Cooper Mann Consulting

January 23, 2013

Licensing and Virtualization: Changes to SPLA May Impact Provider Cost Models

In many application hosting environments, machine and operating system virtualization provide the only realistic means for delivering services for applications which were never designed for high-volume multitenant implementation. In these environments, providers rely upon technologies from Microsoft, VMWare, Citrix and Parallels to provide containment of application environments, creating frameworks where single-tenant applications and hosted infrastructure may be affordably offered to subscribing business customers. Because many of the applications being hosted today do not conform to the various standards which exist for high-volume and multitenant delivery, providers have taken what we’ll call “creative” approaches to virtualized application and environment implementations. Under certain licensing models, these approaches may be sustainable for a period of time. However, recent adjustments to core licensing components and pricing from key providers, Microsoft in particular, may significantly impact the cost of service delivery for providers with less than optimized infrastructure.

One of the notable changes in the Microsoft SPLA (Service Provider License Agreement) is the treatment of Windows and RDS users in the “desktop as a service” model. In previous editions of the SPLA, as was offered with 2008/R2 licensing and prior, providers could select from two different models when implementing service: the SAL-only (server access license) model, which applies on a per concurrent user basis to the infrastructure, or the PL (processor license) model, which applied to the processors installed in systems with Windows operating system and SQL server instances.

For high-density and multitenant environments, the per-processor approach is far more cost efficient to implement, as it allows the provider to create a scale economy with the infrastructure, leveraging hardware and resources across many subscribing tenants. Reducing the cost model to a base infrastructure rate also introduced predictability and stability in recurring costs for the provider, even as subscriber numbers and subscription revenues increase.

The problem reveals itself with the providers deploying “not optimal” infrastructure, whether by design or due to legacy application requirements. These providers rely upon the per-user pricing models to support access and usage to the infrastructure, largely due to the fact that the infrastructure has grown “out” and not “up”. Deploying more servers and more VM instances allowed these providers to present legacy applications as part of a managed application service model. While the management of the infrastructure is greatly complicated with this approach, it is often the only means to addressing the needs of popular “noncompliant” applications (such as Intuit QuickBooks and Sage 50). With the SPLA changes introduced for Windows 2012, these service providers may be in a bit of a tough spot. You see, the per-user option for licensing Windows server access is gone, and only the per-processor licensing model remains.

Microsoft is wisely addressing the needs of the market which is demanding more capability and affordability in terms of cloud-based access to applications. These pricing adjustments are necessary to support the needs of service providers who are increasingly stretching their infrastructure investments to deliver higher user density at a lower per-user cost. Further, application developers seeking new markets and delivery models are taking advantage of these virtualization approaches, creating hybrid and hosted solution models around their legacy application products. The licensing approaches which support these higher density application deliveries introduce options for developers to optimize their applications for the hosted model rather than dealing with immediate comprehensive re-development (which isn’t an option for many ISVs – independent software vendors).

The IT world is forging ahead with cloud computing, high-capacity infrastructure, and heavily virtualized environments supporting larger numbers of users. Software developers must take heed, and embrace these deployment models (or at least adjust to the point of supporting them) in order to have a chance at keeping pace in the anytime, anywhere world of today’s business technology. This means working collaboratively with hosting service and infrastructure providers, crafting services which have the required scalability and incorporating a deployment model agile enough to take advantage of infrastructure licensing benefits as they are introduced.

What was a serviceable pricing structure yesterday may be an anchor holding your profitability down tomorrow. Service providers – make sure you’re keeping a close eye on licensing requirements and delivery cost models, and consider that building up your infrastructure capability is often more cost efficient than building out.

Make sense?

BuildingUP.biz | CooperMann.com

Licensing for Hosted Application Services: Why it costs what it costs

read more about the confusion over hosted licensing on The Progressive Accountant http://www.theprogressiveaccountant.com/tech-tips/confusion-over-hosted-licensing.html

January 22, 2013June 5, 2015

Why is asset management important to a business?

Knowing how efficiently you manage and use business assets to drive revenues and generate earnings is essential to understanding how to increase business value. While various dashboard reporting tools and solutions designed to monitor receivables, payables and cash flow are helpful in addressing daily decision-making needs, the question asked most frequently by business owners is actually one of overall business value and how to increase it.

Business value is generating sustainable cash flow. If you run a highly efficient business, the more top-line growth you deliver, the more cash flow you enjoy. For capital-intensive businesses (either through the need for capital equipment or working capital), growth can actually lower your cash flow and diminish your business value. To understand which side of the equation your client resides, accounting professionals will often look at the return on total assets calculated over time, dividing the operating income for each period from the P&L by the appropriate period values of total assets from the balance sheet. The resulting metric describes how efficiently assets are applied to creating earnings.

