Counting the Costs of Cloud Accounting for a Micro Business

One of the things I haven’t talked about yet is the cost of cloud accounting.

In today’s blog, I’m going to focus on what this cost equation means for a micro business (in other words, a small business with no employees, no inventory, and a small volume of transactions).

The Big Question

No, I’m not talking about Kristina Keneally’s haircut or Julia Gillard’s fashion sense (I sometimes despair about the level of political debate in our media). When I refer to the Big Question, I’m talking about how much does cloud accounting actually costs.

With LiveAccounts, you pay a flat $25 a month, regardless of how many transactions you record. (Note: MYOB reserve the right to charge 11 cents a transaction if you exceed 100 reconciled bank transactions a month.)

With Xero, you pay between $29 and $49 per month, depending on how many bank transactions you reconcile each month and how many invoices you raise to customers each month. Or, if you want foreign currency features, the price is $64 per month. (The price structure can be a little different, and potentially as little as $10 per month, if you subscribe to Xero through your accountant.)

In other words, the total cost usually works out at anywhere from $120 to $770 per year, payable as an ongoing monthly fee.

Is the Cost Worth it?

My first reaction was that both LiveAccounts and Xero work out as quite pricey. Both of these products are pitched towards micro businesses, the kind of businesses that typically shell out a couple of hundred bucks for entry-level accounting software such as FirstAccounts, AccountRight Standard or QuickBooks Accounting.  This expense is a one-off thing, whereas subscribing to cloud accounting is an expense that continues year after year.

However, my reaction changed as soon as I trialled cloud accounting software with my own holiday house business. I started to appreciate how the financial cost/benefit equation actually works. I realised that because cloud accounting software has automatic bank feeds combined with bank rules, I don’t need to pay for a bookkeeper any more. That’s quite a saving.

In addition, there are a few other savings and benefits:

  • I don’t have to spend time doing backups, and I can sleep easy at night knowing that my stuff is always backed up. (I don’t always practice what I preach, and I’d hate to confess how often my backup routine slips.)
  • Product support is on tap, 24 hours a day five days a week. (I haven’t tested what happens if I log a support call at 2am . . . I suspect the voice at the end of the phone won’t be in Australia.)
  • I’ll save time at the end of financial year. Before now, the accounts for my business lived on the office Macintosh and it was always a drama for my tax accountant to open my MYOB file on her PC. This year all I’ll have to do is ‘invite’ her to be a user. She can log on, view my data, and print reports.
  • I save time and money because my accounts are always right up to date. I can also see who owes me money and send out sweet little reminder letters before they get overdue.

My conclusion? Yes, as a micro business I’ll pay more in software subscriptions with LiveAccounts or Xero. However, I’ll spend less in bookkeeping fees, I’ll save time when it comes to managing my accounting records and I’ll arguably manage my business better because my books will always be right up to date.

Weighing the Costs for Your Business

So do you run a micro business and you’re reading this blog? I reckon that the question of whether you can justify the monthly cost of cloud accounting depends on how you value your time:

  • If you have lots of time available and you currently do your bookkeeping yourself, then cloud accounting is going to be an additional expense that you may not be able to justify right now.
  • If you’re time-poor (you know, running a business, looking after the kids, studying at uni, or everything all at once), then cloud accounting will help keep you sane (because your books will always be up to date), and will help you manage your business better (because you can always see how much you’re making and who owes you what).
  • If you currently pay for a bookkeeper, then cloud accounting will almost certainly cost you less than what you will save in bookkeeping fees.

Next week, I’m going to talk more about this whole cost equation, looking at the costs versus benefits for slightly bigger businesses, and for businesses with employees.

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About veechicurtis

a one-woman geekspeak to plain-english converter
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5 Responses to Counting the Costs of Cloud Accounting for a Micro Business

  1. Pingback: Counting the Costs of Cloud Accounting for a Micro Business … | Accounting world news

  2. Pingback: Counting the Costs of Cloud Accounting for Small to Medium Business | Cloud Accounting Review

  3. Dave says:

    Hi there,
    I just stumbled across your blog in my search for a comparison between MYOB Live Accounts and Xero and I’m glad I did. I was thinking Xero was the more suitable offering for my small business but struggled to justify the fact it’s twice the price of Live Accounts, which would also be suitable for my business. You mention “and potentially as little as $10 per month, if you subscribe to Xero through your accountant” and I was hoping you might be able to le me know how I could make this happen, because my accountant is good but maybe not as tech savvy as he could be 🙂
    Thanks in advance
    Dave

    • veechicurtis says:

      Hi Dave

      Sorry for the late reply — I’ve been away overseas and despite best intentions, did not attend to my blog!

      The lowest pricing bracket is for simple cash-based businesses that aren’t registered for GST and who don’t to use receivables/payables, so whether this pricing bracket could apply to your business does depend on how your business operates. Also, your accountant would need to be a Xero Partner to have access to this pricing plan.

      Hope this helps

      Veechi

  4. Hi Veechi!
    Just finished reading your MYOB book – very helpfull.

    Our company focuses on micro businesses and develops the only Micro business management software – Nominal. It does everything a bookkeeping package does including invoicing, payroll, simple inventory & time billing as well as a business dashboard that shows your Facebook, twitter and Google analytics stats – among other useful information.

    I know you’re too busy to add another accounting software to your list, but I really think you should consider having a look at it – sooner or later 🙂

    Thanks!

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