MYOB came out swinging at its roadshow in Melbourne last week. The company released a bunch of new technology, mostly in practice management, that puts it right back in the game. It has rethought its strategy on accounting and is building new products to match it.
The message is much more nuanced than last year’s, “you need to do more advisory work”. While it’s impossible to turn around and produce a cloud version of its practice management software, MYOB has found ways to improve key elements such as collaboration while leaving the majority of the product relatively untouched.
The message to partners is very similar to MYOB’s approach to technology. CEO Tim Reed took the stage to reassure accounting and bookkeeping partners that cloud accounting is a transformation of the industry, and that it will largely be positive for established partners.
"When cars replaced buggies, that's disruption. There's transformation in accounting today, not disruption," Reed said. "We believe your role will be more prominent in the lives of your clients tomorrow than today.”
MYOB sees accounting operating in three strands; transaction processing, compliance and advisory. These three strands are collapsing into one business process. “How well you handle this will determine your future,” Reed said.
The roadshow looked at what MYOB was doing in each strand. MYOB’s goals in transaction processing are auto-reconciliation, real-time access to data and new revenue opportunities.
In compliance the company is working on reduced data cleansing, increased collaboration and streamlined statutory reporting. And in advisory the focus is on management reporting and planning, cloud set-up and add-ons, and business structure and tax planning.
Below are the highlights from MYOB’s product lineup for 2016.
Long Post Warning. You can jump ahead or read it in sections by clicking on the following links.
One of the big announcements at the roadshow was about bank feeds. Now, bank feeds have been a hot topic in the past.
BankLink, a 25 year old company, uses algorithms to test the quality of its feeds and human operators to identify and amend any problem transactions. BankLink’s “secret sauce” gives it a 99.96 percent level of accuracy compared to its nearest rival, Yodlee, which is 99.8 percent.
Yodlee, a US data integrator used by all other cloud accounting programs apart from MYOB and Intuit, mostly copies information from users’ online banking screens and recreates the feeds itself. BankLink collects its data directly from over 130 financial institutions in Australia and New Zealand. (Intuit has its own screen-scraping technology that works in a similar way to Yodlee.)
The bank feed feud can get pretty personal. MYOB said Yodlee’s accuracy would result in thousands of errors given that BankLink processes 250 million transactions a year. Yodlee has told Digital First that BankLink’s claimed accuracy is “impossible”.
MYOB insists that Yodlee’s poor bank feeds result in a lot more work for accountants and bookkeepers who have to correct errors in the accounts of many clients. Xero publishes a feed of errors in various bank feeds so its partners can check if there is an issue with the financial institution supplying the feed.
MYOB is taking the bank feed battle to the next level with the announcement at the roadshow of a money-back guarantee backing the quality of its bank feeds. MYOB will return your monthly subscription fee if you discover any missing, duplicated or incorrect transactions in any of your clients’ bank feeds.
“If you identify them in your feed and you're unsatisfied with the quality of the feed, then you give us a call and you give us the evidence and then we would refund that month's subscription,” says Ben Ross, MYOB’s general manager for design and user experience.
MYOB is convinced that this is a killer proposition for many accountants and bookkeepers struggling with the poor quality of Yodlee bank feeds. “This is a game changer,” says James Scollay, general manager of MYOB’s SME solutions.
It will be interesting to see what impact this guarantee will have. There are definite flow-on effects from guaranteeing a source of data into your accounting program. It means you shouldn’t have to check your bank feed against the balance on a paper bank statement or your online bank account (as Xero recommends its users do).
That said, bank feeds haven’t been in the news for a while now. While on stage Scollay gave three reasons for Xero customers returning to MYOB (total cost, features and offline access, phone support) and the quality of bank feeds wasn’t one of them.
Xero has already established direct connections with the big four banks in Australia which account for over 80 percent of market share. Yodlee still has problems with certain credit cards and accounts with two-factor authentication.
The most likely impact of MYOB’s bank feed guarantee will be to convince larger firms processing thousands of transactions each month that MYOB is a safer bet than Xero or other Yodlee-dependent accounting software. Smaller practices, whose business clients often reconcile their own accounts, will probably be less interested.
