When asked what would happen if a business or organisation lagged ten years behind in adopting smartphones or computers, most people would agree that it would be detrimental to productivity and impede (if not completely stop) growth. Smartphone and computer technology changes quickly – and it’s easy to see why businesses and organisations must keep up. But, what if we asked about systems that aren’t as ubiquitous yet just as important to operational efficiency and security?
We know that the move to cloud accounting is the biggest shake-up to the accounting industry we’ve ever seen. Accounting and payroll used to rely on spreadsheets, paperwork, and outdated systems, but not anymore. So, what does that mean for our digital future?
The current trends in cloud-based services
If we focus on small and medium-sized businesses (SMBs), the frontrunners in cloud accounting are the Nordics, Benelux, New Zealand, Australia, and North America.
Based on the Digital Economy and Social Index (DESI) report, there’s a similar trend for cloud services in general, with the Nordic countries leading the way. Yet we still have a long way to go. Only 40% of SMB companies in the EU are using basic-level cloud services. For sophisticated cloud services, like accounting, ERP or CRM, the adoption rate for SMB companies is only 33% in the EU – with even wider gaps between different countries.
What we’re seeing in each region
To put this in perspective, let’s take a look at each region on the technology adoption curve. Innovators and early adopters are ready to adopt new technology from the get-go and usually gain the biggest benefits if the technology is a breakthrough. The late majority start adopting new technology when the majority of the market already has experience with it. The laggards only change when it’s necessary.
As you can see, the fastest growth occurs between the early and late majority phases – where the largest share of companies in a market adopt the new technology.
The Nordics are leading the way – with Benelux close behind
Visma’s core markets are the most advanced in Europe and are already in the late majority phase with adopting cloud accounting. So, they offer a good look at what to expect for emerging European markets. All of the Nordic countries have extensive ecosystems around cloud accounting and payroll.
Cloud accounting in Benelux is developing quickly. The Netherlands and Belgium are in the early majority phase and are the second-most advanced area in cloud accounting, after the Nordics.
Central Europe is changing rapidly
Central Europe is lagging behind the Nordics, but it is an interesting emerging market. Several countries in this region are hitting the innovators’ phase, and early indicators show a tremendous speed of change in many of these countries.
The Mediterranean has taken its first steps towards adoption
Most Mediterranean countries are far behind the Nordics and Benelux. But, there are some interesting software companies creating movement in these markets, which we hope will accelerate quickly in the next few years.
The biggest driver of upcoming change: e-invoicing
When asked what the biggest accelerator for e-accounting in Europe will be in the next few years, Business Area Director Olivier Constant says legislation changes for e-invoicing will be the driving force. Compulsory e-invoicing has already been a game-changer in several countries, and we’re going to see those ripple effects move into other parts of Europe very soon.
“Every entrepreneur will need to make the switch from Excel or whatever they’re using. By 2028, all processes for accountants will be automated, which will be a huge benefit for them.”Olivier Constant
DACH and their tax advisors
Germany and Austria are really unique markets. The key differentiator is the role of tax advisors. The title “Tax Advisor” (or “Steuerberater” in German) is protected, meaning only they can submit declarations on behalf of a company, organisation, or individual. Some see these advisors as potential gatekeepers to change.
“The way companies work together with tax advisors in Germany and Austria is comparable and special. Tax advisors are necessary to ensure the correct execution of the over-complicated taxation systems and avoid penalties. This dependency on ever-changing tax rules results in a still traditional approach behind the scenes.”Rainer Haude, Managing Director
One important thing to note is that German and Austrian tax laws are very complicated. “As an example, take the Austrian VAT law. Instead of, for example, one VAT rate like in Denmark, you have 55 fields (codes) that might apply for the monthly VAT filing in Austria. It’s really complicated. That’s why tax advisors have a different role than in the Nordic countries. This market is so complex, and the tax advisor is responsible for knowing all these codes,” according to Rainer.
Currently, there are some innovative tax advisors that are helping push this region in the right direction, but there is a lot of room for digitalisation. There are huge benefits that can be gained, including increased efficiency, productivity, and enabling companies to move to real-time financial reporting. So, time will tell if these countries are able to switch to cloud software as quickly as their European neighbours.
Want to see an in-depth breakdown of each country? We’ve got that and more in our state of cloud accounting eBook.