Cloud Accounting Practice Management Xero

How Do I Build a Cloud Accounting Firm?

Written by Patti Scharf

Cloud Accounting FirmAt Solutions14 this past month, I was interested to learn that our community has finally started to embrace cloud technology as a not-so controversial method of delivering services.  People are finally starting to understand that having their information on a cloud server and protected with redundant backups and armed guards is preferable to keeping data on your corruptible c:\ drive with poor backups.  I’m really happy to hear that.

Now I think that the conversation is turning away from “should I” or “shouldn’t I” be in the cloud and turning instead toward “how do I do it?”

My husband, Scott Scharf, and I founded a completely virtual cloud accounting firm just over three years ago.  We constantly receive questions about the services we provide (i.e, what the heck is cloud accounting anyway?), the tools we use, and how we provide our services.

Why Cloud?

As I alluded to before, people are slowly starting to understand that as long as you have a decent internet connection, you are able to work anytime, anywhere and that data is safely stored and backed up and accessible by you, your colleagues, and your stakeholders.  That’s awesome, and it’s a game changer in being able to effectively provide services to your clients.  This is likely not the first (or tenth) time you’ve heard this.

What Tools?

This is the question that everyone has now started to ask.  Which software is better:  QuickBooks Desktop (hosted), QuickBooks Online, Xero, FreshBooks , Zoho, Wave, Kashoo, or something else altogether?  Unsatisfyingly, the answer is:  it depends.

Greg Lam has written a ton of blogs comparing the features of each contender, and that will hopefully push you in the right direction.  But before you can determine the right software, you need to have a strong understanding of two things:  1) who you are, and 2) what your clients need.

Who Are You?

Most important to developing your practice is figuring out who you are.  When we first started out, I still had a small tax practice, and I was trying to determine how to be the best outsourced controller while also kicking butt at taxes.  However, what I realized was that not only was it too difficult for me to focus on being the best in both worlds, but that I didn’t actually want to.  I don’t really like taxes, but I love designing effective cloud accounting solutions for small businesses.  So I split the company and got rid of the tax practice almost from the get go.

I thought that focusing exclusively on cloud accounting would simplify my business.  And it did.  For a little while.  We had decided we were so adept at technology that we could be all things to all people.  I was an Advanced Certified QuickBooks ProAdvisor, got certified in Xero in the summer of 2012 (when it was barely on the US market), and got certified on QuickBooks Online as soon as it was available as well.

What I found was that as long as I was the one doing all the work, this plan wasn’t a problem. But I didn’t want to build a job; I wanted to build a business.  For me, that meant I didn’t want to be tied to my desk all the time, and I wanted a team of people who would be regularly supporting our clients – even if I wasn’t there.

And as our business started to grow, it became really difficult to have separate processes for each client as well as to develop and maintain training on multiple systems, especially with cloud technology developing at such a rapid pace.

Who Are Your Clients?

Once you know who you are, the next question becomes fundamentally important.  Who are your clients?  Knowing your clients helps you understand your clients and fulfill their accounting needs.

Each business industry has its own unique way of doing things.  Law firms, construction companies, flower shops, and online retailers all have different accounting needs.  So before you choose the tools you are going to use, you need to figure out who your clients are so you can adapt to what is best for them.


The advantage of gradually coming to the realization that we needed to specialize was that we had the opportunity to dive deep into many different tools.  We talked to our team members and evaluated what we liked and disliked about the tools we used.  We were wary of people and companies who promoted one tool as being perfect for every client in every situation, and we didn’t discount our options until we’d had the opportunity to vet them for ourselves.

We decided to become (or at least work toward becoming) a Xero-only firm.  This was not necessarily because we think the other tools are substandard.  If we had intended to have a firm full of job costing clients, we likely would’ve built our business using QuickBooks Desktop or QuickBooks Enterprise hosted in the cloud, but we didn’t.

