Cloud Accounting

The State of Cloud Accounting 2015

Written by Greg Lam

Cloud Accounting 2015Starting the new year, I wanted to take a few moments to see where we’ve come so far in cloud accounting, the major events 0f 2014, and then partake in a little speculation as to what 2015 will hold. So here it goes…

Where We’re At with Cloud Accounting Software

  • Core functionality is mostly here. Three years ago, there were serious basic features lacking, such as journal entries or reconciliations. Now pretty much all the major cloud accounting software has these down.
  • Software in the small business (ex: QuickBooks Online, Xero, and Zoho Books) and micro business (ex: Wave, Kashoo, and Sage One) categories of cloud accounting software have continued to entrench themselves in their respective categories; with small business software providing deeper functionality and a ecosystem of apps vs. micro business software providing a simple and affordable way to get into online accounting software. I believe the major factor for the further entrenchment is due to money; the money being invested in the companies and the money being charged to users. At the small business software end, there’s lots of money sloshing around, so faster and broader development could take place. Accordingly, a lot more functionality could be added to small business software in the same time period vs. micro business software. Micro business needed to drop it’s price to reflect its comparative utility, with Sage One and Kashoo both dropping their prices by about $10 a month (they are now $14 and $5 a month respectively); Wave was always free. Micro business software will on average run you less than $10 a month while small business software will on average be $30 a month or more.
  • Previously, mobile apps were companion apps focused on doing very specific things, such as creating and sending out invoices or entering expenses. Now they are becoming a lot more full featured and can be used for capturing receipts, accepting payments, and even performing reconciliations.
  • Online invoicing and payments are now standard features. Now most every software can send out an invoice that can be both viewed and paid online.
  • Bank feeds are the default way to get data into online accounting software. This was always kind of true, but to me it became even truer when Kashflow started to use the third-party bank feed service Yodlee. If you haven’t heard of Kashflow, they’re a popular name in online accounting in the United Kingdom. They’ve been holding off from bank feeds for years, citing potential security risks. Now they’ve finally decided that either they couldn’t last without bank feeds, or that they finally trust the security and the legality of using Yodlee’s scraper service to glean bank data on your behalf. In any case, bank feeds are the norm and most major banks can be connected to.
  • Paperless workflows have improved to the point where you can realistically have a paperless set of books, whether through the use of native file attachments, expense receipt add-ons (ex: Expensify and Hubdoc), or dedicated document management add-ons (SmartVault).

The Bigger Vendor Updates

QuickBooks Online

  • QuickBooks Online finished rolling out it’s new interface to all users. This rollout took around a year to complete. I for one am glad all users are on the same page now.
  • QuickBooks Online hit 739,000 paying customers  and projects 3 million by 2017. On the other hand, QuickBooks Desktop has 5.2 million paying users (which means it’s nearly 8x the size). But, it’s predicting a 25% decline in desktop users by 2017, which means 3.9 million users. So in 2017, the number of online and desktop users are predicted to be nearing parity.
  • A new QuickBooks Online Accountant was released late in the year. This is a major step on the way to QuickBooks Online offering a practice management solution for QuickBooks Online.
  • QuickBooks Online’s API opens up and the add-on ecosystem starts to flourish. Near the end of 2013 Intuit announced they were opening up their QuickBooks Online API. Now over a year later, the API is indeed more open and apps for QuickBooks Online have surpassed those for Xero, numbering over 400
  • QuickBooks acquires Lettuce, and plans to integrate its inventory functionality into QuickBooks Online.


  • Xero hits 400,000 paying customers. This means they roughly have half the amount of customers than QuickBooks Online. However, the more interesting part of this number is when you break it down regionally and compare it to QuickBooks Online. Xero only has around 25,000 paying customers inside North America whereas QuickBooks Online only has 100,000 outside of it. You can see that QuickBooks Online dominates North America while Xero commands the other major English speaking countries (read: Australia, New Zealand, and the U.K.). Consider the following population amounts:
    • Australia: 23 million
    • New Zealand: 4.5 million
    • United Kingdom: 64 million
    • Canada: 35 million
    • United States: 316 million

So if you add up those areas, they come up to 341 million in North America vs. 92 million outside of it. That’s nearly a 4x difference. Provided trends don’t change, QuickBooks Online will continue to grow their user base in sheer numbers a lot faster than Xero.

  • Xero builds out its new reports centre. It’s not completed yet, but the work done has already gone a long way in making the service on par with QuickBooks Online’s reports.

