Our survey clearly demonstrates that small to midsize businesses are migrating financials to the cloud at a rapid rate. Over half our respondents have deployed at least one cloud application already; fully 82.5% intend to uses Software as a Service (SaaS) in the future for their accounting needs.

When things move this fast, best practices evolve quickly too. We felt it would add value to provide an opportunity to interact with Brandt and Seth, in addition to making a copy of the report available to everyone who signs up for the webinar. Brandt is a finance professional who managed his company’s migration from QuickBooks to the cloud. Seth speaks with authority from his perspective as tech editor for the magazine that CPAs turn to for news.

Click here to sign up for the Cloud Accounting Best Practices Webinar at no charge. And bring your questions – a Q&A session will follow the presentations.  Copies of the CAI report will be available to webinar attendees and to Cloud Accounting Institute members. Membership in the CAI is free for the rest of 2012; you can join here.

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The only way to find out is to calculate the total cost of ownership (TCO) of your current QuickBooks set-up and compare that to your options for replacing it.

The direct costs for your current set-up are obvious.You simply add up license costs for the number of QuickBooks instances you have, the costs of the servers they run on, and the portion of your IT costs attributable to QuickBooks. The challenge is to properly quantify the hidden costs of lower productivity and poor data quality – not to mention the sheer frustration of trying to manage the spreadsheet farm in your finance organization.

There is a very good webinar from Intacct that helps you identify those hidden costs as well as potential revenue gains and cost savings. It’s called Advice from the Trenches because Sinohe Terrero, VP of Finance at Etsy, and Marc Linden, CFO of Intacct, share their experiences of running finance in the cloud. Etsy migrated from QuickBooks. Intacct started in the cloud; they eat their own dog food, as the saying goes.

The alternatives to QuickBooks fall into two categories – software installed on-premises and Software as a Service – each of which have their own cost structure.  Since I have discussed this in earlier posts, I won’t go into detail here. Suffice it to say that TCO is like an iceberg. The part you see above water – the software license fee – represents only a portion of the total cost of ownership. Comparing only the license fees will give you a misleading result; you have to measure and compare the two icebergs.

According to The Yankee Group, the above-water portion for the average on-premises software accounts for only 9% of its total cost. All the underwater things you have to buy and pay for to run the software successfully make up 91% of the dollar cost. By contrast, the tip of the SaaS iceberg – the subscription fee – represents the bulk of the TCO –  68%. The remaining 32% of the total costs cover implementation, configuration, and training. These are costs that you would incur no matter what solution you chose; in the on-premises example that the Yankee Group used as a benchmark; these expenses represented 44% of the total cost.

I can offer you two free tools that will make your TCO comparisons and ROI analysis much easier. When you sign up for a free membership in the Cloud Accounting Institute, you can download my BusinessSimple (TM) worksheet for decision makers and the “On-Premise Versus On-Demand Rapid TCO Comparison” tool from Nucleus Research.

The direct and indirect costs of running QuickBooks are so specific to every user’s organization that I hesitate to generalize about them. Except for this: they are higher than you think. Settling for lower productivity and questionable data quality don’t just cost you money and time. They are like driving with your handbrake on. Business moves fast in the world around you. You are missing opportunities if you slow yourself down.

If you move to a SaaS application, you will probably also be surprised at how short the payback period is – anywhere from 4 to 18 months is likely, depending on your situation. Your ROI can come from many different sources. Etsy, which had struggled with financial consolidations on QuickBooks, shaved ten days a month off its close.  Another company might realize its ROI from reduced hardware/software costs. The point is, you won’t know unless you calculate your total costs and determine the investment required.

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The General Ledger view is open in front of you. All divisions and offices in your company access the application over the Internet, as you do, and all transactions are written to the same database. So you – the CFO of your company – are looking at your company’s finances in real time. With a single mouse-click, you select Sales Budget vs. Actual by Location, and print it. A job that used to take hours is done in under a minute.

