With the tide of automation covering more and more bookkeeping and reconciliation functions, technology is coming for accountants either way.
Xero‘s mission is to get accountants on the happy/high impact side of those changes – but how do you pull it off? I got a first hand view from Ryan Watson, Principal of Upsourced Accounting. Watson has also been a Xero Ambassador since February 2017 – that means he volunteers his time to support Xero users, and accountants in transition.
Watson and his partners founded Upsourced Accounting in 2012. Based in Columbus Ohio, Upsourced Accounting is not what you’d call basic bookkeeping. “Management accounting” is closer to the mark:
That means we focus exclusively on working with our clients on a monthly basis, doing their bookkeeping, but also CFO advisory work. We don’t do any compliance-only, assurance, audits, or tax-only. Our focus is being the accounting department for our clients. We use Xero in our practice, and we’ve been doing that for five years.
The danger of bookkeeping as a commodity service
Getting to the right business model wasn’t easy. Watson told me when they started; they wanted to do pick up a high volume of bookkeeping clients. But the flaw in that plan became clear:
Our thought was, “Growth looks like 1,000s of clients paying smaller dollars. We’re going to be bookkeepers for lots of businesses.” As time and technology evolved, it was clear to us that just being a bookkeeper for thousands of businesses – that’s a commodity.
A new model was forged:
The opportunity was to go deeper with smaller numbers of clients and be their CFO, be a member of their management team. And work for higher dollar contracts and get closer to our customers.
Cloud benefits in verticals and third party apps
Like many Xero users I spoke with, vertical focus is a key for Upsourced Accounting. That drove the initial cloud financials need:
We work with two verticals: venture-baeked tech startups, and seven figure creative agencies. There aren’t enough of either of these to build a business in our town. We needed a platform we could use to work with clients all over the country, and to work with them in real time. At the time, very candidly, Xero was really the only cloud game in town worth using.
Cloud transitions usually yield an immediate benefit, but bigger changes are revealed over time. Was that true for Watson?
Our intent from day one was working remotely. What we weren’t expecting or planning is how Xero would automate, to some degree, the kinds of work we thought we were going to have to do.
A core part of Xero’s pitch: a cloud platform has a huge advantage for pulling in third party services. Has that paid off for Upsourced Accounting?
What I didn’t realize with the cloud is what Xero offers in addition to an accounting platform is the ability to plug in these third-party apps to tailor the back office specifically for each one our clients. We can customize it to their workflow and their needs precisely, and use different apps for different clients. That whole app ecosystem was not even a thing we really considered.
Internal automation is also possible:
That also allows us to use tools like a Hubdoc- which is an exhibitor here – that not only plugs into Xero, but it also automates a thing we used to do manually. We spend less time on our work, but we don’t charge any different, so we make more money.
AI might be the future, but automation is now
In his keynote, Xero CEO Rod Drury hit on a topic we’ve heard a lot about this year from the keynote stage: AI and machine learning. Xero’s “AI” emphasis has a practical bent: for now, it’s really about RPA (robotic process automation). Watson knows that in accounting circles, “AI” can lead to fears about mass job loss as bookkeeping/compliance chores are automated. But he sees it differently:
A fun headline in the media goes something like, “AI is coming, and it’s going to eliminate this industry and that industry.” Of course, accounting is a super easy one to say, “What do we need accountants for with AI?” I definitely don’t think it’s eliminating any roles, but it’s very much changing roles.
A bookkeeper used to be paid to physically enter things into a GL. That job is going away, but it’s creating a new job, which is, “How do I select applications? How do I integrate them, how do I troubleshoot?” That’s an accounting technologist more than a bookkeeper.
A different kind of hiring and training is needed
So how does this shift affect hiring? Do Watson and team have to look for different skill sets?
Yes. We find ourselves hiring people that aren’t necessarily accountants, who didn’t necessarily go to school to be an accountant. To be honest with you, we’re looking for what I would call stem cells.
“Stem cells” are what I call people you can plug into an organization who can do a lot of things pretty well. Then they see a need and glom onto it, and become a specialist there.
The pace of change compels Watson to hire people who can adapt:
Over the last five years, our business is very different than we thought it would look. So we’re looking for people who can evolve and adapt, and not necessarily who are good at AP workflow.
Training needs are radically different:
From a training standpoint, I would say it’s a challenge to be perfectly honest. We are finding ourselves not doing a great job of is teaching our staff not just how to do things – but how technology works. We’re finding that we need to educate them on what an API is, how does it work, and how does data flow? So when things go wrong, they can fix it.
It’s about teaching people to become a different type of accountant:
I would describe a bookkeeper now as an accounting technologist. Now you have to educate and train somebody to be a technologist.
The wrap – accounting tech cuts both ways
Watson says Upsourced Accounting’s move to CFO-type advisory hasn’t been easy: “It takes a different model that accountants aren’t used to building.” One huge growing pain: pricing. “Every mistake we ever made was by underpricing ourselves,” Watson added. But they turned that around:
The irony is that when you charge more, you find the kinds of clients that you’re looking for. The ones who value you, if price is the primary consideration, then they’re looking for the value for you can provide, and it’s fun.
We talked about the Xero Ambassador program, and Watson’s efforts to organize local and regional events. The topic of compliance-to-advisory comes up frequently:
There’s a top 100 firm in Ohio; they’ve got audit, and they’ve got tax. There’s these token advisory groups. But their CEO said, “We’re not going to do any of the things we do today five years from now. Our business is going change that fundamentally … The point is, every firm, big and small, is having the conversation around, “How do we evolve our service offerings?”
Accounting tech has two edges. One edge can be used to carve out a future. Watson’s warning: don’t wait to feel the other edge.
I think if you bury your head in the sand and say, “This is what I do, it’s what I’ve always done,” it’s going to eliminate your job. But if you’ve evolved, it does exactly that. It allows us to spend time on what we’re good at – and not on stuff anybody can do.
Image credit - Feature image - time for change © vege - Fotolia.com. Photo of Watson at XeroCon 2017 by Jon Reed.
Disclosure - Xero paid the bulk of my expenses to attend XeroCon 2017.