How will the cloud disrupt practice management software?

Will the longstanding players in the accounting software game be able to compete?

Thanks to cloud computing, the upheavals in client accounting software are now affecting the products accountants use to run their own practices. How will the longstanding players compete?

Cloud computing, where accounts are stored on a distant server and accessed in a web browser, has turned accounting software on its head. But so far, it has had less of an impact on the software that accountants use to manage their own businesses. How long this will remain the case is up for debate.

Practice software incumbents say peace will reign for a while yet; newcomers say changing tastes threaten the very existence of stand-alone practice management software.

Loosely defined, practice management software is a suite of tools to manage the key operational tasks of an accounting firm. It can include modules for producing tax returns, quarterly statements and workpapers, time tracking and billing, storing and categorising documents, and measuring and reporting on staff productivity.

It can also manage a long list of other areas: jobs, tasks, staff workload and capacity, customer details and relationships, and superannuation funds.

The big practice management suites provide all these modules under one interface – and charge a high premium for it. Vendors argue that the efficiency of doing everything in the one suite justifies the price.

“Twelve months ago there was a lot of talk about cloud, but people are refocusing not on cloud for cloud’s sake, but on business outcomes,” says Sam Allert, Reckon managing director for Australia and New Zealand.

“The best thing for us is that we have the complete end-to-end process. No-one else comes close.”

A second theory – backed by cloud-focused vendors with no full-scale suites to sell – is that the age of monolithic software suites is ending. On this view, the suites will be replaced by a collection of best-of-breed apps that individually showcase the latest innovations.

"They are re-imagining what practice management means from even five years ago." Bianca Bowron-Cuthill, Intuit

Apps such as Karbon, Common Ledger and MyWorkpapers “are building out the bespoke needs of practices in Australia,” says Bianca Bowron-Cuthill, a regional product manager for Intuit. Her company sells the QuickBooks accounting line, but has no practice management product.

“Instead of one vendor that is supposed to be the be-all for all firms, a firm can come up with a solution that’s customised just for them. They are re-imagining what practice management means from even five years ago.”

Xero takes this line even further. “The compliance component is the only piece that’s specialised and needs to be integrated into the ledger,” explains Xero’s managing director for Australia, Trent Innes. All other software is “commoditised”, he says, and a stand-alone app can provide that.

Incumbent practice management software vendors say their suites offer features that have been created and refined over 10 to 15 years. Challengers say many of the longstanding features are outdated or no longer useful.

The actual market share of the different practice management suites is closely guarded and hotly disputed. Reckon and MYOB insist their churn rates remain unchanged at below about 5 per cent. CCH iFirm, sold by CCH Australia, claims to be selling strongly to firms moving from Reckon’s APS and MYOB’s Accountants Office (AO) and Accountants Enterprise (AE).

Sage's national sales and marketing manager, Gary Weisz, says the sales trend for Sage HandiSoft “is still very much in our favour”.

Consultants for Xero Practice Manager, Xero’s own practice suite, report that increased interest means their availability has gone from “we can see you next week” to having to book appointments a month ahead.

Cloud up and build out

Meanwhile, the incumbents are gradually upgrading their practice suites to take advantage of internet-based services. Given that replicating all their existing modules in the cloud would take several years, MYOB and Reckon are focusing on improvements that boost efficiencies in the compliance process.


“We’re looking to complement the desktop solution with online capability so firms can make the transition gradually,” explains Adam Ferguson, MYOB’s general manager of engineering and experience.

MYOB’s new portal, launched in late 2015, has been one of its biggest successes in improving compliance workflow. It introduced electronic signatures to replace the hassle of printing and posting tax returns to business owners. An accountant can now send the client a link to the portal to view, query or electronically sign a document. The client can sign a tax return by clicking on their smartphone.

The next step on MYOB’s roadmap is an improved partner dashboard that will display connected services such as bank feeds. Meanwhile, Ferguson says, the company is encouraging customers to move clients to cloud accounting software to help their practices run more efficiently.

Professional Development: CPA Q&A. Access a handpicked selection of resources each month and complete a short monthly assessment to earn CPD hours. Exclusively available to CPA Australia members.

Reckon APS

Reckon is gradually cloudifying its APS suite, says Allert. A new feature called SyncDirect imports data from any vendor’s accounting software – particularly useful for larger firms that have clients on a broad range of programs. Once data is in the practice’s ledger, APS users can reconcile transactions, add fixed assets and run compliance reports, before pushing all the data into the tax return and workpapers. Like MYOB, APS uses a client portal to store documents for electronic signing.

On Reckon’s roadmap are web-enabled timesheets for accountants that can be used on mobile devices, and an improved analytics module using data from the client’s accounting file and other business applications. Accountants will also be able to set up a KPI dashboard and share it through the client portal or print it in a PDF, says Allert.

Sage HandiSoft

At the other end of the market, Sage HandiSoft is promising a complete rebirth after partnering with The popular Sage 50 desktop accounting program will be replaced by a cloud equivalent, Sage Live, which will include practice management components, says Weisz. The first elements of the global suite, called Sage Live Accountants, will be released in December. Weisz expects that on its launch, the suite will include document management and a client portal; integrated workpapers will come after 2017. Sage Live Accountants will integrate directly with BGL Simple Fund 360 to comply with SMSF regulations. 

