The sharing economy and mobile commerce are becoming popular ways of conducting business. This article explains the Internet-based economy and the mobile accounting apps that allow entrepreneurs to compete. CPAs need this information to assist such individuals when they make decisions regarding technology products and services.
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The sharing economy and mobile commerce have changed the way many companies and individuals conduct business. A CPA’s broad business knowledge can be used to help small businesses choose which product will work best for them, whether it is an app for basic bookkeeping or a cloud service for data backup. Accordingly, CPAs providing such consulting services should be aware of current developments in the sharing economy and mobile accounting apps. The following is a list of 20 common questions and answers about these important innovations.
1. What Is the Sharing Economy?
The sharing economy (also referred to as the peer-to-peer economy, mesh economy, collaborative economy, and collaborative consumption) is a socioeconomic system built around the sharing of human, financial, and physical capital. It includes the shared production, distribution, and consumption of goods and services by different people and organizations. These systems coordinate the sharing of excess capacity in goods and services by connecting those with excess capacity to those with need. According to “The Mobile Revolution: How Mobile Technologies Drive a Trillion-Dollar Impact,” mobile technologies accounted for $3.3 trillion of revenues in 2014 (Julio Bezerra et al., BCG Perspectives, Jan. 15, 2015, http://on.bcg.com/1RVrrDu). Examples of well-known sharing economy companies include Uber (taxi service), Airbnb (accomodations), and JustPark (parking spaces).
The growth of microenterprises provides ample opportunity for CPA firms to lend their business expertise.
The core dynamics of the sharing economy involve peer-to-peer transactions where two individuals conduct business without a third party involved. These transactions make capitalism more efficient and enable microenterprises to flourish. The sharing economy adds to the supply and demand of goods and services, which gives consumers access to otherwise unused capacity or idle assets. Instead of being an entirely new economy, the sharing economy builds upon the existing economy, fueling microenterprises while driving down prices for consumers. These new microenterprises and microentrepreneurs will need services from CPAs. For example, a couple with excess capacity in their home can now rent out that capacity through Airbnb; the tax return of that couple will therefore become more complex. In addition, the couple’s CPA may be able to assist them with other consulting services to help expand their microenterprise or plan for their retirement.
2. What Are Microenterprises?
Investopedia defines a microenterprise as “a small business that employs a small number of employees. A microenterprise will usually operate with fewer than 10 people and is started with a small amount of capital. Most microenterprises specialize in providing goods or services for their local areas” (http://www.investopedia.com/terms/m/microenterprise.asp). A microenterpreneur can be thought of as the person or persons who start that small business; such microentrepreneurs are often people without a formal business background or training. The growth of microenterprises provides ample opportunity for CPA firms to lend their business expertise. For example, CPAs can assist these small businesses in choosing the best bookkeeping solutions, navigating their tax returns, and helping set up internal controls.
3. How Does Mobile Commerce Work in the Sharing Economy?
Many microenterprises are small companies or individuals with limited funds for IT infrastructure. These entrepreneurs use apps and mobile devices that provide basic accounting system services at a much lower cost than a full-blown accounting system. Apps can also work with the other features on mobile devices. For example, field workers (sales persons, cab drivers) can be located via the GPS in a customer’s mobile device. This type of integration is expected to increase in the future.
CPAs need to know how to design an accounting system that incorporates these apps, controls mobile transactions, and allows for auditing the cloud. There are opportunities for CPAs to expand their practices into providing Service Organization Control (SOC) Reports for the companies that provide apps and cloud-based services, lending them increased credibility. Moreover, these new entrepreneurs may sorely need CPAs’ expertise in the areas of tax, internal controls, audits, and review services.
4. What Is a Mobile Accounting App?
The term “app” is a popular shorthand for “application software.” Whatis.com defines a mobile app as “a software application developed specifically for use on small, wireless computing devices. … rather than desktop or laptop computers.” Mobile apps have become very popular as more users have devices that can utilize them. A mobile accounting app is designed to run accounting functions on mobile devices such as smartphones and tablet computers.
