Connecting the Pieces
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Connecting the Pieces in the Chunkified World of Business Processes

March 14, 2012 | By | 8 Replies More

For those of us who make a living focused on desktop accounting software such QuickBooks, Peachtree, or any of the dozens of Windows-based accounting products, I see huge disruption, but also exciting opportunities on the horizon. As I look around at new innovations, new venture capital investments, and new successes in the market, I’m becoming more and more convinced that over the next few years there will be significant changes for those of us in the business of accounting software consulting (or teaching), bookkeeping, accounting, or tax preparation.

Driving my thinking around this topic are four simultaneously-growing trends that I believe will fundamentally change the way small business owners, bookkeepers, accountants, and even taxing agencies, will use technology in their everyday activities.

After reading this, you may conclude that some of these technology shifts are not altogether positive, and I am not suggesting that they represent a panacea. However, like many trends, they emerge regardless of their affect on any specific measurement, and therefore warrant our focus and understanding.

The four new trends that I see are:

  • Chunkification – Splitting up separate parts of the overall business management systems into discrete parts.
  • Zero Entry – Taking advantage of connections between the chunks using the Internet moves us closer to a zero-entry world, which dramatically changes the role of the bookkeeper.
  • Collaborative Accounting Services – Connecting accountants and clients to the same data, facilitates a much tighter relationship between clients and their accounting firm.
  • Mobile – Access to all information from a variety of mobile devices allows us to rethink possible, and developers are scrambling to capitalize on this new reality.

Let’s look closely at each of the trends:

Chunkification

In the past 30 years or so, the accounting software market has been dominated by large, all-in-one accounting products such as QuickBooks, Sage Peachtree, Microsoft Dynamics, Sage ERP Accpac, etc.

All of these products include General Ledger, AR, AP, Payroll, Inventory, and most of the functions needed by small and medium sized businesses. While these products were built to solve the horizontal needs of clients by providing basic features common to all businesses, most do not provide the vertical, industry-specific customizations needed by nearly every client.

The new crop of products and technologies, nearly all of which are cloud-based applications, are “chunkifying” those large systems into specific business processes to provide more specific functionality and verticalization. This is a double-edged sword. On the one hand it’s great because we can now find the best match for each business process for each client, but on the other hand, we now have to worry more about how each of the chunks will fit together into a unified accounting system.

Even with these new challenges, chunkification is compelling for accountants, clients and especially for software developers. With such broad adoption of the cloud and mobile devices, developers can now focus on deep functionality and integration that customers demand. And by focusing on smaller chunks, they can develop more profitable business models that allow them to continually improve, update, and customize their solutions to meet the evolving demands of the market. Clients gain incredible benefits from this chunkification because they can pick the best match for individual parts of their accounting system instead of having to compromise with the warts in some areas of whichever product they choose.

Some great examples of Chunkfication are:

  • Shopping carts and Web stores
  • Point of Sale software connected to back-end accounting systems
  • SmartVault (www.smartvault.com) – Document management in a secure online vault with links to accounting transactions, CRM records, etc.
  • Method CRM (www.methodintegration.com) – online CRM that synchronizes with QuickBooks

Zero Entry

For several years now, we’ve been using systems whereby customers and vendors can enter accounting data for us when they place orders on our web stores, or when they send us electronic invoices. Compared with our old world of faxes and paper documents (both sales orders and vendor invoices) in which data is manually entered by the bookkeeper, this is a significant leap ahead for efficiency, accuracy, and reduction in the cost of bookkeeping. This is the trend that is at the core of what I mean by “zero entry.”

The key to zero entry is that it moves us away from data entry and towards connecting business processes with the accounting system via software connections and data flows. We’ll realize the goal of zero data entry by connecting customer-entered data, vendor-entered data, employee-entered data and automated recurring entries that free the “bookkeeper” from entering data. Although we’ll never actually reach zero entry, the dramatic reduction of data entry from this trend is compelling, and revolutionary.

Several new products as well as new features within existing products are using this zero entry concept. Some examples are:

  • Xero (www.xero.com) – Online Accounting
  • Mint (www.mint.com) – Online Personal Finance
  • Downloadable Credit Card Transactions and Payments within QuickBooks
  • Bill.com’s ZEN (www.bill.com)  – electronic vendor invoices automatically populate into A/P
  • Copanion (www.copanion.com) – Tax document automation that scans and populates tax forms

Collaborative Accounting Services

Accounting Professionals also must focus on how to collaborate with and serve clients in ways that were simply impossible just a few years ago.

