Via PC : The rise of more powerful cloud accounting services is changing the way both accountants and the clients they serve manage business finances. Web-based software affects businesses of all sizes but provides even greater value for small to midsize businesses (SMBs) and sole proprietors who gain greater access to accounting and financial tools than ever before to streamline their business.
Cloud-based accounting service provider AccountantsWorld is leveraging this technological shift to improve business productivity across accounts payable and receivable, bookkeeping, inventory, reporting, and payroll, with the philosophy of putting the power back into the hands of accountants and letting small business owners worry about the business instead. In 2003, AccountantsWorld sold its tax software business to Thompson Reuters and shifted its focus exclusively to creating cloud-based solutions for accountants. The company now processes 30,000 company payrolls annually using its software, according to Dr. Chandra Bhansali, co-founder and CEO of AccountantsWorld.
PCMag spoke to Bhansali about how cloud-based solutions are changing the way accountants and SMBs do business, the technological trends affecting the industry, and how evolving mobile capabilities and security concerns are shaping the future of accounting.
PCMag: What were some of the accounting problems you set out to tackle by using cloud technology and the Internet?
Dr. Chandra Bhansali: We asked ourselves, what are the kinds of problems we can solve by using the power of the Internet? We realized it offered tremendous capabilities that desktop did not. One thing we noticed was that payroll is essentially an accounting function because it relates to taxes but, at that time, very few accountants offered payroll services. You have to be 100 percent accurate and fulfill the requirements in a timely manner otherwise there are stiff penalties. Accountants didn’t have the tools to do that so they used to route all of their clients’ payrolls to services such as ADP and Paychex Accounting Online.
We said that didn’t make sense. We realized we should be able to create a powerful processing center and use servers at a fraction of the cost of using the mainframe. So we created the very first cloud-based payroll processing center for accountants, and gave our customers Internet access to it way back in 2004. Now they can use that to offer highly profitable payroll services to their clients, with the software doing everything behind the scenes for them: direct deposit, tax deposit, and filing tax forms and W2, W3, and 1099 forms accurately and on time. All accountants and clients have to do is enter data. For many accountants, it has become one of their most profitable services. So, we’ve changed the paradigm of payroll processing by using the cloud; payroll solution providers have followed suit by now offering some kind of accountant tools.
Beyond these immediate use cases, what are some of the other technological trends affecting the industry?
Bhansali: The trend is really toward integration in the cloud for all of these services businesses and accountants use on a day-to-day basis. Accountants also now have the tools to take over a lot of these back-office functions to help SMBs do what they do best, and to run and manage their businesses more efficiently. It’s a combination of these factors. I see the most significant productivity gains in the small business segment.
The technology is trending toward giving accountants the ability to offer complete services to their clients. It’s about filling in all of the links or components missing in that chain. Right now, business process management (BPM) is a growth area. How effectively can accountants manage that? So, for small businesses, most of the accounting until now has been do-it-yourself (DIY). Clients would do something on their end and accountants would clean it up. There is a major shift happening toward “don’t-do-it-yourself” (DDIY). Instead, work with your accountant. We’re already seeing payroll, which was taken away from accountants, coming back through cloud software. Not only for accountants but for all other service providers, the amount of time spent on back-office work for small business owners and employees is drastically shrinking as they gain the ability to offload the work to accountants.
From the accountant and client perspectives, how are cloud-based solutions changing how they do business?
Bhansali: Large payroll service bureaus don’t give accountants the same level of efficiency and productivity, and they charge clients a lot. Now the accountants they trust the most and with whom they have relationships can offer their small business clients a customizable payroll service very cost-effectively, and with an integration between the accounting and payroll systems to ensure a direct, secure data flow.
With the accounting systems, one major problem is client bookkeeping. I was talking to a CPA friend of mine a few years ago who was fuming over one of his clients, who he told never to enter anything after he closed the books. The client added another entry and it threw everything out of balance. He said he spent 20 to 30 percent of his time fixing the mess these small businesses make when they have no clue about accounting and shouldn’t have access. We started asking accountants and found this kind of client bookkeeping is a huge obstacle. If you attend any accounting or CPA conference, one of the highest attended sessions is always bookkeeping. To solve this, we’re using the cloud to enable a shift to give accountants greater control rather than systems designed for use by the small business clients themselves. We gave accountants the power to customize systems and permissions for each individual client.
