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Consolidation and Innovation – The Xero Trajectory

XeroCon in Australia is done and dusted for another year. With more than 3,000 accountants and bookkeepers from multiple countries attending, there was a certain amount of hype,  but going beyond that, Xero demonstrated that it was continuing to deliver a solid whole of business experience with a dizzying array of statistics. To list but a few:

  • 1,035,000 subscribers world wide, with close to 700,000 in Australia and New Zealand.
  • 500 third party apps integrated to Xero.
  • 99.89% system availability.
  • 2600 product releases in one year.

What’s new in the Ecosystem?

The Projects module was announced at XeroCon and whilst much is on the drawing board, right now the delivered functionality is very rudimentary and cannot deliver much in terms of efficiency although the reporting may be helpful. At the moment the only integration with the core product is that a project is linked to a Contact and after manually entering time and/or expenses (not linked to Bills, Expenses, Bank Feed transactions or Payroll) a customer invoice can be generated. So, a lot of double entry of data and opportunities for inconsistency.  WorkFlowMax need not be concerned at this stage, but further down the track it could be a viable alternative for some business.

Also announced at XeroCon was the mobile Expenses app, designed to simplify the workflow associated with the processing of expenses. Just a few clicks on the mobile and a transaction is generated into Xero along with a photo copy of the receipt for approval and processing – has to make life simpler, and I am sure Rod Drury has experienced the pain himself!

Xero continues to woo accounting and bookkeeping practices by endeavouring to be a one stop shop for all the tools required to run a practice. We have had Workpapers, Practice Manager and Tax for a few years and then at XeroCon last year, Xero HQ was announced and released in Beta shortly afterwards. Xero HQ  is designed to replace ‘My (Green) Xero’ with its single client list (including non-Xero clients), practice-wide report templates and insights in terms of industry, banks and apps used by clients. One year on, many practices have still to actively transition to Xero HQ but a sweetener announced at XeroCon this year is a subset of 9 hand picked apps that will assist in managing client files and providing back office tools for the practice. These apps can synch data and send notifications to an activity feed in Xero HQ. The activity feed can be customised to send only relevant data to prevent information unload and if a user clicks on an alert  it will open the relevant app and client file providing real time visibility and insights into client data. This is a great leap forward from most other practice management software suites and one that certainly gives Xero a competitive edge in the battle for the loyalty of accountants and bookkeepers.

Machine Learning – again a hot topic from XeroCon 2016 where Rod Drury outlined how, with the migration of client files to the AWS environment, Xero had the ability to develop and deploy Machine Learning to avoid some of the pitfalls encountered by manual coding. One year on and this investment is starting to bear fruit. The structured taxonomy of accounting data is small so it is an ideal candidate for machine learning and Xero is aiming for a very high percentage of code-free accounting. We can expect to soon see suggestions in Bills as well as bank feed transactions.

And lastly amongst the announcements – it’s never too early to start become a Xero user. The Lifelong Learning Programme captures our youth at Tertiary institutions and with Train, Retrain and UpTrain there are no limits to becoming a Xero expert at any stage in a person’s lifetime.

As well as delivering holistic functionality for accountants, Xero is ensuring that it delivers software that provides (as far as can be the case with accounting software) a happy experience for small businesses and ‘helping small businesses to grow’. So there have been some helpful enhancements during the past 12 months with a few more on the 90 day radar screen. My highlights are:

  • More granular user permissions – although there is still a way to go on this.
  • Increased functionality in Payment Services for customer invoices including being able to directly on-charge the Stripe payment fee to the customer and the addition of a QR code to an invoice.
  • Ability to send bills and employee payments directly to the bank for payment, avoiding the processing of ABA files (in the 90 day window).
  • Extension of Bank Rules to include transfers between bank accounts.
  • Ability to add a Discuss to transactions other than from bank feeds.
  • Extension of Find & Recode to include manual journals and extension of fields available in the Search function.
  • Simpler BAS forms.
  • Ability to record private use of assets to enable correct depreciation calculation.
  • Increased flexibility for automatic superannuation with the change to a new clearing house, including being able to reprocess returned super payments.

Many of these are minor enhancements and there are many more on everyone’s wishlist – but these continue to improve the user experience.

But what about Payroll? This has long been a pain point for many users. Not much was said on this topic however Xero is committed to providing Single Touch Payroll by 1st July 2018 when it becomes mandatory for businesses with 20+ employees. Along with that will finally come functionality to record termination payments as this will be required in Single Touch Payroll. Apparently the whole payroll module is being rewritten so minor irritants such as not being able to star reports will be addressed. However there is no update whether  some technical non-compliance issues including SGC on leave loading and correctly displaying Casual pay rates on Employee pay slips will be incorporated in the rewrite and no delivery date yet.