Zoho Books

    • Zoho Books adds inventory, joining QuickBooks Online as the only other small business and micro business online accounting software that I’ve reviewed to get the feature. It is basic functionality though.
    • Zoho Books gets an iPad app and Windows app. These are both interesting apps, since they are very full featured, showing how building the entire Zoho Web app from their own publically available API speeds up the process of building out other apps.


    • Wave got a new invoicing interface and customer statements. The new invoicing interface hasn’t rolled out to legacy accounts, as far as I’m aware, but the new interface is much friendly to use.
    • Wave Payroll is now available in all U.S. States.


    • Kashoo gets an Android and iPhone app. The iPhone app is nearly as functional as its iPad app, whereas the Android can only really enter income and expenses.


    • FreshBooks gets its own payment service. Provided that FreshBooks is indeed getting a cut of transaction sales (and it’s not all being passed on to WePay), this may be a profit centre that more and more online accounting software tap into (QuickBooks Online has its own merchant services and Wave partners with Stripe).
    • FreshBooks gets an accountant center. Currently it’s little more than single login access to client files, but hopefully there will be more functionality in the future.

Sage One

    • Sage One added some more basic functionality such as a general ledger, year-end closing, and more reports.

Current Problems with Cloud Accounting

While cloud accounting software is great, there are still some ongoing issues:

  • There’s no solid restore point system. QuickBooks Online lets you download an emergency backup that can be opened in QuickBooks Desktop, but its not a proper backup system with restore points.
  • If you stop paying for the subscription, there’s still no standard export all button in all software, so this makes people nervous.
  • Security is still a major concern, especially with all the news of hacks from major companies like Sony, Target, and Home Depot.
  • While performance is fast and automation helps certain businesses, data entry heavy users find the software slower than desktop.
  • The functionality is still not as deep in certain areas as desktop. This situation, however, will continue to erode as products mature.
  • Ease of completing government requirements is not uniform across the vendors. There’s sales taxes, payroll taxes, and income taxes, to name the top ones. Better integrations and easy online filing will help convince users that online is the place to be.

What to Expect

Before you read the bullet points below, please know that this is purely speculation and I don’t have any inside tracks to what’s going to be coming out. I could be entirely wrong. But after watching the different players for a few years now, this is what I expect to see. Take it with a huge grain of salt.

  • The ground seems to be shifting from getting extra functionality through add-ons to getting them natively. A couple examples are Xero with its payroll service and QuickBooks Online acquiring and integrating Lettuce apps. I expect deeper integrations with popular SAAS (software as a service) companies and potentially some more buyouts of popular add-ons. The user base is getting to the point where it makes sense for both sides to strengthen these integrations. It also makes sense from a product differentiation stand point where solid integrations are a real benefit to users.
  • User adoption will continue to exponentially increase.
  • Instead of news users asking “Why should I go online?”, the question will be “why should I go with desktop?”
  • I wouldn’t expect to see the formation of new online accounting software companies. Rather, I’d expect the number of vendors to start shrinking as leaders consolidate. The new kids on the block, like Xero, Wave, and FreshBooks have been around for more than a half decade already.
  • Vendors will expand upon their hybrid desktop app approach. A hybrid desktop app is one that is native to your desktop OS (like Windows 8 or Mac OS X), but it interfaces with the cloud for the data  (this is actually how mobile apps work). Intuit has done this with its QuickBooks App for Mac app and Zoho Books with its Windows app. More native Windows and Mac apps seems inevitable. This may help with the slow performance issues that desktop users complain about.
  • Practice Management will be a big focus for Xero and QuickBooks Online. With the core functionality of both software largely built-out and the functionality of both software getting more and more similar, appealing to accountants becomes even more important.


So, that’s what I saw happen in 2014 and what I expect to see in 2015. What about you? Is there anything I missed or think I got wrong? Speak out in the comment section below!

About the author

Greg Lam

Greg Lam is a passionate small business guy who loves technology and automation. He holds a BBA from Simon Fraser University, Canada. He's a Certified QuickBooks ProAdvisor, Certified Xero Partner, and Kashoo MVP. His business interests are focused on online accounting and how it can be used to streamline and automate a company’s accounting processes. He currently lives in Tokyo, Japan.

Greg operates the Small Biz Doer website, an "Entrepreneur's Guide to Small Biz Bookkeeping." He is the author of Online Accounting Software: Finding the Right Match, published by The Sleeter Group.

Connect with Greg on Twitter, Google Plus, YouTube, LinkedIn, or Facebook.


  • Brilliant comprehensive deep dive Greg. As you mentioned the QuickBooks Online userbase is growing rapidly. Intuit too is putting its weight behind promoting QBO more since 2014.

