Category: Accounting Software

Cloud Accounting Adoption Grows, But Desktop Solutions Still Pay the Bills

Intuit continues to lead in cloud accounting adoption among small businesses and microbusinesses in North America, with almost 1.9 MM companies on QBO in the US.  QBO continues to make strides outside the US, with 800,000 companies in their latest user statistics.  Xero continues to grow in the US, with 132,000 North America users as of the end of March, but we expect that those numbers will grow more quickly due to possible synergies from the Hubdoc acquisition in August.

QuickBooks Online Self-Employed, a product which is designed to track the cash receipts and disbursements of independent contractors, grew to 750,000 subscribers this period.  Although the number of subscribers bundling this solution with Intuit’s TurboTax income tax preparation software was not disclosed this quarter, last quarter approximately half of QBOSE subscribers also purchased TurboTax.

Intuit has quietly launched a new product targeted at companies with 10+ users called QuickBooks Online Advanced, with premium support, and priced at $150/month.  Industry observers I speak with tell me that they expect this product to go upmarket top serve larger businesses over a period of years.  A strategy for involving accounting professionals and software consultants in QBO Advanced has not been launched yet, as the product is not available on wholesale billing for ProAdvisors at this time (9/2018), and we have not heard of a QBES-style “Intuit Solution Provider” VAR program for QBO Advanced at this time.

Despite these improvements, desktop accounting continues to be the dominant platform for small business.  Intuit’s most recent revenue statistics (under the old GAAP standards, not the new ASC 606 rules) show that revenue for the QuickBooks desktop ecosystem continues to lead the QuickBooks Online ecosystem by a significant margin.  While this will evolve over time, the ratio of QBD ecosystem revenue to QBO ecosystem revenue for Intuit’s quarter ended 7/31/2018 is 1.36:1. (source: Intuit)

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While we don’t have a method of providing a true “apples to apples” comparison of QuickBooks desktop user counts as compared to QBO user counts for a number of reasons, it’s clear that desktop has a larger share of revenue.  The online ecosystem continues to grow, and it’s hard to quantify the impact of the recent QuickBooks Enterprise price hikes on that desktop revenue.  Sage and Xero continue to be a worthy competitor to QuickBooks in many segments, new products like BQE Core and AccountantsWorld Power CAS continue to show promise.  Ultimately, if artificial intelligence and machine learning can even partially live up to the hype surrounding them right now, the whole game could change – but for now, the desktops are paying the bills.

CPATechBlog.com Cloud Accounting Dashboard as of 5/24/2018

I’ve updated the CPATechBlog Cloud Accounting Dashboard for the latest statistics on cloud accounting adoption for the most recent earnings and public company disclosures from Sage, Intuit, and Xero.

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Highlights from the most recent updates include the following:

  • Intuit continued to dominate the cloud accounting space, with 1.82 million companies on QBO as of 4/30/2018, as compared to 132,000 in North America for Xero.  The other competitors in this space do not break out North American adoption stats or are private and do not have to disclose adoption stats to the public.
  • In addition to the 1.82 million companies on QBO in the US, Intuit reported another 720K QBO companies outside the US, as well as 680K users of QBO Self Employed.  The 720K QBO companies outside the US compares unfavorably to the 1.25 million companies on Xero at 3/31/2018, but both performed favorably against the 431,000 reported on Sage Business Cloud Accounting (the product formerly known as Sage One) at 3/31/2018.
  • Intuit disclosed that 330,000 of the 680,000 total QBOSE users bundled the product with TurboTax, which may make some of you practitioners nervous about recommending that product – don’t forget that there’s a way to connect QBO for Accountants to your client’s QBOSE, and Intuit says that they won’t try to sell TurboTax to your QBO self-employed clients – if you need details, drop me a line – Brian at bftcpa dot com.
  • I still estimate that the ratio of QB Desktop users to QBO companies is 1.30:1 as of the most recent earnings release.  What’s more important for you, the gentle reader of this blog to know is two things:
    • While the ratio of QBD users/QBO companies is 1.18:1, the ratio of the desktop QB ecosystem revenues to the QBO ecosystem revenues was 1.42:1 – so desktop versions of QuickBooks are still essential to the QuickBooks business for Intuit.
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    • The really bad news for users of desktop versions of QuickBooks is the forward looking information about desktop versions of QuickBooks – and I’m quoting directly from their Q3 Earnings Call Script here.  “Desktop Ecosystem revenue grew 3 percent in the quarter and is up 7 percent year-todate. For fiscal 2018, we expect QuickBooks desktop units to decline mid to high teens and Desktop Ecosystem revenue to be up mid-single digits.”  While we’ve known for some time that Intuit passed on a price increase to QuickBooks desktop users, it tells me that we should probably expect prices on desktop software to continue to climb as Intuit continues to try to make it financially advantageous for users to switch to QBO, where they have more control over the ecosystem, as opposed to QB Pro/Premier/Enterprise.