The Happiness Index

These innovations and enhancements consolidated with the existing product prophesy a continuing rosy future for Xero. Although there have been and will continue to be critics, CEO Rod Drury has never deviated from his goal that Xero must be global and it has to be a ‘big bang’ approach. This means extensive capital raising, ploughing revenue and capital into R&D and always looking to the future. Going global increases exponentially the potential for customer expansion but unlike many competitors, Xero has never competed on price (a marketing tool used by others) As the first cloud accounting software in Australia (apart from Saasu) it benefited originally from its incumbency position but now the product earns its subscribers. And because approximately half of all Xero subscribers are Australia based, unlike other internationally-based accounting software providers where Australian subscribers are a micro spot on the landscape, Xero can and must afford to pour resources into delivering for Australian businesses.

So in terms of the happiness index, for cloud accounting solutions in Australia – for me Xero is at the apex and I now have 2/3rds of my clients using it. Over the past five or so years, I have evaluated the various cloud accounting software solutions that have made it to our shores and now am not only happy with Xero but doubt that in the foreseeable future any of the other solutions will leapfrog into first position.


2016/2017 – the Then and the Now in the Cloud

2016 was the year when accounting software in the cloud indisputably came of age, it was also the year when most new comers to the cloud were not businesses migrating there but start-up businesses born there. Realistically – if a business has not yet migrated to the cloud, it probably for whatever reason; never will, so software providers now recognise that the initial stage of cloud deployment is complete and they can move to the second stage; aggregating the data and making it work for the business.

But first– where did we go and what happened in 2016?

The cloud accounting software market place in Australia continued to be very competitive. Although 2016 did not see any new players enter the market, there was a continued jockeying for subscribers through the delivery of improvements and enhancements amongst existing incumbents. This was good news for small businesses as they reap value from their investment, get better insights into their business and increase productivity.

Both Xero and Intuit continued to rollout new features during the year. Intuit put additional effort into improving the user experience through changes to colour and fonts to assist in highlighting important information. Intuit also released Self Employed, a mobile-only app enabling the self employed to track expenses and mileage. I wasn’t overly impressed with this primarily because there is no upgrade path, it cannot integrate with QBOA and currently does not cover GST despite Taxi drivers being one of the five vertical markets targeted. However time will tell on this one and although subscriptions may be high, I would expect churn to be high and retention low.

Reckon is gradually enhancing Reckon One but its main focus remains price rather than functionality; although a major redesign of its navigation was launched in August making it much easier to find functions and reports. It remains very much the Harvey Norman ‘we won’t be beaten on price’ solution for the cost conscious small business owner; although COO Daniel Rabie has more elegantly described this as disrupting ‘high margin incumbents through a game-changing pricing model’.

Significantly Xero has never competed on price and remains the most expensive option here in Australia and whilst it has tinkered with field names, it remains wedded to a primarily blue experience with no font or navigation changes.

For the first time for a while, I logged into Saasu and was pleasantly surprised to find that it has become a whole lot more user friendly. It is never going to compete with the metrics of the likes of Xero and Intuit simply because that is not how CEO Marc Lehmann measures success. The company is privately owned so there are no constraints with meeting shareholder expectations and it does generate a profit year on year. The product has a relatively small but dedicated body of subscribers, comprehensive functionality, ticks all the main boxes with regards to Mobile, payment gateway/PayPal integration and meets its own success criteria and so will happily co-exist alongside Xero and Intuit.

Sage completed its second year of providing a cloud accounting option in Australia with Sage One. As with QuickBooks Online and Xero, it has an Accountants Edition to assist in managing all Sage One clients from one place. It did launch with comprehensive functionality and we haven’t seen much change in 2016. The smarts on the customer invoice and the variety of payment options that we see in Xero and QuickBooks Online remain absent.

Third party Apps and the ecosystem – 2016 saw the continued emphasis on the ecosystem. Sage One was the only product to buck this trend integrating with just a selected few third party apps including amongst others; Shoeboxed, WooCommerce, Shopify and eWAY. All other software providers expanded both the breadth and depth of third party apps available although interestingly Intuit looked to be changing course and providing a platform with embedded third party apps. This has already been evidenced in Australia with KeyPay for Payroll but Intuit looks to be expanding the concept in its relationship with TSheets and Bill.com (US only) This approach has the advantage of providing a standard user interface across the platform, a single sign on and a consistent customer experience. It also conveniently takes out all the guess work for the customer in selecting an app but reduces the number of players in its ecosystem.

Mobile; this remains an area of focus throughout 2016 with all software providers working to ensure the mobile experience keeps pace with ever expanding expectations.

Financing: During 2016 there were three separate threads of developments here. Firstly since all business data is in the cloud and available to authorised parties including financiers, there has been an expansion in loan products available to businesses. These can generally be approved by the financier within a matter of hours or at least within one business day. Interest rates are higher than with the major financial institutions but time taken to lodge the application is dramatically reduced making this a flexible and cost-effective option. All the main accounting software suppliers have their own finance provider – for example Reckon One loans is powered by Prospa and by December last year had provided more than $1m in loans to small businesses. Xero and QuickBooks Online have similar providers.

Secondly – there is increasing sophistication in the interaction of the business with its customers and invoicing with the objective of reducing days outstanding. All too frequently, cashflow is a major headache for small businesses and any feature that reduces debtor days can bring welcome relief.

