How to offer a profitable cloud bookkeeping service has been the permanent challenge for many accountancy firms (or indeed any form of bookkeeping service.) If you bring the service in-house you get all the downsides of employing someone and very little of the upsides of enjoying a healthy profit margin on the work. With the forthcoming changes under the Making Tax Digital (MTD) proposals forcing businesses in the UK to keep accurate records, the advancement of cloud technology, and the move towards real time accounting, there has never been a better time to offer a cloud bookkeeping service to your clients.
In this article, Heather Townsend explores with Arun Ravindranathan, CEO of Global Infosys, of the UK’s leading accounts outsourcing company, 3 tried and tested ways in which you can offer a profitable bookkeeping service to your clients.
Cloud bookkeeping: What are the barriers stopping accountants from offering this service?
HT: In your opinion, what are some of the barriers stopping accountants from offering a profitable cloud bookkeeping service?
AR: As a qualified accountant I know that our profession is not normally known for innovation and risk-taking. However, it is absence of these qualities, which are normally the root cause for firms struggling to make a profit on their bookkeeping. The firms that we see who have cracked the knotty problem of how to deliver a profitable bookkeeping service are the ones who are happy to look at things differently, and innovate to stay ahead of their competitors. Very often these firms have invested heavily in the cloud and moved their "bag of receipt" type clients onto cloud bookkeeping apps such as receipt bank, datamolino or autoentry. If bookkeeping for your practice is still heavily rooted in the days of processing ‘bag of receipt’ jobs and billing hourly, then it is definitely time to consider how you could do things differently.
Is using bookkeeping still a good way to blood in new trainees?
HT: Is the traditional way many accountancy firms service their bookkeeping work by using their trainees as bookkeepers, now becoming past its sell by date?
AR: Using bright, young and keen trainees can still be an excellent way to service your bookkeeping work. They can be cheap, and exceptionally cheap if you bring them in on an apprenticeship scheme. With the younger "digital native" generation now entering the workplace you don't have the problems of persuading them to use the cloud bookkeeping apps. In fact, they often demand to use these apps! The downside of this arrangement is they don’t stay a trainee for long. The good trainees will be hungry for more interesting and stretching work. This means, just as they get to the point when you can leave them alone to service the work, they either transition onto doing accounts work, or up and leave for brighter lights elsewhere. We’ve seen using trainees to do bookkeeping work to be a little hit or miss. When it works, it’s great. However, there is a high proportion of trainees who need a large amount of hand-holding and never quite adapt to the reality of life in a practice, i.e. the requirement to be quick and accurate when doing client’s bookkeeping work.
Plus, you never know with the younger generation whether they are happy to be truly client facing. You and I know that a good cloud bookkeeper is no longer purely there to enter data. Their primary role is to ensure the integrity of the data rather than be predominantly manual entry. This means they have to be happy to ring their clients and speak to them rather than hide behind email.
Why are so many accountants adverse to outsourcing their cloud bookkeeping?
HT: I know that your firm Global Infosys has often been called into help a client when a bookkeeper has unexpectedly resigned or just not worked out. Why do you think so many accountants are very anti outsourcing their cloud bookkeeping work to someone like you?
AR: Given that cloud bookkeeping by its very nature can be done by anyone, anywhere in the world, it is surprising that more accountants are not considering offering an outsourced cloud bookkeeping service. When you know your client has a clean set of books it makes it so much easier to deliver a truly "real time" and proactive accounting service.
I’m afraid that many accountants have had a poor experience at the hands of some of the accounts outsourcing companies, or their own attempts at setting up their own outsourcing operation. Let’s be frank here as well, the outsourced Indian call centre, which many large businesses use here in the UK, are never a good advert for our business.
This means that outsourcing is a fairly ‘marmite’ way of doing your bookkeeping at a profitable rate. Those accountancy practices that have made it work for them love it. Those that have had bad experiences would never ever consider it again.
Outsourcing your bookkeeping has a learning curve
AR: Outsourcing your bookkeeping (as well as outsourcing your accounts work), just as if you hire a new member of staff, has a learning curve. Once you have overcome this learning curve, then it is not unusual to make savings of up to 30% on your bookkeeping costs. Technology has completely revolutionised the Accounts Outsourcing and outsourced Cloud bookkeeping service. Gone are the days when we used to have to physically ship over containers of paperwork for our staff in India to handle. The investment in cloud technology that the outsourcing industry has made, means that it is possible to get a very responsive and high service level; normally for a fraction of the cost that your own firm can deliver.
The great thing about an outsourcing service, which is on a ‘pay as you use’ rate, is that it is completely flexible and very scalable. I.e. you can turn it on and off at will. So, no more paying staff to sit around and do nothing.
If you do consider going down the Outsourcing route, make sure you have sorted out your workflows, automated as much as possible, and your chosen provider can give you quality and turnaround guarantees.
What about subcontracting your bookkeeping work to a freelance bookkeeper?
HT: With many firms being very reluctant to outsource their bookkeeping work, what about subcontracting to freelance bookkeepers, or forging joint ventures or alliances with bookkeeping firms or firms that offer bookkeeping work?
AR: This can be a pretty neat route to take. You find a bookkeeping company or freelance bookkeeper you trust and form an informal or formal alliance. You send them all your clients’ bookkeeping work and they send you all their accounts prep and tax work. It can literally be a match made in heaven if it works. Everyone gets to do what they are good at. It can also solve the problem of where your client wants to have an on-site bookkeeping service. But, and this is a big but. You normally don’t get to make any profit on your clients’ bookkeeping work. Similar to when you work with an accounts outsourcing company, you are also reliant on your bookkeeping company’s reliability and quality. Plus, if you are going to use a local freelance bookkeeper, why not outsource your cloud bookkeeping to someone like us who can scale with you? Which may not always be the case for your local freelance bookkeeper.
What about bundling in cloud bookkeeping with a client's annual compliance requirements?
HT: What’s your view on offering a fixed price all-in to do the entire client’s accounts prep and tax compliance?
AR: We’ve seen this work very well. You may break even or make a very small profit margin on the bookkeeping work in order to give yourself a much easier time when it comes to doing the accounts prep and tax compliance work. If you do choose this option, it is important that you are reviewing every three months exactly how much bookkeeping work needs to be done. It is very easy to find that over time the bookkeeping work increases and the all-in-one fee you charge your client stays static.
There is no one right way to increase the profitability of your bookkeeping or cloud bookkeeping service. However, in our experience the more open your firm is to using technology and alternative ways of servicing the bookkeeping work, the greater the likelihood of increasing the margins on your cloud bookkeeping service.