Cloud Accounting : What Happens if the Internet Goes Down?

From time to time, we have mice in the roof. Well maybe they’re mice. They could even be rats. I’d rather not think about it. Whenever the scuttling sounds reappear, John goes up there, hurls some poison in the roof cavity, and things fall quiet for a while.

So how do rodents relate to cloud accounting, you ask? Well, in the last couple of weeks, we had terrible problems with our Internet connection (caused by rodents chewing stuff they shouldn’t). Sometimes our connection was fine, sometimes it was slow as a wet week, sometimes it didn’t work at all.

I could write a whole saga about international call centres, hours spent on hold and patronising service technicians. Or why I had to resort to single malt whisky by Wednesday night, not Friday.

But my real problem with the Internet going down was that I couldn’t access my accounts in Xero or LiveAccounts. I also couldn’t access my emails or my clients’ data, nor could I research the book I was writing. In short, I couldn’t get any work done at all.

Aha! Cloud cynics might cry out in glee: ‘This is the problem with cloud accounting. As soon as the Internet goes down, you can’t access any of your accounts.’

However last week, I discovered that this argument doesn’t hold water. The Internet is now so fundamental to all of my daily work life that I simple can’t function without it. In order to work effectively, I have to have access to my emails and the Internet. Which was why, within a few hours of the home Internet connection dying, I’d figured out how to tether my iPhone to my laptop and I’d gotten a Telstra mobile broadband stick working on the other office computer.

Reflecting on all of this from a cloud accounting perspective, I can see that a broken Internet connection is actually easier to work around than the equivalent kind of problems that occur if you use a regular desktop accounting solution, such as hard drive failure, computer network crashes or theft of computers. A couple of years ago, I remember the hassle of several days in a row without access to my accounts when my hard drive crashed. And once, on that fateful occasion when my teenage daughter decided to use her initiative and start a new financial year in MYOB without backing up first, I not only lost all access to my current data, but I lost several weeks’ worth of work to boot.

My conclusion? People often say that an advantage of desktop systems is that you can always access your data locally. I don’t necessarily see this as such an advantage. If I only store my data locally and my backup systems aren’t 100 per cent perfect, then in the event of my hard drive dying or my laptop getting stolen, recovering my data can be both tricky and expensive.

In contrast, people often say that a limitation of cloud accounting is that you have to have an Internet connection. I don’t see this as much of a limitation any more. Why? Because if one Internet connection fails, I can always connect to the Internet in another location or using another network. Like chocolate and red wine, the Internet has become a life essential that I’m unlikely to be without.

Posted in MYOB LiveAccounts, Xero | Tagged , , , , | 3 Comments

A Month’s Bookkeeping in Less Than Five Minutes

So I got a call last week from someone who’d been following my blog and was keen to get advice about whether cloud accounting was going to work well for her business, or not. What surprised me about this conversation was that despite the fact she’d read my postings, she still didn’t get how bank feeds worked, and she was amazed to hear that for her kind of business — which is a simple, cash-based business — bank feeds really do enable almost all bookkeeping entries to take place automatically.

I hadn’t updated my accounts in  either LiveAccounts or Xero for over a month, and so I thought I’d record a video of me doing my books for the last four weeks (it is the Sydney Film Festival this week, after all). Groundbreaking stuff.

So here’s the video of me doing my books for April and May in Xero. Even with all my chat and explanations and generating a Profit & Loss report, a whole month’s bookkeeping and bank reconciliation only took five minutes. (Compare that with what ‘normal’ bookkeeping would involve, i.e.recording transactions, allocating transactions, reconciling accounts and creating reports, and you can see why my video is way more interesting than anything Almodovar has to offer.)

And here’s the video of me doing the same thing in LiveAccounts (same business, same transactions, same twisted personality)… Again, even with me chatting and explaining how LiveAccounts works, it took less than five minutes to get the job done.

I hope these examples make it a little clearer how the whole bank feeds/cloud computing thing works, and just how efficient it can be.

Posted in MYOB LiveAccounts, Xero | Tagged , , , , , | 3 Comments

Xero Payroll: A winner or a dud?

One of the things that originally held me back from trying out Xero for my own business was the lack of payroll features. (Sure, there are add-on partners that provide payroll features and synchronise with Xero, but I was reluctant to sign up for two lots of monthly fees.)

So I was pretty happy to hear about  the addition of payroll features to the standard Aussie version of Xero. And keen to put these new payroll features through their paces. Which I did today (in a sleepy, Saturday-afternoon-kind-of-way).

