Unpacking Cloud-Based App Solutions 🙋‍♀️ | Heide Robson on the Tax Wrap Podcast

I was interviewed about Accounting Technology on the Tax Wrap podcast. Steve Burnham and I talked about: What are cloud-based app solutions? Can you compare traditional accounting software and cloud-based software? What are some business intelligence tools that a practice can make use of? With the cloud-based solutions, are there some SMSF or compliance tools that a practice can make use of? How do you see the adoption of automation and cloud apps changing the role of the accountant in Australia? Tell us about some new features or releases that have caught your eye recently. The transcript is here: Steve Burnham:         Thanks for being with us, Heather. I'm very pleased to talk to you. First of all, I suppose, just to clarify for our membership, for our audience ... It's not just members who are listening in. Can you fill us in? What are cloud-based app solutions? Heather Smith:          Steve, thank you so much for having me on your show. Very excited to be here. And what are cloud-based app solutions? Great question. You have a number of different type of cloud-based app solutions. The essential one is one that is integrated, it's sitting on the internet, which is what we call the cloud, and you potentially can connect into that and the data can connect into that, flow through it and then potentially flow through to another solution. You also have in that same sort of area when we talk about cloud-based app solutions, you also have cloud-based triggers. So something can happen in one area and cause a trigger action to populate another area. So and what I would call that is a tool. So you have a tool like Zapier and something happens in one area and it triggers something to happen, such as- Steve Burnham:         Remotely. Heather Smith:          No, not necessarily remotely. So say someone comes and fills out a form on your website. That could trigger that information to be pushed into your newsletter form, and so it's not necessarily going to flow ... the information is not going to flow back and it's not going to do anything other than just push it across there. But a cloud-based app solution can ... Typically, it's going to automate tasks, and a small business under takes about 50 to 70 tasks as part of the business, and it may automate just 1 of those task or it may automate multiple tasks. Steve Burnham:         And more the better, I suppose. Heather Smith:          Absolutely. More the better that we can get automated. That's what we like. Steve Burnham:         Okay. Look, Heather, just to ... Our membership from surveys that we've done in the past are ... 45% of us are 60 or older, and 68% of us are male. We're a little bit behind the eight ball as far as knowing what the modern solutions are. Can you compare traditional accounting software and cloud-based software? Heather Smith:          Okay, so I spent a long time working with desktop software, and now I primarily sit with the cloud accounting software. With your desktop software, some of the functionalities are going to be the same through the two solutions because it is accounting software. What you have with your desktop software, you may have purchased it and you no longer need to pay any money to update it, or you may simply pay money to update it for your tax tables when the certain features come out that you need to update, say maybe on an annual basis. Typically, with your cloud-based software, you're actually paying on a subscription basis. Now, the desktop software, the data is typically sitting on your computer, which is fine. However, you need to be responsible for backing it up and you need to be aware if you have a fire or theft what's actually happening with that data. Steve Burnham:         Of course. Heather Smith:          With the cloud-based solution, the data is held in the cloud, and with various different accounting solutions and cloud app solutions out there, it will be held in various different places and that's probably something you need to be aware of. But typically, for the main ones, for the major players in the market, it's held in an area that has a jurisdiction that has very similar laws over safety and security of data that we have here in Australia. Heather Smith:          And also, the data is being backed up in the cloud-based solution and it's typically backed up to various different areas. So if an issue happens in one place, then there's normally recovery sites happening as well. So that's important to be aware of. But one of the provisos if you actually read the terms and conditions of cloud-based app solutions is to take responsibility for your own backup. Many people don't, but that is something to be aware of. Heather Smith:          One of the other things is, with your desktop solution, whenever there is an update, you have to manually install and process and implement the update. Whereas, with your cloud-based app solutions the update comes through automatically. You aren't even aware it's happening there. Steve Burnham:         That sounds like a real benefit to start with. Heather Smith:          Yes. Now, one of the major things that is different between your desktop solution and your cloud app online accounting solution is a thing known as bank feeds. What happens is your bank accounts ... And we're talking, there's thousands and thousands of bank accounts who have enabled this to happen. The actual transactions from the bank feed flow into the accounting system automatically overnight. So there's no longer the need to manually enter any of that data. It flows into your accounting system overnight. Whereas with your desktop solution, you had to manually enter that, and typically you were manually entering and reconciling it on a monthly basis, and the access to real time data was a lot slower in a desktop solution. Whereas with an online solution, very much the access to the data is very real time. If there's a long weekend, we may be talking a