‘Twas the night before Xero…

It’s Xero eve at Dewings, which seems a good time to do a little introspection. Who are we, and how did we get here?

It’s all very existential. The truth is that there’s a lot more to becoming an accounting practice of the future than software. The final decision to go with Xero was in one sense the beginning of a new direction. But in another it was the culmination of a process we’ve been working through for a while.

Dewings takes its name from Phil Dewing. It’s fair to say that he has a savant-like talent for creative business advice. While everyone else is staring at a pile of matches lying on the floor, Phil already has them counted. It’s like he can see the matrix. This isn’t a marketing blurb – it’s just who he is. It’s relevant because it informs who and where we are today. And traditionally it’s been the reason clients come to us. We currently have three directors – Phil, Kathy Allen and me, but his reputation has traditionally been the source of much of our work over nearly three decades.

In recent years we’ve had to start thinking about what life at Dewings will be like without our namesake. That’s involved us doing some succession planning, and it’s a process we’re still working through.

‘Twas the night before Xero
And all through the firm
Were dwindling memories
Of the great pachyderm

But the elephant in the room during the process was a question: where is our work going to come from into the long term future? When Phil – our figurehead and poster boy – starts to wind back, how will we promote ourselves without him out there banging the drum for us? It’s never been something we’ve had to worry about because Phil’s reputation alone has often brought the work in (even though our team delivers the results).

Marketing! That was the solution. And by ‘marketing’, we meant advertising! The only problem was…we’re accountants! Do I need to say any more?

We were really fortunate to have Lowen Partridge of Peartree Marketing as a tenant in our building, so we turned to her for help. Lowen is a leading brand development specialist with a heap of experience. What a fantastic resource!

Or so you’d think we’d think. It didn’t turn out to be what we were hoping for (it was better, but I’m getting to that). We had a limited budget and all we wanted to do was spend that on getting the word out. But Lowen was all about ‘brand engineering’! While we were thinking ‘print or radio?’ she was asking ‘how do you know what you’re going to say anyway?’ Again, those fundamental questions of existence – how can you tell people about yourself in the best, most efficient way, if you don’t know who you are? What would you say?

So begrudgingly we took a step back and began to try to answer those questions. Some of the process was about specifically naming what we already knew about ourselves. Some of it was aspirational – as much about what we wanted to be as what we already were. But much of it was about self-discovery.

In the end it was a brilliant decision, if we might say so ourselves. Defining who we are – everything from our reception area and what we wear to the standards of service we want to deliver – gave us a standard to measure any new initiative against. Does that fit with our brand?

We talked to our team about it and asked for their input, and we summarised it in a brand identity statement that now informs all of our interactions. And we set about implementing it by renovating our offices, scheduling regular training sessions to reaffirm our values, developing new materials and so on. Everything that is seen by someone else, whether internally (by staff) or externally (by clients) eventually needs to fall into step with this identity. We’re not there yet, but we’re getting closer.

You’d think this process would be expensive, but in fact relatively speaking it hasn’t been. A coat of paint doesn’t cost that much. And it’s been gradual, taking place over a couple of years. It’s not that ‘everything must go’. It’s more about making sure that everything fits. Many aspects of our business already did.

One of our rejected marketing strategies: “Hey! Is that car tax effective?”

One area that this certainly helped us was in realising in the end that ‘advertising’ (as we understood it anyway) doesn’t fit with our brand. Our work is based on relationships. That means we need to do more to cultivate our reputation and build connections through networking, sponsorships and specialisation.

This isn’t about giving shout outs. We’re writing about this journey completely independently. This is just what happened. So I say with sincerity that another person who has been a great help to us in this regard has been Michael ‘MC’ Carter of Practice Paradox. It might be tempting for some to lump Practice Paradox in with so much of the other accounting industry noise. That would be a big mistake. MC isn’t so much about operations – burdening you with the guilt of all the things you’re doing wrong. He’s more about teaching accountants how to market with new tools while working with what they already are. Once we had an idea of what wouldn’t work for us, we had to start thinking about what would. Initially through a lot of free material, and then through his  ‘Marketing Masterclass’ which we attended, MC opened our eyes to a whole new way of marketing the practice, including better networking, the value of social networks and yes – blogging!

