Xerocon Brisbane 2019 felt like a watershed in a couple of ways. The first in maturity – Xero looks and sounds much more like a global software company developing operations in multiple geographies, rather than an Australasian success story punching above its weight.
Second, in the way Xero talked about its software and the focus of its product development.
I spoke to a couple of long-standing Xero firms at the end of the first day. They agreed that the show lacked the features razzle dazzle that former CEO Rod Drury usually delivered to enthusiastic applause.
I went back and had a look at what was actually announced and it’s clear that more R&D is going to the broader vision – creating a data platform connected to many and varied real-time sources, of which the accounting software is just one part.
The majority of the value in Xero isn’t going to be in building the best accounting software. It will be in the quality of its insights, more commonly known in technology circles as business intelligence.
This has always been the game plan, it’s just taken a couple of iterations to get there. Follow the slogans: “Beautiful accounting” became “Beautiful business” and now it’s “Simple (collection of) data, seamless workflows and smart insights”.
No mention of accounting, business or compliance.
So what does the end goal look like? Xero will become a repository for an immensely broad range of data, validated against source documents and data feeds through machine learning and accounting partners.
This will create a very valuable pool of anonymised benchmark data. Xero can create all sorts of services that are essentially showing individual versus the benchmark.
It is right there in the Xerocon Brisbane press release.
Together with our bookkeepers, accountants and BAS advisors, Xero is determined to build the most data-rich, insightful and trusted global small business platform anywhere.
And again in the blog post from Xero CEO Steve Vamos.
Xero is evolving from a single ledger in the cloud to a platform rich with data, where workflows are seamless and small business insights are delivered with speed and accuracy.
As we do so, we’ll build on the applications, tools and connections that simplify how data is captured and flows into the platform through advanced AI and machine learning capabilities. This will help unearth insights that we’ll put in the hands of our partners, so they can advise and guide their small business clients.
“Workflows” in this context is about how the data flows into the platform, and not just how accountants and business owners use the accounting software.
This shift explains some of the confusion in the audience. When accountants and bookkeepers at Xerocon hear the word “Xero”, they think about this:
When Xero’s executives get up on stage and talk about Xero, they are talking about this:
See that sign in the middle of the circle, the infinity symbol? That’s the real Xero. Hello! (/waves)
So with all that in mind, let’s take a look at the announcements for Xerocon Brisbane 2019.
Ledger – AutoPay, Cashflow and Data Collection
The reason why you thought there weren’t many product announcements at Xerocon is because... there weren’t. Not at least for the main product, the cloud accounting ledger.
This may be because Xero is keeping the powder dry for the bigger Xerocon London in six weeks, as Anna Curzon hinted heavily in our interview.
There were only three announcements relating to the accounting software; recurring payments and bank feed with Stripe, a pilot of cashflow forecasting that won’t launch until early 2020, and better processing in HubDoc. (And I’m not really sure if that last one qualifies.)
The biggest announcement by a mile was the addition of autopay for sales invoices via a deep integration with Stripe. A business can turn on autopay to receive recurring card payments for repeat billing customers directly through Xero.
Xero says that Xero businesses are sending over 1.6 million repeating invoices in Xero every month. “Imagine if all those invoices that are automatically sent, could automatically be paid.”
A native way to take recurring payments is a fantastic addition. The implementation looks excellent and, as an accountant who was involved in the beta said in the Xero blog post, it means you don’t need to use third-party apps.
How it works:
To add auto-pay, tick the ‘Offer auto pay’ check box on your repeating invoice templates. When your customers go to pay those invoices, they can opt in to be automatically billed on the same credit card the next time the invoice is due.
If your customer’s card changes (i.e. they are replacing an expired, lost or stolen card), Stripe will work with card networks to automatically update the saved card details. This lowers the risk of payment failure and reduces the need to collect new card details.
Stripe charges 2.9% + 30 cents in the US for all cards. (It’s the same rate in Australia for international cards and a cheaper rate 1.75% + 30¢ for domestic cards. The UK is the cheapest at 1.4% + 20p and 2.9% + 20p.)
I wonder what the dollar value of those 1.6 million repeating invoices is? I asked Xero if it is getting a cut of Slack’s fees. The answer is yes, but Xero won’t say how much.
Stripe data feed
Xero has added a new data feed from Stripe – a globally exclusive feature, no other accounting platform has invested the time and money with Stripe to do it, apparently. As a Stripe user I’m very happy about this one.
Back in 2017 Xero announced it had automated Stripe reconciliation for online invoices. When a Xero business added Stripe as a payment gateway and sent an online invoice to a customer, the customer’s credit card payment was automatically reconciled in Xero.
