MIND YOUR OWN Business (MYOB) Company PDF

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MIND YOUR OWN BUSINESS (MYOB) COMPANY

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MYOB Market Operations The accounting software market has been expanding as many businesses prefer using accounting software rather than working out numbers manually. MYOB is one of the leading companies in Australia’s accounting software market. The company eliminates the need for bookkeepers and allows business people to make cash flow management and invoicing decisions conveniently through mobile and desktop apps. It competes for market share with other competitive players such as Xero, Intuit, Reckon, and Sage. The accounting software market is highly dynamic and has been evolving very fast as new and superior designs are constantly being introduced. MYOB has been thriving for long despite market challenges. Although the company is multinational, its operations are mainly concentrated within Austria and New Zealand markets. Apart from encountering competition in terms of creativity and innovation, MYOB is also criticized by rival players with the intention of destroying their public reputation. Although MYOB is the leading provider of accounting software in Australia, it is outperformed by its competitors in some of the business segments. For example, Xero has more cloud accounting subscribers as compared to MYOB. It can be drawn from the previous transaction records that MYOB’s customers have relatively short subscription life implying low customer retainance ability in the industry (Mind Your Own Business, 2017). The business capacities of MYOB competitors have been expanding at a faster rate than the growth rate recorded by MYOB implying in future the company may be outperformed by its rivals in all business segments. The annual number of MYOB’s cloud subscribers is estimated to be only half of Xero’s cloud subscribers.

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Many subscribers of desktop software have been shifting to modernized cloud offers. MYOB which has been majoring on desktop accounting software but less on cloud accounting software is likely to lose market share if this trend continues (Mind Your Own Business, 2018). Success in this industry cannot be measured based on the number of subscribers because there are some active but non-paying subscribers. MYOB has a good opportunity of thriving in this competitive market by investing more on cloud accountancy and luring its existing desktop subscribers to consider MYOB’s cloud offers. MYOB is likely to face tougher competition in the future as business analysts predict a fall in MYOB's market share of paying subscribers while the market share of its competitors like Xero is expected to increase. Analysts argue that the ‘legacy business’ holds MYOB back but the other players without any legacy to protect are expected to be nimble and quick in capturing greater market share as the market shifts with recent innovations. Some of the MYOB’s competitors are well-established worldwide yet MYOB dominates mainly in the New Zealand and Australian markets. MYOB has been investing relatively less in research compared to its competitors implying the company is likely to be outperformed in terms of innovation and creativity by its competitors shortly. MYOB’s Competitive Strategies MYOB has a clear strategy of delivering long term growth and value for the sake of its shareholders. This strategy would be achieved by accelerating the expansion of the existing markets, penetrating the already opened new markets and strengthening new & core Total Addressable Markets (TAM). According to MYOB’s annual report of 2017, the company is planning to expand its existing market through promotion of online subscriptions as well as

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lengthening lifetime value. The company has been investing heavily on sales, brand quality and marketing activities to attract more small and medium entrepreneurs (SMEs). The Connected Practice vision is aimed at winning advisers. Also, there are ongoing operations to shift the nonpaying desktop subscribers to the new platforms. The use of MYOB Platform is expected to facilitate more SME referrals and hence growth in online subscribers. The lifetime value can be enhanced through better customer satisfaction. If the customers are satisfied by the new improved designs, the number of potential customers lost to rival players is expected to decline. Some of these strategies have been initiated successfully as the company experienced a 4% increase in Average Revenue Per User (ARPU) benefit in 2017. The Machine Learning and Artificial Intelligence features have been enhanced in line with the latest The other underway strategy is the penetration of new market niches through expansion of Total Addressable Market. There are plans to attract more clients in the use of MYOB PayDirect. The usage of PayDirect per client is expected to increase as new payment types are being introduced. The 2017 annual records indicate that the MYOB client base using Paycorp service has increased significantly. The MYOB management is currently urging Tier 3 desktop users to online subscriptions. The provision of larger (Tier 2) Enterprise solutions is expected to expand the total addressable market. The MYOB Advanced targets the Tier 3 potential clients. To maintain its position in a changing environment, MYOB invests a lot in innovations and emerging products to retain and support existing clients. MYOB intends to create a market leading platform capable of delivering digital connection among the greater accounting ecosystem, SMEs and advisors. The MYOB strategic priorities are its clients, the platform, brand, market share, and connected practice. Under the Connected Practice, the company has been trying to change its business structure intensively.

