I bought my first fee book from a retiring practitioner in 2010. At the time MYOB was the incumbent accounting software provider to New Zealand small to medium sized businesses. Meanwhile Xero was a rising force with around 15% of the market.

Coming from a corporate accounting background I was software agnostic. However at the time our practice used MYOB as its practice software and many of our clients were on various MYOB packages.

The decision-making process for GECA

One of my goals in moving from corporate to public practice was to give NZ family business owners access to best in class accounting and finance team, led by an experienced CFO, to enable them to outsource their internal accountant. A key component of this offering was CFO insights and advice to the Board and senior management team to help them overcome challenges and grow their businesses. However, to provide these insights required accurate and timely financial reporting and, it soon became apparent to me that the various MYOB accounting packages used by our clients could not deliver what I needed to help them.

What I needed was real-time accurate reporting, accessible anytime from anywhere, which could be analysed for data insights and metrics.

Instead, I was faced with a situation where a client using MYOB would email me a hardcopy report, I would review and advise queries to be followed up by the client, after which we would meet to discuss. Any queries that arose would then be answered following the meeting. It took days and was hopelessly inefficient and was never able to meet our needs to deliver timely, proactive advice.

The solution?

So when Xero came along with its cloud-based approach, that enabled real-time reporting, I was instantly aware of its potential to enable me with the tools to provide my clients with those timely CFO insights. In turn this would allow informed management decision making.  Xero scaled quickly and what was a rudimentary offering in its early years quickly became a sophisticated accounting software package that can meet the needs of small to medium sized NZ businesses. They were smart in leveraging relationships with accountants who became advocates for clients to use Xero and it rapidly grew its subscriber base.  Indeed, the main hurdle for many business owners moving from MYOB to Xero was Xero’s monthly subscription model versus a one off up-front cost to buy an MYOB software package.

MYOB could see the advantages in having a subscription model and that the world was moving to the cloud. They needed to upgrade their software products to at least match, if not surpass, Xero if they were to stay relevant to business owners.  That was six years ago and during this time MYOB has invested heavily in moving its PC-based products to the cloud and taking on Xero’s domination in this cloud based accounting space in Australasia.

So does Xero still measure up or has MYOB finally got accounting software solutions to provide a viable alternative?

First off, what solutions does each provider offer?

Cost

Xero offers one accounting package that comes in three pricing plans depending on transaction volume. This simplicity of pricing does make things easier with Xero. Start a subscription and get going. Xero starts at $27.50 per month for its starter option, moving to $60 for its standard package and $75 for its premium package including accounting for multiple currencies.

MYOB requires more analysis to be sure the software is fit for purpose with its Essentials package and its AccountRight package, again each coming with various options. Essentials offers basic features and is only suitable for start-ups, sole traders or micro businesses. It starts at $25 and has a $35 per month and $40 per month option. However, whilst slightly cheaper than Xero, the feature set compared with Xero is considerably more limited. In our view Xero offers a more effective solution for anyone looking at MYOB Essentials.

The Accounts Right package is aimed at medium-sized businesses and is comparable to Xero’s standard offering. The key differential between the two is the inventory management functionality included by MYOB. Its costs $55 for its standard package and has a $90 version that allows multiple company accounts. Xero only allows one set of accounts per subscription.

AccountsRight works differently to Xero and Essentials in that it is hosted on a PC and updated by connecting to the internet. Xero and Essentials are accessed through a browser through any internet-enabled device. There are advantages and disadvantages to both approaches. Xero and Essentials are based on real-time internet connected data and therefore are always up to date without needing upgrades.  In comparison, AccountsRight is hosted on the users PCs, users are able to work on their accounts without internet access. However, this is a rare occurrence in our internet-enabled world. 

More recently, changes to employer payroll reporting required by the Inland Revenue means a Payroll function has become a strategic component for accounting software packages and valuable additional stream of revenue to the software providers.

Xero’s Payroll function costs an additional $10 per month for one person and $1 per month for additional employees. MYOB AccountsRight bundles Payroll with AccountsRight for $76 per month for 20 employees and then additional blocks of 10 employees incur a one off charge of $150. Therefore a cost comparison between Xero and MYOB will be heavily influenced by the payroll headcount.

However, cost is just one consideration. Which software package offers better value for a business owner? Read on to find out.