The new feed automatically recognises payment transaction data made via Stripe anywhere, whether on an invoice or in an e-commerce store. That means it will split out the Stripe fee from the payment for the product or service.
How it works:
Users connect the Stripe feed in the same way they connect other bank feeds within Xero.
Users who connect Stripe on invoices will see a feed set up automatically on their behalf.
Cashflow Forecasting Tool
Cashflow forecasting is one of the first exhibits in the cloud ledger of the Xero platform benchmarking at work. It visually projects the user’s bank balance 30 days into the future, showing the impact of existing bills and invoices that are paid on their due dates.
It’s only a pilot and a very basic implementation – more a guideline than a useful tool for forecasting. And it won’t launch officially until “early 2020”.
The question is how far Xero will take this? Anna Curzon said that Xero is only the beginning of the functionality it will build. Certainly Xero could do more powerful forecasting than anyone else in the ecosystem because it has the most data.
I interviewed Colin Hewitt from Float, a cashflow forecasting app, at Xerocon (story coming soon), and he welcomed the addition as an excellent way to raise awareness of cashflow forecasting.
How it works:
You need to sign up to the pilot to see this - email firstname.lastname@example.org.
Users will be able to choose a bank account and switch between a 7-day and 30-day view. They’ll also see the impact of paying a bill today versus next week, and know which invoices they should follow up on again to help with cash flow this month.
A better HubDoc
Since the acquisition a year ago, Xero has doubled the processing rate of HubDoc by improving the way in which it reads numbers from printed invoices and receipts.
Anna Curzon highlighted the information that HubDoc collects and automatically adds to invoices. Supplier name, due date, amount, GST (tax), date, invoice number – all of which appears in Xero’s SMB Insights report as a benchmark for debtor days for all businesses.
HubDoc is an app and not part of the cloud ledger, its technology is appearing in other parts of Xero, says Curzon.
“As we continue to automate the most laborious parts of the accounting workflow, we’re working towards enabling 100 percent of all data extraction to be powered by machine learning technology, as well as leveraging these capabilities in other areas of the Xero platform.”
I hadn’t heard of Xero Connect before. This is Xero’s name for the data interface that connects to enterprises that have thousands or millions of business customers. Suppliers in trades materials, stationery, fuel and so on.
Or in marketing speak: “Xero Connect automates the flow of external invoices into Xero, saving small businesses time, eliminating manual data entry, and increasing the accuracy of their invoicing and bill payments.”
Xero has been building connections with these suppliers to automatically ingest supplier invoices into Xero by attaching each to a purchase order or job number. Instead of building individual connections, Xero has an API platform that enterprises can connect to.
These networks exist in the enterprise world and are called an electronic data interchange, or EDI network. Xero is building a small business version. This should accelerate the number of enterprises globally that send bills through Xero.
At Xerocon Brisbane Curzon announced the addition of global petrochemical company BP. The BP (Plus) Fuel card in Australia and New Zealand. This works like an e-invoicing solution that sends an invoice from BP’s billing system to the customer’s Xero file, which is linked to a BP customer ID.
How it works:
A monthly BP invoice will flow automatically into the Xero platform as a draft bill awaiting the business owner’s approval. When the invoice is paid, payment will appear in Xero and is matched to the bill for easy bank reconciliation
No need for HubDoc for your BP bills, then.
Partnerships – Practice Software
Despite Xero’s intensifying focus on its data platform, the accounting partner channel is still clearly important to it.
Xero has had a more effective practice strategy than the direct-to-business Intuit, particularly with the investment in Xero Tax, now up to 5,000 firms in Australia. The company line used to be that Xero Tax in Australia was a one-off and that it didn’t want to buy or build tax in every market it entered.
The acquisition of Instafile shows that Xero may be prepared to make exceptions for critical markets. And right now, the UK is at the top of the pile.
Xero Practice Manager
Xero has had a more mixed run on its practice software. Xero Practice Manager – built on a patchwork of integrations – has languished for a couple of years to the point where it suffered some “stability issues” in the past 12 months. Not great for your line-of-business tool.
Curzon announced that she had built up the XPM team and focused on making the platform more robust. XPM is also getting a couple of nice features such as WIP reports and practice templates for charts of accounts (with report codes pre-assigned). The latter will mean firms won’t have to use the Xero default or upload a CSV file.
Summary of new features:
Consolidate your invoice export to Xero, remove WIP, and update job status in bulk.
An all-new WIP dashboard will let you view your WIP at a selected date and see your aged WIP totals.
In the works: a standard aged WIP report that you can run at a selected date with a number of grouping options to give you the flexibility and deeper insights you need.