All of that brought us to where we are now. Xero is not a punt. It’s not one choice from many otherwise similar and largely indistinguishable options. It’s the logical – in fact the only – choice for us because the Xero ethos is consistent with our own aspirations. How we engage our clients and team must be an extension of who we are. Every component of that is critical, and that includes our systems. Xero fits our brand. And we only know that because we’ve been through the exercise of defining it.

We’re going dark now. Next time you hear from us, we’ll be a Xero practice!

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Minds blown by basic features

Like a stray puppy that finally finds a warm home, it’s fair to say we were ready to love almost anything. But it’s nice when you do better than that.

I’ve just walked out of a demonstration of WorkflowMax (WFM) using our own practice data. There’s a little more to do yet, but the idea was for us to get some of our management team together and see whether it was on the right track.

Naturally we’re reserving a thorough critique until we get in and use it. But initial impressions are quite simply…wow!

If you’re reading this but unfamiliar with the Xero architecture, WFM is the job/practice management module that integrates with Xero.

There were a total of five of us in the room and you could actually see smiles appearing on the faces of people as questions were answered and concerns eliminated. It was a great mix of the old and the new. We felt comfortable that we could get our data into WFM in a way that was familiar. But it was also quickly apparent that we could leverage that data in an entirely new, more powerful – and frankly better – way than ever before.

We’ve pledged to be as honest as possible in this story. We want to cut through the marketing hype and give a realistic assessment of what’s involved in transitioning an accounting practice to Xero, and whether it can deliver on the promises. I’ve sat through many software introductions over the years and I can honestly say that this is one of the first times I can remember where the experience has matched the pitch.

So far, of course. There’s a way to go yet. Today was somewhere between a demo and a first hand experience. It was a demonstration but it was using our data, and responding to our questions about what it could do with that data.

The most significant impact came when realising the number of separate systems that can now be replaced with a single – and integrated – solution. Sure, it does our invoices and then automatically posts them to our ledger for accounting purposes (our existing system doesn’t post them).

But it also can manage our leads and quotes. Previously we’ve used a makeshift spreadsheet for lead management and it doesn’t integrate with anything. We’ve always generated quotes using Word. Now we can generate a quote using our task list and when the time comes to turn that into a job, we can automatically convert the quote.

We can see all of our practice KPIs on a single report, generated automatically from live data in the system. Previously we have always had to generate special management reports on a monthly basis by manually inputting key data from our system reports.

Sure, we can measure that galaxy for you. If you want a customised debtors report though, it’s going to take a little longer…

And while we’re on the subject, just the ease at which we can customise and create reports was staggering! You mean we can just use a graphical interface and select fields? It currently takes a post-grad in astrophysics to even interpret our report writing system itself, let alone output anything meaningful from it.

We currently use a separate workflow management system which requires us to manage jobs separately from our practice management system. OK, so it’s nice to be able to see at a glance where everything in the practice is up to whenever we go into WFM. But even better, WFM can proactively remind us of progress dates and deadlines via RSS or by integrating with our Outlook calendars!

There is much more to say but that’s a good start. Perhaps at this point you’re thinking that none of that really sounds like a big deal. And you’d be right. We’ve become so accustomed to mediocrity that we’re too easily impressed. Almost all of the data that WFM will give us to truly manage our practice is in our existing system. On a day-to-day basis, our users won’t have to do much different to what they have always done. They enter their time each day, allocate it to a job/client, nominate a task, and hit enter. But it’s one thing to have data. It’s something else entirely to have information. We thought we already had a practice management system. It turns out all we have is an invoicing and debtors system – and not a great one at that.

Building Rome in a day

The evolution of a city is something that happens pretty organically. Same with accounting systems. It’s something you only realise looking backwards. The system you have now is not the one you started out with. Sure, that initial decision to lay the foundation of your selected platform was a big one. But it takes time for people to move in and start using it. Gradually they work out their own ways of doing things. They customise it to their liking and build around it, adding new and different modules that become an integrated part of the overall environment. People get comfortable. Generations come and go. Traditions are passed on to the point where they become endemic. How do you tear all that down and start again? And how do you do it all in a month?

