By Andrew Patterson
Competition in the online accounting space has increased significantly in recent years with the launch of high profile company Xero.
But Auckland based provider BankLink recently clocked up 25 years since launching its secure facility for businesses to outsource their accounting functions and has recently begun expanding into the UK, adding to its existing global footprint in Australia.
Founded in 1986 by Malcolm MacDonald, Derek Jones and Steve Agnew, the original aim of the business was to provide a time-saving service to accountants and their small business clients.
It was clear to the founding directors that one of the most time-consuming processes undertaken by accountants was the re-keying of their small business clients’ bank statements into the practice’s own computer system.
It seemed logical that if this data was already recorded by the computer systems of financial institutions, it would be possible to transfer the data directly to the accountants’ computer systems.
This would enable accountants to turn the data into valuable financial information, create efficiencies, and provide added value to their service. And so, BankLink was born.
Richard Rees, General Manager of Operations at BankLink, says the whole accounting process has come a long way from those early days.
“In the 1980s we saw quite a change to the way that accounting practices operated as they began to invest heavily in computerization and that led to quite a bit of discussion within the profession about the need to get electronic data seamlessly into these new accounting packages that were beginning to emerge.”
“So that became the genesis of BankLink. Simply put, the goal was to streamline the accounting process by receiving data electronically in a secure environment, thereby creating significant efficiencies for both accountants and businesses.”
As anyone who worked for a charted accounting practice in the 80s will remember, rekeying data was both tedious and highly inefficient.
“Some of our founding directors tell stories about walking into accounting practices and finding rooms full of people, mainly women, who were doing data entry and were literally keying in hundreds of bank statements in order to create annual accounts and completing GST returns when they were first introduced. It was both inefficient and expensive and not particularly timely, as it often took quite a while to produce the accounts, so it wasn’t particularly good for planning.”
Interface and growth
Developing and maintaining a robust and secure interface to enable the transfer of data to occur has become the core function of BankLink’s business model.
“The fundamental proposition for BankLink is that we have access to well over 100 financial institutions from the main trading banks through to rural providers, including the likes of Fonterra, who have farmers as their main clients.”
“We access the data from those institutions, aggregate it and then process it in such a way that an accountant can receive data for more than 1500 bank accounts into our software which then allows them to efficiently process that data to create management accounts for their clients and complete al their GST requirements at the same time.”
As the number of new businesses continues to grow so BankLink has been able to mirror that growth.
“While the majority of our clients are in the SME space, we do have a number of accountants who use our system to manage the accounts for some quite large entities running on multiple sites with multi-million turnovers. It really boils down to the relationship that a business owner has with their accountant and about how they want to run their accounting process.”
“We now have nearly half a million accounts on the BankLink service which is proof that a lot of businesses chose to outsource the accounting process to their accountant and that means they can be left to get on with running their business.”
BankLink recently issued a warning to small businesses to avoid a practice known as “screen scraping.”
“Because we go through the front door to access data from the banks and other financial institutions, often that means that they have to undertake a specific IT project to make that happen. Generally BankLink funds those projects which sometimes can involve spending tens of thousands of dollars to create a data pipeline for a client. Of course, that can be quite a complex process and can take time to get in place.”
“Screen scraping is the other way of accessing data via an online banking system. That involves a bank customer providing their login and password details to a third party which allows that person to effectively mimic the account holder and gain access to the data. Despite it being quicker, easier and cheaper we obviously don’t recommend the process and clearly there are significant security risks for those who do.”
For more than 25 years BankLink has understood the power of integrating data into software but more recently, competition has arrived in the form of Xero.
The high profile listed accounting company has created a seamless platform that is proving particularly popular within in the SME space.
However, BankLink isn’t fazed by the arrival of its new competitor.
“We see products like Xero, MYOB and QuickBooks as being at the edge of what the BankLink proposition is all about because our system is really about providing a facility for businesses to outsource their accounting functions whereas our competitors are providing an accounting solution to a small business owner to undertake the accounting function themselves. So really we’re working at different ends of the accounting solution, but perhaps in the middle there are some rub points.”
“We welcome the competition. It makes us sharpen up our game and makes us think about how we do business but BankLink continues to grow.”
“Domestically, Xero has been having a fair crack at our business since they established but despite that we continue to grow at around 10% a year and in Australia we’re achieving an annual growth rate of around 15% so I’d argue that competition is good for us because we continue to achieve our growth targets.
Despite clocking up its first quarter century, BankLink still believes the business has significant growth potential in the future.
“In the next 5-10 years I would expect our turnover to have doubled to more than $100 million, we’ll be operating in multiple markets with the UK market substantially larger than our Australian market. I’d expect 90% of our turnover will be in overseas markets and hopefully the BankLink profile will have grown with our expanded global footprint.”
|Sector:||Financial software services|
|Staff:||169 (NZ; 130 / Australia: 32 / UK: 7)|
|Fastest growing markets:||Australia|
|International offices:||Sydney, Melbourne, London|
|Export / Domestic sales split:||70 / 30|
|Ownership:||Private (!00% owned by founding directors)|
|Likely to IPO:||No|