Accountants are supposed to be important business advisers for their clients, but until now they weren’t able to fulfill that role effectively for small businesses. So, for a plumber who knows nothing about accounting, the accountant will give them access only to writing checks and entering cash receipts; that’s all they have to worry about. If a client is a bookkeeper, they can give them access to accounts payable and receivable, and more. Over the years this has evolved because client-side accounting is an unnecessary evil for small businesses. With these cloud-based systems, accountants can take over complete accounting work.
About a year ago, we introduced an app allowing the client to take a picture of an invoice, which goes right into the system to be paid. The integrations are really key here because they can also connect this to the client Web portal and a document management system. So the invoice goes right into the correct folder in the document management system and, at the same time, any payments and credit card transaction can be scanned and identified. When accountants log in to record the payment, all of the transactions are listed. There are also integrations with more sophisticated bill payment systems, time and billing systems, time and attendance systems, and 401k providers. We’re also creating an open [application programming interface] API to integrate with virtually everything.
Cloud accounting software users could be a small business and the accounting firm servicing them, or a larger enterprise business with an in-house accounting department. How do those use cases differ, or do they?
Bhansali: What’s happening with these solutions is there are a lot of analytical tools built in. Small businesses do need CFO-level advice, but midsize and larger businesses have their own accounting department and capabilities in their system to do these kinds of analytics, with CFOs and executives to provide input. Small businesses don’t have that. So, in cloud solutions where accountants are working with live data and have the tools to analyze it, accountants can perform this kind of CFO functionality for smaller businesses. It’s all about helping accountants harness the cloud, and the software gives accountants (and, by extension, small businesses) capabilities they couldn’t afford before.
What effect is the growth of mobile computing having on cloud accounting?
Bhansali: Smartphones are definitely changing the way we’re conducting business. Particularly for sole practitioner accounting firms, one of the reasons they never did payroll before was because, if they were on vacation, let’s say, there was no way for them to access it. Now, through accounting and payroll mobile apps, they can do it from anywhere. Our app has a very simple screen for mobile data entry. There’s also the ability to scan invoices and checks, and another mobile application we’re working on is employee expenses so they can take a picture of their receipts for expense accounts.
The other important aspect of mobile for accountants and clients is alerts. For every business, there are thresholds. Some may set that, if accounts receivable goes over $50,000, that’s a problem. For a larger business, maybe that’s $300,000 and same thing for accounts payable or cash in the bank. Accountants can set thresholds for all of these important business drivers for their clients and, when the thresholds are exceeded, the accountant can set an alert to first receive a text and then call the client to discuss in detail, or set an alert to go out to both them and the client at the same time. The accountant portals also have screens where they can see a bird’s eye view of every client’s threshold status.
When moving to these cloud-based solutions and handling sensitive financial data, how do you tackle the security aspect to ensure safe transmission, file transfer, and storage?
Bhansali: It is absolutely critical. For us, we made the move five years ago to Amazon Web Services (AWS), which was a move to put our customer data in an infrastructure with a very high level of security. On top of that, we do encryption of all sensitive data, from social security numbers and employee identification numbers to bank information. We also layer a lot of information technology and security (ITS) technologies on top of that to reduce the risk, and make our system and client data as secure as possible.
By Rob Marvin Assistant Editor, Business
Rob Marvin is the Assistant Editor of PCMag’s Business section. He was previously an editor at SD Times covering software, managing social media, and writing narrative-driven features on any offbeat story or trend he could find. He graduated from Syracuse University’s S.I. Newhouse School of Public Communications in 2013 with degrees in Magazine Journalism and Psychology. Rob is also an unabashed nerd who does occasional entertainment blogging on movies and TV, reads epic fantasy and historical fiction, and enjoys having his heart routinely broken by the Jets and Knicks. Once a year you can find him on a couch with friends marathoning The Lord of the Rings trilogy–extended editions.