- April 20, 2016
- Posted by: admin
- Category: Small Business Accounting
The arrival of the internet presented a huge disruptive shift in the retailing model. New entrants, with low overheads and no legacy cost structure, began to compete with high street brands. The response from the majority of high street was to add a .com domain to their name and claim they were now in ecommerce. What many didn’t realise, however, was that ecommerce retailing was a totally different business model to traditional high street or mall retailing. The migration was doomed to failure, or at best to deliver significant underperformance, by Companies who did not adequately assess the prevalent issues such as:
(i) Who are we now competing against and how does that impact on pricing and margins?
(ii) Are we selling internationally and are we prepared for language, legislation and taxation implications?
(iii) Do we need to hold different stock levels and how do we finance this?
(iv) How do we factor in additional charges such as pay per click advertising, delivery, packaging, chargeback risk etc?
(v) How will we handle customer refunds and how will we resource staffing given we are now available 24-7-365?
(vi) How will we advertise and attract new customers and how do we measure success?
(vii) Do we have the necessary digital marketing skills to compete against other ecommerce retailers and if not how much does it cost to buy this?
This is only a small selection of the questions that would have arisen. The ultimate observation was that the Companies who simply adopted the exact same business practices for their online sales as that had worked for their in-shop sales, failed to compete with the retailers that were responding and adopting an ecommerce specific sales model.
A similar shift is now taking place in the accountancy world with the spectacular growth of cloud applications. Accessing information in real time from any location has created the capacity for accountants to generate huge efficiencies in cost and time for clients. Whereas the industry was very much focused on generating historical analysis and ensuring compliance, the opportunity exists to now focus increased time and effort on value added activities such as real time cashflow analysis, discussing strategy & generating financial projections, discussing capital funding and investment possibilities and reviewing operational cost efficiencies.
This means advisors can ultimately serve their Companies in a much more integrated way than before.
The approach should be, however, to take that one step further. The advent of cloud applications offers an entirely wider range of possibilities for ambitious Companies. By correctly identifying the specific infrastructure a Company will need to support and maintain growth it is now possible to integrate all key business processes, from day one, using affordable applications, and create one single financial dataset that is equally as important and actively used by the CEO, CMO and COO of a business as it is by the CFO. Financial packs can now include more than just profit and loss accounts but variances on wider online financial metrics such as CPA, CTR, Churn etc, with all data being exchanged and integrated between systems before feeding into one reporting portal.
Furthermore, by working with accountants experienced in that Company’s specific market sector and business model, issues can be identified, addressed and mitigated as soon as possible by people that have actually encountered and dealt with them before.
As an example, imagine we identify in real time that a client’s sales have dropped 15% from budget by mid month. Historically nothing would have happened as the accountant would not have even known this had happened until they ran the month end, quarter end or even year end results way after the time for action had passed. Xero has created the ability to see this happening in real time. Xero’s integration with efficiency tools such as Kwanji, ZapStitch and Receipt Bank has further created the time to devote to a identifying solution. Using Xero as a reporting tool in isolation, we might flag this up to the Company, ask them to investigate and analyse the sales against budget by category etc. We are adding some value but we are not adding nearly enough. If, however, we have integrated Xero into a fully integrated data system which includes the CRM records, online analytics, workflow management data and a specialised reporting tool suited to the applicable business model etc we can start to drill deeper and deeper into the clients data to find out exactly what is going wrong and make a series of recommendations to resolve. If the systems don’t speak to each other this analysis will either be impossible or too late to action on by the time it is manually generated.
The cloud accounting opportunity is therefore less to do with making the traditional accounting model more efficient. It is about redefining the model itself. It is not about advocating that compliance needs can be delivered cheaper and quicker; Companies should be so assured these will now be delivered painlessly and at minimal cost that they become almost no longer worthy of mention other than to notify they’ve been done. Cloud accounting should instead be about making activities previously classified as additional becoming standard and thereafter striving to create an entirely new level of additionality through data analytics and insights.
Nuvem9 Ltd have embraced a wide range of cloud applications to deliver innovative ways to serve Companies. Contact us today for a free consultation on how we can help you grow your business using cloud accounting systems.