Driving Client Relations with a New Dashboard
One of MYOB’s biggest hits in late 2015 was a new portal. More than 1,000 Accountants Office and Accountants Enterprise sites have been using the portal since April 2015, as have 16,000 of their SME clients.
Accountants use the portal to collaborate with clients, send and receive queries, and send returns and statements for electronic signature.
Clients receive an email notification to visit a web portal on their phone, can scroll through the statement or return, and sign the document on their phone with a click. The accountant is automatically notified that the document has been signed and can be lodged electronically with the ATO. The digital signature service is owned and operated by MYOB and included for free in the price of the practice management software. (Xero mostly gives away its practice management software but partners need to buy digital signatures from Adobe, which provides the signing software.)
The big news for 2016 is a partner dashboard. It has three objectives; to centralise all MYOB clients in one place, set up new clients on MYOB software, and upgrade clients on MYOB’s desktop accounting software to its cloud software.
The dashboard pulls the list of client files from MYOB's central CRM system. Partners attach themselves to their client files so the dashboard can list all online clients attached to one particular partner.
Desktop files must be added manually by copying in the serial number to the dashboard for each client.
Upgrading a desktop file takes "minutes or hours" to transform into an online file. The company’s cloud file is automatically added to your client list.
An advanced version of the partner dashboard is due in the second half of the year. This is a major step up from the existing interface in Accountants Office and Enterprise and from the preview looks like it could be very useful for running a practice.
The advanced dashboard will display a list of clients and information about the status of their accounts in a series of columns. The first column shows traffic-light indicators for the types of services used in each customer file; bank feeds, automated payroll or superannuation.
An accountant can look at this column and see how many clients haven’t yet set up their bank feeds. “We're still astonished that for some of our partners only half of clients have bank feeds set up and our partners are just missing out on all the efficiency dividend,” Ross says.
Ross is tipping that accountants offering payroll as part of transaction processing services will be a big opportunity. The dashboard effectively shows which clients the accountant can contact to sell outsourcing services.
“An accountant can look down and see a bunch of clients that don't have bank feeds. They could say, ‘I'm actually only doing payroll for five clients. I could do it for fifty clients. I've got the tools and it's quite easy,’" Ross says. “It's a game changer for all partners to start to offer new services and tap into customer segments, services and revenue streams that were previously too inefficient to access.”
The next column shows a line of 12 boxes for the months of the financial year. A box is coloured green if transactions are all coded for that month. If there are outstanding, uncoded transactions, the box is read. This is an idea taken directly from the BankLink interface.
The third column shows the status of the tax return – the due date, out for signature or lodged.
A fourth column shows a circle that represents the efficiency of a client’s bank coding rules. An accountant can look at the circle and see whether bank rules are automatically coding 20 percent of transactions or 90 percent.
“An accountant will say, ‘My rules aren't really working so well for that client. I need to go in and set up more rules,’" Ross says.
Another feature coming across from BankLink Practice (the desktop app) is suggested rules. After an accountant or bookkeeper codes a repeating transaction three times the software suggests creating a rule for it.
Accountants can run a report on the level of efficiency of all the staff in the practice. The report generates an average percentage of efficiency based on each employee’s group of client files.
The coding data for efficiency measure and monthly transactions comes directly from MYOB’s online ledger (see update below). Non-MYOB ledgers could one day send similar data through an API connection but will never have as tight an integration as ledgers and practice management tools created by MYOB, Ross says.
The partner dashboard was released at the roadshow.
At one time MYOB planned to build a cloud version of BankLink called BankLink Online. This will now be part of the partner dashboard in the form of more efficient coding, workflow and collaboration. (MYOB will continue to develop for the desktop version of BankLink too which has a large and “highly satisfied” customer base, Ross says.)
When will the dashboard replace the desktop BankLink? The dashboard will receive incremental releases that will make it more attractive for accountants and bookkeepers to process transactions. MYOB is building near-identical workflows for the online dashboard and desktop program so assist in the migration. Then users will migrate their data from BankLink desktop to the dashboard.
Online Ledger Refactors The Numbers Game
One of MYOB’s smallest releases may have the biggest impact.
MYOB has created an online ledger to replace the basic ledger that has come free with MYOB desktop accounting software since it was first released in the 1990s.
Many accounting firms use these ledgers to track a broad group of entities that individually have small numbers of transactions. This has three important ramifications.
