Technology for Accountants in Practice | Top Accountants

Looks like users who have previously signed-up to play with Xero on a free trial will have received this email this morning.  Clearly, the marketing ploy is to prompt fence-sitters to make the switch before the start of their new financial year, which for most businesses begins 1st April.

The offer has 43 days to run, so represents a saving of about £26 for a business using Xero’s “Medium” plan.  Is this enough of an incentive?  Personally, I am not convinced but it is a clever way of getting into the inboxes of prospects without looking spammy.

I met up with Hamish Edwards and Darren Glanville  from Xero online accounting software yesterday, when they dropped in to the Pearson & Associates offices.

It was good to meet Hamish for the first time, after previous telephone and cyberspace conversations.  Most of the talk was about how Xero could help us with the process of converting clients from other systems, such as Sage and QuickBooks but we also discussed Xero’s broad development roadmap.  Hamish revealed that one of the things they were working towards is what he described as a “One Ledger” concept.

Now, I must admit that I didn’t grasp the significance at the time but now, having had chance to think it through, it strikes me that One Ledger could have profound implications for most small accountancy practices.

So what are we talking about here?  Well, the big idea (and it’s not rocket science) is to use the same data set (the client’s) for the production of year-end “final” accounts rather than what currently happens – which is that the accountant takes the client’s accounting data and transfers it into his own software for further processing and final accounts production.  Using the One Ledger approach, the need for the accountant to produce separate working papers is eliminated, as is the chore of revisiting the client’s data after the final accounts are produced to make adjustments to correct the opening balances for the new financial year.  The client’s accounting data IS the working papers and IS the lead schedules.

One significant development that will make this possible is what Hamish described as an intermediary coding structure which will allow individual general ledger account codes in a Xero (client’s) chart of accounts to be mapped to the appropriate code in the Xero statutory chart of accounts.  It’s my understanding that, by default, this functionality will only be visible to users with the “Financial Adviser” role in Xero.  Accountants typically reserve this role for themselves, where they have setup the client initially, but there is nothing in principle to stop a client using the extra functionality if they wish to.  This means that, for instance, abbreviated accounts for Companies House can be generated without the intervention of the accountant.  Now tell me that is not a fundamental shift in the balance of power of the client / accountant relationship.

I see this as a positive change, it allows the accountant to distance himself from the traditional compliance service and, instead, demonstrate how he can add value to the process, DURING the process – not just at the end by facilitating filing with the authorities.

Of course, the One Ledger principle cannot realistically work for desktop accounting systems such as Sage or QuickBooks, simply because the client cannot run their business without access to their accounting data during the time it takes their accountant to “do the books”.  This is therefore a way of working that only web-based providers, like Xero, can offer.

I can see some potential problems – such as how to get the tax provision into a set of limited company accounts without first importing accounts information into the practice’s corporation tax software – but I can also see big benefits for both the client and the accountant.  The accountant’s role will change though, to one of reviewing and correcting the client’s data before the client files the accounts, instead of owning the whole process – and charging accordingly.

In a post on the Xero Blog on 15th January, Mark Matt Vickers discusses Vendor Lock-In.  In a previous post, I commented on the automatic upgrades nature of Saas products.  Here I want to examine Mark Matt’s claim that:

“.. if you want to stop using Xero, it’s relatively simple to get your data out in formats that can be used by other systems”

Now, I am a very happy user of Xero but, pretending for a moment that I have decided to pitch my tent elsewhere, I am looking at how I would get my data out.

The obvious starting point seems to be the “Export General Ledger Transactions” routine.  This is accessed via the Adviser menu, so will only be available to users with “Financial Adviser” permissions.

The export routine produces a Text file that can easily be read into Excel.  So a tick in the box here.  However, there is a problem.  The text file does not include the contact name for each transaction, i.e. the customer or supplier name.  Clearly, this is a major limitation if I want to use my historical accounting data in another system.  Looking at the data fields exported, there is a column called “Name” which contains the “Account Type” (Direct Costs, Current Liability etc) and it seems to me that this is an error – I think this column was intended to have the contact name in it.  I have already flagged this issue with Xero support.

An alternative is to run the General Ledger report from the reports menu then click on the “Export detailed General Ledger to Excel” button.

Opening the Excel file produced, I see that I now have the customer or supplier names which is great.  The downside though is that what I am looking at now is an Excel report, with transactions summarised by account name and subtotalled.  This means the data is much harder to use for importing into another accounting system than a text file or CSV file.  The data itself is also less complete than what I had using the other export routine – in particular I don’t have VAT itemised by transaction.

So, if I want to take historical Xero transactions and import them into another system, the current export facilities are almost, but not quite, sufficient.

More typically, I believe, I would want to move to a rival system with effect from a particular date – the start of a new month, or VAT quarter for instance.  In this scenario, I would leave my historical data in Xero, using Xero up to the last day of the previous month or VAT quarter, then enter opening balances only into the new system.

For the purposes of entering opening balances, Xero provides several export routines.  I can get my outstanding customer and supplier invoices using the export option (to Excel) from the Aged Receivables and Aged Payables reports.  Customer and supplier details can be exported easily (to CSV).  I can also export the closing Trial Balance (to Excel) and my Chart of Accounts (CSV), which makes setting up my General Ledger in the new accounting system easier.  It seems that I am now good to go – or am I?

Having moved my Xero closing balance information over to my new accounting system, I can now use the new system for all ongoing transactions but, because I could not bring over my historical transactions, I also need to keep my old Xero account open for reference purposes.  I have to pay for two systems now.  Not really “fair play” in my view.

The guys at Xero are aware of this issue and state in their help documentation:

“In the future, at a reduced cost, we plan to include functionality to allow an organisation to be set as read-only for archival purposes.”

To conclude, I think that Xero are playing fairer than most with my data but maybe not trying hard enough to follow through fully on their statement:

“We believe your data is your data, and what you’re paying for when you use Xero are tools to manage that data.”

What could Xero do better?  I think that all of my data should be available as a text or CSV export, not in Excel format.  Going further, if Xero really “believe in people having choices” they should provide export routines with names like “Export all data to Sage”, “Export all data to Kashflow” etc.  And of course, those competitor products should do the same.  Then we would genuinely be able to own our own data and pay for whatever service we like best for managing that data at a particular point in time.

I know, life’s not like that ..