Romulus took his time. Then again, a new financial year probably wasn’t just around the corner.

That’s how long we gave ourselves to have an entirely new practice management and general ledger system in place. And when I say a month, I mean going from having no real plans at all in late May (other than to explore more options) to using an entirely new suite by 1st July. A new financial year was about to tick over, so it made sense to use that as the changeover date if possible. We knew the schedule would be tight, so just to make sure we kept the pressure at a maximum, someone had the bright idea to blog about the entire experience as we went along! Are we trying to ‘build Rome’ in a day?

Our first week was really about basking in the afterglow of such a monumental decision. Once we’d returned to earth, our second week was spent mapping out what needed to be achieved by 1st July to at least be functional. So last week was the first stage of implementing the plan. We needed to start using Xero.

The best way to get a handle on what really happened during those watershed moments in history is to go back to primary sources. That way you get as close as possible to the action while mitigating the distortion that inevitably comes when looking back through the lens of time and interpretation.

So rather than me tell you about our week, have a look at a small selection of extracts from actual emails sent and received last week. These are some of the conversations we had:

“The Practice Administrator needs to do the following before we go too much further…..
1.     Invite all staff and ensure they are ‘Active’
2.    Review the standard Chart of Accounts in Xero and add or delete accounts as appropriate.”

“Below is a link to the Xero Payroll demo video. We need to set this up pretty soon. How are you placed for time, to both watch it and work out how to bring our data and settings across into our Xero file to be ready for 2nd July?…we might as well try to get as familiar with it as possible before D Day.”

“I think our best bet from the sounds of things is going to be to not bring the debtors into Xero until WFM is set up. …I could imagine there being a lot of duplicates by simply missing a space or whatever in the name if we set them up manually.”

“We currently support the import of transactions using either .OFX (Open Financial Exchange), .QIF (Quicken Interchange Format), or .CSV (Comma Separated Values) data formats. We recommend you use .OFX. If your bank does not support .OFX, then use .QIF or .CSV.”

“I think there are certainly some real pros and cons re the cloud, but security isn’t really one of the cons – well, not a rational one anyway. Relatively speaking, the security comparison is a shellacking in favour of the cloud. It’s really just a perception thing – people ‘feel’ safer with it under the mattress than on the net because they still feel like it’s in their control.”

“What is the purpose of knowing all those traditional accounting firm KPI’s? What do you do with this information? How does it help you run the business? How do they help you improve the business? How many of them are ‘because that’s the way we have always done it’?”

“KoolAid or Red Cordial at the end…?” 

OK, so it isn’t the Magna Carta (what do you think – Kool-aid or red cordial? These are the burning issues…) But hopefully it provides some unobstructed insight into the daily challenges of the building process.

The Magna Carta: written around the same time as our old accounting software.

In a nutshell, last week involved coming to grips with the snowballing implications of having the ‘bare essentials’ in place, and making sure those things happen. Because our existing methods have developed over many years – our system has been ‘lived in’ for over a decade – everything is connected and intertwined. A change here has implications over there. The reality is that we won’t be able to do it all by 1st July. But we probably don’t need to.

You can’t replicate traditions. Instead, you break the ground in a new area, let people move in and settle down, and over time a new way of living begins to evolve. We won’t have an entire eco-system ready to go by 1st July, but no new initiative starts at that point. What we are leaving behind wasn’t built in a day. This won’t be either.

So far, so good.

How we avoided the apocalypse

There’s a bit of the old tele-evangelist about some coaches to the accounting profession.

The end of the world is nigh ! Repent from your evil ways! Give your money to me and heaven awaits!

Or put another way, “There is no future in traditional accounting models so abandon the timesheet! I can show you how to make a million dollars per partner by working 20 hours a week!”

OK, granted…sometimes people – and accounting firms – actually do need to change. The problem is there’s just so much noise! Amongst the cacophony, where can we find the music?

The only possible fate for a world where accountants still use timesheets.

Last year we were at the point where we knew we had to make some changes to the way we delivered our services – not because we did it badly but because we wanted to do it better. But to implement every accounting practice initiative recommended by the numerous industry experts would take a small army a lifetime to complete.