My first comment is that Xero’s Australian payroll is designed as a simple tool. When compared against fully-fledged payroll software, it’s kind of like riding a pushbike to work instead of driving a BMW . . . you still get there, but the pushbike requires more effort.

Having said this, there are some things that Xero’s payroll does just fine:

  • Allows you to record all the essential details of an employee’s pay, including gross wages, tax deducted, any leave taken, superannuation due and employee deductions
  • Organises and memorises pay runs for employees so you can easily repeat pay transactions for employees who receive the same money each week
  • Keeps track of PAYG tax and super, creating bills in your payables so you can see how much tax and super you owe
  • Allows you to record holiday or personal leave, so you can see how much leave you paid to any employee
  • Enables you to set up deductions for things like child support, union fees or whatever

And there’s a few things that Xero’s payroll DOESN’T even pretend to do . . .

  • Xero doesn’t calculate and deduct PAYG tax automatically. (This means that in order to figure out how much tax to deduct from an employee’s pay, you need to look up tax tables online at the ATO website or refer to printed tax tables. Which gets fiddly if an employee’s wage varies from one week to the next.)
  • Superannuation doesn’t calculate automatically either. (Yeah, I know it’s not hard to multiply wages by 9%, but newbies to this employment game are likely to forget the nuances of super, such as the fact you don’t pay any super at all if an employee earns less than $450 in any given month. Some additional detail in the online help alerting employers to this rule probably wouldn’t go astray.)
  • Xero doesn’t calculate leave entitlements. Although you can record holiday pay and see how much holiday pay you’ve paid to an employee so far, you can’t use Xero to calculate how much leave an employee is due.
  • You can’t print payment summaries when June 30 rolls around.

I reckon that Xero are being pretty fair when they say ‘If you have a smaller business and need a simple payroll tool for paying a few employees in your base currency, you can use the pay run function in Xero.’

I agree with this position. So long as you appreciate the limitations of Xero’s payroll, and you only have a couple of employees, the payroll features that Xero offers will do just fine. Sure, the payroll features seem undeniably primitive, especially if you’re used to using a ‘real’ payroll package, but recording pay transactions using Xero is still much better than recording pays using a spreadsheet or worse still, a handwritten wages book.

I’d be interested to know what YOU think about this subject. After all, a blog is meant to be a TWO-WAY conversation . . .  (and a two-way conversation is a good thing, I like to remind my nearest-and-dearest, when I’m prattling away to him last thing at night.)

I’d love to hear your thoughts about Xero’s payroll. So . . . click the Comment hyperlink below and type away  . . .

Posted in Xero | Tagged , , , | 8 Comments

Accountants: Social outcasts or pillars of society?

So I’m at this party last night. A typical Blue Mountains affair. You know the kind of thing: beautiful house, views over the bush, original artworks, a couple of buddha statues in the  garden. A mix of the regular suspects: professionals, artists, writers, gardeners, teachers, chefs and so on.

I’m feeling relatively enigmatic, with my new Cleopatra-esque bronze eyeliner and my Japanese kimono style skirt, when the woman standing next to me asks the dreaded question: “So what do you do for a living?”

My heart sinks. I know that many readers of this blog probably know exactly how I’m feeling because you’re in exactly the same boat. Confessing at this point that I’m an accountant is kind of like announcing that I have bubonic plague.

But I have my tactic. “I’m a business consultant”, I declare. Her eyes flicker, allotting me an ‘interest-level’ score of 2 out of 10.

“And a writer”. I declare. Her eyes brighten. A possible score of 8 out of 10 emerges.

She smiles. “Fiction or non-fiction?”

“Non-fiction” I confess. “Business books, books about accounting software, business planning, that kind of thing.”

Ah. My score plummets once more. Her eyes skim the room, looking for a more interesting conversation partner. But she continues valiantly to find a point of mutual interest. “So have you ever considered writing a novel?”

I want to reply something about having a mortgage, three kids, school fees, and a predilection for single malt whisky, none of which is congruent with being a novelist of ground-breaking fiction. But instead I simply tell this wide-eyed purple-clad lady that I’m happy doing what I do.

And to tell you the truth, I am. I love working with business people. I enjoy numbers. In the same way some folk love looking up the cricket results because each score tells a story, I get a kick of looking at a Profit & Loss and gaining an insight into what’s going on with a business.