Understanding the return on total assets helps business owners understand whether or not the business has to spend more money in order to grow the same volume of earnings. A higher number indicates the business uses its assets efficiently and effectively to drive revenue, while a lower number demonstrates a higher cost of growth. Accountants and business advisers should be monitoring this metric for their clients, helping to identify which path to profitability and growth makes the most sense for that particular business.

The numbers will vary with different business types, so comparing client performance to others in the same industry can provide a great deal of strategic insight. The “return trend” may also be benchmarked against the competition and peer businesses. If the business is utilizing assets more efficiently than competitors, it can represent a significant business advantage.

Accounting professionals need to take a proactive approach to working with clients, and make use of the historical information they’ve developed to deliver business insight and intelligence to help them more profitably move forward. While every business needs a tax return completed, they also need help understanding how to increase profitability and overall business value. Knowing that there are several ways a business can increase profitability, you can help your client understand that driving more sales and improving margins is only part of the story. Businesses can also improve cash flow and their return on total assets metrics by decreasing the base of business assets, disposing of excess equipment, or simply by doing more with less. By doing this, business owners will drive up their business value and create more options for their future.

Make Sense?
J

Special thanks to Matt Ankrum of BodeTree for helping me get this right. We don’t all have the years of experience or expertise to “just know” what the right answer is, and sometimes we know the data is telling us something new, but we’re not sure what it means or what to do about it. BodeTree is the tool advisors and consultants can use to not only identify items that need more attention, but to understand what actions to take to make the necessary adjustment or improvement.

January 18, 2013

QuickBooks Accountant Niche Practice Specialties: Tools for Accountants Working With Contractors

QuickBooks Niche Practice Specialties:

Tools for Accountants Working With Contractors

For accounting and bookkeeping in a small business, Intuit QuickBooks is still the “go to” solution. QuickBooks has functionality needed by most businesses, and some editions of QuickBooks offer more in-depth process support for specific industries and business types. Accountants and bookkeepers working with QuickBooks may rely on essential bookkeeping and reporting features to get basic accounting done, but supporting the processes and offering the functionality business owners and managers need – processes and functions which are specific to the business type and how it operates – is essential to developing a solid business management and reporting system.

Accounting and bookkeeping professionals can be instrumental in developing these systems for their clients, and can use the data collected within these solutions to provide more detailed reporting and actionable advice relating to business activities and trends. Creating a niche practice and specialty means knowing how to address the needs of the niche client and having the tools to make it happen, so accounting professionals working with QuickBooks clients should seek to leverage the Intuit partner network of developers and QuickBooks-connected solutions and extensions to orient their services to the needs of specific industries and client business types.

The most obvious example of applying an industry-specific orientation of QuickBooks is to use the Premier Industry offering of QuickBooks desktop edition. With the Premier Industry editions, additional functionality and reporting for specific industries is addressed directly within the application. Industry editions exist for non-profit, manufacturing, and contractors, among others. A lot of practitioners have met the additional needs of their business clients by using these industry-specific editions.

With QuickBooks Premier Contractor edition, for example, businesses can go beyond general accounting and address specific needs of a contractor or construction business, including tracking and reporting on job costs and profitability, handling estimates and change orders, and billing clients by time and materials, job phase, or percentage completion. Accountants and bookkeepers working with construction businesses can help their clients more accurately and efficiently address the unique requirements of this type of business by offering the user functionality which is relevant to their daily tasks, such as making deposits, entering and tracking bills, and reporting on the progress and status of jobs.

Contractors may also have unique payroll reporting requirements, most of which are not adequately addressed within the QuickBooks solution directly. It is in this area of compliance and complex reporting where the accounting professional may be of particular value, ensuring that these additional business requirements are met and that the data is complete, accurate and timely.

By utilizing the Intuit partner-developed application from Sunburst Software Solutions to extend the functionality of QuickBooks, contractors and the accountants who support them are able to create comprehensive and accurate prevailing wage payroll reports, including the most frequently required WH-347 Payroll Certification Form and the WH-348 Statement of Compliance Form. Further, the solution also provides reporting for nearly all municipal, state, and federal paper forms required in each state. The solution even includes electronic certified payroll submission, compatible with LCPtracker, Hill International {formerly TRS Consultants}, Elation Systems, and other agencies.

QuickBooks has the framework for holding information about customers and jobs, tracks estimates, progress invoicing from current accounts receivable and work complete, and a means to accurately record and track retainage payable and/or receivable. To complete the requirement for AIA billing and other construction business-specific needs, Sunburst CAPS application for QuickBooks holds additional project information, architect information, retainage method data, and billing forms to print in linked records. CAPS also provides a mechanism for percentage of completion calculations with full accounting for stored materials. The information is then merged together from both programs to generate the final billings – ready for signature, notarization, and mailing.

