Who owns your accounting system?

Accounting’s dirty little secretWho owns your accounting software

Online accounting systems provide a number of advantages to you, the small business owner; however, these advantages can come at a cost.

A new model being adopted by some accounting software providers is a subscription-based model where you do not actually own your accounting software. Instead, you pay a monthly subscription to access the software. This model has some real benefits for small business owners. It means that you

  • Don’t have host your software on expensive servers,
  • Don’t have to continually upgrade your software,
  • Don’t have to back up your data,
  • Can just pay for the parts of the system that you use,
  • Can easily link your accounting data to other systems, such as email, job management and inventory systems, etc.,
  • Can have you bank account data feed automatically into your accounting system,
  • Your staff and your Accountant/Bookkeepers can access your accounts from anywhere at any time, and
  • Many more benefits.

Companies like Xero (one of our favourites) have extended this model further. They have engaged the Accounting community as a virtual sales and administration team. Accountants, and bookkeepers, sell Xero products to their clients. The Accountant owns your subscription and bills you each month on behalf of Xero. In return for taking on the sales and payment processing role Xero pays the Accountant an ongoing commission.

So, what’s the problem with not owning your subscription?

If your Accountant owns your subscription they can make it difficult to move to another Accountant, or to access your accounts. From the Accountant’s point of view this arrangement works well. If you do not pay your bill, they have control of your accounts and can prevent you from accessing them until you pay any outstanding invoices.

Giving up control of your Accounting data and your Accountant receiving a monthly commission is fine, if you are aware that this is the case, but most Accountants do not make this clear to their clients. We have a number of clients who have been shocked to learn that their previous Accountant was receiving a commission on products recommended to them. They, rightly so, have questioned if the most appropriate accounting package has been recommended to them, or was it just the one that paid that highest commission?

Some clients have also been concerned that they are paying more than they should be. However, there is little to be concerned with on this front. You can easily check your monthly software charge against what you would expect to pay if you went to the software provider directly – just check the software provider’s web site.

What is the work around to protect your data?

If you have not already chosen your accounting software

  • Subscribe to the software yourself, so that you own the subscription. From within the software you can then ‘invite’ your Accountant to use your subscription.

If you already have a subscription through your Accountant (or Bookkeeper)

  • Ask them if they receive a commission for your software.
  • Ask them why they consider this software to be the best fit for your business.
  • Visit the software provider’s website and check what your subscription should cost. If you are paying more, ask your Accountant why.
  • If you object to your Accountant controlling your accounts, you can ask them to transfer the subscription to you. This is a simple process, but the subscriber (your Accountant) has to make this request to the software provider. You cannot do this yourself, as you do not own the subscription.

How does All Sorted manage this issue for our clients?

We believe that:

  • Any commission payments should be disclosed to the client (and possibly rebated)
  • Clients should have control of their own data.
  • Software selection should be made based on the needs of our clients, not on the level of commission payable. Rebating commissions eliminates this conflict of interest.

 

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