Cloud Accounting: A Modern Day Gold Rush for App Developers

Over the past five years, the accounting world has seen an explosion of innovative, cloud-based apps. We are seeing tools that help with bill pay, time tracking, cash flow management, inventory tracking, payroll, and more—across every industry and vertical.

With Xero’s recent $80m acquisition of Hubdoc—a document fetching app for accountants and bookkeepers—it’s becoming increasingly clear that there is a lot of money on the table for app developers playing their cards right. More promisingly, this might only be the tip of the iceberg.

In 2012, the Australia/New Zealand based cloud software company Xero entered the US market. Intuit, who were keeping a close watch on Xero’s explosive growth Down Under, quickly responded with their own online accounting solution: Quickbooks Online (QBO). Despite Intuit’s dominance in the US market (due mostly in part to Americans’ familiarity with their products), Xero continues to make inroads Stateside. This power struggle came to a head in late 2017 when Intuit acquired T-Sheets, a popular time tracking tool that seamlessly integrates with Xero and QBO, for a cool $340m.

Xero has responded with acquisitions and strategic partnerships of their own. Last month was the Company’s aforementioned purchase of Hubdoc. Days before, Xero announced a strategic partnership with Gusto, an innovative payroll software. This essentially means Xero will be throwing their own proprietary payroll software to the curb. Before the dust had even settled on the Gusto partnership, there was an announcement that Gusto had received $140m in funding. It’s clear that investors are seeing immense opportunity in online accounting apps, and with Xero and QBO just focusing on their core products, the app marketplace is ripe for innovation. In other words, expect more acquisitions of complementary apps in the near future.

So how do app developers looking for a future pay-out become the next T-sheets or Hubdoc?

For new, up-and-coming apps, clearly having the ability to integrate and/or partner with services like Xero and QBO can be highly advantageous—and considering Xero has an open API (completely free to connect), why not start there. Technical founders who don’t have an accountant on their team should consider setting up some type of advisory council of accountants they can consult with on a regular basis. The advisory council can help determine what aspects of a product will and won’t appeal to accountants, as well as ensure the software integration is optimal.

Along the same vein, sales strategy should also center on developing relationships with accountants. As an accountant and trusted advisor, my clients come to me for advice on what tools are the best for them. Before I feel confident recommending a new app, I need to first make sure that it will both benefit my client as well as make my ability to service them more efficient and cohesive. Since clients put such heavy weight on our advice, it’s significantly more productive for apps to maintain strong relationships with accountants, as opposed to spreading a sales team thin and trying to work with as many businesses (end users) as possible.

From a marketing perspective, apps need to make sure that the value proposition of the product is clearly stated. The competition is getting thicker every day and for consumers, it’s easy for us to get “app overload.” When we come to your website, we want to know what your product does and why it will help us and our clients within 15 seconds. Make sure your message is crystal clear; this could make or break your product’s ability to succeed.

With so much innovation and investment in accounting-related services, it’s certainly an exciting time for our industry. Only time will tell who the next big app success story is going to be!

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Nikole Mackenzie is the owner of Momentum Accounting. Momentum Accounting provides outsourced bookkeeping, controller/CFO services and accounting technology support to small businesses and high net-worth individuals. To find out more or to get in contact with Nikole, please visit mometnumcpa.com.