Thirdly – there has been emphasis on the integration between the accounting software and payment partners. In 2016 QuickBooks Online integrated with Apple Pay and deepened its integration with PayPal. Xero integrates with Stripe, Square, eWAY and PayPal. Saasu also has a mix of payment options however Reckon and Sage have yet to come on board here.

What can we expect from 2017?

So one month into 2017, what changes will we see? In many ways 2017 will continue to build on the developments of 2016. ’Cloud Everything’ is becoming the dominant theme for many small business owners. Mobile will continue as a priority as will the ecosystem or platform as the gap between the entry level software and the next level up remains dauntingly high for most small businesses. All software suppliers have fully embraced the need for positive User Experience, whilst this doesn’t add new features or functionality; ease of navigation, meaningful colours to lead the eye to numbers that need attention and clear fonts assist in providing user happiness.

Cashflow will continue to be a focus feature, anything that will assist businesses in receiving cash faster from customers – whether by smart invoicing or streamlined payment options will again be a priority this year. Xero has already released the live preview of invoicing so a business can easily see exactly what the customer will see before it has been sent. There will be more to follow

However one major feature that was very much in its infancy last year was Machine Learning. There should certainly be some huge developments here in 2017

In 2016 both Xero and Intuit announced that due to the volume of data that was accessible to them from the cloud deployment, they are now in a position to aggregate that data via machine learning to deliver both auto-coding of transactions and their version of a Chat bot. Xero will provide a bot via Facebook Chat and Amazon Alexa and Intuit will deliver its ‘QB Bot’, both of which were demonstrated at their annual conferences. Sage already has its bot ‘Pegg’ released.

The rollout of Machine Learning has some interesting implications – if the machine can auto code bank transactions more quickly and more correctly than can be done by manual intervention; why would a business owner use a bookkeeper? And if the machine can deliver better business insights, surely the role of the accountant will be impacted. Additionally the paradigm of big is beautiful has been proven; the more data that is available for analysis, the more consistent the results so accounting software suppliers that don’t have access to large volumes of data are at a relative disadvantage when it comes to Machine Learning and this may impact them as Machine Learning becomes more widely embraced.

Subscribers – Agreed Saasu has done away with that as a metric for success, but Intuit and Xero continue to focus on subscriber numbers. Globally Xero is expected to reach the 1 million mark this year with more than half of these in Australia. Intuit is expected to reach 2 million total subscribers (includes subscribers to Self Employed) but it remains primarily a US company with less than 20% of its QuickBooks Online customers being outside the US and less than 4% in Australia. Based on these soon to be expected number of subscribers; 4% of 2 million is a lot less than 50% of 1 million. This impacts what these two software providers deliver in the way of country specifics.

Xero has always provided excellent support for the Australian BAS/IAS regime. Whilst it has only recently provided auto fill of the W1 and W2 boxes, through Xero Tax they have delivered a seamless and seriously easy experience in reporting to the ATO. The GST preparation and recording in QuickBooks Online remains cumbersome (a by-product of reverse engineering into pre-existing code). An enhanced GST reporting centre is due for release into QuickBooks Online early this year (just as the ATO is releasing Simpler BAS)  , however Intuit has no plans to deliver an SBR solution for Australian accountants except through a third party provider such as GovConnect – a serious point of difference.

Single Touch Payroll

This is finally turning into reality. The legislation is now complete with a timeframe of being available to all businesses from 1st July 2017 and a requirement for all businesses with 20 or more employees from 1st July 2018. (No date set yet for businesses with less than 20 employees). Will the software suppliers be able to provide a solution to meet the July 1st 2017 date? I would expect that both QuickBooks Online and Sage One should be able to comply as they both have embedded integrations with specific third party payroll products which have a client base larger than just those products. I think that Xero will be able to comply however, Xero Payroll currently requires a manual workaround to process an ETP and unless that is resolved, it will not be able to report completely.

Annual Conferences and Roadshows

These have long been an important feature on the calendar for Xero, Reckon, Sage and MYOB. It provides an opportunity for the software providers to outline their achievements and set expectations for the coming year. In 2016 Xero hosted a highly successful and glitzy XeroCon South in Brisbane which even included a session on Conscious Accounting from a Buddhist monk! Intuit has now hosted three international conferences in San Jose, California however the tyranny of distance has prevented many Australians from attending, but this year Intuit will host its first ever QuickBooks Connect in Australia in May. I am sure we won’t be disappointed.

The Accountant

I mostly focus on the accounting software from the perspective of business users, but as many of the software providers market their product primarily through Accountants, the support provided to accountants to manage their clients is an important factor in their recommendation of software to their clients. Sage, Intuit and Xero all provide an accountants platform however Xero looks to have stolen a strategic advantage over Intuit with its delivery of Xero HQ. This open practice platform will replace existing practice management solutions with a single client list highlighting tasks and activities. The fairly basic Beta version was delivered in November but we can expect to see that come to fruition this year. Intuit unfortunately is not planning on delivering functionality of this nature in Australia despite providing advances for our US colleagues. As Xero HQ takes hold, this could prove a disadvantage for Intuit

Mergers & Acquisitions

I am certainly not getting out a crystal ball here. There have in the past been rumours about potential takeovers of Reckon which they have strongly denied. Providing support for the denial is the acquisition this year of perpetual licences to the source code of two cloud based applications; Pose – Point of Sale and MicroManager – time tracking. So maybe it will be business as usual there.