The Expense Management view is open in front of you. As the controller of a professional services firm, you can improve your company’s cash position by timely billing and charge-backs. You want to see whether the staff at remote client sites are entering their time and  expenses at the end of the day, as required by company policy. You are pleased to see that compliance is way up because the staff can now just key in the data and scan in their receipts before leaving the job site. They are more motivated to do it because they get reimbursed faster, thanks to an automated approval workflow. You are happy because approved expenses are immediately available for invoicing.

All the executives and senior managers have a customized dashboard open in front of them, showing the key performance indicators they need to do their jobs. Operations staff have secure access to the exact, real time  financial information they need to do their job. They can see more clearly how their decisions and activities impact upon the company as a whole, so a virtuous cycle is established that enables them to improve performance. The executive team can monitor the function they are responsible for, drilling down to the most granular level or pulling back for a global view, comparative analyses, and what-if scenarios.

Underneath the various dashboards, reports, and analytics is the same thing: dimensionality. You tag transactions with codes for various dimensions of your business – customer, vendor, employee, project, spend, profit or payroll, for example. The codes index entries for analysis and reporting purposes. Some dimensions are common to all companies, but you can define others that are especially relevant to your business (coupons, say, if they drive business for you).

As I’ve said before, problems with reporting and audit-ability are the two most common trouble spots for small to mid-size businesses that have outgrown QuickBooks.  The point is, you don’t need spreadsheets to provide flexible reporting and analysis when you have a cloud accounting solution.  It is much easier to make sound business decisions when you have real-time visibility into your company, and you can’t get real-time reporting from spreadsheets.

Last but not least, when you move from QuickBooks to the cloud, you get out of the IT business and into your own business. Imagine writing a check to the cloud vendor for turnkey service instead of to Dell for servers, Microsoft for licenses, and your IT support for managing it all. Imagine never having to install another version of the software. Never having to restore a computer that has crashed. Never worrying about losing your data. Forget all the other pains of IT ownership. All you need is access to the Internet, at any time, from any location, 24/7/365. The cloud vendor does the rest.

Make it easy on yourself. Stop visualizing a better way of working. Start realizing it.

One of the surest signs that you are ready to graduate from QuickBooks…is that you have to dump everything to Excel to see what is going on in your company. When you were just starting out, it was enough to see the balance in the checkbook-style ledger. That told you whether you could pay your bills for the month.

Time goes by, there’s money in the bank, your business is expanding. Congratulations! But now you may have to work late pulling reports together manually for board meetings, building or updating spreadsheets because QuickBooks does not have the reports you need. The Directors want to see the relationship between cashflow and operations. Profitability comparisons across divisions. What-if analyses of the options before the Board. In short, visibility into the business. You pray that QuickBooks doesn’t crash as you export the data.

Problems with reporting and audit-ability (they go hand in hand) are the two most common trouble spots for small to mid-size businesses that have outgrown their initial system. The more you have to do in Excel outside your core accounting system (QuickBooks or any other), the more common they are.

Spreadsheets are silos of information. The data they contain is static as soon as you export it from QuickBooks. Every time you touch the data – to refresh the inputs, to modify a formula, to add a row – it may introduce an error. The chances of error increase if there are multiple touch-points in your organizations for processing or reporting the data.

All of these pain points cost you time that could be better spent elsewhere. Maintaining a spreadsheet farm may even mean that you have to hire additional staff. Still, the greatest danger associated with spreadsheets it that there come to be multiple versions of “the truth.”  The report you create tonight may circulate through the organization and become a template that different departments or divisions modify for their own purposes. Everyone is creating one-off versions of reports that don’t tie off, but everyone believes his own version of the truth and acts accordingly. Some refresh their data regularly; some don’t get the memo.  The parable of the Tower of Babel comes to mind here when I think of the results.

The pain points that develop where QuickBooks no longer fits your organization are also pointers to the way out.  Let’s return to that idea in the next post.