couple of days old, but in most cases it's very realistic that what you're looking at is what's actually happening in- Steve Burnham:         It's real time. I mean, are there other benefits from cloud-based app solutions? Heather Smith:          There are lots of benefits of using your cloud-based app solutions. One of them is the ability, the flexibility of not actually having to be tied to a desk. You can actually work from anywhere. So I actually have a friend who's just arrived in Amsterdam and he's running his 12 person accounting practice, but he'll be doing it from Amsterdam where he's holidaying with his family for a while. Steve Burnham:         Fantastic. Heather Smith:          Absolutely. One of the things is, when we do move to the cloud I see a lot of people taking what we call a worcation, which is a longer vacation, which they do a bit of work on, but because they do a bit of work they can actually stay overseas significantly longer. Heather Smith:          We also see the benefits ... And one of the benefits that you may not be aware of is because you're moving to a cloud, you no longer need a server. And also one of the things we encourage is to move to a paperless office so you no longer need printers, so you actually save a lot of space in terms of the server, in terms of the printer. And there's a lot of statistical data, I think if you look at the Australian Bureau of Statistics coming out, that says that people over the last decade are actually spending a lot less money. Businesses over the last decade are actually spending a lot less money on hardware, and they're actually spending it on cloud apps. Heather Smith:          But what that means is, you need less space in the office for all of this hardware, for this server. You need less insurance so you're actually reducing your expenses. Plus you've got people able to work from anywhere so you actually need less office space. So it reduces a lot of costs, but because you're able to access and process things a lot faster it also releases a lot of capacity in the firm so you can actually increase your revenue. I know it sounds almost magical, but the implementation benefits you both in terms of reducing expenses but also increasing revenue. Steve Burnham:         Yeah, it's amazing. I've just had a thought. I mean, it's a real mobile office, what you're talking about. No printers or desks or anything. And another plus would be no working out depreciation tables every year at tax time. Every business owner would like that. Heather Smith:          The depreciation tables. Yeah. So Xero, as an online accounting solution ... I just mention that one because it has ... Within the actual solution it actually has the depreciation tables, and you set up all of the rules and you click a button and it comes through every month. And what that means is the small business owner is recognising and seeing their actual depreciation on a monthly basis, rather than at the end of the financial year when it's overlaid and pushed back into the financial data. So yeah, it makes it really easy. And I know that for that particular one, the depreciation table, my tax accountant ... He does the depreciation in a very fancy a depreciation schedule machine that he had, and it came out to about one cent different to mine. So he's like, "I'll stop doing using my expensive depreciation tool and just start using what's within Xero." Steve Burnham:         Speaking of the end of ... Heather, use of tools within a practice. What are some business intelligence tools that a practice can make use of? Heather Smith:          Okay. So in terms of business intelligence tools, what these are doing is helping you strive to assist your clients and give them further insights into what they're actually doing. So I'm going to mention three tools here. The first one I'm going to mention is DataDear. And what this does is it connects to your online accounting solution, be it QuickBooks or be it Xero, and it extracts the data into spreadsheets. So you have it sitting in your spreadsheets and within the spreadsheet you can either manipulate it, maybe do some three-way forecasting, maybe do some graphs, maybe update the information, and you can use that as a report. Or you can push it back up into the online accounting solution so you can actually use it to update the solution. So that's what's known as a tool. Heather Smith:          Another great application of that is if you had three files, perhaps a few Xero files and a few QuickBooks online files, you could actually have all the data download into the one spreadsheet and then add it altogether. So you have multi entities adding together, which is especially useful when you've got complex business relationships or you have franchises and they want to see all the information in one place. Steve Burnham:         What was the name of that tool, sorry? Heather Smith:          DataDear. Yeah. So that's a cool tool that gets all the data into Excel, and accountants generally love playing in Excel and manipulating data. So it brings it out of that structured framework so you can just play with it and do what you actually need to create the reports, the pivot tables, the three-way forecasts that you need to do. Heather Smith:          But moving on from that, there's another sensational tool called Float, which is a detailed cash flow forecasting solution. But what it does is it focuses on producing a short to mid-term, operational cash flow forecasting. You plug it into the online accounting solution. You refine what you've got there, you reconcile your books, you refine what you've got there, and what that's doing is giving you the ability to talk to your client about the next 13 weeks, through to the next three years. Are there any things that they need to be aware of? Are there things that they can take advantage of? Do they need to be open to potentially preparing to have a loan in place if things are going to be stressful in the next few weeks? But what you're doing by