In Summary 

One thing is certain – change will continue in a myriad of ways throughout 2017. The cloud has disrupted how businesses operate and this year it looks set to disrupt the working lives of the accounting professionals themselves. Accountants and Bookkeepers like many other jobs are not immune from automation. However anticipating and embracing the change and the opportunities that change brings means that never again will accounting be considered ‘boring’, it will remain cutting edge, pushing the boundaries of technology and working in tandem with businesses.

Cloud accounting software products are by now fairly mature, robust and sophisticated so the changes that we see in 2017 will be more on the periphery – mobile, the ecosystem and banking. But these changes will positively impact businesses in terms of productivity, insights and service delivery.

2017 is looking good.

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Beyond the Basics in Cloud Accounting Software

With a world of apps and the opportunity to custom build a cloud accounting ecosystem, it may appear that the life of entry-level accounting software such as Xero or QuickBooks Online can be extended almost infinitely. A planned ecosystem using third party apps can enable the business to:

  • Access and integrate additional and advanced functionality.
  • Achieve a best of breed solution with the careful selection of apps.
  • Exponentially extend any restrictions on transaction volumes (especially Xero) as many transactions will be stored in the app.

However using third party apps may not be a universal panacea for organisations that are at the upper end of ‘small and medium businesses’, those with a more complex business model or a more complex business structure. When the boundaries are being reached, a conundrum is also reached – where to go? There is not the same level of choice, the price increase may be large and the complexity of the software requires specialised assistance in implementation and maintenance.

For some time now, Netsuite with the scaled version – JCurve has provided an option for businesses moving beyond entry-level business software, but more recently we have seen the emergence of Microsoft Financials for Office 365 (Fo365);   powered by Microsoft Dynamics and a cloud version of tried and tested Navision means it is both a mature and comprehensive Enterprise Resource Planning (ERP) product.

I had the opportunity to test drive the product over the Christmas break to see how it fits into the landscape and assess whether it could be a viable option for businesses who may be encountering roadblocks with a Xero/QuickBooks Online ecosystem.

The F0365 website states that the product is designed for small business; is built for growth and that their mission is to make every small business as efficient as their large competitors using smart technology and insight – sounds promising.


The product has all the major modules expected from an ERP system including:

  • Financials.
  • Fixed Assets.
  • Job Costing.
  • Manufacturing.
  • Inventory.
  • Service Management.
  • Sales & Purchasing.
  • Warehousing.

Much of the functionality met my expectations for ERP system,  but for many small businesses, it is their manufacturing and advanced inventory requirements that cause the most stress in an entry-level environment. The following features required by so many businesses are thankfully are all present in Fo365 (no specific order):

  • Multi level bills of material.
  • Support for multiple costing methodologies including FIFO, LIFO, Average, Standard at the item level.
  • Serial and lot number tracking.
  • Make to Stock and Make to Order production methodologies.
  • Multi-Warehousing.
  • Inventory Available to Promise.
  • Landed Cost.

This is not an exhaustive list of what is available in these modules, it barely scratches the surface and the level of detailed information that you can store against an Item is so comprehensive (includes Planning, Warehousing, Replenishment) that there can’t be anything not covered!


Despite the extensive functionality  there are some key omissions:

  • At this time there is no Payroll module, although a solution is scheduled for delivery by June this year
  • No Bank Feeds
  • No Payment Gateway/PayPal Integration
  • Not SBR enabled
  • No E-Commerce or POS modules (both available in Netsuite)

We have come to expect all of these features (with the possible exception of SBR enablement)  in the likes of Xero and QuickBooks Online and their omission in this product could come as a disappointment to potential users. (You get Landed Cost but lose Bank Feeds!)

Apps and Integration

Because Fo365 is a fully fledged ERP system, there isn’t generally a requirement to expand functionality with apps, however a couple of additional tools are provided free of charge:

  • Jet Express– links to financial data base to expand reporting (including multiple companies).
  • Power BI – model and design dashboards to illustrate business performance.

If a more powerful CRM is needed, Fo365 will integrate to Microsoft Dynamics CRM and there is also an integration to Sharepoint.


And yes, Fo365 is fully mobile enabled including Windows phone and tablet which often miss out on mobile enablement


This  is not a product that a business can implement on its own (although the implementation of a fairly simple system such as Xero benefits from accounting professional input in the set up and maintenance) There are Fixed Scope Implementation packages to ensure fixed implementation costs and the  implementation methodology allows for configuration, training and user acceptance testing.

The Standard and Premium editions have a fixed price implementation fee – $2990 for standard and $9990 for Premium. There is no charge for implementation of the Lite edition mainly because that is largely delivered pre-configured with master data populated.