Addressing this additional level of complexity and compliance for contractors is a critical element, and an essential benefit, of working with accounting professionals who understand the needs of construction businesses and employ the tools and applications to meet those needs well. It is through specialization, and knowing how to address the unique requirements of (and to capitalize on the opportunities presented in) the client industry and business, that accountants and bookkeepers will demonstrate and retain their value in today’s challenging economy.

Make Sense?

Read more about using QuickBooks to serve a niche or specialty practice – Not-For-Profit and Retail
Read more about the pressure on accounting professionals to deliver more value and intelligence to their client businesses

January 14, 2013October 28, 2015

Re-defining the role of the accountant, or going back to the good old days?

I grew up in a small town in Oregon where my parents ran a “business accounting office”. Many of the businesses in and around town were my dad’s clients, and we all got to know each other pretty well. Dad, you see, wasn’t simply the accountant, and the people working for him weren’t just bookkeepers. Dad was the business advisor, purchasing negotiator, collections agent, and anything else the client needed that he could provide. He fought for lower worker’s compensation insurance rates, got better prices on truck tires, and in general helped his clients with just about every aspect of running their businesses, including getting more customers and managing growth.

I had always believed that this approach, a consultative approach where the professional was intimately familiar with the business and proactively worked from inside the organization, was what all accounting professionals did. This proved to not necessarily be the case. Over the years, I have found that many accounting professionals focus primarily on the historic reporting of activities in the business, rather than actively helping to improve client business operations and performance on a daily basis.

According to one source, describing the differences between a CFO and an accountant: “CFOs are focused on working inside the business helping it generate wealth – ensuring proper capitalization, fostering the right banking relationships, addressing compliance issues – focusing on the company as a whole. Often CPAs tend to be more focused on specific tasks. Is the year-end audit done? Is the tax return done? …While both are vital to a business, a distinction we see is that the CPA’s dominant focus is historical – looking back to prepare tax returns and financial statements. The CFO, though, needs to be a forward-looking, integral part of the management team”.

It has become a reality that many accounting professionals are somewhat disconnected from their clients, a result perhaps of removing themselves from daily bookkeeping and other tasks. Recognizing the disconnect, many firms are now taking steps towards rebuilding those intimate client relationships by offering services which address more operational and strategic aspects of the business. These firms are offering “CFO Services” to their clients in addition to the standard offerings of financial statement and tax preparation. They have recognized the need become closer to the client business, delving deeper into the intricacies of the operation in order to find areas where improvements may be made and necessary controls instituted.

Accounting professionals seeking to increase the value of the services offered to clients should give strong consideration to what the client recognizes as valuable. Historic reporting is necessary, but finding ways to fund budgets, controlling expenses, helping to guide cash investments and taking steps to improve profitability are how a consultative accounting professional delivers real value to the client, building up the basis for long-lived and mutually beneficial business relationships like the ones my father once built.

Make Sense?

Joanie Mann Bunny Feet J

Small Business Owner to Accountant: Make Accounting Valuable to ME

January 11, 2013

Trends Impacting Every Business | Forbes.com

You think good accounting isn’t a big factor in getting business credit? Consider this tidbit from Intuit’s CEO Brad Smith, from a recent article on Forbes.com:

Two-thirds of Intuit’s QuickBooks customers were declined a loan due to poor FICO scores and other credit measurements. In the Loan Finder trial, a business could opt-in to allow banks to use QuickBooks data to evaluate if a prospect was a credit risk. As a result of this additional data, the banks provided several hundred new loans with an average of $10 million dollars.

Accounting professionals… isn’t this something you could be helping your clients with?

Read more about helping make small businesses bankable

Make Sense?

Read more about how accountants need business intelligence, too
Read more about how there’s no fear and loathing in accounting
Read more about the pressure on accountants to deliver more value and intelligence to their clients
Read more about Data Warriors: accounting in the cloud

January 10, 2013

Using Structured Workflow to Manage Offline Clients | Intuit Accountants News Central

The demand today requires that accounting professionals be more attentive and, yes, aggressive, in terms of “attacking” a regular flow of processing client information rather than batching it at period end. This drives a great need to structure and organize the work, and workflow, so that the repetitive and regularly performed processes may be streamlined and made easier to manage on an ongoing regular basis. It is no longer good enough to wait for clients to deliver the information and request the resultant reports. We must proactively request and gather the required information for processing, especially with offline clients, in order to get the work done more frequently.

Read the entire article at Intuit Accountants News Central