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This article was first published in the September 2016 China edition of Accounting and Business magazine.

Accounting software companies are increasingly encouraging businesses to move their finance functions to the cloud. But what’s in it for accountants? Why are they, too, now promoting the likes of Xero, MYOB, Saasu and Reckon, when such programmes effectively enable SMEs to take care of their own bookkeeping drudgery – tasks usually outsourced to accountants?

The charge is being led by Australia and New Zealand, with even the Big Four on board – stepping, seemingly, into the deep yet relatively uncharted pool of small and medium-sized enterprises. Enter the likes of PwC’s Next, KPMG Agile and Deloitte Private Connect, with EY preparing a platform of its own.

PwC’s Next was launched in February 2016 as a new business solution combining multiple cloud accounting tools and integrated cloud applications on an open platform, with customisable dashboards. A collaboration between member firms in New Zealand and Australia and a handful of Australasian start-ups and emerging technology companies, PwC’s Next is currently being used by private businesses, families and individuals, and is expected to filter up the chain to the more traditional Big Four territory of larger clients.

‘We’ve tended to start at the small end of SME business because that’s where [cloud] penetration is taking hold,’ David Wills, PwC’s private clients’ leader, explains. ‘That’s also the part of the market that’s being most disrupted.’ As more and more add-ons enable a more sophisticated analysis of what the basics do, the platform will become more relevant for the medium-sized business. ‘You start with a minimum viable product and you then evolve it in its sophistication and complexity to other parts of the market,’ Wills says.

He admits to being a bit surprised that the push is coming from ‘Down Under’, while noting that countries such as Singapore, China and Hong Kong are ‘really watching with interest’ the Australasian experiment. He guesses it’s because uptake of cloud accounting tools is comparatively high in that part of the world – around 20% of businesses in New Zealand and 10% in Australia.

Next evolved as a result of PwC partners’ realisation that the market demanded more than merely cloud enablement.

‘Our clients are looking for deeper insights and the ability to get on the front foot in making decisions,’ Wills says. ‘They want the freedom to choose the cloud tools that best suit their needs – whatever they may be.

‘By using open architecture technology at the core of PwC’s Next, we’ve created a rich cloud ecosystem that goes beyond bookkeeping and accounting; it’s a whole of business solution.’

Add value

Next is not designed to be a ‘made-by-PwC product’. (‘Our market reality is that there are nimbler organisations already well advanced in terms of cloud accounting,’ Wills says.) Rather, the vision is to add value to existing cloud products, via analysis, scale and skill, and wrap it into an ecosystem which the firm’s accounting professionals can support and enhance.

Next has multiple general ledgers (including MYOB and Xero), with the capacity to bring in others. Letting the client use tools they are already familiar with is an important design feature, Wills says. ‘Even the cloud solution providers well know that they won’t have something unique forever. We can’t be stuck in one dynamic. We’re not signing up to exclusivity here; we’re letting the market decide what’s best of breed. As long as we can provide a skill set over and above that, then we will add our own IP on top of it.’

The platform offers a single sign-on to access all software and cloud-based tools, bank-level security, automatic data transfer and a holistic view of an entire portfolio in real time. Clients gain clarity around all their accounts, in consultation with PwC advisers who ‘will help them flush out what’s important to them’.

From a practice viewpoint, Next will run in parallel with PwC’s existing way of doing business. ‘Some of our clients will not embrace the cloud, and we respect that,’ Wills says. But PwC will ‘continue to share the virtues’ around the cloud – being speed, cost efficiency and time efficiency – and Wills believes that, as cloud accounting penetrates deeper into the global arena, ‘Next will be more and more relevant for an ever increasing percentage of our clients.’

Existing client base

When Deloitte launched Private Connect, its cloud-based technology platform targeting small businesses, in mid-2014, it was tapping an existing client base of SMEs – privately owned enterprises, individual and family wealth and not-for-profits. Deloitte Private, a parallel business established in Australia years earlier, already had more than 100 partners and 1,000 staff working nationwide. (Although rebranded as Deloitte Private around 2009, the firm’s service for private clients had existed for many years prior.) 

‘It’s not as if Deloitte has entered this market off the back of these cloud products; we were already there,’ says Adrian Batty, national lead partner, business advisory services for Deloitte Private. ‘Our involvement in some of the cloud solutions is a result of us understanding what the marketplace wants us to do and streamlining our own business to operate more proficiently in that chosen market.’

The service began in Australia – quite possibly because of the sheer weight of SME numbers there – but elements of the private client concept are being replicated in Asia-Pacific member firms, Batty says. He expects that a version of Private Connect, even if branded differently, would be a logical extension into places such as Hong Kong, China and Singapore, each of which has a large private-sector client base. Already, Deloitte Private has both a Chinese and a Japanese services group, Batty explains.

The move into cloud services is one of the results of Deloitte’s challenging itself to provide a better experience for its own practitioners as much as for its clients. By letting technology do some of the heavy lifting, Batty says, it shifts the role of a traditional accountant from a scorekeeper of what happened in the past to a strategist for the future. 

‘A lot of accountants including ourselves had been so busy doing year-end accounting and tax work that we didn’t really have the time or the information at our fingertips to have a discussion with our clients about how to move forward,’ he says. Cloud products allow both client and accountant to operate more seamlessly, freeing up time to offer professional insights – ‘which is what the clients really want’.

The move into tailored cloud services has also opened up unexpected new markets, Batty points out. An individual franchisee in a shopping mall or a small start-up, for example, might not have been on the radar of the Big Four firm, nor most likely could it offer services at a price point they would expect.

Replicable design

That scenario changes with Deloitte Private Connect. The franchisor can
aggregate data across its whole fleet of stores while the franchisee gets on with its business. Dealing with the operators of co-investment start-up hubs has also enabled the firm to more deeply penetrate the start-up space. The model could easily be replicated overseas, particularly in South-East Asian countries, which have big franchise and start-up communities. From a fee perspective, Deloitte Private Connect is a subscription service, allowing Deloitte to compete on price with smaller accountancy firms. ‘We’ve embedded so much technology and process to do a lot of the manual effort that we can compete on price with any firm in the Australian marketplace,’ Batty explains. 

Meanwhile, KPMG Agile, a cloud-based service for processing, payroll, accounts payable and GST compliance, works in partnership with Xero. Like Deloitte, KPMG already had an established, SME-focused business in Australia, so KPMG Agile was a natural progression, according to Michael Hine, a partner and practice lead in KPMG’s Enterprise team.

Hine stresses that KPMG Agile is not about selling cloud services – it’s leveraging technology to enable its business processes to be done more efficiently. ‘This effectively allows us to offer to the client an end-to-end business administration service, right though to the final compliance product,’ he says.

The cloud will, however, impact on accountancy firms’ business, Hine adds, including culling some of profession’s traditional roles. ‘That’s the inconvenient truth of the cloud,’ he says. ‘Ultimately it will lead to a high degree of cannibalisation of what a lot of accountants actually do at the moment.’

Does that worry him? ‘It would if we weren’t responding to it,’ Hine replies. ‘As long as we can find other ways of adding value to our clients well beyond compliance, KPMG will continue to have a different business. If we were relying purely on compliance fees to generate our revenue stream, then yes, it would be very concerning about what’s likely to happen moving forward.’

Peta Tomlinson, journalist