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The Real Breakthrough of Cloud-Based Accounting

The last 7 years has seen an explosion in cloud-based software…

Not everyone has fully grasped what this has made available.

What small businesses (and by small I mean up to $100 million in sales) have to choose from now is spectacular.

It is the realization of a dream.

A dream you say? Come on, you are an accountant!

A 1999 Prophesy

Yes, a dream. I will never forget a conversation I had– way back in the old days of 1999. This was when I first had the vision of serving our clients in the cloud.

A man said to me – “Mark, the true power of the emerging internet is not social media. It will be the speed that you can process financial transactions”.

That stuck with me. Well, speed, I have come to learn is not exactly the true breakthrough of the net.

The breakthrough is automation.

Let me explain.

The Evolution

Back in the day (ha-ha) of the 90s, software for small business had evolved to a pretty high level. QuickBooks desktop started as a tool for simple businesses like trade contractors. As it evolved more and more features were added. Businesses with sales volumes of $10-20 million would use QuickBooks.

Even uber-big software programs designed as ERP systems for mega businesses did not have some of the cool features built-in to little, old Quickbooks.

In other words, there was a gap. Boring, featureless software that could handle huge transaction volumes on the one hand. And very inexpensive, feature-rich software that could do lots. The kicker was that they would shake off the rails under higher transaction loads.

 Here is what was handicapping software developers…

…the architecture.

A Design Flaw

Let us go back to 1999. You find a good accounting package like QuickBooks. You need a powerful inventory management system. Throw in a super-cool CRM package. Dang, these were not available inside QuickBooks.

So, you shop around for those. Problem number 1 – you would not be able to find a great inventory package that would run independent of QuickBooks.

And here is the kicker…

…no software talked to each other in those days of old just 20 years ago.

Why? Each software company kept their code private and proprietary.

What did you do then? You shopped for an enterprise-level software that did it all. Inventory management. Customer relationship management. Sales order entry.

There is the problem with that. No software can ever be, nor will ever be good at all things. It will have one, maybe two great strengths. Everything else will suck.

Worse, it will be a highly specialized system with less customers and the response time for support will be high.

Customization costs will be astronomical.

The Cloud Breakthrough

Then…along…comes…cloud-based software…

And the dream of software talking to each other beautifully, seamlessly, accurately was born.

This is the current world we live in – a hyper-specialized world where you can buy software that does one tiny function. But here is the cool thing – what happens when you get hyper-specialized?

You get really, really expert at that one thing.

And the proprietary problem mentioned above? Gone. Disappeared. Almost all small accounting packages have open APIs. What is an API? An Application Program Interface.

In simple terms, they let other software programs enter in! Now, software programmers could write a cool, specialized software program and hook into Xero or QuickBooks Online!

The result? It turned basic accounting, although very functional and cool programs like Xero into 800-pound gorillas!

I will illustrate an example of where we are at for a typical small business. This is not exaggerated. It is real.

A Real Life Example

We have clients with 9 separate software programs that together function as a well-oiled machine:

  1. At the core and heart of it all, a basic online accounting for reporting, accounts payable, accounts receivable
  2. Online payroll software that connects to (1)
  3. Inventory management system that tracks unlimited inventory items, in multiple warehouses, in multiple currencies, able to track lot numbers, do drop shipments, cost in real-time, and on and on. This connects seamlessly to (1) above;
  4. Online order entry system for customers to order products connecting to (3) above;
  5. Approval software that routes incoming vendor bills to department heads for approval. It too talks politely to number (1);
  6. Software that chases accounts receivable resulting in fast turnover of accounts receivable. This one connects to (1) above;
  7. Online bill payment software connecting to (1) above;
  8. Document extraction software doing basic data entry, connecting to (1) above;
  9. Finally, stunning month-end reporting package connecting to (1) above. Oh, and it does rolling 3-way, 36-month forecasting. (Message me if you want to know what a 3-way forecast is).

Oh, wait, I can hear your objections! I do not want 9 separate pieces of software! I do not care how nicely they talk to each other! That looks complicated and unwieldy!

Sorry to be blunt. You are wrong. I will tell you why.

What is the Alternative?

The alternative is this. Finding a software vendor – could be cloud-based – that does all of that in one simple package! Be super cool, right?

No. no. no. It is not. It is not because firstly, that software will not do each of those functions well. Number two, it will be way, way more expensive. And number 3 it will become super-expensive as you ask for customizations for things the software above will do. And do much better.

The architecture is all wrong. The thinking is all wrong. It is not where we have evolved to. It is backwards thinking. In the old days – the 1990s – you had to do this. Remember, the software in the pre-cloud days, did not communicate at all, let alone nicely.

If you want a fourth reason, here it is. What happens when that custom, Mr. Big Software Package fails? You have everything in one basket.

However, if one piece of that 9-item software suite fails, you only need to focus on one piece of your business.

Another objection I hear is cost. I hear people say, “I only pay $450 a year for QuickBooks desktop. I do not want to pay for 9 pieces of software!”

The good news is some of the software above is free when you use Xero. That would be the document extraction. Others are super low cost. As in, $25/month. The one doing all the heavy lifting will likely be the inventory management system. That is more expensive, yes. However, compared to a full-blown, all-in-one ERP system it is ultra-low-cost.

What We Do

But here is what you must know. The level of automation, and cost savings are radical. And the 9-suite software system mentioned above becomes very, very inexpensive. There is a catch…

(Warning. Warning. Beep. Beep. Commercial coming. Ok, you have been warned). You need someone who will setup the automation for you in a way that takes advantage of all the features available in the cloud software out there. Someone who will not only impeccably set it up. They will train you and co-manage with you. If needed they will run the whole thing for you. That would be us, at ControllershipPLUS.

Breath. Commercial is over.

Thanks for reading…