Accountants, CFO’s and those charged with digging numbers are risk adverse.
I believe my sweeping generalization is true, but to prove it would require surveys and endless arguments of semantics, because accountants, CFO’s and those charged with digging numbers are also sticklers.
Generational shifts and workforce turnover opens the creaky door to new entrants and alternatives. The next generation does the forensics on processes, procedures and looks for opportunities to improve shareholder value.
That’s where we are today with accounting solutions. Intuit owns the US market not because it’s the best but because it’s the choice for those who feel warmer in the Emperor’s (new) clothes.
Xero is a major contender as an accounting platform and they have filed their S1 for listing in the US. Tom Tunguz wrote a great analysis with some perspective on the market from a macro view:
To complement that I asked a friend from Australia, Chris Hooper of Accodex, Xero’s home market, to provide his diagnostics on the product and the choice his firm has made.
When we were starting our practice four years ago, we did some research on the software available on market. Among that list was a New Zealand startup called Xero. I spoke with representatives from all the main companies and played with their software; there were a few features that set Xero apart from the rest:
Live bank feed data: While this is available with most platforms, Xero had this built into the software as standard
Existing SaaS ecosystem: There were already a number of applications that plugged directly into Xero – we knew this would be a game changer
Cloud based: This meant we had real time access to the client file, which meant no more version control issues
Live updates: We didn’t have to install software and our tax tables were updated behind the scenes.
Client collaboration: We were able to converse with client on transaction specific matters outside of email
Monthly billing: We know clients hate big bills, Xero charging monthly reduce the price barrier for many small businesses
So having discussed why we chose Xero over the others, I will now explain why we committed to using one platform:
Staff expertise: Our staff is experts in Xero; they use the software every day. Efficiency is increased as we are not jumping between 3 different platforms.
Specialists: Being known as the “Xero Guys” locally has meant that we’ve landed a lot of enterprise level work that firms dabbling in Xero would not be considered for (30% of our revenue is coming from accounting software consulting and integration)
Practice management: Through acquisition, Xero has become an end to end practice management solution
Our approach comes with some obvious risks – entire business hinges off of the success of Xero. But I am confident that in the battle of the accounting tech wars, Xero come out on top.
How clients use Xero:
Proactive accountants are finding themselves doing more software consulting than ever. This has been a great outcome for us as it is very high in the value chain.
Xero is the central hub to the modern business’ software ecosystem:
Front End: This is the software that typically pushes data into Xero. It is client facing and team facing. The software will vary depending on the industry obviously, but we have found there is an application that integrates with Xero for practically every business case. Below is a list of applications I have worked with personally:
Vend: Retail and basic hospitality (Cafes, small bars, food trucks etc)
Kounta: Advanced hospitality (Restaurants, large bars)
WorkflowMax: Professional services and construction
Unleashed: Wholesale and Manufacturing
Agent Box: Real estate
Service M8: Trades
Back End: Applications are characterized by the fact they typically pull data from Xero (and other apps). You’ll find that many back end apps can be used across a number of industries. Here is a list of the ones I have worked with:
FathomHQ: Interacting monthly management and board reporting
Spotlight Reporting: Highly customizable reporting software
CrunchBoards: Real time business performance dashboards
Debtor Daddy: Collect your accounts receivable, fast
ReceiptBank: Take photos of receipt then throw them in the bin!
How We Use Xero
Xero is the core application where we can access can access all of our client’s files and staff training. An underutilized feature of Xero is “Report Packs” where we have built templates to produce annual financial statements in a few clicks.
Practice Manager (Formerly WorkflowMax): Practice manager is a complete practice management solution for accounting firms. This system deals with time keeping, job management, invoicing, quoting, client file maintenance and lead management. The Australia and New Zealand Practice Manager has the ability to prepare tax returns and sales tax reports directly to the government, all in few clicks! I imagine it’s just a matter of time until this functionality is available in the United States.
Workpapers (Formerly Spotlight Workpapers): We use work papers to run compliance procedures on our client’s accounts. The platform enables us to prepare workpapers and link substantiation directly to them. We can even raise client queries in an online portal where they can attach documents directly to the workpapers and save the email exchange. Workpapers synchronizes with Xero so you can update your file whenever any changes are made through the ledger.
Practice Ignition: A new player in the market has provided the missing link for us and client engagement and billing. When we met with a prospective client we build a proposal by dragging and dropping a number of predefined modules: it only takes a minute. We then send that proposal to the client where they can accept online, enter their credit card details and our work is billed monthly. We have no debtor days to worry about! An added perk of Practice Ignition is the ability to automatically deploy the job to PracticeManager, so the staff member can pick up the job and run with it as soon as the engagement has been accepted. The invoices are automatically generated in Xero and reconcile automatically in your accounts receivable system.
Google Apps: Underpinning our business is the very flexible Google Apps which we use for email, calendar, files, knowledge management and enterprise social.
The combination of these platforms has eliminated the double handling of data and translated to a 50% efficiency gain. As an added perk we have the ability to work anytime, anywhere in the world. The cost is the most surprising thing; this suite of products (with the exception of GoogleApps and Practice Ignition) is free for Xero silver partners.
Comparing to other accounting platforms on the market (most starting at $20,000+) you can understand why we went with Xero!