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To me, what makes tax season so nightmarish is not just the mountain of data or the avalanche of schedules and forms. It’s that tax reporting means that you – as the controller, accountant, or CPA – find yourself face to face with the limitations of the company’s or the client’s accounting system just when there’s no time to do anything about it.  And you have to clean up the mess before you can apply your expertise.

Is it more beneficial to file using the cash or the accrual method? I don’t know – how easy is it to get a report both ways? Why can’t I get these accounts to reconcile? I don’t know – why do you have multiple spreadsheets, all classifying expenses different ways? If you have to be a detective to sort out the client’s accounts, it can take you down some seriously time-wasting paths under excruciating time pressure.

I shared a lot of that pain when I was a senior accountant at a Big 8 accounting firm. Now I  see clients’ accounting systems from a different perspective because my firm specializes in managing migrations from QuickBooks. Many of these companies are tech start-ups that outgrew QuickBooks as quickly as they did their offices. Others are companies that have diversified or grown through mergers and acquisitions, and need to do complex financial consolidations and multi-level reporting. As you might guess, I help them implement cloud accounting solutions that provide the functionality they are missing.

For example, I just began working with a software company in a growth spurt. When they took me through their files, it was clear that they were suffering from revenue leakage from two sources. First was a recurring problem with revenue recognition, and secondly, they were not capturing all the relevant  time and expense data. Stopping the leakage from just these two sources would immediately save them  between $100,000 and $135,000 a year. That’s more than enough to hire another developer – or pay for a cloud accounting solution.

So, my fellow CPAs, my advice is, as soon as the tax madness is over, why don’t you take a look at the cloud-based solutions that AICPA offers. There’s one for tax preparation workflow, but don’t stop there. Look at the core accounting systems and discuss them with your clients. Life could be a whole lot easier next tax season.

If you sign up for a membership in CAI, I will share with you the AccessTekBusinessSimple (TM) questionnaire that I use with clients for requirements definition and cost/benefit analysis. In addition, Ian Campbell, CEO of Nucleus Research, has given us permission to distribute the latest, greatest version of  his company’s much-requested TCO tool, “On-Premise Versus On-Demand Rapid TCO Comparison.“

We are very excited to be able to make this offer. Nucleus Research is a global provider of investigative, case-based technology research and advisory services that provide real-world insight into maximizing technology value. There is no cost for these downloadable tools. And for our inaugural year, CAI membership is free as well.

The BusinessSimple questionnaire will help you gather the cost information that the Nucleus TCO comparison tool calls for. The questionnaire eases you through the decision making process I outlined earlier. You can set your finance, operations, and management objectives; consider what value you want to add with a new accounting system; and document, rate, and prioritize your functional requirements. This information is the basis of your ROI analysis.

Now you know what you have been spending on your existing accounting system. You have a checklist of what you need. Ask for license and implementation estimates from the on-premise and cloud accounting vendors that interest you. Plug the numbers into the Nucleus Research spreadsheet for a truly “rapid TCO comparison.”

Immediately it calculates and graphs the cost impact of the two options. You will see a three-year TCO for each option and a graph of cumulative costs over six years. You’ll see how much the solution with lower TCO saves you over the option with higher TCO. This can be exciting. I loaded real data given me by a real company; the on-demand solution showed a 45% cost savings.

What really sends me about this version of the Nucleus Research TCO tool is the new analysis section. It calculates and graphs CAPEX, OPEX, and after-tax cashflows for four periods: Upfront and Years 1-3, based on the base costs you entered.

Here’s the icing on the cake. The last section of the TCO tool provides links to free related research from Nucleus, explaining best practices for Business Case Development. It starts with a process flow infographic, then deals with various factors involved in quantifying TCO and ROI completely and accurately.

I will leave you with this take-away point from one of the related research papers,”The strengths and weaknesses of TCO.” It wraps up both sides of its subject by saying that “TCO provides an understanding of future costs that may not be apparent when an item is initially purchased. However, the metric focuses only on cost and companies that rely entirely on TCO end up following a strategy that minimizes expenditures rather than maximizes the return for the company.”