System Benefits:

  • Fully scaleable for business growth
  • Being a full blown multi currency, multi company ERP system, additional apps are generally not required meaning there is a single user interface across the product
  • Data is hosted by Microsoft Azure and is stored in Australia (same for Xero and Reckon)
  • Completely Microsoft compliant, with the familiar icons and short cuts making the user interface that one step easier

The Downside

  • Complicated to implement and requires much more time to learn
  • Reports were not very user friendly to run, and cannot be viewed on the screen until exported to PDF, Word or Excel


This is mostly available via the Implementation Partner, although email support is also available.

Pricing and Editions

Three editions of Fo365 are available with pricing per user per month plus a free login for one external accountant. There is no additional charge for multi companies. From a price perspective this cannot be compared directly with the entry level accounting software as they all charge per company file not by user.

  • Lite, allows up to 3 users, charged at $29 per user per month. This edition has only very basic functionality including basic inventory and really has no functionality that you would not find in Xero or QuickBooks Online. There is $0 setup cost for this edition
  • Standard – allows up to 15 users, charged at $99 per user per month – this edition includes advanced inventory but basic warehousing , job costing, multi currency, service management, manufacturing and Fixed Assets
  • Premium – allows up to 150 users, charged at $159 per user per month. This includes Advanced Warehousing.It is provided on a single tenanted platform  (the Lite and Standard editions are multi tenanted). Premium can also be run in a desktop environment, the Lite and Standard editions are only available via a browser or mobile.

Both the Standard & premium editions allow for a Reports Only user at $49 per user per month

Overall Evaluation

Fo365 is a comprehensive ERP solution with full Microsoft compatibility. There are currently a number of functionality omissions as noted above which could make it less than attractive to a business migrating from a Xero/QuickBooks Online environment. It does represent a big leap in complexity that would need to be managed effectively. Would I recommend the product?   I would definitely consider recommending the product but it would be very much dependent on the organisation:  its requirements, its ability to cope with change and manage a more complex business system. For the average small business, I would really be looking to extend the Xero/QuickBooks Online ecosystem. Disappointingly I will have to keep searching for the ideal next step up system.


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Closing the Gap – QuickBooks Online and Xero?

I was fortunate to be the guest of Intuit again this year at the annual QuickBooks Connect conference in San Jose, California at the end of October. Nearly five thousand people attending from around the globe with 1,700 of them being accountants – can life get more exciting? It was somewhat of a sensory overload across four days and five evenings with a lot of insights and takeaways on the current direction of QuickBooks Online.

I had come away from XeroCon South in Brisbane in September feeling very positive about the direction Xero was headed as it embraced machine learning, pushed its ecosystem platform and unveiled its sophisticated platform for Accountants -Xero HQ, (due for release this month). So I was keen to understand what Intuit was delivering to assess if QuickBooks Online would be suitably positioned to reduce the gap between its number of paying customers versus those of Xero in Australia. (Currently around 312,000 Xero v 53,000 QuickBooks Online)

It is always a little difficult at a global conference to assess the Australian content of the announcements and with  not many more than a dozen Aussies apart from Intuit staff in the audience there was no real need for the presenters to be specific.  However the good news was that next year – we will get our own QuickBooks Connect – good news for two reasons – firstly Intuit will have to be clear about what we will be released in Australia and secondly hopefully it will be more culturally in tune with Australian attitudes towards future developments, some of our US counterparts can be rather conservative.

Throughout the conference, Intuit continually reiterated its commitment to small business success, which makes sense for a software company providing an accounting application for small businesses. Its deliverables included:

  • Helping small businesses get paid faster through initiatives such as its partnership with PayPal  and the link to ApplePay .
  • recognising significance of self employed workers with the Self Employed app (see below for more details).
  • Stressing the importance of Mobile with the QBO app increasing in functionality.

There wasn’t much that was new in the product itself to entice Australian subscribers but given the importance Intuit places on the relationship between the accountant and small business it was disappointing to see that although enhancements were being delivered to QBOA (the accountants platform to interact with client data), importantly there was no integration to an Australian tax product or to directly file returns of forms with the Australian Taxation Office. This is a major efficiency feature for Xero but Intuit will only deliver this sometime in the future via a partner integration. Big thumbs down here regarding closing the gap.

I do acknowledge that Australian accountants have an edge with Xero in that around 50% of all Xero subscribers are in Australia so Xero can afford to deliver functionality, for Intuit we represent a small dot on the world map, consequently return on investment just cannot be realised.

The Ecosystem

Xero has always emphasised the importance of third party apps to provide functionality that may not be in the core product. Intuit too has followed that approach for many years but this year signalled a new direction when it announced that two key apps T-Sheets and Bill.com would be fully integrated into QBO (Not sure about Bill.com for Australia as it only works on USD) similar

This change was applauded by Matt Paff in his review of QuickBooks Connect  because it demonstrated that Intuit was working towards as single platform with embedded functionality, and a standard user interface. However Blake Oliver also reviewing the same conference came to a different opinion – that by working exclusively with particular app developers, competition could be stifled. Time will tell on this one but from my perspective a single sign on and a standard  user interface are winners for the end user and if the applications selected are best of breed then it is an all round win.

