Leaping into cloud-based accounting and finance systems?

14th February 2011

The rise of cloud computing may have as much to do with the effectiveness of hype as it does with the effectiveness of the on-demand delivery model. This doesn’t detract from the benefits, but as FSN contributing editor Lesley Meall finds, when she talks to finance professionals who are using online accounting systems, they are very carefully considering their options, before making any leap of faith.

Although businesses are increasingly comfortable with all things internet, and au fait with the possibilities offered by the cloud computing model, many finance professionals are more than a little nervous about the notion of putting their sensitive financial data in the hands of third party providers. 

David Johnson does not fall into this category. He is the finance director at Blue Glue, an online recruitment company that provides an exclusively online outsourced service for IT and technology-related businesses, so he is perhaps more open to the idea of online accounting than some other finance professionals might be. Nonetheless, when he started looking for an online alternative to the on-premise system he was using, the FD was disappointed by what he found. ‘The software was either too complex for the bookkeeper or manager, who are not accounting experts, or not complex enough for the accountant,’ says Johnson, in a criticism that’s often levelled at traditional accounting systems too. 

The FD was sure he wanted an online accounting system, as multiple users needed browser-based access to the same data from multiple locations, but he wanted something that could meet the different needs of those users and accommodate their different levels of expertise. ‘As an accountant myself, I want to be able to get detail and export data to Excel to manipulate it how I want to. But I also want the system to be extremely easy to use for sending out invoices or reconciling bank accounts; and I want my fellow directors to be able to access management information directly,’ he explains. 

When Johnson eventually found a system that could offer the balance he was looking for, it was Xero. ‘I can access and input all the accounting data I need to, the bookkeeper can manage day to day transactions, and even the MD can find what he is looking for. ‘When I produced aged debtors reports with the old system he dismissed them as “too complicated” to look at,’ but the dashboard, graphs and charts Xero uses to present information have eliminated this problem. ‘Now the MD can instantly see where the business is in terms of who owes money, and run simple P&L reports and monthly comparisons for himself,’ says Johnson. 

When the accountant David Harbron was asked to act as finance director for the Fenchurch Group of commercial and residential property development companies, he knew that an online accounting system was going to be vital. ‘The managing director has no fixed office, all of the companies trade from an address in Berkshire, and I am 300 miles away in Keswick, so we wanted to build a virtual administration system for all of the businesses,’ he explains; and although Harbron’s past experience of accessing on-premise accounting software and data using Symantec’s pcAnywhere had been positive, he felt an online accounting system would be an improvement, and after trying a few systems out for himself, he opted for Liberty Accounts

‘It offers the level of functionality I need as an accountant,’ says Harbron, ‘and employees at Fenchurch Group can successfully enter all of the necessary transactions and manage the sales ledger down in Berkshire, despite having no finance training.’ Then the acting FD can see what they’ve done, edit and cancel things if necessary, and do things that only he does, such as preparing VAT returns. When the UK VAT rate rose to 20% in the New Year, Harbron knew that Liberty would immediately be updated to reflect the increase, and that the automatic invoices the Fenchurch Group had set up for its tenants would all go out with the correct VAT rate on.

 Although some finance professionals are wary of online accounting because their third party data will be held outside their corporate firewall at third party premises, Harbron had no such qualms. ‘Fenchurch is not especially IT literate, but it is internet literate. We are very good at using it to do things,’ he says. ‘I think that the only people who are paranoid about keeping their data on third party servers are people who have never lost data because of problems with a desktop system. After you’ve lived through that, you know that having your data safely stored on a third party server is worth its weight in gold,’ he says. 

Not all finance professionals are quite so sanguine about putting their sensitive financial information in the cloud – even when they are part of the ‘inner circle’ of technology companies that provides the hardware and infrastructure their fellow-technology companies use to provide cloud-based services. As the CFO of one such provider comments: ‘We use Salesforce.com [for CRM], Marketo [for marketing], and Workday [for human resources], but pushing our financial data out in the public environment, I don’t think we’re ready for that,’ he says, because he believes that cloud service providers ‘still have some work to do’ on key services that are ‘very sensitive’. 

He isn’t the only FD to dip his toe into the pool of available on demand software offerings with something other than finance, and one of the most popular places to begin is with the CRM and e-business offerings that are needed to support online retail operations. So it was at Nu-Heat, the underfloor heating specialist: ‘We needed a CRM that linked to our website,’ says finance director Ian Jeacock, because the company was expanding, and the bespoke database system it had been using to manage customers, stock and deliveries, could not provide the flexibility or the functionality Nu-Heat needed to support this. 

At this point, Jeacock could have gone for Salesforce.com, but he didn’t. ‘We wanted something that could expand with the company as it grew,’ says the FD, and something that would offer the potential for more extensive use throughout the business, so it opted for an online enterprise resource planning system that could deliver CRM, e-business, and a host of other areas of functionality, without the integration issues that can occur when you try to get multiple software applications (of the on-demand and/or the on-premise variety) to work together. ‘We chose NetSuite for CRM because it is all-encompassing and fully integrated, and not on the basis of what it could do as a finance system,’ recalls Jeacock. 

So, a few years later, when he did decide to explore its potential as a finance system, what did the FD think? ‘I already knew that the search tools and alerts were very straightforward and that the dashboards were good, but the ease of getting information out of the system was unexpected,’ he says, and when Nu-Heat did decide to use NetSuite for finance, it was because it out-performed the existing on-premise system and alternative online options. ‘I looked, and there wasn’t another online system around with the functionality we required,’ recalls Jeacock, adding: ‘There wasn’t another system with the same cost profile over a three or four year term either,’ despite the cumulative costs of the pay-as-you go approach. 

NetSuite has now been in use at Nu-heat for more than five years, and during this time, the underfloor heating company has doubled in size, and the online ERP has grown with it; and making the leap of faith with online accounting has enabled it to make the leap of faith in other parts of the business too. ‘When we first started using NetSuite we didn’t have much of a field presence, but now we have lots of field staff using iPhones,’ adds Jeacock, who’s glad that NetSuite ‘has an app for that’, as this has supported and prompted changes in the way that Nu-Heat operates. ‘We’ve taken the system and run with it,’ says the FD, ‘and done things like remote working much more quickly than we would otherwise have done, or been able to.’