While Intuit has a lead in US cloud accounting, if the much vaunted machine learning and artificial intelligence capabilities which the cloud brings us in the next few years ever actually happen, accounting software may become something that people used to use – like buggy whips.  Truthfully, if the technology winds shift quickly – it’s still anybody’s race.

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Dear Brian: Clearing Out Old Vendors, Customers, Items, and Accounts in Desktop QuickBooks

Dear Brian:

My client has been using QuickBooks Pro for well over 10 years.  They upgrade every few years however the file size is getting very large.  They do not want to switch to another program and do not want to switch to QuickBooks Online.

I was under the impression that the newest versions of QuickBooks allows you to purge old data or allows you to reduce the file size.

What should I do?

Sincerely,
Carl in Philadelphia


Dear Carl,

You may want to consider using the Condense Data feature in QuickBooks (File, Utilities, Condense Data from the menu)- it will let you remove the old data as well as the old list items – vendors, customers, accounts, etc. which you haven’t touched in years.

You can download a PDF file with directions on how to do this by filling out the form below:

5th Annual Accounting Firm Ops and Tech Survey Awards Announced

April 05, 2018, Hutchinson KS and Minneapolis, MN – Randy Johnston, CEO, Network Management Group, Inc. and Dr. Leslie Garrett, CEO of Insight Research Group are pleased to announce the winners of the 5th Annual Accounting Firm Operations and Technology (AFOT) Survey Awards. Survey respondents identify the software used in their accounting firm that has the greatest impact on their firm in three separate categories: Profitability, Risk Mitigation and Productivity.  The 5th Annual AFOT Survey results book will be released in May 2018.  Respondents selected award-winners in each category from a list of 87 accounting firm software products.

Continue reading “5th Annual Accounting Firm Ops and Tech Survey Awards Announced”

Cloud Accounting User Counts

I’ve been tracking the user counts of cloud accounting tools for microbusinesses from publically available sources for about seven years now.  My latest cloud accounting user counts appear below.  Note that Intacct probably shouldn’t be in this list (especially since we also didn’t include other mid-market apps like Oracle NetSuite, as they’re both a little “up market” for most users of this.  As you know, FreshBooks and Wave are private, and don’t have to report anything publically, and with Kashoo doing more as a bookkeeping service instead of as a software company, the user counts there (which were hard to get anyway) are a little less relevant here.  We expect to have new data from Intuit, Xero, and Sage sometime in late April/early May.

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P.S. Tipsters who have good public (non-confidential) data sources for user counts (e.g. court filings, press releases, etc.) which are more detailed or more current than this (as I write this on March 27, 2018), I share Starbucks cards with those who point new things out – I’m @BFTCPA on twitter.

P.P.S. If any software publishers want to be included in this list on a going forward basis (or want any of the analysis which goes along with this), including some work on cloud vs. on premises for user counts, reach out to me and we can discuss.

Who Will Be The Profession’s Digital Plumber?

I’ve been using, supporting, and following accounting software developments since the 1990’s, and there’s a common problem which still needs to be solved:

“How will I get (my)(my client’s) data from (application one) into (specialized application two) so I can perform (task)?”

There have been a wide range of people who have taken on solving this problem, and almost every family of solutions (e.g. Intuit, CCH, Thomson Reuters, Sage, etc.) has solved the problem for their stack of solutions.  One can easily go from most of the major client bookkeeping products into that publishers tax application, and with a little more difficulty, one can pull data from QuickBooks desktop into the tax software.  All bets are off, however, when you step outside of your tax software’s family of solutions.

If you look at e-mail in the 1980’s, we had services like Prodigy and Compuserve, which in their early iterations had closed e-mail systems – like those run by many companies.  In fact, I have had professional jobs in my career where I didn’t have internet-based e-mail – because it was a closed system.  Once these systems opened up, I had internet e-mail from Prodigy (fmpm09d@prodigy.com).

