Wolters Kluwer 2014 Accountants research

DEALING WITH

DIGITAL DISRUPTION

WHAT IS DIGITAL DISRUPTION?

Digital Disruption

Changes enabled by digital technologies that occur at a pace and magnitude that disrupt established ways of value creation, social interactions, doing business and more generally our thinking.

- The University of Sydney

Daily distribution of Australian screen minutes

TV, 125

PC, 102

Tab, 37

Phone, 132

Source: Milward Brown AdReaction, 2014

Can the Accounting Profession keep up with clients and the cloud

11

Key Takeaways and Themes ______________________________________________________________________________________________________________________________

• Embrace, not fear, the cloud.

• Current business transformation is more than the cloud. Emerging digital experiences will define you and your clients business

• 69% of accountants surveyed use a cloud computing platform for accounting software

• The overall impact of cloud is quantifiably beneficial for the accounting profession. Your SME clients are net positive, but need more convincing

12

Methodology – Quantitative and Qualitative ______________________________________________________________________________________________________________________________

Quantitative Methodology • 200 Australia wide telephone interviews of SME organisations• 300 Australia wide telephone interviews of Small to Mid Sized Accounting/Tax

firms

Qualitative Methodology • 12 in-depth or one-to-one interviews of SME organisation employees• 12 in-depth or one-to-one interviews of Small to Mid Sized Accounting/Tax firm

employees

13

Quantifying Cloud Usage for Accountants______________________________________________________________________________________________________________________________

69% of accounting firms in Australia currently use cloud computing (SaaS)

based accounting applications

(sample size = 300 Accountants in Australia)

14

Quantifying Cloud Usage for Accountants______________________________________________________________________________________________________________________________

• Australian accountants use an average of 1.9 cloud accounting apps

• 59% of Accountants operating cloud based software, use 2 or more cloud apps

• Xero and MYOB dominate the market.

• 98% of accountants using cloud use at least one of these brands.

• 49% of accountants using two cloud apps use both of these brands

(sample size = 300 Accountants in Australia)

15

Regional vs Urban Accountants ______________________________________________________________________________________________________________________________

• 26% of accountants were located in regional centres, the remaining 74% in the state and territory capitals

• 60% of accounting firms in regional areas are using cloud based accounting applications with their clients

• 72% of accounting firms in urban areas are using cloud based accounting applications with their clients

• Overall whilst uptake in regional areas is lower than urban, there is limited defining behavioural patterns differentiating the two locations

• This reinforces the universal client driven demands to go to the cloud(sample size = 300 Accountants in Australia)

16

Is There an Accounting Age Divide?______________________________________________________________________________________________________________________________

Average age of an accountant using cloud accounting

applications = 36

75% of accountants under the age of 50 are currently using cloud accounting packages

Average age of an accountant NOT using cloud accounting

applications = 40Just 45% of accountants over the

age of 50 are using cloud accounting packages

(sample size = 300 Accountants in Australia)

17

Baby Boomers vs Millennials______________________________________________________________________________________________________________________________

• This issue is clearly critical to how you communicate with your clients and co-workers older and younger

• You cannot use a one size fits all approach across the age divide. Younger accountants understand the technology and the benefits

• A critical qualitative issue is the way in which the cloud is sold to Millennials.

• “Everyone is trying to sell cloud to our parents, not to us”

• “Don’t sell us the cloud - Tell us why I should use MYOB not Xero”

• “Help us sell to our clients, and create a cloud ecosystem for the SME”

(sample size = 300 Accountants in Australia)

18

Depth of Impact of Cloud Computing on Services provided to SME’s ______________________________________________________________________________________________________________________________

Will Services Provided to SME’s Be Impacted by the Shift to the Cloud

Consider it a significant negative impact

Consider it a slight negative impact

Neutral/No Opinion

Consider it a slight positive impact

Consider it a significant positive impact

(sample size = 300 Accountants in Australia)

19

Depth of the Impact of Cloud Computing on Services provided to SME’s ______________________________________________________________________________________________________________________________

0%

10%

20%

30%

40%

50%

Consider it asignificant negative

impact

Consider it a slightnegative impact

Neutral/No Opinion Consider it a slightpositive impact

Consider it asignificant positive

impact

Cloud Users

Non Cloud Users

(sample size = 300 Accountants in Australia)

20

Depth of Impact of Cloud Computing on Services provided to SME’s ______________________________________________________________________________________________________________________________

• On the scale of 1 (significant negative) to 5 (Significant Positive) • Users of cloud computing rated the impact of cloud on the accounting

profession as 4• Non-Users of cloud computing rated the impact of cloud on the accounting

profession as 3.5• A clear indication that the adoption of Cloud Computing is seen as

overwhelmingly positive • “The cloud is the most exciting “invention” for the accountant since the abacus. It

will make our job easier and allow us to add real value for our clients” • “Cloud will find out poor bookkeepers, but for most it is a very positive part of the

industry as it allows us to focus on supporting the client”