The launch of a notifications-driven interface called Xero HQ all the way back in 2016 appeared to be a refreshing take on firm workflows. However, the concept hadn’t been fully tested and accountants, overwhelmed by notifications, largely ignored it.
The launch was clearly premature, as one team member admitted on the floor.
At Xerocon we saw a reboot of Xero HQ where the activity feed is split into different areas by service line or role. Xero HQ Payroll will be available for Australian users later this year, and Xero HQ BAS is due next year. (NZ users will receive both these features next year as well.)
Presumably Xero HQ BAS is based on Xero HQ VAT, which launched in the UK a week before Xerocon Brisbane.
How it works:
You plug your payroll person into Xero HQ Payroll. They then use that dashboard to only see payroll notifications, and click directly into the payroll section for each Xero file from the notification.
These function-specific areas will “see further into the future” than the current activity feed. You can organise and filter views, add notes for unusual details, and directly click on a link to the right place to complete the work in the client’s organisation
You can see the information in Xero HQ Payroll/BAS on-screen or as a CSV export
Xero plugged a big hole in its practice strategy with the GreatSoft partnership. Firms with more than 100 staff are apparently using Xero Practice Manager. But XPM struggles with reporting for multiple partners, offices and service lines.
GreatSoft is a cloud-based practice suite built for large firms. Built in South Africa, it was built by some of the original founders of Reckon APS.
GreatSoft has some big name customers such as Deloitte South Africa on its books. It has been in Australia for the past 18 months or so building the connections to required applications in the accounting ecosystem.
Integrations are a major point of difference. Neither Reckon APS nor MYOB Accountants Enterprise play nicely with the accounting ecosystem, which has limited the pace of innovation for firms using those suites.
GreatSoft has few Australian customers as yet – reasonable given the complexity of migrating practice software for a very large firm. The Xero partnership is a strong signal that GreatSoft is now ready.
GreatSoft’s integration with Xero Tax will be a key selling point for large Australian clients who are on legacy practice software.
“Many firms want to upgrade to Xero’s tax solution but are hamstrung by their outdated desktop suite, which doesn’t integrate,” says Brian Armstrong, Australian MD for GreatSoft. “That changes with this partnership.”
Will this be a global partnership? The UK market for practice software is apparently underdeveloped. Xero’s acquisition of Instafile for tax in the UK could follow a similar model.
The next generation
One last comment that is worth mentioning. Xero’s Australia MD Trent Innes said the most exciting development was the progress of Xero’s education platform. Starting from scratch, Xero Learn has added 10,000 students in 18 months attending 100 institutions in Australia, New Zealand, America and Asia.
Xero Learn is a training platform for universities, technical colleges and other registered training organisations. It is designed to replace the free CD of MYOB that was previously used by every single educational institution teaching bookkeeping or accounting in Australia.
Winning over these institutions is of enormous strategic importance. If every accounting and bookkeeping graduate is fluent on Xero rather than MYOB that will influence sales for years to come.
Interestingly, I haven’t heard of anything similar under construction by Intuit or MYOB. (Apparently it takes a lot of work to build.) It’s a big advantage.
The application ecosystem (filed under “Technology” in Xero’s platform) also had some noteworthy updates. Just as you have “Log in with Google” or “Log in with FaceBook”, soon apps will have a “Log in with Xero” option.
This will reduce the number of passwords a firm or business requires to run their business – single sign-on (SSO) is great for security. However, it’s not the main attraction for Xero.
“Sign in with Xero... removes friction and eliminates the onboarding steps to acquisition. It allows our app partners to demonstrate the end-to-end on-boarding process at the point of sign up, and makes it easier than ever for customers to connect their Xero to apps,” Nick Houldsworth, Xero’s executive general manager for the app ecosystem, said.
Xero’s clearly trying to increase the attachment rate for its ecosystem partners. To increase stickiness?
And Xero advisors will soon be able to create lists of recommended apps that their clients will see when they visit Xero’s new marketplace at apps.xero.com. The idea here is increasing personalisation and using Xero’s benchmarking data (Xero Insights) to recommend apps by industry.
While some Xero partners are all over apps, the majority aren’t. Will be keen to see how well this works in practice.
There’s a lot happening at Xero but not as much on the surface and not just for accountants, bookkeepers and SMEs. Quoting Anna Curzon again: Xero will “bring customers, employees, suppliers, banking, government and technology together, into one dynamic and connected community, guided by advisors.”
Even though Xero is stating out loud that it is a data platform, it will take a long time for people to accept that it’s more than the accounting software bolted on the front end.