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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.

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One comment on “Consolidation and Innovation – The Xero Trajectory

  1. Great post Margaret! We are looking forward to Xerocon London in a couple of weeks,

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