QuickBooks Self Employed

As part of its commitment to small business success, Intuit has released its Self Employed app which enables the small business owner to keep track of expenses – both business and personal and mileage. The app packs some punches as it supports bank feeds and allows for a photo of a receipt to be attached to transactions. Recognising the importance of mobile, the app was launched in Australia as a mobile only app (not available on Windows phones) Disappointingly the Australia version, although it targets 6 vertical markets one of which is Taxi/Limo drivers, does not support GST. It is understood that this functionality will be available at a later date.

QB Bot (QuickBooks Robot)

This was definitely a peek at what is coming in the future. A  robot named “QB” that is equipped with a camera and interactive touch display that acts as a personal assistant, data analyser and business advisor in one. It was impressive and hopefully not too far off enabling business owners to gain valuable insights into their business at the touch of an interactive screen. Watch this space……

Machine Learning

Yes – Intuit has embraced this. Unfortunately unlike XeroCon this was not fleshed out too much at QBConnect – maybe Intuit did not want to spook the myriad of ProAdvisors in the room as many were still clearly grappling with the concept of Firm of the Future. Machine Learning takes automation beyond bank rules to auto-coding and for the less proficient bookkeeper could be akin to playing chess against a computer. But this is where we are headed and the writing is clearly on the wall – embrace or perish.

Other announcements/Under development

  • The integration of Google Calendar and Contacts into QBO to generate invoices – that is for those not using value pricing.
  • Payment of a sales invoice using a Pay Now button will generate an update in the Accounts Receivable ledger (although even if receiving customer is also a QBO customer – it will not update their Accounts Payable).
  • For some time Intuit has been promising enhancement on the BAS functionality which is both complex and incomplete and the cause of much confusion with clients – nothing further on this.
  • Factoring of Accounts Payable by American Express (maybe just US though)


Will the current raft of enhancements help Intuit to close the gap between the number of Xero and QuickBooks Online customers in Australia? I think the answer is probably not. Xero has a more powerful toolbox for the accountant so unless Intuit can generate enough enthusiasm by going direct to small business owners the challenge will remain for many years.

However there are a couple of  positives:

  • Intuit demonstrated conclusively that they are right on track for the future with machine learning and QB Bot.
  • Having an Australian QuickBooks Connect in 2017 demonstrates not only Intuit’s commitment to our region, but also that Intuit is ready to compete with existing players in a conference arena and that it has enough confidence in its solution to be able to face tough questions from Australian accountants and customers.

Intuit is definitely here for the long haul and we can expect to see healthy competition continuing between it and other key players in Australia but I don’t think the gap will be closed in a hurry.

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XeroCon 2016 – Beyond the Cloud to the Stars

A few years ago we all used to cheer madly when Xero announced the release of features such as Quotes or Stocked Inventory, but XeroCon last week clearly flagged that: the product was moving from the mundane to the magical, that there are now no boundaries, that Xero has truly reached the ‘end of the beginning’ and is strategically poised to realise the dreams of CEO and founder, Rod Drury as it moves to Cloud 2.0.

There were the usual statistics which dazzle with both depth and breadth – just a few:

  • 74,000 users were invited into Xero last month.
  • 1,400 product updates were released in the past year.
  • 194 files per minute were being migrated to the new Amazon Web Services platform
  • 500+ Apps now connected to Xero.
  • There had been over $1 trillion across more than 450 million incoming and outgoing transactions in the past year processed through Xero.

And there were the usual announcement relating to new features in the core accounting software that will make for a happier existence for many users – including:

  • Standard date pickers in reports
  • Auto balancing journals
  • Fixed asset pools and tax reporting
  • Copying of key data including chart of accounts and bank rules to a new file
  • Auto populating Contact data with real time links from Veda
  • Prompt payment discounts on customer invoices
  • Streamlined management of PayPal fees

This complements releases during the year with new reports and new features including customisable columns and report codes.

However the jewel in the crown from a functionality perspective was the unveiling of Xero HQ – an open practice platform for accountants and bookkeepers. Scheduled for release in November, this product is designed as the next generation partner tool for the advisor with a home page providing access  to anything and everything required by the practice.

The main features include:

  • Single Client List
  • Activity Feeds to collate to do lists for client services
  • Reporting
  • Explorer – the pivot table of client data – Xray vision


The breadth of the application is quite startling, it will enable advisors to be proactive in both managing existing clients with a complete range of analytics and insights as well as marketing to new clients. With a single platform for practice manager, tax and work paper,  it will bring new efficiencies to the modern practice. Xero is strongly demonstrating  its commitment to the single ledger concept by providing an unparalleled experience for its accountants and bookkeepers. This surely has to be the icing on the cake.

But wait – there is more excitement. In his keynote address Rod Drury outlined the strategic significance of Xero’s move from the Cloud 1.0 hosting environment for its servers to the Amazon Web Services platform. The new environment provides all in one place:

  • A multi tenanted relational database.
  • An elastic data centre.
  • Big data.

Xero is now able to access a range of artificial intelligence and machine learning tools which will drive greater automation for customers. Machine learning requires large amounts of data to identify patterns and validate algorithms, Xero now has access to that critical data mass and we can expect to see mass automation and high value insights – a true Cloud 2.0 experience

Xero might just have pulled the rabbit out of the hat here as many smaller competitors do not have these volumes and may struggle to develop and utilise these self-learning algorithms.