    In terms of products maturing, between Xero and QuickBooks Online, which one do you think have the edge? In terms of releasing updates, refining features or acting more on customer feedback?

    • It is interesting to watch the two companies, each bringing out new features and competing for the same users. Intuit releases things on a faster cycle, but sometimes I think it is too fast. They seem to rush things out a bit. Xero releases seem to be more measured and have fewer initial issues.

    • Hi Tejaswi, That’s hard to say which one has the edge. In 2013 I thought Xero did a better job on all fronts. In 2014, I’d give it to QuickBooks Online for the releasing updates and features. I’ve always thought Xero has had better support and has acted more on customer feedback. For 2015, it’ll be interesting to see. If you’re in the U.S., it’s hard to ignore QuickBooks Online. If you’re outside of the U.S., it’s hard to ignore Xero. Honestly, I’d be familiar with both (even if you only want to specialize in one piece of software).

      I also agree with Charlie, in that Xero releases tend to be more solid out of the gate. But I have to give credit to QuickBooks Online for continuing to improve upon their initial release features (for example, bank rules has been improved a few times since it’s initial release).

    • Slickpie( fills an important gap in my business. I am Not an accountant or bookkeeper person. I can manage all my invoices easily. It links with my bank accounts and credit cards, gives me professional invoicing and tracks all of my taxes.

    • I am working as an Accountant, The Slickpie free accounting software helped me in decision making very useful and easy to use. I can navigate the software from any screen to analyze data, reports and any information I need. It is impressive how quickly the software is.

  • Thanks for the specifics guys. One point I noted was xero community forum has lot of participation from their team. In qbo, the community has low or no participation from core team. Most active are pro advisors and community leaders

  • I agree it will be interesting to see how 2015 plays out. I think Intuit has rushed recent feature releases and invested in large volumes of advertising – when many long time users have yet to even receive the rollouts. In many cases, the new features are not working as touted. With all the fanfare, under-delivery could really harm Quickbooks online. I use both and find myself leaning more towards Xero. Time will tell. Thanks for the article!

  • Great insight on cloud accounting for 2015. There’s a LOT of room for improvement but I hope security should be taken importantly, although we all know that there’s not a perfect software program.

  • I noticed no mention of IntAcct in this article, which seems like a major up and coming cloud-based accounting solution for small to medium sized businesses, and is the only product of its kind endorsed by the AICPA. Any thoughts?

    • Hi Matt,

      You’re right, Intacct was not mentioned and they are definitely a viable solution for small to medium sized businesses. My coverage generally consists of micro business and small business coverage, that’s why I didn’t cover companies like Intacct or NetSuite. I would say that if you’re looking at small business software like QuickBooks Online, Xero, or Zoho Books and they don’t seem to have the functionality you need, then those businesses should definitely look at companies like Intacct and NetSuite.

  • Do you have any comments regarding putting QuickBooks Desktop onto a file server, as in Right Networks, Cloud 9 or others? This solves the problem of backups and security, as well as permitting the user to use a mature product that everyone knows how to use. We are providing recommendations to clients and can’t seem to find a good review on this topic.

  • This is a really good article and a thoughtful insight into the current state of the market. As relative new boys into this area we still think many of the current solutions are just becoming far too complicated for the average micro business owner and sole trader. Bank Integration, payroll integration and automated tax submissions are examples of where the accountant should be supplying real value but are now being cut out the loop. Our point of view is that there is a need for a much easier collaboration tool that will enable parties to get the most from the services they provide while allowing the business to concentrate on what it does best!

  • I have just moved from Xero accounting and I must say am very impressed with Slickpie( It is an easy to use. This is an excellent accounting software that doesn’t require being an accountant to understand and use it correctly. Whenever I have had questions the support stall has been brilliant. Not only do they respond quickly, but they also offer remote support to train and help with any questions.

  • I use Wave for a non-profit that I manage and QuickBooks Online at our business. Both are awesome for the money.

    Its crazy that Wave is free. It has all you need to manage the books of a small business (general ledger, invoicing, reconciliation). There are definitely some limitations. Reporting is very static and basic – particularly compared to QuickBooks. Wave also has limitations on invoicing and managing customers and invoices. But its free – so I cannot complain too much.

    Quickbooks is awesome for the price – particularly when integrated with other apps. I particularly like the invoicing and reporting in QuickBooks. In reporting, you can drill into any number. But was I really like about QuickBooks is the integrations. We use Intuit Payroll which is completely integrated with QuickBooks. We also used the marketplace to find other integrations – such as syncs to, Mailchimp, Tsheets and MicroBiz POS. The exchange allows you to connect with another app just by logging into your QuickBooks account. Super easy.

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