We loved the simplicity and the smart way that Xero works and its ability to integrate with all of our other favorite tools.  I’m sure I’ll talk much more about Xero in the coming months (in fact, if there’s anything you want to know, leave a comment, and I’ll be happy to include information in future blogs), but suffice it to say that we are huge Xero evangelists.

Finding our niche (ecommerce) meant that we could develop a core toolbox of Best of Breed tools (Xero, Stitchlabs,, SmartVault, Hubdoc, ZenPayroll, and others). Since then, we have been able to streamline, dive deep with both the tools and our clients, and greatly accelerate the growth of our business.

About the author

Patti Scharf

Patti is a blogger, speaker, and thought leader in the accounting technology industry and is the co-founder and Chief Controller for Catching Clouds LLC. She is a CPA and holds several current software certifications: Xero, (Guru), QuickBooks Online, and FreshBooks and was previously an Advanced Certified QuickBooks ProAdvisor. She absolutely loves designing effective accounting systems for ecommerce businesses and is committed to advancing the artistry of accounting through the use of technology.


  • How do you square being an Intuit certified Quickbooks Online ProAdvisor and a Freshbooks Certified Pro Advisor with “We decided to become a Xero-only firm”? You’re either all in, consistent and true to your words, or you’re not, no?

    I know you’re a huge Xero evangelist, but that’s in name only. Your actions speak louder than your words and for sensible, sound, and beneficial reasons you see value in being Intuit Quickbooks Online and Freshbooks Certified, and pushing that fact, marketing that branding, logos & badges on your site.

    More power to you, I also hedge my bets 🙂

    • Hi Steve,

      Here’s the issue. Just because we’re a Xero-only firm, our future customers may not be. I need to understand the other technologies so I can migrate and/or integrate them with our systems. For example, many people use Freshbooks integrated with Xero. Freshbooks gives them great invoicing flexibility, and Xero gives them a strong double-entry accounting system.

      If it makes you feel better, I let my QB ProAdvisor subscription lapse this year. ;o)

      • Patti,

        I say “Agility Trumps Ability” and that’s what you have embraced in your practice.

        You know LOTS of software and LOTS about accounting, but you’re focused on a few things, yet still AGILE and ready to embrace new technologies or processes as you find better ways to improve your practice.

        Great post, and great business strategy.

      • “Just because we’re a Xero-only firm, our future customers may not be.”


        We are currently a Xero-only firm ourselves, but we’ve come to realize that although this helped us focus, differentiate, and build our business in the beginning, it is hindering our growth quite a bit. We turn away potential new business on a weekly basis because the leads are using QBO and do not want to convert to Xero. As such, we’ve taken meetings with Intuit and next week our entire management team will be getting our Quickbooks certifications.

        We are working vigorously to build up our brand and separate it from the software we use. This will attract clients whom are interested in doing business with us because of our processes, people, etc., and not the software we use. This is the key to staying agile and is a winning strategy in my opinion.

        – Cameron

        • Hi, Cameron.

          I absolutely agree that you need to stay agile and be aware of your options in the marketplace, but I don’t think my comment came across as I intended. I meant to say that they might not currently be on Xero, but they *will* be even if they aren’t yet (or they won’t be one of our clients).

          We have no problems turning away work, and our growth is not hindered by using Xero. That’s because prospects understand that we are experts in what we do, so they trust us to provide the right tools to accomplish their goals. To date, I don’t think we’ve ever had a client ask for a demo of Xero before we put them on it.

          If you think you can meet your clients’ goals best by using QBO, that’s great. I would just be careful that you’re not allowing your clients dictate what tools to use. You’re the expert, not them.

          I’ve also found that it’s harder to build a scalable business by trying to be all things to all people. You’re now coming up with different systems for different clients, and you’re training your team and documenting those processes on multiple systems, and cross-training on clients becomes more difficult. All of this can slow your growth down more than just focusing on one system and moving full steam ahead.

          Just some things I’ve learned along the way….

