In last week’s blog, I talked about weighing up the costs and benefits of cloud accounting for a micro business. (As my granny used to say: ‘Count the pennies, and the pounds look after themselves’.) Today I want to turn my attention to slightly larger businesses, including businesses with employees, inventory and more complex accounting needs.
How Much Does Cloud Acounting Cost?
I mention in my cost summary last week that the total cost of cloud accounting if you subscribe to LiveAccounts or Xero tends to end up being anywhere from $120 to $770 per year. Businesses that need extra stuff such as inventory or point of sale usually end up paying additional monthly fees on top of that. To me, this cost seems pretty small in the scale of things, and certainly cheaper than a coffee every morning. (Although not nearly so much fun.)
How Does This Cost Compare to Regular Desktop Software?
A quick trawl around the net gives current costs for some regular desktop accounting software that includes payroll:
- MYOB AccountRight Plus (single-user only): $799 purchase price plus $519 annual fee for support and upgrades
- QuickBooks Plus (single-user only): $650 purchase price plus $440 annual fee for support and upgrades
- MYOB AccountRight Premier (multi user): $1849 purchase price plus $705 annual fee for support and upgrades
- QuickBooks Premier (multi user): $1,550 purchase price plus $890 annual fee for support and upgrades
I include the cost of annual support and upgrades here because annual upgrades are pretty much essential for most medium-sized businesses. If you don’t cough up the fee for annual upgrades, you’ll be stuck with payroll tax tables that are out of date. Not the best approach when it comes to looking after your darling employees.
What Other Cost Savings does Cloud Accounting Offer?
I was chatting to Wayne Schmidt from Xero last week and he emailed me the following document, in which he outlines what he considers to be some of the less obvious savings that cloud accounting offers. (Note: These savings apply to all cloud accounting products, not just Xero.)
I reckon this document is clever because it highlights how the hidden costs of desktop accounting can become the unexpected benefits of cloud accounting. The only thing I’d add to the mix is that although all the savings that Wayne outlines in this document are legitimate, not all savings are relevant to every business. (In my business for example, other software that I use requires me to update my PC every couple of years, and subscribing to cloud accounting won’t actually take away that expense.)
Where’s the Hitch?
From the figures above, you can see that most businesses with employees may actually save money if they switch across to a cloud accounting solution. However, although I’ll recommend cloud accounting to most new clients, I’m not going to recommend to all my existing clients that they switch across. Why not?
- Some people buy and sell stuff. Neither LiveAccounts nor Xero have inventory features. (Although there are a couple of add-on products offering inventory that integrate with Xero, these come with an additional price tag.)
- If it ain’t broke, why fix it? Most of my clients are very happy with their current accounting software (a mix of MYOB and QuickBooks). The learning curve and hassle involved in switching to cloud accounting may just seem like too much pain, with not enough gain.
- The chicken comes before the egg. For a medium-sized business, the benefits of bank feeds and bank rules are less significant. Why? Most medium-sized businesses use their accounting software as a starting point, first recording transactions in their accounting software and then sending bank files to their Internet banking. In other words, MYOB or QuickBooks ‘feeds’ the bank, rather than the other way around.
- The Aldi Syndrome. I love Aldi, but it doesn’t quite cater for my wide range of food fads. In the same way, the features in MYOB LiveAccounts and Xero are currently more limited than their desktop counterparts (this limitation applies in particular to LiveAccounts, which is a much more basic product than Xero). Some of my clients rely on unusual features such as intricate form customisation, integration with custom third party products, quote management, time billing and so on, and for them, neither LiveAccounts nor even Xero currently fit the bill.
- The cloud isn’t the only place to be. You can gain many of the online benefits that cloud accounting offers by subscribing to a product such as QuickBooks Hosted by Reckon Online (now there’s a catchy title), a full-featured solution that retails for the very modest fee of $295 per user per year. (QuickBooks Hosted by Reckon Online is a hosted product, rather than a true cloud accounting product; I’ll talk about this distinction in future postings.)
- A deadlock and handsome bodyguard aren’t quite enough. Some of my clients are anxious about security, and about accessing data if the Internet goes down. (Life without the Internet . . . unthinkable?) Are these security concerns legitimate? I’m not so sure yet.
So What’s My Conclusion?
I’m still exploring the whole cloud accounting thing. I’m pretty convinced that cloud accounting is a winner for cash-based businesses with no employees, especially ones that currently pay for bookkeeping. For medium-sized businesses with employees, I think there’s definitely a place for cloud accounting, but I still have a few questions:
- How do the features really compare between a product such as Xero and a product such as the full version of QuickBooks?
- Can I be sure about security? (Or indeed, is cloud accounting actually safer?)
- What about Saasu? Saasu is another player in the cloud accounting market that I’ve yet to check out.
- Which cloud accounting product gives the best value for money?
- Where do hosted products fit into the picture?
I’ll be exploring all these issues in the weeks to come. So until the next gripping installment (go on admit it, this blog is waaay more interesting than Master Chef), stay tuned . . .