I try to steer our conversation towards safer ground. “What do you do for a living?” I ask. She beams at me. “I’m a sexologist” she replies. Fascinating.

Pondering over my coffee this morning, I feel a little defensive. Sure, I studied business at uni and I write books about accounting software and business for a living, but that doesn’t mean I’m a complete pariah. I do have some redeeming attributes that could make me a mildly interesting companion at social functions.

I’m reminded of that ice-breaker game they get you to play at those excruciating conference events where you have to tell people two things about yourself: One true, one false. Your colleagues have to guess which is ‘the real you’.

So, I’m going to share a few things about myself right now. Exactly half are true, half are false:

  • I’m currently ensconced in a passionate lesbian love affair with my next-door neighbour.
  • I got my name ‘Veechi’ when I joined a religious cult at the age of 13 and spent my teenage years doing a whole load of things that really freaked my mother out
  • Last night I dreamed I was installing Xero for a band of Vikings who were on a search for Attila the Hun’s burial mound of silver
  • I believe in astrology
  • I play the bagpipes
  • I’m a closet Liberal voter (that’s risky when you live where I do)
  • What I’d really like right this minute is a whole bar of organic dark chocolate to eat all for myself
  • I’m secretly working on my first novel

Can you figure which is which?

Now the question is this, what shall I say next time when I’m asked what I do for a living?

Posted in Uncategorized | Tagged , , | 5 Comments

Am I certifiable, or not? (and more on becoming a Certified Xero Partner)

Last week I bit the bullet and battled my way down to the Big Smoke to do the Xero Certification Course. (Yep, I’m a girl who really knows how to have a good time.)

Actually, it was quite fun in a nerdy way. I’ve been working with accounting software for 20 years now, and the interesting thing about Xero is that it rethinks many aspects of how people do their books.

Here’s some of the stuff that I hadn’t noticed about Xero before now but which caused my eyebrows to go up:

  • If you allocate any transaction to a fixed asset account, this then automatically hooks up to an asset register. Your accountant can specify the depreciation rate and then Xero generates depreciation journals automatically, within your Xero file. (You normally only get this kind of functionality in asset management software, which typically costs hundreds of dollars and isn’t integrated into your accounting software.)
  • I liked the way you can flag transactions with a comment, so that if you’re unsure about how to allocate a transaction, you can add a comment for your accountant. You know the kind of thing: ‘Is this an asset or an expense?’ ‘Can I really claim my holiday in the Cook islands?’
  • When you’re managing payables and receivables, you can not only set payment terms (such as ‘Payment due in 30 days’) but you can also set expected or planned payment dates. So for example, I may have a client that is on 30-day terms but I know they always pay in 60 days, so I can predict my cashflow on the basis on the day I expect to get paid, rather than when I’m meant to get paid. (sigh . . . )
  • Whoever designs the reports at Xero has a good insight into what small business people typically want to know. Reports such as the Executive Summary (I show a copy of this one just below) are very powerful in the way they combine key info from your Profit & Loss, Sales report and Balance Sheet and present it in an understandable format all in the one spot. (Although I do qualify this statement by saying that you get way fewer reports with Xero than you do with products such as MYOB or QuickBooks, and the reports aren’t so fully customisable either.)
  • I finally realised how to have more than one window open at a time (duh…) so that I can have bank rules open in one window, reports in another, my bank reconciliation in another and so on.
  • And I know I’ve mentioned it before, but the interaction between bank feeds, bank rules and the cash coding screen (although the last feature is only available for accountants/Xero advisers) is the thing that makes everything gel. Once you get used to working in this way, you kind of wonder whether you can ever go back to doing all that data entry from scratch, not to mention the process of ticking off transactions in bank reconciliations.
Reporting in Xero

The Executive Summary provides a neat snapshot of your businesses key financials

Anyway, I’ve done the course, sat the ‘exam’, and  — in the words of the congratulatory email from Xero — I am now ‘certified’. (I’m sure when I was growing up, ‘certified’ used to mean something altogether different.)

Posted in Xero | Tagged , , , | 2 Comments

Counting the Costs of Cloud Accounting for Small to Medium Business

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.)

The hidden costs of desktop accounting can become the unexpected savings of cloud accounting

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 . . .

Posted in MYOB LiveAccounts, QuickBooks Online, Xero | Tagged , , , , | 2 Comments

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.

Posted in MYOB LiveAccounts, SAAS, Xero | Tagged , , , , | 5 Comments