Functionality

All the above packages offer bank feeds. This is an automated feed from the business bank account that sends a daily list of bank transactions to the accounting ledger for reconciliation. This was a revolutionary idea when pioneered by Xero and MYOB quickly bought BankLink, a standalone bank feed service to integrate into its accounting packages and compete with Xero. Whilst integration was less than smooth in the beginning, MYOB now offers a comparable bank feed function.

For an additional $10 increase in the monthly subscription, Xero also offers a project management function that allows job tracking for one user and $7 per month for additional users. This functionality is included as part of the MYOB AccountsRight package.

AccountsRight provides a comprehensive inventory management function and for many businesses that carry stock, this can be a key differential in going with MYOB. In comparison, Xero does offer a limited inventory function but it is unable to track stock levels. Therefore it can be very limited in its usefulness for stock management.

For added functionality, Xero provides an add-on store that allows business owners to add integrated third party software to manage a myriad of functions such as inventory management, HR, on-boarding, CRM, etc. The advantage of this is the vast array of software add-ons available. The downside is again the vast array of software add-ons available. Selecting the right software can be challenging. For example, integration into Xero and the business is like any software integration – more difficult and generally more expensive than was budgeted for. To help with selection, Xero offers a review service that allows users to review software. Generally this is an effective way to see how other businesses have found using the software add-on within their businesses.

MYOB also now offers an add-on market place. However, being late to the cloud space, it is considerably smaller than Xero – 300 vs 2,800 and counting.  To help selection, MYOB offers an accreditation service which provides certification the software will work with MYOB.

Neither firm provides third party software support. Therefore, it is very much a case of buyer beware when selecting and implementing add-ons. We recommend business owners seek advice from your accountant to get help with this.

Reporting and Accessibility

As you would expect, both Xero and MYOB offer a comprehensive range of reports. With many more years in the market MYOB offers a wider selection of reports than Xero. However, Xero provides report customisation functionality that allows users to adapt reports on the fly to fit their needs. The add-on market place also provides a range of reporting packages that can provide greater sophisticated reporting.

These days we spend more time on our phones than our PCs. Therefore a functional app is an important piece of the offering.  Xero has a mobility app available for both IPhone and Android. This allows invoices to be issued, create expense claims and track debtors and sales income on the go.

MYOB also offers an app that allows invoicing and debtor tracking. It doesn’t allow bank reconciliations as the Xero app does – handy to do when there is some downtime. However, it does offer a BNZ Payclip device that allows processing of eftpos and credit cards, albeit for a relatively expensive fee, with a charge per transaction of 2.85% and a monthly fee of $30.

Again, horses for courses, if you want to be able to process mobile payments then MYOB will be the way to go.

Support

Having timely support that allows you to get on with what you are doing is crucial.

Both MYOB and Xero offer comprehensive database driven support for answering queries and then escalate to human assistance. In Xero’s case this comes in email format with 24 hour turnaround whereas MYOB provide phone-based support enabling quicker resolution of queries. However, the call times can be excruciating – up to thirty minutes in some cases as I know from experience when contacting MYOB recently. More disappointing is the lack of knowledge displayed by staff about their products and giving advice that is incorrect.

Conclusion

Like any software decision, it is important to analyse your needs and then review software for a good fit against these needs. My own experience has been Xero has been the innovation leader in the accounting software space and MYOB has been playing catch up since Xero entered the market.

Starting with a clean slate, Xero has created accounting software that is intuitive to use and is on a continuous development path. Upgrades to the software are seamless with no requirement from the user to do anything.

MYOB tried to maintain its existing client base and port them into a cloud based model. However this approach has been flawed. The requirement to host AccountsRight on a PC means the MYOB product cannot access many of the advantages to be gained from cloud-based technologies.

Therefore, we recommend Xero to our clients and use it as the basis for our Virtual Finance Team and Virtual CFO services. However, MYOB will be suitable for some businesses especially those with Inventory requirements.

In conclusion, careful consideration will need to be given to what accounting software is suitable for your business.

If you need assistance determining the accounting software for your business – give Giles a call for a no obligation, complimentary chat about your circumstances on 0800 758 766.

The post Xero vs MYOB – What works best for your business? appeared first on GECA Chartered Accountants.

Last week a colleague sent me a fascinating article on how the future may look, the full copy of which can be found here (it’s a short read and I thoroughly recommend it). One fact really stood out for me from a personal and professional point of view.