21

Which Accounting Business Processes Impacted by Cloud Computing –

Remembering it is considered positive______________________________________________________________________________________________________________________________

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0%

Don't Know

Business Mentoring and Executive Board Services

Corporate Financing, lending access and advisory

Personal Financial Planning

Technology strategy and enablement advisory

ASIC Reporting and Corporate Secretarial

Self Managed Super Fund Establishment and Compliance

Business Establishment and Structuring

Business Planning, Forecasting and Cashflow support

Business Advisory

Tax Planning

Financial Reporting and Taxation

No Cloud

Cloud

(sample size = 300 Accountants in Australia)

22

Which Accounting Business Processes Are Impacted by Cloud Computing ______________________________________________________________________________________________________________________________

• Overwhelmingly the number one accounting process impacted by the cloud is “Financial Reporting and Taxation”. This was cited by over 40% of respondents.

• This is regardless of whether the respondent is a current cloud user or not. • Other key processes impacted include:

• Business Planning• Forecasting and Cash-flow support• Business Advisory• Tax Planning

• In general there is an alignment between cloud and non-cloud users in terms of their perception of impacts

23

Key drawbacks for Accounting firms when Using Cloud______________________________________________________________________________________________________________________________

Security Concerns17%

Client Concerns15%

Downtime 15%Being Tied

to One Supplier

13%

Lack Of Support11%

Data Location 11%

Loss of Client

Integration

9%

Overall Cost 8%

Other1%

(sample size = 300 Accountants in Australia)

24

Key drawbacks for Accounting firms when Using Cloud______________________________________________________________________________________________________________________________

• Whilst the accounting profession is very positive about the cloud, there is a range of drawbacks for use of the cloud

• Security Concerns were the number one drawback of cloud for 17% of respondents

• Client Concerns was ranked second. Qualitatively and anecdotally we also know that the client concern is largely security related.

• Data location is only an issue for 11% of organisations

• Cost is a non-issue

25

Is Government Red Tape Reduction a Challenge? – Accountants say NO!!______________________________________________________________________________________________________________________________

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

Is government concern over red tape a threat to Accountants?

Consider it asignificant negativeimpactConsider it a slightnegative impact

Neutral/No Opinion

Consider it a slightpositive impact

Consider it asignificant positiveimpact

(sample size = 300 Accountants in Australia)

26

Future Cloud Investment______________________________________________________________________________________________________________________________

• Current users of cloud computing are very confident that they will increased usage of cloud computing in their business

• 76.3% of current users are “very likely” to increase their expenditure on cloud computing

• A further 19.8% are “quite likely” to increase their expenditure on cloud computing

• Increased investment in cloud is anticipated across all age groups• “There is no way back for cloud computing. We are embracing it all the way”• “We are partnering with a firm who provides CRM SaaS support to enhance

customer outcomes”

(sample size = 300 Accountants in Australia)

27

SME Investment in the Cloud for Accounting Services ______________________________________________________________________________________________________________________________

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Are you, or your Accountant using a Cloud Computing Based Accounting system for your Financial Management?

Currently Use a CloudBased System

Have Considered Using aCloud Based System

Have Not Yet ConsideredUsing a Cloud Based System

(sample size = 200 SME’s in Australia)

28

SME Investment in the Cloud for Accounting Services ______________________________________________________________________________________________________________________________

• Currently 27% of SME organisations are using cloud based accounting services

• 60% of organisations have not yet tried to shift to the cloud.

• This is a significant untapped opportunity

• “We embraced the cloud a couple of years ago after our accountant suggested it to us”

• “The real benefit for us is the improved software. Cloud was secondary”

• “We will likely go to the cloud at some stage as these are the firms who are innovating. It is hard to avoid Xero, they must be doing something right”

(sample size = 200 SME’s in Australia)

29

Who Makes the Cloud Decision? – Not the Accountant______________________________________________________________________________________________________________________________

Respondent Someone Within Organisation Accountant Third Party

0%

10%

20%

30%

40%

50%

60%

70%

(sample size = 200 SME’s in Australia)

30

Brand of Cloud Accounting Package Used ______________________________________________________________________________________________________________________________

MYOB

Xero

Saasu

Reckon

CCH

Intuit/Quikbooks

Other

(sample size = 200 SME’s in Australia)

31

Key Drivers of Cloud Investment by SME’s______________________________________________________________________________________________________________________________