The online ledger is built on the same software platform as MYOB’s other cloud programs, which means accountants and bookkeepers can move data from ledger to full accounting programs without a complicated migration process.
This will encourage more mobility between businesses on free ledgers up to the fuller featured accounting program, Essentials. A migration is a natural point to evaluate the competition, so it’s likely that eliminating the migration should increase the percentage of businesses choosing to stay with MYOB.[/caption]
Secondly, the new MYOB Online Ledger is designed to import data from competing vendors’ cloud accounting programs. The client uses a competing product while the accountant sees the same data in an MYOB ledger.
This is a tactic well practised by Xero. Accountants don’t have to convince business owners to switch away from their preferred program while the accounting firm can consolidate its workflow around one vendor’s accounting software.
The Online Ledger brings in the journal entries from competing products so you can see underlying transactions behind a change in balance.
MYOB is effectively playing catch-up to this tactic which should reduce the churn from its existing customer base (partners and business owners).
the third impact of the Online Ledger is it allows MYOB to start counting ledgers as part of its cloud subscription numbers, just as Xero does. Xero knows exactly how many ledgers it has because the files are saved in Xero’s cloud data centres.
This has helped Xero (262,000) push past MYOB (170,000) and claim the crown of the largest cloud accounting company in Australia. (Correction: MYOB's 170,000 figure is for Australian and New Zealand users. Xero has an additional 162,000 users in New Zealand, so the correct comparison is 425,000 for Xero and 170,000 for MYOB.)
MYOB can only estimate the number of desktop software ledgers by profiling firms and the number of ledgers they typically have on hand.
“We think, on average, there are about two desktop ledgers per client,” Ross says. “We've got estimates of how many ledgers are MYOB desktop ledgers are active right now and they're all in the millions.”
A percentage of those ledgers won’t move to the cloud – accountants won’t bother moving clients with non-trading entities, Ross says. Still, “you only need tens of thousands of them to be eclipsing the growth rate of Xero,” he adds. “When commentators talk about online market share, we're laser focused on that. We sit here confident that we're about to bring it.”
The Online Ledger will replace MYOB’s three desktop ledgers, Accountants Office General Ledger, MAS and Accounts. The online ledger is based on MYOB Essentials and will eventually have the same functionality as the desktop ledgers including the ability to group items, add quantities and so on.
(The online ledger is available now and launched with 80 percent of the desktop ledgers’ features.)
The number of features in the MYOB ledger “is one of the reasons why MYOB has been so dominant”, Ross says. “They make a big difference to accountants because they're working in these things all the time.”
If an accountant wants to add a bank feed or give the business owner the ability to look at and edit transaction data in the ledger they must upgrade from Online Ledger to MYOB Essentials Connected Ledger, previously known as Essentials Cashbook. Online Ledger is free while Connected Ledger costs A$16 a month. (You can read more about the launch of Essentials Cashbook here.)
MYOB is also introducing a third low-end product, Essentials Accounting Starter, which is a detuned version of the Essentials Accounting program. It lacks payroll and has limited invoicing. “Businesses can get in at a lower ticket price and if they want more functionality they can unlock it and use full-blown Essentials,” Ross says.
Accounting Starter targets the “white space” in the accounting software market – the tens of thousands of sole traders and micro-business owners running their business on a spreadsheet instead of an accounting program.
(Intuit has done something similar in the US with a program it released last year called QuickBooks Self-Employed. QBSE helps sole traders split their personal and business expenses, and tracks health fund information.)
Behind The Big Push (in Ledgers)
The incentive for accountants to move their ledgers online is to access the same collaborative tools available for MYOB AccountRight and Essentials.
Today accountants using MYOB Accountants Office or Accountants Enterprise need different workflows for their desktop ledgers. “If you use the online ledger you can use the same set of tools and the same workflow across any file,” Ross says.
MYOB is obviously very keen to see its partners migrate those ledgers and is trying to make this as easy as possible. MYOB has added a button to Accountants Office and Accountants Enterprise that migrates the three types of desktop ledgers and legacy asset registers to the new online ledger. The automated process is handled by MYOB and takes two minutes.
Key workflows that used to happen in the three Ledgers have been moved to the Workpapers module in Accountants Office and Accountants Enterprise. This will save time switching between contexts. MYOB is sending a free cut-down version of Workpapers to all partners for those still using Excel to do their calculations.