Artificial Intelligence: Computers are becoming become exponentially better in understanding the world. In the US, young lawyers can’t get jobs. Because of IBM Watson, you can get legal advice (so far for more or less basic stuff) within seconds, with 90% accuracy compared with 70% accuracy when done by humans. So if you study law, stop immediately. There will be 90% less lawyers in the future, only specialists will remain.  Watson already helps nurses diagnosing cancer, 4 times more accurate than human nurses. In 2030, computers will become more intelligent than humans.

And while we accountants think we are already dealing with changes to our industry with recent developments like cloud based software, what lies ahead will completely disrupt the traditional professional advisory services model. The role of an expert adviser, providing costly advice and analysis based on knowledge and experience to a limited number of clients will more than likely be replaced by an app on your phone with the intuition to know what the questions are and the processing power and data storage capacity to provide better advice than a human adviser. While this will democratise business advice and provide a level playing field for small business to complete with large business, it means I need to reinvent my business model to stay relevant. And I need to start doing something about it now because the speed of change is getting faster every year.

However, I still need to maintain profits and pay the bills whilst changing my business model and achieving this will be a critical challenge for myself and many other businesses – even the world’s biggest company Apple is facing the very same issue (read the article).

To do this, I will follow the path adopted by businesses in other industries impacted by technological change, such as the postal service, by firstly understanding and acknowledging the impact on my industry. Croxley is a global wholesaler of stationery and related products with Kiwi origins. While they know their postal mail business faces an ever decreasing market, they are determined to be the market leader of this space and make money until the last letter is sent.

Having understood the impact on my industry, I then need to decide how to position my business to adapt to the change.  Typically the technology disruption begins with the adviser acting as an technological interpreter for the client, keeping up to date with changes and acting as an interface between the new technology and the client. However, in time the technology becomes so simple there is no need for an interpreter and my role as a business adviser will change again.

So whilst computers will eventually have the capability to replace me as a pure expert adviser, this will take a number of years and the interim step is for me to embrace the new technology as a tool in my business to improve our offering as business advisers.

There is no doubt the value of compliance work, that can increasingly be done by software, is diminishing and those traditional accountants who try to maintain high margins with intensive labour rates will see clients move to business advisers who provide real value with commercial advice that leverages the software tools at their disposal. A good example of this is the Xero Business Performance Dashboard. This powerful tool is free for all Xero ledgers and yet is rarely used, however, a good business adviser can set up a simple dashboard for your business and provide real time advice about those numbers that can help you grow your business and your cashflow. A much better way to spend your money than getting a pretty set of accounts done at great expense that are used by no one.

And as the computing power increases over the next five years, I will need to refocus our offering more intensively on the empathic side of being a business adviser, providing the coaching and mentoring services that rely more heavily on a human interaction (although this will no doubt be taken over by computers as well in due course – look at how good Facebook’s facial recognition software is). Which will require upskilling my team of advisers to ensure they have the skills and experience to remain relevant to our clients in this brave new world.

Wish me luck! And if you are in an industry facing significant disruption and need an adviser who understand these challenges and can help you with strategies to stay profitable, call me now on 0800 758 766.

Giles Ellis (Chartered Accountant & Business Adviser)

The post Prepare Yourself – Change is Here appeared first on GECA Chartered Accountants.

“In 1998, Kodak had 170,000 employees and sold 85% of all photo paper worldwide.
Within just a few years, their business model disappeared and they went bankrupt. What happened to Kodak will happen in a lot of industries in the next 10 years – and most people don’t see it coming. Did you think in 1998 that 3 years later you would never take photographs on paper film again? Yet digital cameras were invented in 1975. The first ones only had 10,000 pixels, but followed Moore’s law. So, as with all exponential technologies, it was a disappointment for a long time, before it became way superior and became mainstream in only a few short years. It will now happen with Artificial Intelligence, health, autonomous and electric cars, education, 3D printing, agriculture and jobs. Welcome to the 4th Industrial Revolution. Welcome to the Exponential Age.

Software will disrupt most traditional industries in the next 5-10 years. Uber is just a software tool, they don’t own any cars, and are now the biggest taxi company in the world. Airbnb is now the biggest hotel company in the world, although they don’t own any properties.