5. Which Operating Systems Do Mobile Accounting Apps Run On?
Mobile accounting apps run on a variety of smartphone operating systems, including Android, iOS, Windows 10 Mobile and Windows Phone, Linux, RIM-BlackBerry, and various open source systems. Not all accounting apps run on all operating systems; accordingly, CPAs must know how to help individuals integrate the app with their operating systems.
6. What Are the Unique Features of Accounting Apps?
Accounting apps are connected to functional accounting systems. Their typical features include the following:
- Online accounting—log in from anywhere
- Bank reconciliation—automatically import and code transactions
- Mobile invoicing—create and send invoices automatically from a mobile device
- Dashboard—download important accounting information such as sales statistics and cash balances to quickly track how the business is doing in real time
- Files—attach documents to financial data
- Lists—for example, sort contacts based on purchase history
- Contacts—keep track of customers and suppliers
- Mobile payment—accept customer payments through a mobile device
- Add-ons—a wide range of functions, including 1099 e-filing and e-delivery, processing of international foreign currency payments, or filing of sales tax returns.
7. What Are the Most Popular App Stores?
The most popular app stores are the Amazon Appstore, Google Play, Microsoft Store, Samsung Galaxy Apps, and Apple App Store. CPAs should periodically review available products and features in these stores to provide the most current product information.
8. How Much Do Apps Cost?
While some apps have a one-time purchase cost, accounting apps usually involve a subscription fee. Prices range from free to $70 per month per user, depending upon the features and the number of transactions. Obviously, a large business with a large number of users and transactions will have much higher costs than a freelance individual proprietor. Most apps have free trial periods that range from one week to one month.
The real advantage of apps for the microentrepreneur is the savings one can achieve by using an app instead of making large capital expenditures for IT infrastructure, which have economies of scale issues for microbusinesses. For a more in-depth discussion of these savings, refer to question 12.
The real advantage of apps for the microentrepreneur is the savings one can achieve by using an app instead of making large capital expenditures for IT infrastructure.
9. How Do Apps Work?
Mobile apps work like most other computer programs. Their use for accounting purposes usually follows five stages: 1) install or download the app from the Web, 2) input data into the app’s user interface, 3) store the data on either the device’s onboard storage or a cloud-based server, 4) process the data into usable information (e.g., periodic reports), and 5) send information to the user via the app interface.
10. What Is the Difference Between a Native App, a Mobile Website, and a Widget?
A native app is a small piece of software that must be downloaded to a mobile device. Native apps must be periodically updated and come in different versions to run on various operating systems. Some native apps work without a live Internet connection or integrate with features on the mobile device, such as cameras and GPS.
Mobile websites are accessed using a web browser installed on a mobile device; most devices come with such a browser installed. A mobile website does not need to be downloaded or updated; however, it does require a constant live Internet connection, and may run slowly if the connection is poor. Mobile websites will run on any mobile device. Their development costs are less expensive, and the design is less complex.
Widgets are self-contained miniprograms distinct from apps that run on Android phones. They perform simple functions, such as the clock widget showing the time and temperature dynamically with automatic updates. In addition to showing current information, widgets can serve as control switches; for example, a widget can be used to turn a phone’s Bluetooth function on or off. Some apps include their own widgets. Running many widgets that constantly check the Internet for fresh information can run down a device’s battery.
11. What Are the Most Common Types of Mobile Apps?
Apps can be classified as static (offline), batch (connect periodically), or dynamic (constant, real-time connection). A static app is a system that does not need to constantly reference changing information. Some types of static apps include calculators, content checklists, how-to manuals, and recipe books.
Some apps will batch data (e.g., several transactions) and then upload it to an online cloud service. These apps only need a periodic connection to the Internet. Examples include database input and output apps, bookkeeping apps, and periodic information retrieval apps (such as for sports scores or stock prices).
Dynamic apps reference constantly changing information, requiring a realtime feed from the Internet. These apps need a stable and high-speed web connection. Some examples include dynamic transaction execution (e.g., stock buying) and information delivery apps (e.g., weather forecasts).