In this new world, cloud computing provides the perfect platform for both accountants and clients to work collaboratively on the same data at the same time from anywhere in the world. By centralizing the client’s data in the cloud, surrounded by robust security measures (both physical and network security), we can provide clients with the same features and capabilities they used to get from their premise-based systems, but in addition, we can work collaboratively with clients and manage their business information.

Examples of products/services:

  • QuickBooks Hosting – Several hosting companies provide QuickBooks hosting to allow accountants and clients to access the same, live data anytime, anywhere.
  • Cloud accounting products like Intacct, QuickBooks Online, Xero, Wave, and Outright.
  • Bill.com allows accountants to provide bill-paying and/or accounts receivable management services.
  • Online Payroll services such as QuickBooks Online Payroll, Surepayroll, and Payroll Relief all provide online payroll that allow accountants to prepare and manage payroll for clients.

Mobile

Mobile devices have become nearly ubiquitous among business owners and they allow both accountants and clients to access data from anywhere. This is an area that is expanding rapidly.

A few examples are:

The Payoff for You and Your Clients – Lego Mastery

Although the process of getting from today’s world to this new, cloud-based, collaborative world may be disruptive to your practice and to your existing clients, in the end the payoffs will be huge.

The key payoff is that by focusing less on teaching clients to enter data, and more on helping them implement zero data entry systems, everyone becomes more efficient. Your clients can focus more on growing and managing their business and you can move up the value chain and provide high-value business consulting services including business analytics, real-time dashboards, and management consulting services.

Think about what it takes to become a “Lego Master.” These masters can quickly identify the right Lego pieces from thousands of shapes, sizes, colors, and textures, and assemble them using the right connections in order to create the most complex and interesting structures. These skills are a perfect analogy for what we must develop to succeed with clients in the new world of cloud-based, chunkified accounting software. By combining the trends of chunkification and zero entry, the role of the bookkeeper will change in dramatic ways. I believe the bookkeeper role will change from being the expert on how to enter transactions efficiently to how to manage transactions and other “data flows” between “chunks” of the system.

We will still use all the knowledge and experience we acquired as accountants and bookkeepers, but now we’ll apply that knowledge, combined with expertise in various software chunks, to connect and integrate data for each client to create a customized, efficient, accounting system. Very much like fitting together different Lego parts into a complete Lego masterpiece.

Connecting the Pieces

The new world will demand that we all learn how to connect pieces, hence the name for this column. In future articles, I’ll bring specific examples and tips for success in helping clients build “connected” systems.

Please add your thoughts/comments below on how these concepts are driving your firm, your clients, and your successes or challenges with these new methods.

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Category: Connecting the Pieces, Expert's Corner, For Consultants/Accountants, Success Tips, Technology/Trends, Xero

About the Author ()

Doug Sleeter is a passionate leader of innovation and change in the small business accounting technology world. As a CPA firm veteran and former Apple Computer Evangelist, Doug has melded his two great passions (accounting and technology) to guide developers in the innovation of new products and to educate and lead accounting professionals who serve small businesses. Doug is best known for his expertise in QuickBooks as well as driving the adoption of online accounting and small business process solutions. In the early 1990s, Doug was a pioneer in developing the first QuickBooks seminars in the country and has since built the largest group of accounting software consultants in the small business accounting profession. Doug serves on several advisory boards for technology companies and has consulted with numerous industry leaders, including Intuit, Sage, Apple, and Adobe Systems. CPA Practice Advisor has recognized Doug as one of the "Top 25 Thought Leaders" in the accounting profession for the past several years and he has been named to Accounting Today's "Top 100 Most Influential People in Accounting" each year since 2008. Highly sought for his ability to engage and educate accounting professionals, Doug presents at various accounting events throughout the year, including those held by the AICPA and numerous state CPA societies. Doug also hosts the annual Accounting Solutions Conference, attended by hundreds of accounting professionals, industry leaders, and technology developers.

Comments (8)

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  1. My apologies to everyone (and Doug) – somehow this article became marked as “no comments allowed” – I’m not sure how that happened. I’ve fixed that now…

  2. Jim Savage-The QuickBooks Guy says:

    Great article Doug,
    The consultant that is sucessful will be the one that can master putting the pieces together. You don’t have to master all the pieces, but through building a small network of trusted associates, you should have all the tools at your disposal for anything someone can throw at you.