What was the stuff that we actually needed to do – like, really needed to do – and how could we ever find the time to do it?

So it was that last September there was a voice that broke through, just a little. It took an email about becoming an ‘iPractice’ to finally get my attention. It was from Tim at Focus Growth Strategies (FGS). I’m not sure what it was that stood out about it. Perhaps it was that some of the more techno stuff appealed to my inner geek – running your practice from an iPad and all that. The thought of doing so while sitting on a beach didn’t hurt either.

More than anything though I think it was that it wasn’t trying to scare us into action. Of course it tantalised with promises of a practice without timesheets – what accountant doesn’t long for that world? But it also offered balance. “If you want to hang onto them, that’s OK – we will show you how to have the best of both worlds as well.” No doomsday prophesies.

The clincher though was this: “The iPractice will show you exactly how you do it – Strategy, Implementation and Technology”.

One of the biggest barriers to change was the question of who was going to do it. The learning curve in going from an entrenched system to knowing something else well enough to roll it out across a practice, and deal with all of the migration issues and training, and… well, ‘curve’ is a generous term. Perhaps ‘wall’?

A DIY rollout would no doubt have been poorly executed. Even worse (because after all, we were used to living with a system that didn’t really work properly), the result may have been new applications that did nothing more than replicate the old ones. We needed the outcome to be better than that. What is best practice? Do we really ‘have’ to do the things that we think we have to do? How can we leverage our IT to deliver efficiency and create value for our clients?

But now here was FGS offering to give us the leg-up we needed to get over the wall. These guys weren’t just telling us what we needed to do. They were offering to do it for us! It still took a while for us to finally pluck up the courage but in the end, having little to lose and much to gain, we signed on for a ‘review’ of our systems. It took one meeting for us to realise a review wasn’t necessary. We knew what we had. We needed to spend that time, effort and money on going for it.

Last Tuesday Tim and I met with our accounts manager (Kim) and our product champion (Claire) to road-map the critical things we needed to do to be ready by 1st July. So far that involves:

  1. Having WorkflowMax (WFM) ready for people to enter time; and
  2. Having people familiar with how to do that (i.e. training).

Left to right: Claire, Tim (from FGS) and Kim.

In terms of the work required before 1st July, that means configuring WFM with all of our client database information and setting up our tasks for timesheet entries and billings. We’ll also need our practice Xero file ready go – the Xero ledger we’ll use to operate the practice. We plan to gradually phase out our existing system, which means we can replace our client ledgers with Xero ledgers as work for 30th June 2012 comes in over the next year. That takes the pressure off us having to have everything ready to go by 1st July.

As we were sitting there talking through the various things that needed to be matched between the old and the new systems and what we could expect to be different and so on, it suddenly struck me how simple it was. A lot of work, but not complicated. The reason was that there was someone there to connect the dots for us. FGS know what we need to do to make it work. The terms are familiar. The problems we were expecting have already been anticipated. And best of all, this is still accounting!

It’s not just that one voice is louder than all the others now. The noise has actually quietened. We don’t have to do it all. We’re not abandoning our timesheets yet! The doomsday clock has started ticking backwards. Was there ever really an impending apocalypse at all, or had we simply been drinking too much of the Kool-aid?

A journey of a thousand miles…

The first step on our journey was announcing it to our team last Thursday. We did so with all of the fanfare and revelry you’d expect from accountants –  a meeting in the board room.

I want to tell you a little more about who we are and how we arrived at this point. But I’m also hoping to keep this story as close to ‘real-time’ as possible, so that you can get a sense of the sights and sounds of the journey. So rather than approaching it in a linear narrative form, I’m going to jump backwards and forwards a little.

On Thursday last week we announced to our team the decision we’ve made to move forward with Xero. If you don’t know much about Xero, don’t worry – neither do we!

Whenever an accounting firm decides to change software, it’s a pretty big deal. And no matter how many demonstrations you see and testimonials you read, relative to the amount you’re about learn, you’re still flying into the process pretty blind. Demonstrations always look slick. Testimonials are only ever gathered from the most euphoric zealots. Experience is the true test, and thus far we have none. So to say we don’t know much about Xero doesn’t mean we haven’t done our research. It just means that we don’t have the kind of intimate knowledge that comes with use. If you read my first post, you’d know of course that what I’m saying is we’ve just had our security blanket ripped away from us!

