Xero HQ’s Future As a CRM for Practices: A Chat with Xero’s Heads of Product

Accounting Software


The limitations of Xero Practice Manager (XPM) have long frustrated growing Xero firms, as has the lack of integration with Xero Workpapers and Xero “blue”. The company announced at this year’s virtual get-together, Xero On Air, that it was finally fixing this integration problem by creating a master record in Xero HQ.

What’s a master record? For accountants, it’s that thing you want when you don’t know what you want – one place to see all the information about your client. One set of fields to update, that sync with every other contact field in all other Xero products. In short, how you expected Xero practice tools to work in the first place (and have quietly resented that they didn’t).
Why has it taken so long? Because it turns out that it cost a lot of money to do this, and most of that investment is invisible to Xero’s users.

Here’s the scenario facing established software companies (ditto for Intuit, MYOB and Reckon as well as Xero): If you had a bucket of money, do you spend it on a fundamental overhaul of the platform – which barely changes in its function? Or do you create a couple more features that will keep up with the market leader, or give you a feature advantage in a fast growing market like the UK or South Africa?

If you’re going for growth against a fearsome competitor, you keep spending on features for as long as you can. And in the meantime you promise to your existing customers that The Big Rebuild is just around the corner.

Well, it looks like Xero is turning that corner. How do we know is this not another promise with no deadline? Xero is talking more about practice tools than it has in a long time, the promises are specific (developing a master record) and it has some evidence of delivering on the promise. In talking about a master record, chief product officer Anna Curzon says Xero “has already nailed it”.

There’s a lot more to go, and how fast Xero moves on this front will really show how committed it is financially to this rebuild. But clearly this is a stronger start than past promises.

I had a Zoom party call with Anna Curzon (chief product officer), Gareth Cronin (executive general manager of practice) and Simona Turin (executive general manager, product) about the biggest announcements from Xero On Air.

Other topics on the call:

  • A Starter plan that's actually useful. Xero has removed bank reconciliation limits on the Starter plan to make it much more attractive to new businesses – which are apparently popping up all over the place during this pandemic. It’s a smart move that will increase the top of the funnel for Xero without cannibalising too much revenue from the more expensive plans.
  • Better payments integration: There are deeper integrations with Stripe, Square and GoCardless. This should speed up onboarding and reconciliation.
  • Cashflow for all. Xero claims that its cashflow forecasting pilot was so successful that it decided to make a basic version free for all users. Xero intends to release a paid version with more powerful features at a later date.

The biggest change is the work that’s going on under the surface, and the longer term implications for running practices on Xero.

The conversation below has been edited for clarity and length.

A New Focus on Practice – for Real

Digital First: Xero has talked a fair bit in the past about how “We're going to do new things with Practice!” and hasn't met expectations. Has there been a decision in the business to invest at a higher level than before? What changed? Because clearly, Xero Practice wasn't getting the same kind of love as Xero Blue.

Anna Curzon: We recognised probably around 18 months or so ago that we needed to fix a lot of the architecture (for Practice tools). A lot of our partners, especially in the southern hemisphere, lobbied for it. People were saying to us, you've got to (create) a single client record. They were saying, “You have to make sure data is flowing seamlessly through these apps and make sure it's an integrated, single experience because it's doing my head in having to go in and out (of the applications). I’m losing time having to re-enter data, and I'm making mistakes.”

Anna Curzon, Chief Product Officer, Xero

So (18 months ago) we went to the board as an executive team and said, “This is really important to our partner community. We need to make sure we're continuously delivering for them. But we can't go much faster until we fix some of the foundational stuff.” So we have dedicated teams now that are ring fenced, that have a clear roadmap, it's been endorsed.

Then when COVID hit, the leadership team and board came together to look deeply into the things that would matter most right now, and to make sure that we had the investments in the right buckets. Next Gen Practice was absolutely a priority. We all agreed that we needed to double down on that, because anything that we can do to help our partners help small businesses, was the logic. So it was an easy decision.

We've been heads down, focusing on some massive architecture and infrastructure work to enable that to happen. It's almost like when you paint the roof it's not necessarily immediately noticeable. But it allows us to do really cool stuff.

Gareth Cronin: There were teams but they're bigger teams now. We can't go into the specifics of how big but they're definitely substantially bigger than they were if you're thinking back a couple of years ago.

And if you ask any of the teams around Xero what our top priorities are, in that list of top priorities are practice tools and Next Gen Practice. So it’s something that's now really understood as very important.