    There’s another tool I just stumbled across recently thaat looks pretty cool:
    InvoiceASAP-an Ipad/Iphone app http://www.invoiceasap.com

    Jim

  3. Doug Sleeter says:

    Thanks Jim. You are absolutely right. It will be a network of trusted associates that will help us all deliver the total solution. No single person can know how to deal with all the different “chunks,” but through the network of experts, they can be confident of helping clients across a very broad spectrum.

    Happily, you’re doing a lot in the eCommerce area, one that we desperately need better solutions for.

    In my next post about this, I’ll discuss why I think this trend towards chunkification is really just a swing of the pendulum, but the successful “chunk” vendors will, for good or bad, start building out features that will create the next generation of BIG players.

  4. Thanks for the article Doug – I see this everyday in my practice because my focus is integrating the “chunks.” It’s a challenge because clients are often looking for the one stop shop software solution for their operations and accounting systems and it just doesn’t exist. That said, some of the operation systems, although great for operations, are truly lacking when it comes to accounting. I’ve seen less than optimal accounting data coming from a “chunked” system where the ops and accounting are supposedly integrated.

    It’s the challenge of finding the best balance between the two. Regarding zero entry, I find that although clients are physically entering fewer transactions, it is more of a challenge to wrangle the various pieces – debit cards, credit cards, paypal, Bill Me Later, and the list goes on. I think that clients have less of a handle on what they are spending because it’s so easy to do it automatically.

    Just my two cents!

    • Andrea, it’s like my daughter and her checking account. She never balances it the “old school” way, she just looks at the online account to see if she has any money left or not. The data entry was done, but the management is not.

      You are right, the clients often don’t have a handle on things because they didn’t have to do the actual data entry work (or feel that they don’t have to). The job of the Accounting Professional is to set up a process for them so that these already-entered transactions can be brought in to QuickBooks the right way to minimize issues, and then perhaps to work with the client’s data to reconcile or adjust things if they can’t do it themselves.

      Then you are billing your time for the education process, and the management/analysis process, rather than for the bulk data entry.

  5. John Power says:

    For those working with QuickBooks in the US (or Reckon Accounts in Australia) looking for a “chunkified” integrated BI and Analytics solution go here http://www.sleeter.com/awesomeapps?13 first then follow the links to our site.

  6. Matt Paff says:

    Doug
    Interesting spin on things, but in my opinion “chunkification” is a fancy word referring to a trend that is neither new nor anything but a representation of the immaturity of entry level Cloud solutions in the business software space.
    Entry level and mid-market providers have relied on third party solutions to fill functionality gaps generally found in enterprise for many years. Not knowing the US market well (I’m an Aussie), I can only think Fishbowl and QuickBooks as an example in your terms. Let’s be frank, chunkification is really driven by functionality gaps in core systems. In the fullness of time, if enough clients genuinely can use the functionality of third party solutions to sustain those third parties, then acquisition or development is justified from the core provider. Think Xero who resisted payroll at first and its acquisition of paycycle. Or Xero relying on stock control via third parties such as Unleashed, now building out their own functionality.
    All-in-one is far from a thing of the past, its a thing of the future as far as entry level cloud solutions, a thing of present with desktop mid market and enterprise solutions.
    Cloud, moreover open APIs, has just simplified and opened up the opportunities for third party, sorry chunkification, providers. Whilst cloud is catching up with desktop functionality, and new connected technologies increase possibilities, chunkification will be prolific, but this is a temporary category or a “bubble” that will settle to a realistic addon market, at best…in my humble, Aussie opinion…

    • I’m not entirely sure that I agree with that, Matt, but thank you for your comments. I think that one difference we have now versus what we had in the past is an improvement in how easy it is to integrate products (or data). I worked with EDI as a data exchange method back in the 80′s, and it was painful to do. Now we see that it is easier to connect the pieces than it was in those days.

      Certainly there will be an increase in vertically integrated monolithic products, but those tend to limit your options as a user.

      Let’s look at Intuit and QuickBooks Online as an example, as I’m more familiar with its direction than I am with Xero. The product has limited scope, it is simpler than the desktop product. If you want to use payroll or payment solutions, then at this time you are limited to an Intuit solution, as Intuit integrates more and more “features” here. However, they have also stated that they don’t intend to cover EVERY option that people want. They are working with partners to expand into areas that they covered themselves in the desktop environment. Do you want Point of Sale with QBO? Intuit clearly stated that they won’t move their desktop POS system to the cloud, instead they are partnering with Square to provide that.

      Beyond partnerships like that, the “digital plumping” tools that are out there that allow developers, and even users, to create their own “connections” between disparate products, are a big improvement over what we have had in the past.

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