"There’s going to be a massive shift in this space." Trent Innes, Xero

Sage cloud software already released in the US and the UK includes a dashboard called Sage Impact, with links to all clients’ accounting files, even if they’re on a non-Sage program. Sage View imports data from online accounting programs (Sage and others) to produce business advisory reports including KPIs and what-if scenarios. Client Accounts imports data from any accounting program and runs financial reports. Sage Australia is localising Sage Impact, View and Accounts and expects them to be ready by 2017.

Challengers start small, aim high

Perhaps the most serious challenger for incumbents in the mid-market range is CCH iFirm, a New Zealand acquisition that CCH Australia has turned into a global player.

CCH iFirm

The cloud-based CCH iFirm is sold in eight countries: Australia, New Zealand, Singapore, Malaysia, Hong Kong, the US, Canada and India. Its CCH iQ, an iFirm module, uses predictive intelligence to drum up advisory work. It identifies clients affected by changes to tax legislation or industry events and sends them templated invitations to discuss the issues.

Daniel Wyner, Wolters Kluwer’s general manager for Asia-Pacific, says iFirm’s sales are being boosted by its online tax program and also by a desire for better capacity planning and job management.

“Capacity within an accounting firm is very difficult to manage,” says Wyner.

“The incumbent desktop suppliers all but force you to Excel to manage that properly.” iFirm uses alerts and notifications to flag when a job is taking longer than average, which might drive management intervention.

Other firms are looking for a way to escape yearly price increases and heavy infrastructure investments from incumbent vendors. One accountant was quoted A$50,000 just to upgrade a server in order to keep running a competitor’s suite.

“That’s a lot of money to a small firm,” Wyner points out.

Xero Practice Manager

Xero has some presence in the mid-market, despite its focus on the estimated 97 per cent of firms with fewer than 20 employees. Xero Practice Manager (XPM), a suite of applications from a number of acquisitions, is used by larger firms.

XPM includes job management and workflow, time and billing, workpapers and tax. It integrates with NowInfinity (corporate compliance), Class Super (SMSF management) and SuiteFiles (document management). While it has no hard-coded limit to the number of users, XPM lacks the divisional reporting required by large firms.

Matthew Prouse, Xero’s solutions manager for practice tools, says it is used by “thousands of firms”. Many of those are on Xero Tax, which is free to firms with Xero Bronze partner status or higher.

While Xero Tax is a part of Xero Practice Manager, most firms use it as a stand-alone product with the other elements hidden.

Despite Xero’s declared interest in small practices, Xero Practice Manager has a disruptive impact on the lower end of the mid-market because Xero gives it away for free to firms at Silver partner status or higher.

If practice management software is being disaggregated, larger firms may decide to go with Xero’s free compliance tool and invest separately in enterprise-grade CRMs and other systems.

“Why would you build e-signatures, marketing automation and document management when it’s all available already? The investment cost [for incumbent vendors] would be prohibitive,” says Innes.

“There’s going to be a massive shift in this space.”


Although Intuit dominates the US client accounting market – and hopes to repeat this success elsewhere – it has steered clear of practice management until now. Its client app, QuickBooks Online, now integrates with more than 200 apps, some of which are well suited to accountants.

These include online lodging portals LodgeiT and GovReports; TSheets, which firms could use for time billing; Karbon, an email management and CRM platform for accounting firms; Common Ledger, which automatically shifts data from client files to online ledgers or other files; and the cloud-based MyWorkpapers. 

Mid-market firms previously had two choices for practice management. With online accounting now such a hotly contested space, those days are over.

ATO portal takes a trip to the firm

The Australian Taxation Office (ATO) announced as part of its digital transformation that parts of its tax agent portal would be available through practice management software. The first steps toward that goal have begun, with the ATO gradually moving from the electronic lodgment service (ELS) to the practice lodgment service (PLS) in the 2016-17 tax year.

The ATO will turn off ELS on 31 March 2017. 

The PLS, which is based on the government’s Standard Business Reporting (SBR) framework, will allow practice management suites to interact directly with the ATO, instead of downloading and importing data.

Accountants will be able to use the PLS to pre-fill income tax returns, add and remove clients, create additional reports, lodge applications for private rulings and arrange direct debit payments for tax liabilities, with other functionality added over time.

One workflow that could be improved is the deferred lodgment application for clients who need an extended due date. To get an approval through the portal takes about 28 working days; Xero’s Matthew Prouse calculates that this figure could plummet to about 90 seconds.

The biggest change of all will be expanding the amount and type of data that accountants can pull from the ATO to pre-fill various forms, including tax returns.

Client lists in the ATO portal will also soon sync with the larger practice management systems. CCH iFirm has developed features for the already digitised New Zealand Inland Revenue Department that it will bring across to Australia when the ATO is ready to deal with them.

These include ATO notifications when a client meets or misses a payment, as well as notifications of assessment.

Like what you're reading? Enter your email to receive the INTHEBLACK e-newsletter.
October 2016
October 2016

Read the October issue

Each month we select the must-reads from the current issue of INTHEBLACK. Read more now.