Drury quickly clarified he meant no disrespect. But the comment shows the Xero vision is far grander than what desktop software has so far achieved and what most would assume an accounting program ought to be.
From the outset, the New Zealand-born software phenomenon has hawked the idea that it is building an operating system for small business. The message has intensified as Xero draws closer to matching the features of desktop accounting software with the last pieces of its tax module, due in early 2015.
MYOB and Intuit have echoed the platform-based concept. “Our vision for QuickBooks has been the operating system for business,” says Brad Paterson, Intuit’s managing director for Asia Pacific. “Another way of saying it is that our goal is to make accounting invisible, so it just happens for small business.”
When you peel back the rhetoric, two trends are working to make small business accounting software programs much more powerful and useful. They also hold the promise of rescuing accountants from mechanical, price-squeezed compliance work and put them in the box seat as global business advisers.
Small business ERP
The rise of online software is giving small businesses an unprecedented ability to run with the productivity of big businesses.
The theory goes like this. All businesses – from corner shops to global car manufacturers – face a similarly broad range of tasks. Companies spend millions of dollars on customer relationship management (CRM) software for their sales force and on complex enterprise resource planning (ERP) programs that route information from one end of the organisation to the other, to maximise efficiency and profits. The vendors range from SAP and Oracle, selling to the world’s biggest companies, to NetSuite, which targets smaller firms.
Small businesses, though, have run their processes within a handful of industry-specific programs, along with a large helping of Microsoft Excel and Word. Moving data between programs typically involves re-keying a lot of data, which adds errors and puts a brake on productivity. Small businesses rarely have the budget or the stomach to connect together their systems into a more efficient machine.
But cloud software is bringing enterprise software ambitions to small business. Xero has fostered a broad ‘ecosystem’ of third-party online programs that can freely and automatically exchange data such as transactions, customer details and inventory. MYOB, Reckon, Intuit, Saasu and others are doing the same.
Small businesses can build a Frankenstein of online business programs connecting sales, marketing, procurement, HR and inventory, with the accounting program beating at its heart.
Chris Ridd, Xero’s managing director for Australia, understands enterprise software: he previously ran the Australian operations of Microsoft’s Dynamics CRM, its ERP and CRM system.
“What Oracle and Microsoft were trying to achieve with monolithic code, Xero is providing with a horizontal platform, where you can connect inventory or CRM or job costing or any vertical line of application,” says Ridd. “With free integration [between programs], it’s quite feasible to have NetSuite-like applications, but it costs less and is easier to use.”
Linking services
The second trend is far more exciting and far less well-explored. The software companies want to connect a broad mix of financial services to their customers’ accounting programs. The upside for business owners is that they can quickly apply for a loan or get a quote for insurance.
The benefit to software companies is expected to be a ‘clip of the ticket’ for each insurance policy or loan that they facilitate. This is a brand new revenue stream that could conceivably be more lucrative than the software subscriptions themselves.
CGU, part of the huge IAG insurance group, claimed at Xerocon that it had made the first ‘insurance add-on’ for an accounting program. A demonstration video showed how a Xero customer could click on an emailed offer for workers compensation insurance, approve CGU’s access to their accounting file and receive a custom quote without talking to a single CGU representative.
The data CGU collects from each Xero file includes the number of employees, payroll, location, industry, contract or labour hire. Xero and CGU are working on the ability to revalue the premium each month so that a business is never underinsured or overpays – CGU calls it ‘real-time insurance’.
Accountants who make use of Xero software can now offer this service to their clients, says Scott Gunther, CGU’s national manager of channel enablement. “It becomes a unique value proposition accountants can offer their customers to differentiate themselves,” he adds.
Although CGU won’t pay commission to accountants who sign up their clients, the insurer says that as businesses grow, they will need professional, personal advice – and it will pass those leads back to brokers. (Gunther claims CGU is not paying any commissions for the Xero “partnership”.)
CGU intends to add more types of business insurance and to target industry segments – such as health, trades or accounting firms – based on size and geography. “The strategic opportunity is to build tailored insurance solutions for their business,” says Gunther. “The accountant in Port Melbourne might not be the same as the accountant in Manly.”
From within Xero, users can now also verify a business’s registered address via Sensis, conduct credit checks on customers and suppliers through Veda and – like other vendors – upload digital tax forms directly to the ATO.
The latest direction is to add benchmarking and business intelligence, where Xero users will opt in to share their anonymised data. “An adviser could benchmark all their retail clients for debtor days and cash flow,” says Chris Ridd, adding that the data could give accountants early warning of potential problems. “Is this business heading for trouble or are they approaching best practice?”
Accountants, natural masters of the accounting program, will see their domain expand in step with the ambitions of software companies. The future, it seems, will be far from boring.
Wading into the software battle
Accounting software giant Intuit is putting boots on the ground in its attempts to build a beachhead in Australia for its new flagship, QuickBooks Online. In 2014, it has recruited a high-profile managing director, Nicolette Vass. She’s a veteran of eight years at eBay, most recently as its head of buyer experience.
Intuit’s Australian team has swelled from five to 35 in 12 months, with plans to double that by early 2015. Intuit is adding local positions in sales, marketing, product and customer service. “We are going to be very aggressive in the market in recruiting,” says Brad Paterson at Intuit. Meanwhile, UK-based Sage has promised an ‘Australianised’ version of its well-regarded Sage One Accounts cloud accounting service for early 2015. With Xero, MYOB, Reckon, CCH and Saasu all competing hard in this crowded software space, accountants are spoiled for choice.
