Can Legacy Accounting Practices survive and thrive without moving to the cloud?

In a short word, No! 

The future of accounting is cloud-based and with the advantages so heavily out-weighting the best of which desktop can offer, legacy firms need to take decisive action NOW!

Not next week, not next month, it has to be NOW!!

We need to understand the speed at which accounting technology is moving, the rate is an increasingly steep upward curve and if everyday legacy firms don’t act, they are falling further behind.  Modern cloud firms are steamrollering their way to success with slick processes, high value-added output and are often seen by clients as an investment, rather than a cost.

Legacy Practices have a lot of hurdles and challenges they need to overcome. Staff and clients should be at the forefront of thoughts throughout and all the projects may need to be broken down into bite-sized chunks.  It can be scary, but the alternative is far scarier. 

Cloud firms are growing at a rate that has never been seen before in the industry, the only outcome if things continue as is, is they will overtake legacy firms and even long before then, legacy firms may never be able to catch-up as the task may have become too large.  

It’s decision time, do you want to be a Google or a Kodak?

There will be the usual get-outs - clients don’t want to move, clients don’t want to pay for it, clients don’t want additional information etc.  But, we only have to look at the growth of the number of businesses on cloud accounting platforms to prove this isn’t true:

(UK Xero Numbers – 2015 > 83,000, 2016 > 130,000, 2017 > 250,000 & continually increasing, Quickbooks Online has a similar growth curve).  

The numbers will likely skyrocket over the next year or two with the legislative change Making Tax Digital will bring, and that presents a massive opportunity for smart firms.

One thing I’ve heard a lot is the view that ‘our clients are loyal and won’t leave’, and while loyalty has its merits, how long will receiving a service far less than that of their competitors (not based on the skill of accountants but the cloud tech available) test that loyalty?

If you were out for lunch and could buy a sandwich for £5 but you could get the same sandwich, a soup, a packet of crisps, a piece of fruit and a drink for £5, are you going to continue to go to the shop you went to before?  No, of course, you wouldn’t, and it’s dangerous to assume your clients would.

To make the point more relevant to our industry, there is a reason why we don’t offer manual payroll services anymore, systems were created where the calculations were done for us, meaning less chance of errors occurring, it's more productive, and staff could increase their portfolio size.  

We adopted these systems to remain competitive, it was more cost-effective and the client received a higher level of service, the same thing is happening with bookkeeping and accounts production.  Using desktop systems now is the exact same as doing manual payroll.

What will happen to legacy firms who don’t adopt the latest technologies?  The modern firms tend to be more selective with the clients they work with, they want the clients they can offer the high-level advisory and/or offer a really efficient compliance offering to, and who appreciate and see value in their work.  

This will leave the non-adopters fighting for scraps in the future, undercutting each other to win low-value, low-recovery work, the clients who want the cheapest minimal compliance will always exist.  They are often the hardest work. So, would we rather have 7 of these type of clients or 1 who values us and appreciates we are adding value to them and is happy to continue to build on the relationship?   

Which leads us on to staff, where would staff rather work?  A modern firm with appreciative clients, perhaps potential to work hours/days remotely and improve their work-life balance, while earning a good salary from a profitable successful business.  Or, the non-adopter way, where squeezes may need to happen from every direction...

Apologies if this seems a bit bleak, but sometimes, a reality check by an independent party with relevant experience can help.  It shouldn’t be seen as a negative, far from it, the opportunity cloud brings to all accountancy practices is absolutely incredible.  It just takes a bit of planning, speaking to the right people and an open-mind while knowing that change needs to happen.

We are building a community for forward thinking accountancy practices who want to maximise the current and future opportunities operating in the cloud brings.  If you would like to find out more about our Community, please visit http://www.vcd-fa.co.uk/page/appacus-community/

A little caveat – when I say I don’t think accounting firms will survive and thrive if they don’t move to the cloud, there will be the odd exception for firms whose primary focus is audit, corporate finance and the like (for now until tech evolves), it’s aimed at the majority of practices offering business services, accounts preparation, tax etc. who want to offer more efficient compliant services and high-value advisory.

A question I have asked a lot of people over the years when faced with resistance to changing to a cloud environment - ‘please let me know a better alternative to Accountancy Practices moving to the cloud?’  No-one has yet even attempted to answer.

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