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A Serious Track Record
IT Inside Out started hosting Sage Line 50 five years ago and this month it's three years since we launched Online50. That's a serious track record of service, and as the world becomes a harsher place to do business in you need to know you have the right partners in place.
This month we take a look at churn, customer loyalty, and how online accounting gives you an edge. We also report on a real remote control story of a North East accountant who's taken a firm grip of a client's accounting system - on the Isle of Wight.
As always, we want to hear from people who want to make an impact in the market for accountancy services: call us on 0800 195 0835 or ask us a specific question online here.
Case Study: Systemising for Growth in the Property Sector
Stokoe Rodger, an Online 50 partner in the North-East, are using online accounting with their client, Christopher Scott Group, to help the client systemise their accounts, and realise their ambitions for growth.
As a demonstration of the power of online accounting, not only are Stokoe Rodger in control of the client’s accounts system, they’re in control from 400 miles away as the client is based on the Isle of Wight.
Christopher Scott Group is a collection of property-related businesses which grew out a chartered surveying practice. As with any business which grows rapidly over a short period of time, the reporting and accounting systems don’t always keep pace. If an accountant isn’t involved from the start, not only does the statutory reporting become more difficult than needs be, but putting in place a professionally designed system retrospectively can also be problematic.
The solution adopted by Stokoe Rodger was to get control of the clients existing accounts by moving Christopher Scott onto Online50. Ian Christer, of Stokoe Rodger comments: “By putting the client online we instantly had a real-time view of their accounts data – we got an immediate picture of where potential trouble spots lay because of late postings of transactions and the accounts to which certain transactions were being posted to.”
Ian goes on to say: “However, simply seeing what needed to be done was only the start. The client knew they had to departmentalise to get meaningful reporting information to allow them in turn to make more informed investment decisions. We helped them do so, working with a newly appointed bookkeeper to devise the procedures required – all on the Isle of Wight whilst we were in Hexham.”
Going forward, Ian comments that Christopher Scott now has a solid platform for growth: “We recently helped the client set up their next venture, an LLP. We were able to design the COA as we desired online, then simply gave the client a new log-in to an accounts system which we had set-up and have ongoing control over.”
Ian’s final words?: “A company which wants to invest in professional advice from their accountant will get more from their investment if they collaborate with the accountant online. In today’s world, we don’t have the luxury of guessing at the facts, the client needs us to know how their business is running and online accounting is an essential tool for being able to do so”.
Why Worry About Churn?
If you’re in certain business service sectors you’ll know all about churn – the measurement of the proportion of your customer base within a set reporting period which terminates their relationship with you. In sectors which suffer from high levels of churn, differentiation in service levels receives a high level of attention – as merely to stand still the players have to run very hard indeed. As an illustration of how dramatic this can be, we’ve used figures from the telecoms sector, where churn is measured and publicly reported on an ongoing basis. By June 2006 Vodafone had lost 1 in 5 of the contract customers it had in June 2005 – which means that to stand still it had to recruit 1,200,000 customers from other networks.
Telecoms is not accounting – it’s easy to change telecoms provider, and unlikely that Vodafone has a stronger personal relationship with a client than an accountant would. The churn figure for the accountants we’ve surveyed ranges from 1% to 10% - as expected lower than the levels seen in telecoms. But we’ve also surveyed banking professionals, who arguably enjoy a greater hold over their corporate clients than accountants because of the paperwork involved in switching – and here too we were given customer churn figures below 10%. So the implication is that churn in accountancy should be higher than in banking, but probably not as high for a service with easy switching such as telecoms.
Those are the figures, but what’s the attitude of UK accountants to churn in their sector? Research by Joanne Edwards, who runs accountancy marketing consultancy, JE Business Consulting, indicates that around 70% of the reasons for a client leaving an accountant are outside the accountant’s control: mainly cessation of trading.
Attitudes we found ranged from intolerance of churn to “laissez-faire” – perhaps engendered by that high number of leavers outside the accountant’s control.
But in accountancy services, as in any other business sector, complacency is fatal. A practice which can reduce its churn below the average will simply grow by absorbing clients churning off other practices. But if a proactive practice can at the same time improve the service/price combination on offer to clients in the marketplace, it can win clients even faster. One way to achieve this is by offering online accounting - here’s how it can help:
- Service: Online accounting allows collaborative working without a physical presence on site with the client. The ability to take control of the client’s screen and mouse (see the side-panel article on Screen2Screen) means that an online accountant can now literally lend a helping hand to their client, massively increasing the level of service available to businesses.
- Price: Online accounting is also a gateway to qualified staff offshore, who are being used in increasing numbers by UK accountants. With costs savings of up to 80% being offered to UK accountants by certain offshorers, fee erosion is inevitable.
To give the numbers at the start of the article impact, if the accountancy service market doesn’t change, it would take 7 years for a typical practice to lose a quarter of its customers through natural wastage. However small changes in the churn figure, have a big effect on customer loss because of compounding. If the same churn figure seen by Vodafone in the UK were to apply to an accountancy practice, the practice would lose a quarter of its customers in only 16 months.
If you’re not offering online accounting to your clients, but want to know how to do so, please call us on 0800 195 0835. If you think that service levels and fees won’t be changing in the future, and that churn is an irrelevant measurement please call us anyway – we want to find out what you think.
ITIO Sets the Standard for the Fifth Year in a Row
This is the fifth year which IT Inside Out (“ITIO”) has hosted Sage Line50 - and this month sees the third anniversary of the launch of the full Online50 service - we had a two-year commercial pilot period from April 2001 to October 2003.
The Online50 concept was born from a desire to allow accountants and their clients to work more closely together. During the pilot we operated a live service for real businesses on a daily basis, proving the concepts of online collaboration. ITIO has left the pilot phase well behind – under the Online50 brand we offer a proven, reliable hosted Sage software service for the mass-market. Top-15 firms such as Tenon, Vantis, Mazars and Haines Watts have all trusted us with the safety of their client’s data.
As usage of the service has grown the technical platform has grown with it. We launched with two ASP Servers, one as a ‘master’ and the second as a backup. We quickly outgrew the limitations of this architecture and have built a flexible, scalable cluster that allows us to add capacity on demand. We host our equipment in two “Tier 1” locations – connected to the internet by four different providers. As we continue to upgrade and expand the platform to cope with the increasing capacity our partners benefit from access to the greatest possible economies of scale.
But it’s not just about hardware - as newer versions of Line 50 have been released these have been added to the choice on offer – partners can now work with client data from v8 to v12, with the 2007 version currently available for partners to test before adopting. We offer Sage Payroll to allow accountants to run client accounts and payroll in parallel. We’ve added Microsoft Office to empower Excel and Outlook integration. We can offer an optional support contract for Sage software and we also offer a number of Sage Additions - and of course we continue working on a range of other value added software.
Quite simply we’ve made Line 50 work online – and we've done it legally. Users of our service are correctly licensed for all vendors' software - not just the application software, but, under Microsoft's SPLA programme as Gold Certified Partners, also for the necessary Microsoft components to make the system function. With accountants providing this service to their clients the assurance of correct licensing is of fundamental importance.
ITIO’s achievements have been recognized by the industry with a number of awards – we’re currently finalists for the third year in a row in the Accountancy Age Awards. As we ready ourselves for the next five years, and a changing accountancy services market, we’re confident we’ll remain partners of choice for accountants and their clients.