12. What Is Cloud Computing?
Cloud computing is an extremely successful rebranding and expansion of the concept of offsite storage. Resources such as software, applications, data, and information are accessed by computers and other devices as a utility over the Internet. The software, services, and data are stored on servers at the cloud provider’s computing facility, providing computation, security, storage, backup, and privacy without requiring users to know the location of, nor maintain, the computing infrastructure. Software as a Service (SaaS) allows consumers to use the provider’s applications and services running on a cloud infrastructure. This gives many users computing power that they could not afford individually, as resource pooling allows for rapid elasticity and metered services that only charge consumers for what they use. Cloud services can encompass an entire computing platform, which allows small business users to develop customized programs using the provider’s platform without having to make a large IT investment.
13. What Is a Computing Platform?
A computing platform is a preexisting environment that a software program is designed to run within. A mobile enterprise application platform (MEAP) is a comprehensive suite of products and services that enable the development of mobile applications. Platforms may include hardware, operating systems, and application software. These platforms can host apps written in application-specific languages such as Java. Programming can be facilitated by a software development kit (SDK) like Android Studio.
14. What Are the Most Common Mobile Accounting Apps?
There are scores of mobile accounting apps. A few of the most popular accounting apps are listed in the Exhibit, along with the intended users and the platforms they run on. Open API (Application Programming Interface) refers to a publically available interface that allows one application to interact with another. An open API also allows two applications to share data.
Popular Mobile Accounting Apps
15. What General Accounting Apps Are Available?
Users who want reliable and detailed answers to general accounting questions will find that, as the saying goes, there’s an app for that. For example, My Pocket CPA charges a fee of approximately $10 per answer. Ask A CPA is a free app that gives basic tips about taxes and other accounting issues in a number of categories. Available topics in most apps include insurance, retirement planning, investing, loans, college planning, credit and bankruptcy, and expense tracking. In addition, there are a wide variety of expense-tracking apps that can help a microentrepreneur with basic recordkeeping. These include Cashbook Expense Tracker for Android, Expenditure for iOS, Expense Manager for Android, and Expensify for iOS, Android, Blackberry, Windows Phone and Palm.
Platform as a Service (PaaS) allows consumers to deploy onto the cloud consumer-created or acquired applications using programming languages and tools supported by the cloud provider.
16. What Tax Apps Are Available?
H&R Block Tax Preparation allows users to prepare taxes right from a mobile device. The app offers a review process to make sure there are no issues with the return and promises full audit support should the numbers come into question. In addition, H&R Block guarantees accuracy and a maximum refund.
Intuit’s TurboTax is the most popular tax software. The TurboTax app guides users through the entire process of filing federal and state returns, step by step. Like its simpler version, SnapTax, TurboTax allows users to scan W-2s and proceeds to autocomplete many tax forms. In addition, Intuit’s MyTaxRefund provides a tax refund estimate; however, this app does not work unless a taxpayer has already filed a return. It also tracks the status of the return. Similarly, the IRS provides IRS2Go, which checks the status of a tax return after filing, provides tax tips, and gives access to the IRS Twitter feed.
TaxACT Express allows users to prepare, print, and e-file simple federal and state tax returns for free. There is a financial aid worksheet for college loans, bookmarks that allow you to add notes, and guidance for gray areas you may encounter. TaxAct also has the apps Track Return Status (self-explanatory) and Donation Assistant, which allows users to track charitable donations year-round to maximize deductions at tax time.
Cloud computing provides infrastructure convergence and shared services that are better than the end users could provide for themselves.
All of the above apps are available on both iOS and Android; however, some have mixed to poor reviews and should be considered carefully. CPAs should monitor reviews of tax apps and be prepared to justify why their services are superior to these apps. CPAs should make clients aware of the value-added activities they can perform beyond tax preparation work. For example, CPAs can provide proactive tax planning and tax minimization advice. In addition to tax services, CPAs can assist with personal financial planning needs, such as retirement planning and saving for college.