Register now as a Cloud Accounting Institute member to receive these and other benefits to come. Please keep coming back, commenting, and sharing the word with your network. Follow us on:

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Now, with over 20 years of experience in providing technology services to clients, I see it differently. New things come out of old patterns. In computing, the pendulum keeps swinging between two poles: dedicated and shared resources. (Got kids? Watch them flip back and forth between ”That’s mine” and “Let’s share.” Same song, different verse.)

Art Rosenberg got me thinking about this with his “back to the future” blog  on the roots of interactive applications. “As we watch ‘cloud-based’ applications, Mobile UC, and IP networking take over communications between people and business process applications, I find it interesting to go back to the early days of business computers that were limited to premise-based mainframes and ‘batch processing’ with punched cards. That’s when I got involved with enabling computers to support remote end users with keyboard terminals to access ‘interactive’ applications,” he writes.

That was in the days of the dinosaurs, so to speak. As Rosenberg says, “Because mainframe computers were big, slow, expensive, and with limited processing power, it was not practical for individual end users to use computers the way they can now.” Rosenberg helped innovate and market a new concept: time-sharing. This enabled “a number of users [to] share a computer interactively, independently, and concurrently by time-slicing the CPU and swapping active user programs dynamically between secondary storage and main memory.”

Time-sharing programs made the minicomputer commercially viable for companies that could not afford a mainframe. Time-sharing service bureaus extended minicomputer access to companies that could not afford dedicated computing power. The personal computer came along and finally gave dedicated processing power to individuals. Networks enabled personal computers to communicate among themselves and with central servers and to share expensive resources such as applications, storage, printers, and control devices. And so it goes, with the pendulum swinging back and forth between increasing personal control and optimizing shared resources.

The leading edge of this dynamic today is cloud-based computing. Now access is dedicated and the infrastructure is shared, enabling individual users to leverage shared resources for software development, servers, data center infrastructure, support services, etc. at a level they could not afford if they had to acquire and own them individually. Like all the advances that led up to it, cloud computing enables users to do old things in new ways. What makes cloud computing transformative is that it greatly increases the interactive potential of all the people, devices, and processes involved.

The CPA who can work on a file online with his client, the company accountant who can outsource a business process, the small business owner who can suddenly afford Fortune 500-level software capabilities are all beneficiaries of this evolution. As Rosenberg points out, “Time-sharing also introduced the beginning of what we refer today as the ‘user experience’ that has become the focus of good business communications.”

The marriage of something old and something new, something owned and something shared, is bringing new benefits to the light every day.

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The Cloud Accounting Institute is launching its first survey to determine how many companies have adopted or intend to adopt cloud accounting solutions and why (or not). In addition, we want to know how many employees will actively use these applications and whether they are centrally located or use the application from remote locations. This time around the percentages will be the big story, but when we refresh our data at the end of the year, we expect to begin making our own predictions.

If you would like to help us gather this data, please click here to take the survey. Your answers will be kept anonymous and held in strict confidence. We will also reach out to your peers through our LinkedIn account and other groups. Anyone who takes the survey may receive a copy of the results, and you can be sure that I will share them with you here as well.

Thank you for helping to build our view of cloud computing from the ground up.

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Andrew Hickey’s “10 Cloud Predictions for 2012″ starts out, “Ok, ok. This time it’s for real. We’ve been hearing it for the last four or five years, but 2o12 is it. 2012 is the real deal. 2012 is, for lack of a better term, the year of the cloud.” You’ll see that statement repeated everywhere this year. It’s number 2 on the Top Ten list of predictions in Crain’s Chicago Business, my local source for what business decision makers are thinking. But Hickey is writing in CRN for an audience of Value-Added Resellers and systems integrators. When CRN, with its industry-wide perspective, says that a technology has gone mainstream, it has.