In its quest to forge ahead of its competitors, Xero does enjoy a couple of unique advantages. Firstly it is a single product company – all it has to do is deliver a memorable cloud experience to small business owners and accounting professionals. Other cloud accounting software suppliers such as MYOB and Reckon have to support a range of other products across diverse markets resulting in internal competition for R&D dollars and company focus. Secondly Xero isn’t unduly by shackled by share price and investors – investors are not there for dividends and profits, they have signed up for the long haul and focus on strategic development and the non-financial metrics which Xero loves to deliver. The year on year growth in operating revenue and paying subscribers provide the necessary proof that Xero is on the right path (although net losses also grow year on year as Xero maintains its investment in scaling its global business) This situation enables the dream and the magic to come to maturity and that is the dividend the shareholders and investors receive.

Next month I head to San Jose for the annual QBConnect – the conference for all things QuickBoooks. Whilst I don’t expect to run into Brad Smith on his skateboard in the break out area, I am hoping there will be some similar excitement there – so watch the space.


Further Reckoning – ReckonOne Payroll released

Only last week I published a blog on software supplier Reckon so it is a little soon for a second one, however Friday 8th April was an auspicious day for Reckon – it was the day the long awaited Payroll module was released into its cloud-based accounting software ReckonOne.

Unlike other cloud accounting software suppliers such as Sage and Intuit, Reckon did not enable the integration of a third party payroll product until its own was ready, so the lack of payroll functionality imposed limitations on the suitability of the software to many potential customers.  The release of the payroll module has the potential to close that gap.

ReckonOne overall still awaits some key features before it can compare with products such as Xero and QBO. In particular there is no:

  • Multi Currency.
  • ABA files (MYOB Essentials has this for employee payments).
  • Inventory module.
  • Fixed Asset module.
  • Very few third part apps integrate to the product although the APIs are available – the Add On Marketplace only identified one product – WebNinja Collect.

The product therefore remains more comparable with and has many similarities to MYOB Essentials.

Like MYOB Essentials the ReckonOne Payroll is native to the application. Reckon was able to capitalise on the expertise gained with its Reckon Accounts payroll module to deliver its own Payroll module. Since Australia has arguably one of the most complex payroll regimes in the world, non-Australian software suppliers such as Intuit have wisely opted not to start from scratch and instead provides KeyPay as part of its subscription which integrates to QBO but remains a separate product. Xero bought third part app PayCycle and fully integrated it into its software nearly four years ago and having ironed out the wrinkles, it is now firmly embedded.

The Good, Not so Good and What’s Coming of Payroll

Reckon has advised that this is the 101 release of Payroll and enhancements are planned to be delivered fairly rapidly so the following list of the Good and the Not So Good should be seen in that context. Overall there were no major surprises – it was pretty standard payroll functionality, but Payroll is the one area where many small business owners struggle and need assistance so the more user friendly it is, the less likelihood there is of getting things in a mess.

The Good:

  • Security – there is a high level of granularity embedded into User Roles to maintain control over the data.
  • The module is SuperStream compliant if using the Medium level (although this was the one area I had difficulty with in the set up – it was a little cumbersome).
  • Direct link to Awards and Classification Levels – not that this currently goes anywhere or does anything.

The Not so Good:

  • All the Pay Items had to be set up from scratch – it would have been helpful to have the standard ones preloaded.
  • Specification of the general ledger posting accounts is very limited (note MYOB Essentials uses preset defaults without allowing any specification).
  • The PAYG Withholding from the payrun is passed to the accounts as an Accounts Payable transactions rather than as a Balance Sheet item – this makes recording a BAS payment more complicated and means the PAYG amount owing is not quickly visible.
  • No integration of Payroll values into the BAS reports.
  • Recording opening balances of pay and leave for employees was rather cumbersome.
  • Some navigation features could be streamlined to improve the User Experience.
  • I did encounter a major technical error while processing that has not been resolved by Tech Support,  indicating the product may not be as stable as is needed for a payroll application.

And on its way:

  • Employee Payment Summaries.
  • Increased range of reporting, currently only two available.
  • Integration with Projects.
  • ABA files to pay employees– this functionality is on the road map but the file will be combined for suppliers and employees.
  • Employee Portal.

(The Not so Good list is longer than the Good but that is mainly because so much is standard, it doesn’t need identification.)

Where to for Reckon One?

So is this delivery too late to shift the product up a level? It hasn’t made an impression on the share price. Reckon has definitely missed the boat for the first and even the second wave of businesses migrating to cloud-based accounting software. Additionally early promises on the product failed to materialise in a timely manner resulting in some credibility issues. So there is a lot of ground to be made up.

The marketplace for cloud accounting software is very competitive so a point of difference can definitely assist in market penetration and Reckon has one with price. ReckonOne is definitely the Harvey Norman of all cloud accounting software products as it won’t be beaten on price (unless it’s free). The total subscription payable is dependent on which modules are used in any month and the level selected, but the maximum you could pay per month is $32 – this is with the medium level of every module and full bank feeds. Many customers would not need all modules so would pay less than this. Payroll with SuperStream compliance comes in at $5 per month for an unlimited number of employees. So price conscious start ups and shoebox organisations should find this a positive factor.

