers whilst also gaining new ones. There are three main sources of new customers:

  1. Customers new to accounting software – either start-ups or moving off manual systems.
  2. Customers migrating from Desktop to Cloud within the same supplier – largely MYOB and Reckon.
  3. Customers converting from one supplier product to another.

The issue of retaining customers is something MYOB has grappled with over the past few years. Historically software suppliers such as Xero and Saasu have said that the source of new customers has been about 50% customers new to cloud accounting and 50% converting from another supplier’s product. More recently Xero has said about 60% of its new paying customers are conversions from another product (35% from MYOB).

So the marketplace for customers changing their accounting software is a lucrative source of business for the cloud-only players such as Xero and Intuit, both of which provide free data conversions from MYOB and Intuit also provides free data conversions from Reckon Accounts.

Converting and new customers come from a variety of sources and select the new software for a variety of reasons. The main sources are recommendations from accountants or other businesses, or from individual research. And the main reasons for converting to another software product are disenchantment with existing supplier or software, finding the current software too difficult or not responsive enough to the needs of the business.

All these factors mean that now more than ever software suppliers must be fully engaged with their customers, they must understand and meet (or even anticipate) their requirements. So 2015 is shaping up to be an interesting year with a lotof moving and shaking expected.

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One comment on “Cloud Accounting in 2015 – where are we at and where is it going?

  1. As always Margaret – a wonderfully honest and professional review of Accounting software showcasing many of the features and benefits of the main players – however – like Google – ‘Xero’ were born in the Cloud and their ‘sum of the parts’ integrated Add-On ecosystem – is by my reckoning about two years ahead of any competition. This then is the holy grail for any trusted Accounting Professional and advisor – SMB’s are desperate for unified and integrated workflow solutions – not just a great accounting platform and why Xero leads whilst the others just follow.

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