  • Hi Patti,

    Moving past your Intuit Quickbooks Online affiliation, branding & marketing, I noticed on the subject of what type of accounting systems a business should use if their business is online your firm, Catching Clouds, says, “I recommend one of the new cloud accounting platforms, specifically Xero, Freshbooks or Kashoo.”

    You’re a Freshbooks Certified Pro Advisor, you use their branding on your site, Catching Clouds directly advises people use Freshbooks for online accounting, yet you’re a “Xero Only firm”? ….Aahhhh Sure you are…

    Looks pretty clear that you’re a Xero, Freshbooks, and sometimes Intuit Quickbooks Online and Kashoo firm (which ever way the winds blowing I suppose…..)

    • Steve, as our writer Greg Lam has pointed out in multiple situations, we don’t view FreshBooks as a full accounting program. It is an invoicing program, with some accounting features (but not a full accounting program), and often it is used as an add-on product that works with full featured accounting products like QBO and Xero. So I don’t see any issue with Patti’s statement regarding the accounting products her firm works with.

      I also believe that it makes sense to be certified in a variety of products, since you may have to deal with them as you gain new clients.

      And, as the products all evolve, I do see firms that switch from recommending one product to another as time goes on- If one evolves to become a better solution than another, you want to work with what you consider to be the best.

      Just my opinion. And, note, I personally am certified in multiple products (QBO and Xero, amongst others), and I’m looking very closely at FreshBooks at this time.

    • Hi, Steve.

      The blog you quoted is a general advice blog directed to ecommerce business owners. Similar to how I mention in this blog that every accountant should choose the tool that works best for them based on their clients’ needs, every business owner will need to make that choice for themselves.

      But if they become our client, they’ll be using Xero (and possibly Freshbooks as an add-on if their situation warrants it). We have an entire page on our site dedicated to the tools we use which doesn’t include the other software you keep referring to, but who knows… as the tools develop and improve to fit the needs of our clients, maybe they’ll show up there someday. We’ll just have to wait and see.

  • Nice post, Patti. My firm is also in the process of switching all our clients over to cloud-based software. The biggest problem I have with Xero is that if a business ceases operations or leaves your firm, how do you keep a copy of their books? With QBO you can always convert it to a QB desktop file and keep a copy forever.

    • Hi, Eli. Thanks for your comment.

      I agree that’s a limitation of Xero… unless they leave your firm but continue to use Xero. In that case, you just transfer the account.

      But if they don’t want to use Xero anymore, we’ll typically save Excel copies of the G/L, PDFs of financial statements, etc. for historical purposes, but there’s not currently an off-line workable file like there is with QBO converted to QB Desktop. (Of course, you still need QB software to be able to access the information in the future.)

      I’d say all software has different pain points, but I feel like we have a much better chance of getting our “wish list” fulfilled by working with the people at Xero than by working with Intuit. But again, every firm has to make the choice about what works best in their firm and for their clients.

    • Eli, note that the conversion from QBO to QB Desktop isn’t always that smooth. The databases aren’t mirrors of each other, so there are differences. No guarantee that all of your QBO data will show properly when you convert to QBDT.

      So, while you have that option with QBO, it still isn’t perfect…

      • Right Patti, I did the same with the one client that I tried out on Xero – saved ever conceivable report I could on Google Drive (I love their Google Drive integration!) and closed the file.
        I don’t know what it is; I used Xero and liked the interface but somehow didn’t fall in love with it; I didn’t love the way the bank feeds work…I don’t know, I went back to QBD and now I’m adopting QBO.

        You’re right, Charlie, of course, but still transactions are linked to each other correctly and that’s better than having to dig through a Transaction Detail Report for the year to find the G/L side of a check written out in March for $4.35.

        • Hi Eli. That’s funny because I love the way the bank feeds work, particularly the related bank rules and cash coding. :o)

          But like I said, they all have their strengths. I like QBD for its power (i.e., job costing), I like QBO for its ability to drill down into report details easily, and I like Xero for workflow, simplicity, and stability. When I first start using Xero, I remember thinking that the more I used it, the more I loved it. Ditto for my team members. They all prefer Xero to other systems they’ve used. But that doesn’t mean it’s for everyone, and I know other people who are just as passionate about QBO.