Additionally Reckon products have always had a robust Job Costing flavour, as yet the Payroll doesn’t cost payroll hours to Projects, but the hooks are there so once that is in place – this will be a further positive point of difference that could be capitalised on.

And the final reckoning – would I recommend ReckonOne? Yes I probably would, it is now more functionally rich, the user experience is reasonable but I do need that comfort factor that Reckon will be able to deliver the promised enhancements in a timely manner to be 100% convinced.


Reckon is Not For Sale and Other Stories

I attended the 2016 Reckon Accredited Partners conference last weekend and received a full immersion of the position of Reckon, where it was going as a company and what it had delivered or was delivering on its various accounting software platforms.

Clive Rabie – CEO of Reckon was scheduled to participate in a ‘By the Fireside Chat’ at the conference however he was in the US working on the Reckon acquisition of SmartVault – see more below on this and  was replaced by Managing Director, Sam Allert. The first question posed to Sam was ‘Why does the Reckon share price continue to fall’. Sam gave a brief overview of the events last year surrounding reports in the national press that Reckon was an acquisition target. The official version is that Reckon approached Macquarie Group first, to understand why its market capitalisation was so low and subsequently asked shareholders to forgo dividends so that profits could be reinvested to fund R&D operations. The second action  caused the share price to fall even more and fuelled the rumours of a takeover. Sam stressed that Reckon is alone in accounting software companies to be profitable – (Saasu is profitable but is a private company) and pay a dividend (a dig at Xero who generates increasing losses every year) and no sale is on the horizon. So with that sorted – on to the software.

Reckon One – After a few years of anxious waiting the Payroll module is about to be released – tomorrow!. Whilst the beta version of the module looks to be fairly comprehensive, disappointingly the initial release will not allow for integration to Jobs or Classes. The Time & Expense module in Reckon One is currently very limited as it cannot capture employee labour costs, I had hoped that Reckon One would have a major point of difference from its competitors by providing this function – but not yet. Another missing feature from Payroll is ABA files – this feature is due for release shortly but will be for suppliers and employees in a combined file. An Employee Portal will be available in the Medium version of the module which will cost $5 a month or $3 a month for the Lite version – both with unlimited employees – definitely a point of difference here.

Eighteen functional releases were delivered into the product last year and there are now more than 30 third party products that use the API to integrate to Reckon One (being a true cloud product – this process is much easier than in the Hosted version – see below) So both the depth of functionality and the User Experience is gradually improving. The mobile app  now includes supplier bills as well as customer invoices for those that use the product on the go.

The product remains somewhat lightweight in comparison to Xero, QBO and Sage One, however Payroll  has for some time been a significant hurdle to clear. Once the first release is delivered, resources will be freed up to work on other areas and with a Payroll module, the product becomes a more viable option when selecting cloud based accounting software and the potential increase in subscribers should increase the pressure for greater functionality.

Reckon Accounts – The majority of R&D effort over the past couple of years has been channelled into Reckon One so only a few goodies were released in the 2016 version of Reckon Accounts (coming next week for Hosted). This included:

  • ABN validation.
  • Webmail support for Hotmail, Gmail and other providers.
  • Enhancement of functionality in Bank Rules including ability to set classes on a rule and add a rule whilst in the bank feed.
  • Additional  SuperStream functionality.

Reckon Accounts Hosted – Sometimes I am surprised that there are any customers remaining on the product, it has been so plagued with horror stories. Downtime continues to be an issue despite the migration to AWS and Reckon experiences challenges in supporting the 3,000 or so people that log in over a short period in the morning. Resources and servers are being thrown at the issue and improvements are being made to the file server architecture.

Whilst the APIs required for third party apps to integrate to the product are now available and there has been some take up, technical issues continue to plague deployment making it a long road for some vendors. The increasingly popular and highly functional time sheet app TSheets for example  has been unable to integrate with Hosted although it is available on the Desktop version (It is also available on QBO and Xero but not MYOB Essentials or Saasu).

SmartVault – Earlier this year, Reckon acquired US-based SmartVault – an online document management system which will sit alongside the existing document management system; Virtual Cabinet which offers an enterprise level document management and portal solution to businesses and accountants. Whilst this is an important strategic acquisition for Reckon complementing Virtual Cabinet, it also enables Reckon to provide a similar solution to Xero in that documents can be directly linked to transactions in Reckon Accounts and stored in SmartVault. Other business documents can be stored and shared as well but the link with Reckon Accounts will be a useful feature . (Again Reckon Accounts Hosted users – don’t hold your breath – whilst SmartVault is a cloud based service – it does not integrate with Reckon Accounts Hosted!).

The message is – Reckon remains open for business (although share price continues to decline), it is continuing to deliver more features and functionality in its accounting software products, whether or not Reckon One will be a product to be taken seriously remains to be seen; I am just waiting to test out the Payroll module in Reckon One tomorrow and will let you know how I go.