The founder of shaving preparation brand Oscar Natural hired a Sydney accounting firm in July last year to convert his accounting software from MYOB to Xero, favoured by a growing number of Australian small business owners.

He was told in an email it wouldn't cost more than $9000, and de Vries was given the impression it would take a week or two.

But months on, he's still waiting for the conversion to be finalised and has been trapped in a cycle of bill payments.

The frustrated business owner is speaking out to warn others in business to be wary of the subscription model offered by Xero, which he says can effectively lock business owners out of their own accounting system.

He's accused the accounting firm he hired of holding his financial information to ransom. He receives regular bills for services rendered, so far forking out around $20,000 to the firm.

De Vries didn't realise the firm would take out the Xero subscription in its own name, instead of his, meaning he's effectively wedded to the accountant.

“I'm effectively being held to ransom and they refuse to transfer the subscription into my name, so I'm stuck with bills I never signed up for. This could amount of restraint of trade, but I've so far been unable to get the issue resolved,” he says.

“I should have insisted on a formal quote, as I clearly didn't sign up to have this firm continually bill me for ongoing support.

“I've been stung, and it's taken an enormous amount of time to try and resolve this. I want other small business owners to be aware that they need to take a Xero subscription out in their own name, and not let their accountant hold the subscription,” de Vries says.

He admits he hired the accountant in a hurry because his business couldn't afford any downtime.

A subscriber has to give authorisation before a subscription can be transferred, he says.

“I have a new accounting firm lined up, which has given me a written quote and is ready to take over. However, while the current firm continues to control the subscription, it has full insight into my financials and could delete all other users, including me. It truly is an outrageous situation.”

He's not alone. Andrew Simpson is the owner of Sydney industrial design firm Vert Design. He's been stung in exactly the same way.

“Xero offers great software and I love using it, but the bookkeeper makes a margin if the subscription is in their name, and continued to send me bills.

“The thing that really worried me was that I was having a financial dispute with someone that had control over my invoices.”

The bookkeeper appeared to be logging in and seeing payments made by his clients, then would send a bill, he says.

“I've got another client in exactly the same position at the moment. I had a quote for the work, didn't keep it, and the costs just keep rolling in, so spent more on bookkeeping than I ever bargained on.”

Simpson applied pressure to his bookkeeper to convert the subscription to his name, but wanted to warn others.

Rival accounting software provider MYOB has heard of similar cases from small-business owners who have concerns with the Xero subscription model, according to general manager of the business division, James Scollay.

“For example, a Xero customer's ex-business partner went bust and the subscription licence belonged to the other party, so that customer wasn't able to access their data.

“As in any industry, but especially in technology, early adopters sometimes like to try out shiny new toys and applications.

“We've had accountants and bookkeepers bringing groups of clients back to MYOB in their hundreds because they're unhappy with the competitor's experience, and have realised they were on to a good thing with MYOB.”

Xero Australia managing director Chris Ridd says the company is aware of the case between de Vries and his accountant, and has attempted to help resolve the dispute. The accountant is not acting as an agent for Xero, he says.

He advised small-business owners to consider who they wish to act as "subscriber" when signing up to Xero.

“If necessary, a small business owner can register for Xero and assume the subscriber role, and limit the accountant's involvement to that of 'invited user', which is a user with certain rights set by the subscriber,” he says.

A growing number of accountants are being recruited to sell online accounting software, including Xero, MYOB, Reckon, Intuit, Saasu and Freshbooks, Melbourne CPA accountant Simon Wilson says.

Accountants are being enticed with reduced subscriptions, extra software and marketing support, he says.

Business owners need to read contracts carefully, he says.

“While you can subscribe to these packages directly, the preference is that it goes via an accountant, who can offer set-up and ongoing support,” Wilson says.

If you want to change accounting software, firstly speak to your existing accounting firm to get their advice, he advises.