The other thing that's really important is the recognition that all of those workflows in the practice always start and end with the practice tools. So while you've got Xero blue for doing the actual accounting work, there still has to be management of clients around it.

For a lot of people, XPM is now acting as “almost a CRM but not quite”, because it's not really pulling together the data and the insights from other places. But that's certainly what we want Xero HQ to become.

How the Master Record Will Work

Digital First: So what exactly have you been working on?

When you've got a bunch of tools that – each one of them in their own right is great – but they're not communicating with each other in an ideal way. We are making sure of fundamentals like the client list in Xero HQ has data points (from other Practice tools). That list of data points will be ever expanding through different data repositories around Xero.

Digital First: So the contacts database in Xero HQ has a field for every field in every one of the other Xero practice apps?

Gareth Cronin: HQ has always had a client record but it just hasn't been synchronised well with XPM. It will now become the master record. Anything in XPM that's important to our partners will also be replicated in the HQ record. When a client is created in HQ they will also appear in XPM. It's not a one way sync from XPM.

Digital First: So can you categorically say that every field in XPM and Xero Workpapers and Xero Tax are all reflected within the master records in Xero HQ?

Gareth Cronin, Executive General Manager, Xero

Gareth Cronin: No. That’s what we're shooting for, the “Next Gen Practice” vision. We'll be starting with the most important fields like the legal and trading name and all of the things that really matter when you're seeing that summary of your clients. Then we'll progressively add more fields as we get to them in the way that you'd expect if you were wanting to use a CRM type application in your practice.

Anna Curzon: We're positioning this ultimately as a CRM for accountants and bookkeepers, like a Sugar CRM or Salesforce. That's what our partners have been asking for. And so that's the vision that we're working towards.

We needed to build the foundations like that single customer record. That's been a very tricky thing to work out, without going into details. But we are delighted to have nailed it because it'll just make things exponentially easier for us moving forward.

Digital First: Why was it so tricky to work out?

Gareth Cronin: When you’re adding new functionality you have to be careful that you're not causing problems for existing users. The simplest thing to do would be to break the current experience – but that's the last thing we want.

We want to make sure that, while we're in the process of pulling this all together and putting things where they should be, that we're not having a deteriorating experience for users, because people don't like that. So that’s really the most difficult aspect.

Why Accountants Need CRM

Digital First: MYOB and Reckon feel your pain. It’s interesting you’re calling this a CRM, because accountants rarely talk about CRMs and selling. Any observations about what this means for how accountants run their business or the importance of the sales function or customer experience more generally?

Anna Curzon: We've spoken to near on 1,000 partners in the lead up so it's probably CRM by another name. I don't know if accountants would say, “Oh, I know what's been missing in my life, it's a CRM.” But there is the frustration of not being able to access that data. And then you think, well maybe accountants haven't been able to be more proactive because they haven't had that data at their fingertips.

Gareth Cronin: You know what CRMs are for and the power you actually get when you have one. And that's mainly from the fact that you've got an anchor. I've worked in businesses where we've gone from many spreadsheets to a central system that is connected into the different data repositories. The acceleration that gives you and the ability to do things, and also bringing new people on, is a big factor.

That's something we've recognised as one of the pain points with partners. It's not just onboarding clients, it’s onboarding staff as well. If you're a growing practice and are hiring graduates that need to come up to speed quickly, they need to see all the key insights (about a client) straight away. That makes a big difference.

For us, a CRM can be like a very basic sales and marketing kind of CRM, but it needs to be accounting specific. Our partners are saying, “When I look at a client, I would like to be able to see all of the important things”. And that might be the banks that they are connected to, the number of unreconciled transactions that are building up over time, or important integration points.

One of the things we're releasing soon for the UK market – they have an Open Banking connection that expires every so often and has to be reconnected for the APIs to work. Those are the sorts of things (that matter) at a customer experience level because you can see at a glance that you need to pay some attention over here.

So I think you're right, it's probably the customer experience primarily. But it obviously becomes an effective sales tool as well with prospecting and things like leveling up on the advisor directory, and so on.

Anna Curzon: I remember asking one of our key partners in the UK, “Your growth is awesome – What are you doing differently?” And he said, “Well, we always ask people why did you decide to move accountants?” Because it's hard to do that. And he said, “More often than not, they'd say, ‘I never heard from them’.”

Whereas Paul (the UK accountant) was sending out a monthly newsletter and information. You think about the environment of COVID and how important it is for people to feel like someone's got my back, that they are thinking about me. Even the importance of communicating en masse with your client base is going to become more and more important.

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