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The essence of the Connected Practice is to promote advisory services, increase the efficiency of transaction processing and compliance. MYOB’s new strategy of long-term market value is likely to yield sustainable profits. The strategy focuses on the future market needs and the emerging conditions in the accounting software market. If the strategy is implemented successfully, the company is expected to have many paying subscribers in the future. The easy to use and at the same time, sophisticated designs will serve to attract new clients and retain the existing ones. Therefore, the MYOB’s profits will be sustained if the underway strategy thrives in the current and future accounting software market. The expenses incurred in implementing the strategy are affordable in the longterm, and the company is less likely to exhaust its resources in the attempt of executing the strategy (Mind Your Own Business, 2016). Analysis of MYOB’s accounting The 2018 Financial Reports of MYOB indicate that the firm’s total revenue increased by 6.9% to $445,237. On the other hand, the company aggregate expenses increased by a greater margin, that is, by 12%. The untaxed profits of 2018 were less than the untaxed profits of 2017 (Mind Your Own Business, 2018). However, the 2017 income tax was higher than the same figure of 2018, and as a result, the company experienced an increase in net profits between the two financial years. The MYOB's current ratio based on 2018 financial reports was 0.78, and hence the company can be considered to be under financial crisis (Mind Your Own Business, 2019). A current ratio below 1 implies the business’s short-term liquidity is at risk and is not in a good position to meet its financial obligations. The debt-equity ratio of MYOB is undesirable to shareholders and management. Expressing the 2018 investment from borrowings as a fraction of

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shareholder funded investment, the value is approximately 341. This statistic indicates a very high debt to equity ratio implying the company investment is mainly supported by borrowings. Part of the future company's revenue will be spent on servicing loans rather than expanding the business. Just like in any other company, the management of MYOB may find it attractive to manipulate earnings and overall company performance figures to fulfill their interests or for the benefit of the company. For instance, the management may report less than actual earnings so that the performance goals of the subsequent financial year are easily attainable. Underreporting mostly happens when a company performs exceedingly well. On the other hand, if the company extremely underperforms, managers are aware that their jobs are at risk and hence they likely to report more than actual earnings. The interests of shareholders and customers may influence the earnings reported. Shareholders are interested in high profitable investment. Based on MYOB’s annual reports for the last five years, there is no evidence of financial manipulation. However, the absence of such evidence does not necessarily mean that the company does not manipulate earnings. It would be difficult to detect any form of earnings manipulation from financial statements because some accountants are clever in the sense that they manipulate every detail to conform to their reports. Some forms of financial reporting manipulations can only be identified by business insiders. In the event of manipulating earnings, managers and accountants are careful not to disclose such frauds to the public.

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References Mind Your Own Business, 2015. 2014 Annual Reports. Retrieved from: http://member.afraccess.com/media? id=CMN://3A422782&filename=20150504/MYO_01622091.pdf Mind Your Own Business, 2016. 2015 Annual Reports. Retrieved from: https://www.google.com/url? sa=t&rct=j&q=&esrc=s&source=web&cd=3&ved=2ahUKEwiX2OqT2JLhAhXEq48KH bMfDpMQFjACegQIBRAC&url=https%3A%2F%2Finvestors.myob.com.au %2FDownloadFile.axd%3Ffile%3D%2FReport%2FComNews %2F20160225%2F01715605.pdf&usg=AOvVaw3MQoSfPfF7xykoCs62P9xW Mind Your Own Business, 2017. 2016 Annual Reports. Retrieved from: https://www.google.com/url? sa=t&rct=j&q=&esrc=s&source=web&cd=6&ved=2ahUKEwiX2OqT2JLhAhXEq48KH bMfDpMQFjAFegQIBhAC&url=https%3A%2F%2Finvestors.myob.com.au %2FDownloadFile.axd%3Ffile%3D%2FReport%2FComNews %2F20160225%2F01715657.pdf&usg=AOvVaw0_MaW5ZEwyQiRV8n7YOaZI Mind Your Own Business, 2018. 2017 Annual Reports. Retrieved from: https://investors.myob.com.au/FormBuilder/_Resource/_module/HhW--OHCfUMPYnMov-UPA/documents/8413_MYOB_AR17_EDIT_v7a_INTERACTIVE.pdf Mind Your Own Business, 2019. 2018 Annual Reports. Retrieved from: http://member.afraccess.com/media? id=CMN://3A499146&filename=20180824/MYO_02013461.pdf

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