          I hope you find a system you can fall in love with.

  • Hi Patti,

    You mentioned splitting the company and getting rid of your tax practice. Was this before you had decided on picking a niche (ecommerce)? Did you have other non tax clients you were able provide controller services for or did you start from scratch in getting clients? Just trying to figure out if it makes more sense to convert an existing practice to cloud accounting or if starting from scratch and focusing from the get go on a niche would make more sense. Thanks,


    • Hi, Ross. Here’s a little more detail about how all that went down.

      Before we started Catching Clouds, my client mix was mostly tax, but I was also a virtual controller/bookkeeper for a couple of clients as well. Those two clients were on QB Desktop, hosted at Right Networks. That had been their setup since 2009, and it worked well at the time.

      When we launched Catching Clouds, the two outsourced controller clients came with us, one was our first Xero client (in 2012) and the other is still on hosted QB Desktop to this day (they need job costing which Xero doesn’t yet do). The Xero client is ecommerce, and the other client is a legacy (non-ecommerce) client who we’ve worked with so long, we just don’t have the heart to fire. :o)

      All our new clients are on Xero and are ecommerce clients. If they aren’t the right fit for us, we refer them elsewhere.

      And yes, I eliminated all of my tax work prior to picking a niche. We did this because 1) we wanted to sample the different industries to see what resonated with us before picking a niche (that took some time), 2) we sort of thought that only offering cloud accounting was its own niche (it’s not), and 3) with the regular nature of ongoing outsourced bookkeeping services, I thought it would be extremely painful during tax time to try to run two separate service lines at once while simultaneously trying to grow the business. And besides, I didn’t really like the tax work, so it was an easy cut.

      That’s what happened with us, but I know lots of successful firms who enjoy offering both lines of services. Particularly if you’re not short on available capacity, there can be advantages to offering a one-stop shop. It’s just my personal opinion that it’s best to pick the one area you love and become a rock star there. After you’ve conquered that realm, you can always grow into adding more services based on the needs of your clients.

      I hope that helps.

  • Really enjoyed your informative article Patti.

    You mentioned the migration from building a job to building a business. How did, or do you go about outsourcing some of the work? this is something that keeps bugging me because as I as you mentioned do not want to build a job. I’m getting ready to retire from one of those, I want to build a business that will continue without me.

    thanks again,

    • Hi, Rick. We don’t currently outsource. Our team is exclusively made up of employees. I will say that building and training the right team is the most challenging (and rewarding) aspect of our business.

      In our world, it’s not enough to hire a glorified data entry person as in days of old. This is a whole new world, and our team needs to understand how different technologies work and integrate… while also understanding accounting so they can identify when things go awry.

      So far, all of our employees have come from Craigslist ads. It’s amazing how many applicants we get when they know they’ll be able to work from home (we have a ROWE environment). Probably 95% of applicants have been moms.

  • Great post Patti! I love reading how you decided to pick a niche in this large and vast industry and you are winning with that strategy. This is part of my plan for 2015!

  • Hi Patti,

    Great article, but I have a different paradigm. Hosting, QBOE, Xero, Wave, RDP access, etc we use them all. Our main focus is that of building always on systems connected to the same data as our clients. These connected systems provide the pathway to providing value added CFO and Controller services.

    Much like you, we have narrowed our tax practice to focus on our business clients tax issues. We still have a few annual 1040 clients that have been with us since the 90’s, but the annual 1040 is now less than 8% of our practice and shrinking. I don’t think we will ever get to 0%, but we actively try to shrink it annually.

    Are we a virtual firm? I would say yes because every program and document we use is maintained at a data-center somewhere else. Also, we can (and occasionally do) work from anywhere at anytime. Our virtual nature as allowed us to have clients in three time zones and escape the confines of our little town.

