Both small and large accountancy firms increasingly use online accounting systems to collaborate with their clients.
Online access to client data around the clock presents accountants with a number of major benefits and new ways of collaborating.
However, online accounting systems require accountants to ensure that client data is stored with a professional provider with a high level of security and that a strict internal access control within the accountancy firms is in place.
Software as a Service
The so-called Software as a Service model for accounting in which companies rent software for a monthly payment has been widely embraced by accountants. Clients don’t need to install software or back up data, but can work directly in the system with their accountant through a web browser.
This model has led more and more accountancy firms to build a distinct line of business directed at small and medium businesses. PriceWaterhouseCoopers in Esbjerg is one of the accountancy firms that have done this, with 50% of its small and medium businesses having implemented online accounting systems.
- We have marketed ourselves as a provider of online accounting, and this has turned out to be a good opening approach with this segment of companies. Both newly-started and well-established companies in all industries appreciate how easy it is to get started. Also, they avoid having to back up data and invest in a range of hardware and software products. Furthermore, it helps optimize our work and our relationship with our clients, says Tonny Løbner, Chartered accountant at PriceWaterhouseCoopers in Esbjerg.
Improved dialog with clients
Tonny Løbner explains that the major benefit is that now accountants can service their clients at all hours, irrespective of the location. Additionally, accountants may be more proactive towards their clients in order to stay on top of developments in the company. If a new issue arises, accountants can look into the problem and assess whether the customer needs to be informed.
- Because we have online access to our clients' accounts, we take a look at the situation in the companies once a year, typically in November. Some things may need to be handled differently – e.g. in relation to tax or pension plans. It could also be that too much money has been withdrawn. We can now take care of this proactively. I also feel that we’re in closer contact with our clients because they call more often while they’re working with the system, says Tonny Løbner.
- Online accounting software also allows us to search for information across the system if we're looking for something specific. This gives accountants an extra opportunity for supervising their clients. The profitability of the system also becomes apparent when we do the accounts because we can easily transfer data directly into our system, says Tonny Løbner.
Security and information
Although PriceWaterhouseCoopers doesn’t collaborate online with listed companies, IT security in relation to sensitive online data is paramount – both to accountants and clients.
- Obviously, you have to make sure that you're working with a professional provider who stores data in certified surroundings where neither data nor storage media can be accessed by unauthorized persons. In other words, you need the same level of security as online banks use, says Tonny Løbner.
Tonny Løbner also stresses that internal practices in the accountancy firms must be up to the standards of the provider’s IT security. This entails a clearly specified policy concerning who will have access to each client.
As secure as online banks
Software company e-conomic, Denmark’s largest provider of online accounting systems for small and medium businesses, emphasizes that its IT security is just as advanced as that of online banks, as long as the provider follows the certified security measures. Accordingly, it is far safer to have a hosted solution than to store data on your own computers.
- Because we are exchanging very sensitive data online, security obviously needs to be up to the highest standards. Therefore, we follow specific measures in order to live up to security standards. For instance, all our data transfers are encrypted via 128+ bit SSL encryption, which meets the security levels of online banks. In practice, it is thus not possible to pick up data via network traffic, says Tejn Vanting Nielsen, director at e-conomic.
All data in e-conomic is stored on mirrored disks to protect against common disk errors. Backups are performed once every hour and frequently moved to a secondary, secure location. Access control to the application is managed via login with agreement number, user ID and password.
- ’Brute force’ attacks, i.e. cracking passwords, are not possible because the system automatically blocks access following five repeated unsuccessful attempts to access the same agreement from the same source, says Tejn Vanting Nielsen.
At e-conomic, data is officially deleted 90 days after termination of a subscription, but they point out that you are obliged to store accounting records for five years, which is why you should use the system’s export function before the end of the notice period.
All types of companies
Accountancy firm Beierholm also offers online accounting to small companies. According to accountant Daniel Herfort-Bruun, this results in a more dynamic collaboration with clients as well as better and faster service. Today, all types of companies are using the Internet to collaborate with their accountants.
- Although every company is unique and has individual needs, they do have some features in common, because they all need to register their revenue and costs, assets and liabilities. However, the similarities more or less end here. Each company is a unique entity with unique needs. Therefore, knowledge and insight is required to find the right solution for each company. The right solution is one that takes both companies and accountants into consideration, says Daniel Herfort-Bruun.
According to Daniel Herfort-Bruun it is paramount to most companies to keep costs at a minimum, but have access to maximum status information at the same time. The reporting required by the individual companies may differ a great deal, as may the companies’ need for involving the accountant in the process. This is where online accounting comes into play.
- Online accounting allows companies and accountants to share data in an easy and safe way. Besides saving costs for companies, it also enables accountants to offer a wider range of consultancy fields. Furthermore, accountants can be far more present and available than before, since presence no longer requires physical attendance at clients' facilities or in the office, says Herfort-Bruun.
Peter Thor Kellmer, chartered accountant and partner at Beierholm’s technical development department, is also sure that online accounting will grow. There are certain ethical considerations, but nothing that will hinder this development.
- As accountants, we can't process entries that haven’t been approved by the client, which means that we must make sure that a statement has been signed when working with clients online. However, this will not slow down the rise of the online segment, says Peter Thor Kellmer.
Growth for online accounting systems
According to estimates from market research company IDC, Software as a Service for accounting systems is a rapidly growing market in Europe, with Denmark at the forefront. At present, the European market only represents approximately one per cent, but growth rates are rising dramatically these years, according to IDC analyst Bo Lykkegård.
- Although online accounting systems have only existed for a short number of years, they are being adopted in many companies. And according to our analyses, the high growth rates will continue for many years to come. For the moment, Danish companies and accountants are far ahead of other European countries, says Bo Lykkegård.
Competitive parameter with accountants
Software as a Service for accounting systems is primarily used in small and newly-started companies due to a widespread demand for simple, cheap and easy-to-use systems. This demand may turn out to be a competitive parameter in the accounting sector.
- As the demand for online accounting systems increases and as accountancy firms increasingly compete for small companies, online accounting systems may eventually become an important competitive parameter for accountants. However, it will require development and innovative thinking from accountants – for instance, they will have access to a number of automation features, which they haven’t had before, says Bo Lykkegård.
In addition to accountancy firms offering online accounting system to small companies, they will also tend to specialize in this sector.
- If we look a bit further ahead, we will probably also see more modules added to the accounting systems in order to attract diffferent types of companies and especially large companies, says Bo Lykkegård.