My friend Randy Johnston has often compared the “my tools only” integration strategy as a nationalist strategy – that is, you’re picking winners and losers in a war (e.g. NATO/Warsaw Pact).  Some of this is because of benign neglect, some due to economics, but part of this is an intentional strategy.  That’s OK – providers have no obligation to support competing solutions – but it’s still frustrating.

What we haven’t seen in the US is someone who will be the accounting data version of Switzerland for practitioners– a company which will put in tight integrations to everything.  The closest company to that strategy seems to be Caseware, which exports to most practitioner tax solutions – but their relatively small US market share diminishes their effectiveness in this role.  QuickBooks is probably as close as any app here – but that’s primarily due to its marketshare in the US.  Without good cross-platform integrations and effective/automated import/exports between the different provider cloud offerings, adopters are just trading an on-premises cloud island for a provider-hosted island.  If there’s no easy way to move traffic between islands, you’re just a castaway.

I will point out that Avalara does this successfully with hundreds of accounting/ERP solutions on the sales tax side, so it’s definitely possible, and I think their strategy will pay off in the long run.

I did a session on Digital Plumbing at the Sleeter Accounting Solutions Conference last year, and some companies are out there which do different tasks associated with this for general accounting solutions.  Leaders are ITDuzzit (now part of Intuit, no longer commercially sold), Zapier, and OneSaaS, but there are many nascent competitors in this space, and I haven’t seen anyone reach scale yet in the practitioner market.

Chris Keall of the National Business Review in New Zealand points out today (link requires subscription) in a paid article that Kiwi company Common Ledger has received a relatively small amount of funding ($1MM NZD) to develop solutions in Australia/New Zealand.  What a pity that we don’t have anyone taking on this task in the US.  VC’s seem to be throwing money like crazy at cloud products, but nobody seems to be helping the various data clouds automatically talk to each other.  What a pity.

If any of you readers are aware of anyone who is solving this problem, please let me know.  If accounting is going to become more automated, we have to move past 1980’s solutions like manual import of CSV files and transition into real solutions which are less of a pain to implement.  We’ve seen this change radically with bank feeds in the cloud accounting solutions– when will we see it with other accounting data flowing between various best in breed practitioner solutions?

 

Recent Reading and Writing, March News Update

I’ve been quite busy over the last couple of months, but unfortunately, I don’t have a lot which I can show you, the gentle reader of this blog.  A listing of some of the writings I’ve worked on in the last few weeks is as follows:

I also have been meeting with software publishers and reading voraciously preparing for this year’s tech conferences and seminars, which start for me next week in Philadelphia, and take me around much of the continental US this year.

I hope you’ll plan to attend the 2015 @AICPA Practitioners/TECH+ Conference in Orlando June 7-June 10th. You can save an extra $100 w/code TAC http://pstech.cpa2biz.com/

I share articles which I find interesting on Twitter – I’m @BFTCPA.  Some of the stories I’ve been following include:

I’m sad to see that The Sleeter Group has sold to Diversified Communications, but I know it was an offer which Doug and Sherrill couldn’t refuse.  Congratulations, and we hope to continue to work with you in the future.

Be careful out there, people.  I look forward to seeing many of you on this year’s journey.

 

Recent Software Company M&A Activity

As readers of this blog know, the only constant in the accounting technology space is change itself.  With that in mind, I wanted to let you know about some recent acquisition announcements in the accounting space.

SAP to Acquire Concur– Enterprise software giant SAP announced after the market closed last Friday that they have an agreement in principle to acquire the outstanding shares of Bellevue, Washington based Concur Technologies.  Concur provides tools for managing the expense reimbursement process in small companies (with a SaaS offering) and with an on-premises expense management toolkit for enterprises.  (Source: @WSJ)

Sage to Acquire PayChoice  – Small and mid-sized business management company Sage has announced an agreement to purchase PayChoice, a provider of payroll and HR services for small businesses over a software-as-a-service (SaaS) platform.  Sage’s press release described PayChoice as follows:

Founded in 1990, PayChoice is headquartered in New Jersey with 260 employees and 16 offices across the US.  PayChoice provides full-service and self-service payroll and HR services to more than 100,000 SMBs in the US, through a direct sales force and third-party licensee channel.  PayChoice’s revenue for FY13 was US$38.9m.

