Posted by Stuart McLeod on Tuesday, December 2, 2014
I’ve spent the best part of the last six years – four of those in Australia and the last two or so in the United States – talking to accountants.
Not many people can write such a ridiculous sentence, but here I find myself contributing six times a year to Air New Zealand’s profitability and over the key markets for Xero and now, arguably, Intuit.
Having just started a new company again, Americans ask me why would you ever worry about Australia and New Zealand when the US market is so big. Aussies and Kiwis ask me why their Northern Hemisphere counterparts don’t understand the benefits of cloud accounting. Quite the paradox really.
Outside of the states of California and New York, the adoption of technology is typically mired in regulation and incumbent interests. The best example of this is the continued proliferation of bank checks (or cheques).
America also has a large population of people without bank accounts, estimated to be in the tens of millions, mostly illegal immigrants. This is one reason why the adoption of internet banking remains at much lower rates than in other countries.
When we first arrived in San Francisco in late 2012 we used internet banking to transfer some funds to a supplier of handyman services or similar. The bank turns that request into a check which it physically mails to the supplier. In the US, that’s electronic banking for you.
This glacial pace of technology adoption by business has not altered the thinking of the user like it has elsewhere. For example, bank feeds, while terribly useful, aren’t the whole picture of the operator’s account. Many businesses still employ a manual process of check approval before they’re posted in the mail to vendors.
Bill.com’s own numbers suggest a low number of purely electronic transfers throughout the US.
So the benefits of cloud aren’t able to be fully realised. More importantly, the shift of mindset has barely even begun.
Intuit’s transition of revenue from desktop to cloud is currently being executed extremely well.
While I’m sure they’ll disagree, the education process that facilitates this transition is not as strong as it needs to be. It’s not just about moving from a desktop application to a tab in Chrome; the life-changing differences are profound and critically important. And they need to be emphasized effectively and broadly to the accounting market.
Most accountants and especially tax providers are very transaction-oriented and typically interact with their client only once a year. Sure, tax returns keep the client out of jail, a very important goal in life, but it doesn’t add any value to their business.
I remember vividly Rod (Drury, Xero CEO) and Hamish (Edwards, ex-Xero co-founder) and Wayne (Schmidt, ex-Xero national sales manager) explaining to anyone who would listen about why this is such a terrible business model for accountants. This education process is critical to cloud accounting adoption and it’s not being executed well enough by any vendors in the US, yet.
Arguably, until recently, the cloud-based tools have not been available in order to facilitate broad adoption. While Quickbooks Online was first released in December 2000 its functionality and user interface was dwarfed by its desktop cousin. The enormous cultural transition that is required from being a CD shipping company to a cloud company should not be underestimated. Few if any large organizations have made this transition successfully.
All of these reasons are why the adoption of cloud-based accounting has been slow in the US. I expect that over the next few years the pace of the transition will quicken as the benefits are realised and the competitive landscape heats up.
Image credit: MomItForward