Key Drivers of Cloud Investment

Security 44.4%

Functionality 42.6%

Price 5.6%

Pricing Flexibility 3.7%

Scalability 1.9%

Quality 1.9%

Data Location 0.0%

Frequency of Updates 0.0%

None / don't know 0.0%

• Cloud investment for SME’s is all about focus on security and functionality

• Get this correct and your clients will thank you

(sample size = 200 SME’s in Australia)

32

Perception of the Security of the Cloud Platform______________________________________________________________________________________________________________________________

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

Cloud much more securethan current office system

Cloud a little more securethan current office system

Current office system a littlemore secure than a Cloud

system

Current office system a lotmore secure than a Cloud

system

SME

AccountantsUsing Cloud

© 2014 capioIT 33

If you don’t transform you will be SMAC’D by clients______________________________________________________________________________________________________________________________

Digital Business

Engagement

Mobility

Cloud

Social Business

Analytics

© 2014 capioIT 34

What your Clients will demand from SMAC’D

Cost Scale Hustle Secure Agility

______________________________________________________________________________________________________________________________

© 2014 capioIT 35

A successful Accountant has to build a business around these ideas______________________________________________________________________________________________________________________________

• Business Outcomes based opportunities

• Drive Business Agility

• Transform Business and Technology Engagement

SMAC’D

• Cloud based

• Scalable/Cost removal

• Cross Industry

• Business Outcomes based opportunities

Business Platforms

© 2014 capioIT 36

______________________________________________________________________________________________________________________________

Embrace, not fear, the cloud.

Cloud and emerging digital experiences will define you and your clients business

(

Daniel Wyner

Head of Strategy, Mergers & Acquisitions

Asia Pacific

What are the top 3 challenges that technological advances are creating

for your accounting practices?

38

Three Emotions

Key take outs

1. Proliferation of SME cloud solutions

2. Services Impacted by cloud computing

3. Lack of understanding of Governments actions

4. Education not prescription

Proliferation of SME cloud solutions

Services Impacted by cloud computing?I told them advisory

was the future! 1…2….3….

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0%

Don't Know

Business Mentoring and Executive Board Services

Corporate Financing, lending access and advisory

Personal Financial Planning

Technology strategy and enablement advisory

ASIC Reporting and Corporate Secretarial

Self Managed Super Fund Establishment and Compliance

Business Establishment and Structuring

Business Planning, Forecasting and Cashflow support

Business Advisory

Tax Planning

Financial Reporting and Taxation

Which Accounting Business Processes Impacted by Cloud Computing –Remembering it is considered positive

No Cloud

Cloud

Compliance 72% Advisory

26%

Don't Know2%

Services impacted positively by the cloud- Cloud users

Lack of understanding of Governments actions

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

Is government concern over red tape a threat to Accountants?

Is Government Red Tape Reduction a Challenge? Consider it asignificant negativeimpactConsider it a slightnegative impact

Neutral/No Opinion

Consider it a slightpositive impact

Consider it asignificant positiveimpact

Nagative Impact12%

Neutral48%

Positve Impact40%

Is Government Red Tape Reduction a Challenge?

What Changes?• Automation of Individual tax returns (iReturns)

• “…developing a light touch or no touch income tax experience”

• ATO no longer sends Cheques on iReturns

• BAS & IAS changes • If you lodge via ELS or Portal say bye bye to paper BAS/IAS

• 12 months away from no physical NOA’s to Tax Agents

Privacy Act 1988 - Tax File Number Guidelines 2011Guideline 6 Storage, security and destruction of TFN information

6.1 TFN recipients must take reasonable steps to:a) protect TFN information from misuse and loss, and from unauthorised access, use, modification or

disclosure, andb) ensure that access to records containing TFN information is restricted to individuals who need to

handle that information for taxation law, personal assistance law or superannuation law purposes.

Computer and network security – by adopting logical barriers and measures to protect computer systems and networks from unauthorised access, modification and disclosure such as: • user identity checks and password controls• separately storing, processing and transmitting TFNs from other information handled by the TFN recipient• systems including audit trails to detect unauthorised access.• Communications security – by protecting communications via data transmission, (including email and voice communications), from interception, and preventing unauthorised intrusion into computer networks

Office of the Australian Information Commissioner http://www.oaic.gov.au/privacy/privacy-resources/privacy-fact-sheets/other/privacy-fact-sheet-6-the-binding-tax-file-number-guidelines-2011-and-the-protection-of-tax-file-number-information

Respondent Someone Within Organisation Accountant Third Party

0%

10%

20%

30%

40%

50%

60%

70%

Who Makes the Cloud Decision?

Key take outs

1. Proliferation of SME cloud solutions

2. Services Impacted by cloud computing

3. Lack of understanding of Governments actions

4. Education not prescription

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