Artificial Intelligence: Computers become exponentially better in understanding the world. This year, a computer beat the best Go player in the world, 10 years earlier than expected. In the US, young lawyers can’t get jobs. Because of IBM Watson, you can get legal advice (so far for more or less basic stuff) within seconds, with 90% accuracy compared with 70% accuracy when done by humans. So if you study law, stop immediately. There will be 90% less lawyers in the future, only specialists will remain. Watson already helps nurses diagnosing cancer, 4 times more accurate than human nurses. Facebook now has a pattern recognition software that can recognize faces better than humans. In 2030, computers will become more intelligent than humans.

Autonomous cars: In 2018 the first self driving cars will appear for the public. Around 2020, the complete industry will start to be disrupted. You don’t want to own a car anymore. You will call a car with your phone, it will show up at your location and drive you to your destination. You will not need to park it, you only pay for the driven distance and can be productive while driving. Our grandkids will never get a driver’s license and will never own a car. It will change the cities, because we will need 90-95% less cars for that. We can transform former parking space into parks.1.2 million people die each year in car accidents worldwide. We now have one accident every 100,000km, with autonomous driving that will drop to one accident in 10 million km. That will save a million lives each year. Most car companies might become bankrupt. Traditional car companies try the evolutionary approach and just build a better car, while tech companies (Tesla, Apple, Google) will do the revolutionary approach and build a computer on wheels. I spoke to a lot of engineers from Volkswagen and Audi; they are completely terrified of Tesla.

Insurance companies will have massive trouble because without accidents, the insurance will become 100x cheaper. Their car insurance business model will disappear. Real estate will change. Because if you can work while you commute, people will move further away to live in a more beautiful neighbourhood. Electric cars will become mainstream until 2020. Cities will be less noisy because all cars will run on electric. Electricity will become incredibly cheap and clean: Solar production has been on an exponential curve for 30 years, but you can only now see the impact. Last year, more solar energy was installed worldwide than fossil. The price for solar will drop so much that all coal companies will be out of business by 2025. With cheap electricity comes cheap and abundant water. Desalination now only needs 2kWh per cubic meter. We don’t have scarce water in most places, we only have scarce drinking water. Imagine what will be possible if anyone can have as much clean water as he wants, for nearly no cost.

Health: The Tricorder X price will be announced this year. There will be companies who will build a medical device (called the “Tricorder” from Star Trek) that works with your phone, which takes your retina scan, you blood sample and you breathe into it. It then analyses 54 biomarkers that will identify nearly any disease. It will be cheap, so in a few years everyone on this planet will have access to world class medicine, nearly for free.

3D printing: The price of the cheapest 3D printer came down from 18,000$ to 400$ within 10 years. In the same time, it became 100 times faster. All major shoe companies started 3D printing shoes. Spare airplane parts are already 3D printed in remote airports. The space station now has a printer that eliminates the need for the large amount of spare parts they used to have in the past. At the end of this year, new smartphones will have 3D scanning possibilities. You can then 3D scan your feet and print your perfect shoe at home. In China, they already 3D printed a complete 6-storey office building. By 2027, 10% of everything that’s being produced will be 3D printed.

Business opportunities: If you think of a niche you want to go in, ask yourself: “in the future, do you think we will have that?” and if the answer is yes, how can you make that happen sooner? If it doesn’t work with your phone, forget the idea. And any idea designed for success in the 20th century is doomed in to failure in the 21st century.

Work: 70-80% of jobs will disappear in the next 20 years. There will be a lot of new jobs, but it is not clear if there will be enough new jobs in such a small time.

Agriculture: There will be a 100$ agricultural robot in the future. Farmers in 3rd world countries can then become managers of their field instead of working all days on their fields. Aeroponics will need much less water. The first petri dish produced veal is now available and will be cheaper than cow produced veal in 2018. Right now, 30% of all agricultural surfaces are used for cows. Imagine if we don’t need that space anymore. There are several start-ups who will bring insect protein to the market shortly. It contains more protein than meat. It will be labelled as “alternative protein source” (because most people still reject the idea of eating insects).

There is an app called “moodies” which can already tell in which mood you are. Until 2020 there will be apps that can tell by your facial expressions if you are lying. Imagine a political debate where it’s being displayed when they are telling the truth and when not.

Bitcoin will become mainstream this year and might even become the default reserve currency.

Longevity: Right now, the average life span increases by 3 months per year. Four years ago, the life span used to be 79 years, now it’s 80 years. The increase itself is increasing and by 2036, there will be more than one year increase per year. So we all might live for a long long time, probably way more than 100 years.

James Smith“

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