giving them that information is you're giving them the ability to actually think about it rather than just put on blinkers and not think about it. Steve Burnham:         You mentioned a third one? Heather Smith:          And then another solution is Maus Business Solutions, which is a company based out of Sydney. And what they do is they assist the accountant, if they want to do this, in both providing the software solution and the education about becoming maybe an advisor. And so, what they do is they have lots of different avenues to point you along. So they can assist with doing a needs gap analysis of the accounting solution and identifying areas of improvement, or they can assist with taking the information and creating it into a business plan. And there's lots of checklists with that solution that assist you, that help you ask questions around it, and help the accountant understand their actual client by delving deeper into what's happening there. Heather Smith:          So that was a spectrum of different solutions and ways to tackle situations. What we're seeing in the accounting industry is there's a lot of cloud app solutions taking over the clerical roles, scanning bills and receipts, automating a lot of that side of it. But what it's doing is it's shifting the role of the accountant up towards offering the ability to offer more advisory work, if they want to, if that's where they want to. Heather Smith:          What I see is two things. One, they have the ability to take on a lot more clients and just do the same thing, but significantly more. Three to four times more, and as I watched the wave come through, it's quite surprising when people say, "I used to have 12 clients. I now have 80 clients and I couldn't imagine when I had 12 clients I would have 80 clients." So they're actually able to significantly either increase their client base, or what I always say is grow your clients and actually do more with your clients. So you either have lots of little fish or a few big fish- Steve Burnham:         And as the fish grow bigger they want to do more things and all that sort of thing. It all makes sense. Heather Smith:          And that can get really exciting, and if that's where you want to go, you've got the opportunity and there's a lot of tools that you can just lean on to assist you in doing this. Steve Burnham:         Heather, we also represent quite a few SMSF trustees. There's about 30% of our membership, but it's growing. There's more and more SMSFs around all the time. With the cloud-based solutions, are there some SMSF or compliance tools that a practice can make use of? Heather Smith:          Absolutely. In fact, I was just signing off on my own SMSF just before we got on the call. So one of the solutions I've used for many, many years is BGL Corporation Solutions, which is Simple Fund 360. Now, many people may be aware it used to be a desktop solution, but they now have it fully integrated in cloud-based solutions. So you can potentially be still using the desktop, but the cloud-based solution has all of the bank feeds that I was talking about before, plus it has feeds coming in from all different areas that you actually need for a self-managed Superfund. Heather Smith:          The benefits are that the client can jump in and see all of the reports, see all of the graphical representation, there's a lot of nice graphs in there, while the accountant and the auditor are reviewing what they need to on their side of it. Plus it's populating with all the necessary information from share movements, dividends, franking, etc. That just automates and populates because they've got these fantastic feeds in there. And the Simple Fund 360 has really embraced machine learning and automation within their tool. So it really makes it a lot simpler, easier to use, and actually spend your time with your tax accountant or your self-managed Superfund accountant talking to them rather than answering questions about the nitty gritty. Steve Burnham:         And all the compliance things. And I suppose it would make the annual audit a lot easier too, especially if the third party auditor is switched on and keyed in to the- Heather Smith:          Absolutely. So in terms of auditing and when it comes to the cloud solutions, both in the self-managed Superfund space and if we look at the online accounting space, with your ... What you're able to do is actually upload documentation or push documentation in. So with my self-managed Superfund, all of my documents are in there and my superannuation accountant loves me for that. With my online accounting, all of your clients can upload their documentation using a solution like Receipt Bank, which scans all of your receipts and your bills. It extracts the data and it pushes it up, and the document actually attaches to the transaction. Heather Smith:          So now the auditor swoops in. And typically when an auditor comes along they've got various things to check, but then they spot check various things. So perhaps they do 20 spot checks. They do 20 spot checks and they have found the supporting documentation attached to every single transaction. They're happy. They're not going to do any more spot checks because everything is lining up, and it's so easy and you don't think about ... When you go into setting up online accounting solutions and adopting them, you don't think of how much time it's going to save at the other end just in searching for documents and in the auditing of documents. Plus we already talked about, if there's fire or floods, I'm in Brisbane. We flood every few years. We need to be aware of that. Heather Smith:          But jumping back to talking about compliance. BGL also do an asset compliance solution called CAS 360, again. So if you're in the compliance space and you need to have trusts set up very quickly, that's another nifty, very niche solution that you can leverage. So when I'm talking to people and saying, "Look, have a look at cloud app solutions and look at them." You