So here’s what we told our team.

Actual whiteboard from staff announcement last Thursday. Cloud not drawn to scale.

Xero is a cloud based accounting system for business, a bit like MYOB or QuickBooks but web-based. It uses a web browser for its interface. We’ve often yearned for an internal practice management, tax and ledger solution that worked as well as these off the shelf products. Some have even asked “Why can’t we just use QuickBooks for our accounting practice too?”. The practical reality is that it’s so much easier to use than our made-for-practice accounting solution. Its reporting is more powerful and customisable, it’s more flexible and it looks better. The simple reason we can’t is because QuickBooks (and MYOB) can’t do practice management for accounting firms very well. They can’t do statutory reporting or tax either.

But Xero is different. Xero partners with many different developers to fit complimentary products around Xero which in turn increase its functionality. There are many of these products for accounting firms and clients alike. So for us, Xero itself can’t give us the kind of job costing and time-based billing capabilities that we need. But Workflowmax can. And Workflowmax uses Xero as its ledger. Xero itself can’t give our clients statutory reporting capabilities. It provides management type reports on the client side. But for accountants, it has the ability to use an additional feature set and draw upon the same data used by clients to create statutory reports. From there we can add a module that prepares more analytical, KPI driven reports. And a module to prepare working papers. And so on. That part of the journey is on the map, we’re certain of it, but we haven’t decided exactly how and when we’ll get there yet.

For now we’ve committed to replacing our existing ledgers with Xero come 1st July this year, and add Workflowmax for practice management. We’ve given ourselves a month to do it. Sadly, there is no tax product available yet for accountants but apparently that’s coming. So it means that we have to stick with our existing tax solution for another year yet.

There is one thing though that for us elevates Xero above any other product. It allows us to work collaboratively with our clients. In our opinion, despite all the hype, there’s no point in cloud for cloud’s sake. There has to be some additional benefit. With Xero, there is a single ledger for both accountant and client. Whether it be our clients doing their bookkeeping off site or us preparing statutory reports and tax returns at our end, we’re both using the same data. A change made by us is reflected immediately in their reports, and vice versa. In addition, Xero includes the ability to feed data in directly from banks on a daily basis, and have standard transactions pre-coded already. That collaboration should inevitably lead to greater efficiency and an enhanced working relationship with our clients.

The response so far? Cautious optimism. It’s been really encouraging to see the team thinking about how working in this way can benefit their clients, and they’ve already offerred some great suggestions of their own. Perhaps the greatest lament to date is that we’re not changing our tax product over yet! That’s been a source of much frustration over the years.

Breaking the news to the crew. “Chances are we’re not coming back.” Crazy off-kilter camera angle demonstrates just how committed we are to smashing the stereotypes.

The truth though is that we are a little scared. Once again, there is comfort in familiarity. But there is also excitement in potential. Christopher Columbus set out to prove there was a westward path to Asia by heading out into the unknown. I’m not sure, but I’m guessing he felt a little the same. Relatively speaking, what we’re about to do is far more mundane. Our fear is in letting go, not in what lies ahead, because unlike Columbus, we already know that others have successfully gone before us. There is an exciting new world waiting for us at the end of this journey.

And even better, we have a guide – Focus Growth Strategies (FGS). More on that part of the journey later.

It’s accounting, not rocket science

The recently retired NASA space shuttles still ran on technology that was 30 years old. Accounting firms can be much the same.

The space shuttle supposedly still operated a general purpose computer with 1MB of RAM. That’s less than most mobile phones today! It’s understandable if you think about it, because blasting through the stratosphere and orbiting hundreds of miles above the earth is a pretty dangerous endeavour. So for the systems on board a space shuttle, ‘fail-safe’ trumps ‘cutting edge’ every time. If it ain’t broke, don’t fix it. Things need to be 100% reliable.

Accountants like ‘reliable’ too. For the most part, we have a reputation for being a conservative bunch. And that’s not always a bad thing. It’s why people trust us. But it can also make us seem a little…cautious.

