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Cloud accounting for small business focus of big shift

Intacct cloud software provides Education Pioneers with real-time collaboration, more detailed expenses and faster closing of books than on-premises QuickBooks.

When Education Pioneers dropped desktop QuickBooks and began using Intacct cloud accounting for small business software, corporate controller Todd Forsyth said the organization saw several improvements, including faster financial reporting, real-time collaboration and much more detailed expense tracking.

Forsyth said "the big advantage" of a cloud accounting system like Intacct is that users in the organization can access live financial reports to see the status of their operations. "That was probably the biggest driver for the change," he said.

With Intacct's cloud-based ERP system, when Forsyth pays a consulting fee for a program in California, for example, a member of his team in the West Coast office will see it immediately. That was not possible with on-premises QuickBooks, he said.

With Intacct, Forsyth said, Education Pioneers can close its monthly financial books by day number 15 of the following month. On Jan. 15, for example, he provided the profit and loss statement, the balance sheet, and cash flow for the month of December in a report to his executive team.

Some small businesses moving to cloud financials

In the realm of cloud accounting for small business, Education Pioneers has plenty of company. The nonprofit, based in Oakland, Calif., which develops, recruits and places data analytics, finance, HR and other support staff in more than 200 public schools and other educational organizations in 20 cities in the U.S., is among a growing number of small to midsize businesses that are ending use of on-premises accounting or financial management software and moving to the cloud. The organization replaced desktop QuickBooks with Intacct in late 2013, Forsyth said.

Gene Marks, president of the Marks Group PC, said Intuit's QuickBooks dominated on-premises accounting software, but may not hold such a commanding position in the world of cloud accounting for small business. Although a good basic tool for invoicing, payables, inventory management, and profit and loss, Marks said the cloud version, QuickBooks Online, started with less-than-adequate features for cloud accounting for small business. But Intuit is catching up, he added.

"As people move to the cloud, a lot will make decisions to consider other alternatives and move to other alternatives for various reasons," said Marks, whose company resells cloud accounting software -- such as Xero and QuickBooks Online -- and provides services such as implementation, training and customizing. He noted that ERP systems from Intacct or NetSuite often are chosen by companies with more complex needs such as purchase order management, sales order management or warehouse management.

As an example of low-cost cloud financials, Russ Fujioka, U.S. president of Xero in San Francisco, said Xero offers cloud accounting software for small business, with more than 600,000 subscribers worldwide including 47,000 in the U.S. and Canada.

Both Xero and Intuit also offer online marketplaces with hundreds of applications, such as Shopify for e-commerce and Unleashed for inventory management, which can be integrated with their accounting software. Many of the applications can bring ERP functions to small businesses at a price and speed that was cost prohibitive just three or four years ago, Fujioka said.

Intacct integrates with Nexonia for expense tracking

At Education Pioneers, Intacct integrates well with Nexonia, cloud software for business and travel expenses, which is a big piece of the organization's operating costs, he said. The information from Nexonia flows directly into Intacct.

Forsyth said he is reviewing a possible purchase of planning, budgeting and forecasting cloud software, but right now a lot of detailed budget work is completed in Microsoft Excel. Operating costs and other summary information from 15 departments is loaded from Excel into Intacct at the start of a fiscal year and then used for reporting and planning for the rest of the year inside Intacct, he said.

The budget is consolidated in Intacct and individual budgets are also available for departments in finance, executive and business operations, he said. "Each individual budget director can then see their department's budget versus actuals throughout the year."

Intacct allows greater expense details

Forsyth said Intacct also allows him to add different levels of detail to an expense. QuickBooks on premises, on the other hand, was limited by the amount of data it could provide for defining an expense. The reporting functions in Intacct are much more nuanced and granular than he could obtain with on-premises QuickBooks, he said.

For example, with a $20,000 catering fee, he can use Intacct to add details such as the location for the expense and that it was tied to a specific grant from a certain foundation. It allows him to report that it was a cost for a program, not fundraising or management, he said.

"If I want to know what my management overhead costs are, I can quickly do that," he said. "I can see which costs were classified as management overhead. If I want to know my programming costs, I can do that. If I want to know my programming costs in Chicago versus my programming costs in Dallas, I can do that. These are all dimensions that I have been able to add to these entries. You cannot do that within QuickBooks."

Although an ERP system works for Education Pioneers, small to midsize businesses often do not need to move to an ERP if they use something like QuickBooks or Xero, said Jaime Campbell, chief financial officer for Tier One Services in Rock Hill, S.C. Instead of purchasing an ERP, users can save money by integrating with an application for customer relationship management, project management, invoice and billing, or time tracking, she said.

"God willing, the business will grow and then the business will need a full-sized ERP," said Campbell, whose company provides technology consulting and outsourcing of CFO services. "A lot of businesses don't need to go there now."