Hickey shows how all the pieces of enterprise-level cloud computing have fallen into place to support the value proposition. You can mix, match, and manage SaaS, PaaS, and IaaS–software, platform, and infrastructure as a service. Cloud storage is becoming the obvious solution to the exponential increase in enterprise data. Acquisition of cloud companies is rampant, hiring is up, skilled development and deployment resources are getting scarce, and certification programs are popping up all over.

If your interest is specifically cloud accounting from a user perspective, you might want to skip ahead to Hickey’s Number 2: Mobile Marries Cloud.  Hickey predicts that “2012 will be the year that mobile cloud services dominate.” Business executives are driving the demand and workplace acceptance of the smartphone as an essential business tool.

Here is what one executive, Craig Stack, CFO of ProKarma, says about mobile cloud accounting. “In November, I was staying at a wonderful villa in northern Argentina in a small town called Purmamarca. I sat down at the pool with my iPad, logged into Intacct, checked out how the business was doing, approved a few purchase orders, and within five minutes I was back to enjoying Argentina at its best. Intacct on the iPad is nothing short of revolutionary – it makes finance fun again.” Questions, anybody?

Ok, so let’s take a look at the second article, Adam Neary’s post on the Accounting Today blog, titled “2012: The year we stop talking about the cloud – and start doing.”  This article is written for accounting professionals, obviously, and the main message is clear from the title. Neary starts by dispelling a lot of the fears – and excuses (his word) – that  justify inaction in the face of attraction.  He doesn’t just blow the smoke away; he lights a fire under his readers by proposing “five actions you can take to dip your toe into cloud technologies. They’ll go a long way in helping you get comfortable with things and more confident in your ability to forge deeper client relationships (which is one of the ultimate goals!).”

And while you are thinking about it, here are Neary’s action steps:

“1. Take advantage of cloud-based backup solutions (i.e., Dropbox) to quell those preliminary “Gasp! Our data’s gone into the cloud!” feelings. Dropbox’s interface and ease-of-use intuitively communicates what the cloud is and how it works.

2. Test remote PC access to save time and money replacing on-site data entry (i.e., GoToMyPC).

3. Save yourself time and hassle by moving clients with expense policies onto a hosted expense report system (i.e., Expensify). This is a great first step as filing a tedious expense report and the pain that goes with it is something virtually everyone can relate to.

4. Start running your clients through a “virus scan” to catch mistakes in their QuickBooks files (i.e., AuditMyBooks). This will help your client’s get comfortable with cloud technologies as well.

5. Explore ways to be more than just the report generator. Web-based turn-key analysis portals that let you and your clients meet in the cloud can provide that “Ah-ha!” moment.”  If you’ve never used an analysis portal, check out Profitably, the company that Neary heads, and take a free tour of their app.

There are a few dark clouds widely predicted as well. Dave McClure, also writing in Accounting Today, notes that “Security is an issue. In a cloud services industry that still does not have a code of conduct, there is little outside of a legal contract to ensure that client data is secure from hacking and other probing eyes. Interestingly, for companies outside of the U.S., the major concern is not hackers but the U.S. government. Under the Patriot Act, data housed on a U.S. server – where most global companies prefer to have their data warehoused – can be accessed or even seized by the government without a warning or a warrant. The government has issued a statement that such concerns are unwarranted, but many companies remain wary.”

As we’ve noted before, the size of the cloud customer is one of the key determinants of whether data is more or less secure in the cloud than on premises. Smaller companies generally enhance security when moving to the cloud with a SaaS vendor. This adds less value to large enterprises that have already optimized IT services.

So Happy New Year, everybody! I hope it is prosperous and satisfying. Please make a resolution to start leaving me comments so that I can finetune this blog to your interests.

In keeping with that, Season’s Greetings from everyone at the Cloud Accounting Institute! We will be taking time off for the holidays and you will not hear from us again until the beginning of the new year.  Come January, I will tell you about our plans for an awards program for cloud accounting project leaders. Make a New Year’s resolution to enter your project!