    For us the question is..How Do I Build firm alliances into the client’s daily business? The Cloud is just a part of the means to that end.


    PS: Xero is very cool, but so is the new QBOE

    • Hi Hank,

      Out of curiosity, is your tax practice in the cloud too? And do you maintain the accounting systems for your clients, or do they host them and allow you access?

      I always think it’s interesting to hear how different firms design their businesses.


      P.S. I’m curious to see what happens with QBO over the next few years. I think Xero poked awake a sleeping giant and may have its hands full. But we (and our clients) are ultimately the winners in that battle.

      • Hi Patti,

        For the past 4 years we have hosted ProSeries, Quickbooks, MS Office etc on a private virtual server (Cloud9realtime). We maintain clients’ desktop quickbooks everyone is on the accountants version. Our QB Enterprise clients maintain their own servers but allow RDP access. We use a third party IT firm to setup and maintain our RDP access.

        We did beta test the intuit ITO, but it fell extremely short in its ability to convert from proseries and it didn’t have a great set of tools (yet).

        Our back office is a deeply integrated collection of best of breed:
        Solve360 – CRM, Project management, group calendar, etc.
        Google Apps – Email, spreadsheets, documents, etc. – Document management
        HelloSign – e signatures
        Kloudless- cloud API and storage automation with
        CloudZap – print, scan and publish to cloud storage
        Metrofax – fax delivery and management
        Webhooks – custom built as needed
        Paysimple – automated ACH billing and collection – vendor payments
        QBO – our books – hosted payroll, time/attendance and HR (Plus Services is a wholly owned affiliate of our firm shareholders)

        Stay in touch,

  • Hi Patti,
    I just discovered and really enjoyed your article. It hit the nail on the head regarding where I am at right now with my business. So far I have been a one-person firm trying to be all things to everyone. Now I want to expand and bring on staff to “build a business, not a job”. I currently use QBD, QBO and Xero, am a QB Advanced Pro Advisor and certified in Xero as well. Your article describes almost exactly the direction I want to take my business, with remote staff working from home, etc. I’d love to talk or even meet with you sometime to discuss further. I have friends and relatives in the Denver area and lived there at one time. Thank you! – Matthew Toenjes

    • I’m glad you found this helpful.

      We’re always happy to connect with others on the same path. Give me a shout next time you’re in the area, or maybe we can meet up at SleeterCon in November. :o)



  • Well, this is like a breath of fresh air reading your blog, in the last few weeks I have just grasped the concept of cloud accounting after being introduced to xero at the start of the year.

    Like you my practice has been based around tax which means mostly compliance work, but to be truthful I have had enough. I love the idea of grasping the new technology and trying something new and exciting. Its not my plan to ditch my clients but to help them develop and see if i cn move as many as possible to cloud accounting, and the rest we will see as many of them are small, and small means “can you do it cheap cheap”.

    I look forward to reading more posts.. thank you

  • there are many Benefits of Cloud Accounting like

    Earn greater profits, firms are finding the higher value CFO and planning services offered by cloud accounting carry a much higher profit margin than even the core services like audit and tax.
    Make yourself indispensable, transactional services are simply a part of doing business and business owners don’t place a lot of value in them.

  • Dear Patti,

    I had over 4 years experiences in one of the Big Four Firm. I just quit from there and planning to become a lecturer. Basically, now I would like focus on long-term business plan rather than jump back into a full time job. So, is that possible to use your business model in my country, Myanmar? Can you be my mentor? or is there any way we both can be benefit? Thanks a lot.

    • Hi Tim,

      To be honest, I’m not familiar enough with Myanmar to speak to whether our business model would be successful in your country, but it’s worked very well for us here in the US.

      I don’t offer coaching services, but I share lots of practice management tidbits on our YouTube channel, particularly on the “Saturday Slowdown” videos I do. You can find it at if you’re interested in checking it out.

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