While we continually try to convince people that it’s just a stereotype and that in fact we’re really quite zany, that kind of talk often makes us seem even nerdier. Far more dignified to be comfortable in our own skin. Let’s call it what it is – we don’t like change. To any accountants reading this and preparing their very best response as to why they are the exception – you just proved my point! Cool people don’t need to tell people they’re cool. At least, that’s what a cool person once told me. I can’t speak from first-hand experience. But let’s get to the point.

Many accountants run their practices like a space shuttle. Sure, we need IT to enable us to function. It’s mission critical. But more often than not, we don’t like our systems. They’re often clunky and designed with the ‘precision-over-all-other-practical-and-social-considerations’ mindset of an accountant. We tolerate them because we know them inside-out. They give us a result of sorts, sometimes begrudgingly (ever tried customising a report?!), and that’s what matters. We do all of this because in fact there is an efficiency in familiarity and we’re in a profession that craves efficiency. We’re constantly working towards deadlines. We feel like we have more work than we can manage, and yet we need to deliver a result that is timely and accurate. People trust us to do just that, even though there are times when they don’t understand exactly what it is we do. Under those circumstances, fail-safe trumps cutting edge every time. We need our systems to be reliable, even if it means that the result is of no constructive use to anyone. At least we made it back safely again this year! That’s the main thing.

But familiarity does not necessarily translate to efficiency. It can also breed complacency. And that can lead to a false sense of security where we miss opportunities for improvement through fear and inaction. Refer previous comments regarding our conservative point of view. For people like us, familiarity can be a comfort blanket.

Or is all this just me? Maybe it is. Regardless, the breakthrough for me came when I realised that quite simply (if you’ll pardon the cliché), it’s not rocket science. We’re not trying to defy gravity here. We’re not trying to launch something into orbit with human beings inside of it that also needs to survive re-entry. We’re a business like any other, and what we do is customer service. So if others can do it better, why can’t we? What’s stopping us? Why should our systems be such that we just manage to get ourselves over the line each year? Why shouldn’t we utilise cutting edge? Maybe it’s possible to be more efficient and deliver a better result at the same time! Everybody wins.

We have some great relationships with many of our clients. And we often find that we do deliver a result that they love, especially when doing the stuff that actually helps them grow their business and save money – our consulting work. But isn’t this even more reason to put everything under the microscope? One set of tax returns and financial statements pretty much looks the same as the next. We happen to think we do it very well, with a high standard of quality and integrity. But what accountant doesn’t? And would our clients notice the difference anyway, when the result looks the same no matter where they go?

Perhaps if they were audited they might, but that’s a bit like having a great life insurance policy. It’s probably sensible to look around for the best policy you can get regardless of the cost, and there will be those that do, but right now there are many who will simply shop around on price because until you need it to be great, the immediate outcome is the same. The only way to differentiate is on price. Unless you’re able to offer something more. For most people, compliance is exactly that – what you’re forced to do to comply with the law. If our clients really love us saving them money and helping them grow-  and that’s the work that we love doing too – doesn’t it make sense to find ways to do our compliance work as efficiently and cost-effectively as possible (while still maintaining our quality) so that we can spend more time doing what everyone involved would prefer? And in the end, isn’t delivering the best possible return on investment the heart of good customer service?

So as a firm, we’ve decided that if it’s out there, we’re committed to finding it and embracing it. Our goal is for all of our clients to love what we do for them!

If you know anything about accounting technology, you can probably tell from the title of this blog where we are headed. But while the sense of discontent is something that’s been percolating for a while, we literally only made the final decision to throw most of it out and start again last week. So this blog will be the story of that journey, for better or worse.

There are numerous personal goals in all this too. As directors, we want a business that works for us. And we want our team to love what they do and be rewarded for it. We all want more time for the people and things that we love.

So…work/life balance that’s weighted on the side of ‘life’, and a product that our clients love and recommend to their colleagues and friends? Is it too much to ask? It might be utopia – a kind of Shangri-La that exists ultimately as an ideal to be aspired to. But we’re determined to getting as close to it as possible.