How To Start & Grow Your Business

New Survey Results: Accountants Face Stiff Client Resistance to Cloud Accounting Apps

Staff Writer
Jan 9th, 2015
  • Estimated reading time: 5 min read
  • Hummy's
    Highlights

    1Only 5 percent of SMB's already using cloud accounting. 2In other software industries, cloud-based is favored. 3Security, cost and training are top concerns of SMB's.
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Hands of accountant with calculator and pen Photo Credit: kurhan Shutterstock

Accountants are encountering extraordinary difficulties in getting their small- and mid-size business clients to adopt cloud computing, according to new research findings made available first to CPA Trendlines.

Accounting is the last operation small business wants to update. Everything else comes first, according to Software Advice, Austin, Texas-based accounting technology reviews company.

Key Findings:

  1. Over half of respondents express moderate to high levels of confidence in cloud-based accounting solutions, with 32 percent indicating “moderate” confidence.
  2. With 5 percent already using cloud accounting, only 16 percent more are likely to move ahead anytime soon.
  3. The top concern with cloud-based accounting, cited by 46 percent of small business owners, is security. Cost and training were other key concerns.

Majority Use On-Premise Accounting Software

Currently the most common current method respondents reported is on-premise accounting software, meaning software installed on the company’s own servers, at 46 percent.

A smaller number, 20 percent, are using manual methods such as pen, paper and spreadsheets for their accounting, while 18 percent outsource their accounting needs.

Finally, the number already using cloud-based accounting software is 16 percent: a relatively small percentage.

Many Confident in Cloud Accounting’s Reliability and Safety

Nevertheless, says Noel Radley, Software Advice market researcher, “We were surprised to see a degree of confidence in cloud accounting among survey respondents that was actually higher than current rates of adoption.”

The majority, 51 percent, expressed moderate to high levels of confidence in the reliability and safety of cloud-based accounting software, with the highest number of respondents reporting they are “moderately confident” (32 percent) and another 19 percent saying they are “very confident.”

“However, a significant number still had their doubts,” Radley says. Some 22 percent are “minimally confident,” 16 percent are “not at all confident” and 12 percent are “not sure.”

“Confidence in the reliability and safety of cloud-based software is approximately a 50-50 split between those who are confident, and those who are not confident or are unsure,” Radley says.

To be sure, about half are keeping an open mind, with 32 percent “moderately likely” to move to the cloud and another 16 percent “very likely.”

Likelihood of Moving to Cloud-Based Accounting Software

As for the remaining 47 percent of respondents, 21 percent are “minimally likely” to adopt a cloud-based solution and 26 percent are “not at all likely.” In other words, businesses are sticking with what they already know they like.

Top Concerns With Cloud-Based Accounting Software

Nineteen percent cite the cost of cloud software as a top concern. Thirteen percent are concerned about training staff to use a cloud-based solution, and 10 percent think usability could be a problem.

Most Buyers Are Replacing an Existing System

Nevertheless, SMB accounting software may be at a turning point.

Some 63 percent of prospective buyers are currently using some form of accounting software, while 15 percent are still using manual methods, such as spreadsheets or pen and paper.

SMB Buyers’ Existing Accounting Methods

Among buyers using existing accounting software, 25 percent are on QuickBooks by Intuit — either on its own, or in combination with other tools.

SMB Buyers Want Greater Functionality and Efficiency

About 41 percent of SMB buyers are seeking greater functionality in a new accounting system, making this the most-cited reason. Many say their current systems “couldn’t handle” the scope of their accounting work, and that they needed to be able to generate reports more easily.

Seventeen percent of buyers also cite the need to automate processes. This makes sense, given that one in six are still using manual methods of some type.

One buyer, for instance, complained that their current system was a “huge mess” because of how many invoices the company was receiving from various locations that had to be processed manually.

Meanwhile, 32 percent of buyers say they need to improve efficiency and accuracy, 17 percent expressed a desire to update or modernize their technology and 11 percent reported that their current system was too cumbersome or slow.

Core Accounting Is the Most-Requested Application

Core accounting (i.e. basic bookkeeping, A/P, A/R, fixed assets and bank rec) is the most commonly requested application among the buyers, with 67 percent seeking this functionality.

Other top-requested applications are financial reporting, at 48 percent, and billing and invoicing, 44 percent.

Over Half of Buyers Want an Integrated Suite

Accounting software encompasses many different types of applications, from fund accounting to billing and invoicing. Some vendors offer a set of applications together, called an integrated suite, while others offer them as standalone, or best-of-breed, applications.

The vast majority of software buyers in our sample (64 percent) were interested in purchasing an integrated suite of two or more applications, such as core accounting, financial reporting and billing and invoicing. Only 36 percent of buyers were looking for a best-of-breed application. Less than 1 percent of buyers had no preference either way.

Web Deployment Preference Less Common Than Average

Most buyers, 76 percent, have no deployment preference.

Of those with a preference, they are almost evenly split: 52 percent prefer cloud deployment, while 48 percent requested on-premise.

Accounting’s 52:48 spread is much different than in other software industries, where cloud-based software is often favored by most buyers.

Among SMB buyers in 11 other markets, 77 percent prefer cloud deployment — 32 percent higher than accounting software buyers.

While there are more Web-based accounting systems available today, buyers may also be reluctant to make the switch.

Accounting software is generally harder to migrate than say, a customer relationship management (CRM) system, where customer data can often be easily downloaded and exported directly into the new software.

In the end, however, a company’s decision to adopt Web-based software will be dictated by vendors.

“I don’t think business owners will have a choice in the next five to seven years,” one analyst tells researchers. “We’re going to move to the cloud whether we like it or not.”

This article was published on CPA Trendlines, the world’s only research and advisory service focused solely on the tax, accounting and finance professions.