Responding to the VAT increase: the cloud v on-premise scorecard

by admin on January 4, 2011

in Cloud Computing/SaaS

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The first day of full work for many people is accompanied by an increase in the standard rate of VAT. What better way to start the New Year? If you’re a Sage Invoicing user for example then it might not be the easiest of experiences. According to their instructions YOU have to make the changes. The pattern is repeated for all Sage on-premise applications. In fairness to the company, they do provide comprehensive instructions. They are at pains to say that what you do with the changes is down to you. However, what is not clear to me is when those instructions were included on the website. AccountingWeb track Sage more closely than I but this was what they Tweeted this morning:

[blackbirdpie url="http://twitter.com/AccountingWEBuk/status/22222220252160000"]

I often poke fun at AW for being late on stories but I can’t imagine they would have been particularly tardy on this one. Looking at its website, I see AW has plenty of good stuff on the topic.

On the other hand, the SaaS/cloud vendors were far more pro-active. They have to be. Back on 3rd December, Kashflow put out a blog post detailing how they’ve automated the process. Customers have nothing to do but I’m not convinced they have provided the full answer. This morning, FreeAgent put out a Tweet saying:

[blackbirdpie url="http://twitter.com/freeagent/status/22227203634757632"]

They provide a detailed explanation that helps you understand the changes and how you should respond to specific situations.

e-conomic has provided a detailed explanation but I find it worrying they require the user to walk through changes. There is however a useful video showing you how code changes are made.

Xero issued a blog post mid December talking about the pieces they automate and the things customers will need to do for themselves. Again, they provide a reasonable amount of detail but no direct advice that ties back to HMRC. Interestingly, they also provide advice for developers that have created Xero add-ins that might be impacted by the changes.

Billing solutions like Blinksale leave you to deal with the problem. This is not untypical. These are narrow range solutions that have global appeal but which cannot realistically handle all the tax rates that might exist among their customer groups. At least not yet. Freshbooks however does provide a reasonable guide to getting over the basics.

Lessons and benefits

  • What you should be discerning by now is that theSaaS/cloud players are going a lot further than on-premise vendors in supporting the change. The fact some have automated the change is an example of the way SaaS/cloud vendors can go further than the on-premise vendors who simply cannot automate handling these ‘legs and regs’ issues. Viewed objectively, the SaaS/cloud vendors provide a clear benefit.
  • If FreeAgent is an example of what the future holds then it is easy to see how they are straying into professional advisory territory. If you are a professional advising on this topic (and who isn’t as of today?) then you might want to think about the broader implications for your business model. Xero’s advisory to developers is interesting and raises an issue that is not going away simply because we have services operating on the internet.
  • The extension and expansion of services through the addition of third party services is a great example of how SaaS/cloud can offer a platform through which business will, in the long term, be able to tailor solutions to meet their needs. From my observations, there is massive potential upside for end user organizations. This is still in the early stages of being worked out but…it still leaves the integration problem when there are mandatory legislative changes.

Selection considerations

If you are looking at SaaS/cloud, then asking the MAIN service provider how they cope with this situation should be part of your evaluation process. You should also ask vendors how they ring fence their code so that any underlying structural changes they make impact the work that third parties might do. This will help you assess the risk of errors occurring when changes are made.

Comments on this entry are closed.

Karin H (=Hermans) January 4, 2011 at 10:46 am

Kashflow gets my vote! Almost everything automagically changed from 17.5 to 20% overnight without me having to do a thing (hardly do a thing).

Karin H

Karin H (=Hermans) January 4, 2011 at 10:46 am

Kashflow gets my vote! Almost everything automagically changed from 17.5 to 20% overnight without me having to do a thing (hardly do a thing).

Karin H

Karin H (=Hermans) January 4, 2011 at 10:46 am

Kashflow gets my vote! Almost everything automagically changed from 17.5 to 20% overnight without me having to do a thing (hardly do a thing).

Karin H

Guy Letts January 4, 2011 at 12:49 pm

Just to set the record straight…I viewed the instructions for the VAT changes on the public Sage website on 1st December. It’s not surprising that they were re-tweeted today but I don’t think there’s a point of differentiation here between SaaS and Sage concerning efforts on advance information.

There is of course a clear point of differentiation on who applies the change, and no question that for most that’s easier with SaaS.

What’s interesting in your comparison is the range of styles to presenting the information even between SaaS vendors. From the user’s point of view I applaud those who not only make the change for you, but also ‘show their working’ so that any customers or professionals with edge cases can work out how to handle them.

And your final point about third parties is very well made – as SaaS evolves to accommodate more integration and customisation, as it must to meet the needs of the wider market and the higher end, that’s going to be a key consideration.

[Disclosure: Used to work for Sage.]

dahowlett January 4, 2011 at 3:54 pm

Thanks for clarifying.

Edge case issues are always the ones needing attention so yes, it was good to see FreeAgent for example picking up the cudgels. On their blog they were responding to accountant queries on the topic which is also good stuff.

Guy Letts January 4, 2011 at 12:49 pm

Just to set the record straight…I viewed the instructions for the VAT changes on the public Sage website on 1st December. It’s not surprising that they were re-tweeted today but I don’t think there’s a point of differentiation here between SaaS and Sage concerning efforts on advance information.

There is of course a clear point of differentiation on who applies the change, and no question that for most that’s easier with SaaS.

What’s interesting in your comparison is the range of styles to presenting the information even between SaaS vendors. From the user’s point of view I applaud those who not only make the change for you, but also ‘show their working’ so that any customers or professionals with edge cases can work out how to handle them.

And your final point about third parties is very well made – as SaaS evolves to accommodate more integration and customisation, as it must to meet the needs of the wider market and the higher end, that’s going to be a key consideration.

[Disclosure: Used to work for Sage.]

dahowlett January 4, 2011 at 3:54 pm

Thanks for clarifying.

Edge case issues are always the ones needing attention so yes, it was good to see FreeAgent for example picking up the cudgels. On their blog they were responding to accountant queries on the topic which is also good stuff.

Rfmessik January 4, 2011 at 1:10 pm

SaaS applications make the change very easy. I dont believe the process can be completely automated, however, as much will depend on when the individual user has completed raising their December invoices for example – if you are still sending them out now you don’t want the new rate to apply. The key is how easy the change is. E-conomic, for example, takes a matter of minutes.

dahowlett January 4, 2011 at 3:53 pm

Richard – you miss the point. Much CAN and HAS been automated by at least 2 vendors where e-conomic hasn’t done any of that. It looks more like an on-premise way of handling the issue.

Rfmessik January 4, 2011 at 1:10 pm

SaaS applications make the change very easy. I dont believe the process can be completely automated, however, as much will depend on when the individual user has completed raising their December invoices for example – if you are still sending them out now you don’t want the new rate to apply. The key is how easy the change is. E-conomic, for example, takes a matter of minutes.

dahowlett January 4, 2011 at 3:53 pm

Richard – you miss the point. Much CAN and HAS been automated by at least 2 vendors where e-conomic hasn’t done any of that. It looks more like an on-premise way of handling the issue.

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