17. Which Apps Enable Mobile Payment?
Mobile commerce requires microentrepreneurs to make and take payments anywhere at any time. A number of apps can be used to process credit card transactions. One of the most popular is Square, which is available on Android and iPhone. A swiping device plugs into the device’s audio jack and, in conjunction with the app, can process credit card transactions anywhere. A similar app, RoamPay, works with just about any type of smartphone or Blackberry. PayPal works with iOS, Android, and Windows. Some payment apps integrate with accounting packages; for example, Square works with QuickBooks and Xero.
18. What Are the Advantages of Accounting Apps?
Smartphones create a distributed network among employees, customers, and vendors. As a result, a mobile accounting app can allow all users to interface with the accounting system from anywhere. This makes it easier to record transactions, book sales, and track expenses on a real-time basis. For example, customers can make payments by phone at the point-of-sale. In addition, users can synch up their devices with the latest data in the cloud.
Cloud application providers aim to provide seamless service and performance, functioning as if the software programs and databases were installed locally on end-user devices. Cloud computing therefore provides infrastructure convergence and shared services that are better than the end users could provide for themselves. This type of data center environment allows microenterprises to launch their own applications faster and with easier manageability and less maintenance. Cloud services also enable enterprises to quickly adjust IT resources (e.g., servers, storage, networking) to meet fluctuating and unpredictable business demand (i.e., scalability).
19. What Security Issues Do Accounting Apps Present?
Most apps store data and information in the cloud. Therefore, the information is only as secure and reliable as the cloud servers and wireless services. CPAs should ask for the cloud provider’s SOC Reports. Providers with these reports are more creditable regarding security than those without.
In spite of the promise of wireless cloud computing, several problems still exist. Handheld mobile devices need to be more water- and shock-resistant. Wireless speed needs to be boosted, and wireless range is still a problem for remote users, as is the reliability of wireless and cloud services. More content must be added to cloud databases and data warehouses, and security and privacy must be enhanced.
On the user side, the following best practices will minimize security risks:
- Make sure that employees have password-protected devices so that if the device is lost or stolen, it cannot be accessed.
- Limit data access to only authorized users that need that data to do their job. For example, in a college or university, only registrars and advisors should be able to access student transcripts.
- Add additional security steps to access data when not on the premises, such as passing through a firewall and a second level of sign-in.
- Use encryption for messages to ensure that valuable data is not easily stolen.
- Be aware of jurisdictional and industry-specific laws and regulations regarding data—for example, the specific rules under the Health Insurance Portability and Accountability Act (HIPAA) controlling the privacy of medical records.
- Use network monitoring software to record an audit trail, including who is accessing the data, when it is accessed, and what operations were performed.
20. How Can CPAs Help Small Businesses Leverage Apps?
Aside from the accounting and tax apps detailed above, there are also many other apps that can be used to manage other functions of a microenterprise. For example, Hootsuite and Buffer allow microentrepreneurs to monitor their social media marketing accounts. Similarly, WordPress and Blogger make blogging easier. If employees need to share or update files, Google Drive allows users to access and edit documents and files from a variety of devices, as well as collaborate with others. Fees will vary with these types of apps, so CPAs should assist with evaluating which app would be best.
CPAs should familiarize themselves with mobile technologies so that they can help individuals make more informed choices. After listening and making a list of their needs (e.g., mobile payments, accounting, tax), CPAs can match those needs with the appropriate apps based upon their choice of mobile device. The maturity, security and stability of apps should be investigated, as should the ability to integrate apps with one another. Once the cost of potential apps is calculated, it can be compared with the microbusiness’s resources and adjusted if needed.
CPAs should also make a list of valueadded services offered by themselves or their firm. For example, CPAs can do a much better job of tax planning and tax minimization. In addition, CPAs can assist with personal financial planning, such as retirement planning and college savings programs. Apps cannot replace the personalized attention that a CPA will provide, and the proper balance of technology and personal interaction will enable a CPA to deliver superior value.
Now and in the future, microentrepreneurs will ask CPAs to help them navigate the complex waters of the sharing economy and mobile commerce. In a rapidly changing economic environment, small businesses will look to innovative solutions to gain a competitive advantage. Therefore, it is critical that CPAs understand these technology products in order to provide valueadded advice and services.