don't need to implement, and it's not expected that you implement everything all in one go. You can just identify one area, look at implementing it, implement it, refine it, train staff. Make sure you're really comfortable and embedded with the processes and then look at another one. What we say is, accounting practices will have a typical tech stack that they can implement, but we wouldn't say implement it all in one go. Just gradually work through it until you're comfortable. Steve Burnham:         And then the next step. So baby steps. You can do that. Heather Smith:          Yes. Yes. Steve Burnham:         It's a whole new world actually for accountants and tax practitioners, it seems. How do you see the adoption of automation and cloud apps changing the role of the accountant in Australia? Heather Smith:          Well, I think what it's going to do and what it is doing is it's reducing any need for manual data entry, and as I mentioned before they're able to take on a lot more clients. But they're also able to spend more time talking to their client, and there's a lot of talk around at the moment that you actually need to have these forward facing skills to have empathy with the client and that they need to talk to them. And they also have this ability to have these business intelligence tools in place that can trigger them having conversations about helping them actually manage and grow, and efficiently and effectively develop the business. So I think the accountant has an amazing opportunity to really develop some great relationships with small businesses and help small businesses, and adopt the efficiencies around processing the tax and the compliance side of things so that they can help them in other areas. Steve Burnham:         And as you know, when barbecue talk and pub talk ... I mean, if you can do something for someone else that saves them an hour or two or day or two, and do it cheaply or efficiently, that's all good and it's good for business. Heather Smith:          Absolutely. Absolutely. And some people actually refer to cloud apps as an extra employee. So when you have a few in place, they're replacing so much time in your business that it's like a subscription based employee that works 24/7, never has time off, and it actually ... In many cases I see it just giving people so much capacity, and giving them the flexibility to live ... It sounds really corny but, live a better life. And I know for myself, I take the longer worcations, as I mentioned. I run my entire practice. I'm a Premium Xero partner. I run my entire practice in my handbag, and I talk about going to coffices, which is a cafe office. And I go to a coffice and I just pull out all of my gizmos, set myself up, and just have an enjoyable morning wherever I may be. Steve Burnham:         That's amazing. Heather Smith:          But I am able to work and get work done. And obviously everyone's a bit different, but it does give you that flexibility. Steve Burnham:         That's amazing. Well, Heather, you're at the ... I was going to say, "Coalface," but it seems a bit old hat now, talking about cloud solutions. But anyway, you know what I mean. You're at the forefront of the industry, of what's happening. Tell us about some new features or releases that have caught your eye recently. Heather Smith:          Well, there's been a few new releases that are quite interesting. One of them comes from Expensify, which is an expense claims management solution. So you would typically, if you had a business that had multiple people using corporate credit cards that they need claims back, they needed to claim back money on, that would be a solution that you would typically recommend to them. And what they've recently done is integrated with Global VAT, and it means that when you process your expenses with Expensify, it can run through this other solution and it can identify if you can actually claim back GST or VAT from other countries that you've visited, depending on the requirements, etc. in those different countries. But it will do the assessment for you, which frees you up so you don't need to think about it. It's just nice to go ... My bills go through the system and are intelligently scanned and identify if I've got money I can claim back in terms of ... You know how the GST laws keep changing overseas? It's like, what can I do now? What should I be doing? Etc. Heather Smith:          So that's a cool solution and I did briefly mention Receipt Bank before. One of the solutions that has implemented just recently is I can go in and I can give it the details of the local toll roads, and it will go out and it will actually collect my invoices and my statements and just pull them into my system. I don't need to get them sent to me. So it's the system that calls itself Fetch. It just goes out, fetches the documentation, and pulls it in. One of the things that people say is, the documentation, it just goes out, fetches it and pulls it in for you. Look, it's really interesting and you think ... I always think, "We're here. We're here. We're here." And then someone brings out another one of these amazing solutions and I think ... Such as with Expensify, I think, "Well, for some people that will save them a huge amount of time and it will actually probably make them far more money than the solution costs in the long run." Steve Burnham:         That's exactly right. It's amazing. Heather Smith:          Yeah, so, I love it. Steve Burnham:         It's good to hear. I think our membership have really got to catch up a bit. There's so many things that could help their business. Hopefully they will after hearing this and reading a lot more about it. Heather, that's very enlightening. Thank you very much for your time today. Heather Smith:          Thank you so much, Steve, for having me on the show. Really appreciate it and I really appreciate talking to your members. Steve Burnham:         That's great. Hopefully we can do it again sometime in the future, Heather. Thank you.