PayChoice has developed a next generation, cloud-based payroll and reporting platform called ENCORE.  The platform, which was launched in September 2011, encompasses both mobile and web-based payroll applications, operating from a single codebase for both its direct and licensee clients.  ENCORE supports the needs of businesses with self-service solutions through to more complex full-service solutions on the same platform, supporting the needs of SMBs as they grow.

The release also disclosed that consideration for the purchase was approximately $157.8M (converted from GPB at a rate of 1:$1.628)

From the release:

“PayChoice is an excellent business, with a strong management team, attractive cloud platform and a proven business model based on supporting the needs of small and medium-sized businesses and licensees,” said Pascal Houillon, president and CEO, Sage North America.  “We are excited about the growth opportunity that the combination of Sage and PayChoice creates in this market and delighted to welcome the management and staff of PayChoice to Sage.”

Payroll and compliance with constantly changing employer regulations are two consistent challenges for SMBs.  This acquisition will enable Sage to provide intuitive payroll solutions as well as integrated ancillary services such as tax filing and direct deposit as part of the company’s core offerings, making it easier for small and medium-sized businesses to consolidate and review business data, manage relationships, and simplify day-to-day operations.

Infor Completes Acquisition of SalesLogix – Infor announced earlier this month that they have completed their acquisition of the assets of the SalesLogix CRM application from Swiftpage.  Readers may recall that Sage spun off both SalesLogix and Act! to Swiftpage in early 2013. as part of a series of deals which included spinning off Sage Non-Profit Solutions (now called Abila) to a private equity group run by KKR-Accel.

Consideration was not disclosed by either party, but Infor did mention that SalesLogix is used by 70,000 customers at 1,700 organizations who use SalesLogix.  300 of these companies use both SalesLogix as well as one of Infor’s solutions.  Infor plans to incorporate the product into Infor CloudSuite, a set of cloud applications which run on Amazon to meet the needs of specialized industries.

 

It’s Time for Two Factor Authentication, SaaS Vendors. NOW, not later.

You’ve heard about the security issues at a number of organizations in the last few weeks.  Thankfully, there haven’t been any breaches at software companies who serve professional accountants (except maybe for Evernote – although I don’t know that I would put HIPAA or taxpayer data in that service).  One of the important things that is coming out of this is that major software vendors like Evernote and Google are planning to implement a security approach called “Two Factor Authentication”.  While I won’t go into much detail on how it works (although there’s a good Wikipedia article here), the basics are as follows:

Security tokens, like the RSA SecurID above, have a formula which generates a new six digit code every minute that is used as a one time password.

There are three basic ways to validate someone’s identity

  • Something they know (username, password, PIN, etc.)
  • Something they have (cell phone, RSA token, USB key, etc.)
  • Something they are (biometric identification like fingerprinting, face identification, or iris scans).

Historically, we’ve used only one factor of authentication – a username and password – to access most online systems.  While this is adequate for some information types, the sophistication of phishing attacks and other techniques used by the “bad guys” requires a more sophisticated approach to security.  Two factor authentication normally requires users to validate their credentials to two servers – one which controls the username and password, and a second which validates that they have a particular device or item through a one time password.

I’ve used a number of two factor authentication devices in my career, including:

All of the devices worked well, and I still use some of them to authenticate to many services.

One important point is that the use of factors other than passwords (something you know) is not a panacea.  Use of any of the items listed above in lieu of a password doesn’t accomplish anything.  The real benefit comes from using these tools in ADDITION to a username and a password.  Even if a person with bad intent knew your username and password, they would be screened out by the second factor, whether it is biometrics (fingerprint, iris, or face) or a device you have (token, cell phone, smart card, USB key).  Just like high security installations have more than one layer of security, you want the same layers of security verifying that you are really you online.

The ugly reality of the accounting profession is that a significant breach would undermine the confidence that others have in the profession, and could send us back to the ‘90s with some technologies used in business today.  It’s hard enough to be a small business in our economy without having to deal with concerns about security of data.

It’s time for two factor authentication with online services, people.  Ask your vendors about their support for it, and look for opportunities to protect your data with these types of authentication regimes.  It’s time for this technology – we can’t wait for some practitioner to lose their house over an online information breach to deal with this significant issue.