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Back in the day of desktop accounting, both clients and their accountants were somewhat disconnected from the true financial events taking place behind the scenes of their company. SMEs ran their business based on gut feel and measured their success on how much cash was in the bank. But that is a volatile and risky method.
Before Cloud accounting, receiving daily live data updates was prohibitively expensive, and only really feasible for larger corporations. This in turn meant businesses were being run based on old financial data – 30 days after the end of the month, or even six months after the end of the financial year. Anomalies were missed, small issues snowballed, and all too often alarm bells rang too late.
The real beauty of Cloud accounting is that it produces real time data, even if that simply means live bank feeds and raw data in the system. But what is key here is that the data is reliable; SMEs can rely on their bank feeds and use them in conjunction with other apps to increase data accuracy.
The result of all this real time financial data is that business owners now operate their businesses in real time. They can analyse last week’s results, as opposed to last month’s or even last year’s. And in turn, they begin to forecast longer and more in depth based on these trends.
Having access to real time financial data creates better business owners. The volatile just became stable.
They’re more informed, they understand their own data, and their financial literacy is growing. They are learning on the job.
Using the framework provided by Xero, SMEs grow and prosper, thus increasing profits which they either draw out and spend (which is good for the economy) or they reinvest into their business, hiring more staff and using more services.
More importantly, during the financial down times, they can react quicker, keep their heads above water, and avoid being caught out. Just a few daily tweaks to a small business’ operations can be the difference between survival and liquidation.
And on the flipside, accountants are able to further their learning too. As they move clients over to the Cloud, they need to sell all the benefits, including the fact that we, the accountants, now have better access to our clients’ data too, so we can use that to help them run their businesses better.
But we can’t just make this comment off the cuff. Clients are listening and as business conditions get tougher they want help. They want to speak to us more, but we need to speak to them when we have relevant and reliable data. Clients want tangible results. They want real advice. They want solutions to their problems.
And this is where the hard part comes in. To meet demands for the provision of advisory services, we have to un-learn what we know from desktop accounting, and re-train ourselves on true management accounting and corporate accounting principles using real time data. We don’t need to become virtual CFOs, but we do need to present data with real advice on how to improve the areas of concern.
In 2017 I am 100 times a better adviser than I was before I started using Xero. Presented with the opportunity of leveraging the cloud to deliver the advisory services I had wanted to do for some 10 years, I began re-training myself. When I moved clients over to Xero they challenged me on the value my original advisory services delivered. So, I had to work hard to meet their expectations. The Cloud and Xero have required me but also simultaneously enabled me to become a better accountant and adviser.
A happy consequence is, and I’m more than comfortable to acknowledge it, is that my financial literacy has improved, and I now run my own business better. As I move forward advising my base of clients, the long-reaching impact is that I can help all of them individually thanks to the cloud, which has a positive knock-on effect for the economy. Add this to the thousands of accountants and advisers using Xero and Cloud accounting applications and you begin to realise the financial impact the Cloud and Cloud accounting has had, and will continue to have, on the global economy.
This effective change is not without effort on behalf of the adviser, but all worthwhile changes require time and endeavour.
James Solomons 