MYOB is looking beyond the efficiency gain of training staff on one workflow. Its internal goal is to make sure that working with an MYOB file in an MYOB practice suite is twice as efficient as working with a non-MYOB file. For example, it is difficult to view uncoded transactions in a Xero file and view them with one click.
There is some neat integration planned between the client accounting program MYOB Essentials and the MYOB portal. In a demo of an upcoming feature, an MYOB user can click on a transaction in Essentials to turn it into a query. Essentials sends query to the client to answer on their smartphone through the MYOB portal.
When the client responds to the query, the annotation is saved directly to the transaction in Essentials and the partner’s dashboard is automatically updated. If the client uploads an image in response to the query – such as a scanned bill or receipt – it is saved with the transaction in Essentials. This feature is due later in the year in an update to the portal and dashboard.
MYOB is also adding auto-mapping to the chart of accounts so accountants don't have to rekey a trial balance.
Online Tax Further Ahead Than Expected
MYOB is gunning to become the third accounting software company to release an online tax program after Xero and CCH Australia (Wolters Kluwer).
The fringe benefits tax form and activity statement are in testing and the company form is next. There are five major forms left to complete, Ross says, however they won’t take as long to finish as the first two.
“We've cracked the back of it in terms of the forms,” Ross says. The tax program consists of four elements; a form builder to render online tax forms; a validation engine to check the data on the form; an authorisation engine to ensure that the right Auskey and cloud-based authorisation is supported; and the SBR lodgement engine to lodge forms with the ATO.
The first form takes the longest – the FBT took about four months. The BAS (business activity statement) only took a month, as will the company and individual forms, Ross says. FBT and BAS are complete, and MYOB is mid-way through the Company, Partnership, Trust and SMSF forms.
MYOB hopes to release online tax before the next tax financial year (i.e. before June 2017). The BAS is already available online for MYOB AO and AE users to submit.
MYOB isn’t in any rush to release Online Tax. “You’ve got to remember there's different incentives for us. Xero is racing to get their tax out because they don't have a desktop tax program on the market. We could put it out there and suggest to our current users that they stop using the desktop BAS. But desktop is working for them, and at the moment SBR is really the only advantage” for using online software, Ross says.
MYOB has prepared for the upcoming AUS key transition (the AUS key is the digital certificate for accessing the Australian Taxation Office website) by adding an automated phone call service and an online mechanism. Both will take an AUS key and push it up the ATO’s cloud system.
Once this transition occurs MYOB will be able to integrate its online portal more closely with the ATO’s databases.
“Tax on its own won't be a massive game changer. It's tax combined with portal and combined with that bureau processing to make sure that the tax is pre-filled. That's the game changer,” Ross says.
With more efficient transaction coding through BankLink Online, the tax form will be almost automatically populated, Ross says. The accountant or bookkeeper can then lodge it electronically with the ATO.
Essentials Picks Up a Few Bonuses Too
Other efficiency boosts include a new mobile app called MYOB YourPay, due out in a few weeks.
The app is for clients’ staff to record their timesheets on their phones. Timesheet data feeds straight into MYOB Essentials, eliminating the need to manually type in paper timesheets.
MYOB has added online invoices to Essentials with an activity log showing when the invoice was sent, when it was viewed (and how often), and when it was paid.
The online invoice feature works in the same way as Xero. A user can send an invoice from Essentials to a customer which they receive as an email with a link. The link opens up a browser page with the invoice details and a Pay Now button.
Instead of third-party gateways such as eWay or PayPal, MYOB uses its PayDirect payment gateway to handle all payments.
MYOB is moving a lot faster than it has in recent years, as this hefty post of product updates shows.
It is also making smarter moves in technology. Accountants in larger firms will feel reassured that MYOB can surf the innovation boom in accounting software too.
Xero is already trying to move the conversation beyond the accounting software itself to networks of financial institutions, data aggregators and enterprises, where it has a clear lead.
Yet for MYOB’s most important market – medium and large accounting firms – they are still concerned about improving their efficiency and selling more services. On that front MYOB is doing more than enough to keep them happy.
Disclosure: MYOB paid for my airfare and one night's accommodation to Melbourne for the launch of the MYOB roadshow.
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