Shift to cloud financials may come slowly

Vendors are in fierce competition for cloud accounting for small business, but the shift from on premises won't happen overnight.

Gene Marks, president of the Marks Group PC, said many small businesses are sticking with on-premises QuickBooks, even though Intuit is phasing out support and maintenance to move users to the cloud.

However, Chris Davey, a director of product management with Intuit, said rather than reducing support and maintenance for on-premises QuickBooks, the company is focusing on feedback from desktop users and making changes to improve the product's support and features.

Cost is a big reason for staying on premises. "A lot of people have sunk costs into their accounting system and now they have to move to the cloud and pay a monthly fee," Marks said. "A lot of my clients say, 'Why would I do that?'"

Sales numbers show that Intuit's desktop business is still strong amid the change to the cloud. In a recent fiscal year, Intuit reported $527 million in revenue from QuickBooks Online, while the desktop business was at $1.5 billion. In the coming years, the revenue mix will rapidly change since year-over-year growth of QuickBooks Online subscribers is at 47%, said Stephen Sharpe, a spokesman for Intuit.

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What is your opinion of the quality of cloud accounting for small business?
Intacct is a great cloud system but it's complex ad the pricing structure is opaque.

Xero is a stripped-down, easy-to-usem inexpensive cloud accounting system and you can build your own system by getting add-ons.

QuickBooks Online is pretty awful. Outages, few business intelligence features, and not as robust an add-on ecosystem as Xero.

Many small business are going for on-premises QuickBooks hosted in the cloud such as Right Networks in order to get great business intelligence and a easy-to-use interface. However, some of the add-on capabilities of this version of QuickBooks are being sunsetted.

I think Xero is headed in the right direction for startups and small businesses, and they can grow into Intacct if their businesses become complex and they want to have everything integrated into one system instead of synchronized add-ons.
campbellcpa - Thanks for the comments and insights on QuickBooks Online, Right Networks, Intacct and Xero. This information is important because it is coming from someone who is familiar with the tools. - 
Interesting that Intuit has allowed itself to fall behind in migrating to the cloud and yet at the same time it sounds like they're trying to move everyone to the cloud. How does that work?
Thanks for the comment, Sharon. Intuit is not behind in the cloud, but may not dominate cloud accounting for small business as it does on premise with QuickBooks. The cloud contest between Intuit, Xero and others will play out in the years ahead. Intuit, like many other vendors -- Oracle, for example - moving users to the cloud from on premise, disputes that it is reducing support for on premise during this shift but the focus clearly seems to be on the cloud because of the growth in that space. QuickBooks Online has been around since 2001, by the way, or before "the cloud was the cloud," according to Chris Davey of Intuit.
Sharon -- At one point in this article, Gene Marks, PC, does say that QuickBooks Online is "catching up," but he was referring to features, not the contest for sales in the cloud with competing products.
It has been our discovery that many people would love to have the cloud provide a resource for them rather than having the cloud dictate their life. Based on the increased cost, reliance on the internet speed/connection/web server reliability and in some cases, reduced functionality, many people we encounter are opposed to moving their financial data completely to the cloud. That doesn't mean cloud hosted solutions are bad, it just means some clients would like an alternative.

For instance we know many people that continue to use the QuickBooks Desktop version with Qbox as a solution for not completely wanting to switch to the cloud and not exactly wanting to leave the familiarity of their desktop. Qbox integrates the best attributes of the cloud without really changing how clients work on their financials.

This isn't to say that Qbox is the solution for everyone, but it is one solution for those that are rather hesitant to move to the cloud. I believe that the bottom line is, "one size does not fit all," and we can best meet the needs for our business, clients, or prospects when we are willing to consider their situation first and then apply the most appropriate solution. This simple business philosophy will lead to an increase in new clients and a greater retention of the clients you already have.

Thanks for you article. I hope I was able to give a differing view.
Thanks for your comment, lstegemiller. That does offer an interesting angle about providing some cloud functions with QuickBooks desktop. If you can provide a couple of users of your product for interviews, it might make for a good story. I would need users, however, to develop a story.
@dring1 if you're still interested in knowing more about Qbox and what our users are saying, you can email us at :)
Yes, I understand that they're talking about features, not sales, but I'm wondering how they expect to move all the people to the cloud if they don't have as many features as their competitors.
Sharon Fisher -- Good point. What you think of Don Trump's chances on Nov. 8? I think he looks good to go in Idaho, but tell me how he is going to win Virginia, Ohio or Florida. I have to laugh about the speculation in Pennsylvania. Same speculation takes place very four years, then come election day, the Keystone State votes Democratic and it is called rather early. Same thing will happen this year. Vote for Trump and you vote for someone who declared bankruptcy six times, paid a fraction of his bills to people left in the dust by his bankruptcies and then made his money on the same global forces he is criticizing. Rich people bought his condos and buildings and immigrants work at his casinos, golf clubs and other businesses.