One of my top goals is to keep myself, our company, and our network of consultants on top of technologies and trends that help us grow our business, be more efficient, and make better recommendations to our clients. Lately I’ve been looking at a trend that I believe will make a fundamental change in how accounting professionals work with clients and their data.
New technologies often come with some unintended drawbacks. For example, ever since the PC revolution in the 1980s, with the “distributed” computing model, when everyone did their own accounting and bookkeeping on their own PCs in their offices, accountants started to lose control of the general ledger. Accountants lost control because they could no longer be the gatekeepers of entries to the general ledger. And as client-based accounting software has flourished, tax preparers continue to receive even bigger messes from clients than in the old shoe-box days. This “bigger messes from clients” issue is a good example of how innovative, technological revolutions present us with useful and productive new tools — but at the same time they disrupt our tried-and-true business processes, often in ways that seem to produce the opposite results they intend to produce.
So as I look around for better ways to do things, every now and then I have that “aha moment” when I feel like I see the future. Recently, such a moment came when I visited the offices of Xero in Wellington, New Zealand.
The big “aha” for me is that while so many of us “experts” have focused on learning better tricks for entering data into accounting software programs, the future as demonstrated by Xero’s online accounting system is that entering data will no longer be the focus in tomorrow’s accounting systems. The Xero philosophy is to move us closer to zero data entry!
We get to zero data entry by using the power of the Internet to connect banking feeds, customer-entered data, vendor-entered data, and employee-entered data into a system, so the “bookkeeper” no longer enters data but instead manages the flow of transactions through the system. The bookkeeper role will still be important in this new world, but I think their role will change dramatically from how to enter transactions efficiently to how to manage transactions and other “data flows” on the Web. There will be some data entry in the new world, but only a fraction compared to the way we do things today.
If you’ve seen Mint, Intuit’s free online personal financial management product, you’ll see some similarities with Xero, but the key is that Xero is taking these concepts and serving them up for small business. Another example of the zero data entry philosophy is demonstrated in Bill.com’s Zen feature, whereby all vendor bills are faxed or e-mailed to a special address where the transactions are entered for you.
Xero is already succeeding to the tune of 30,000 customers around the world, who pay between $20 and $40/month for the service. The company was founded in 2006 by Rod Drury and Hamish Edwards, along with a very talented team of passionate engineers, led by Craig Walker. They focused on building the best architecture for SaaS software and a robust accounting engine. The company is now a public company in New Zealand and they have raised $35 million to build out their vision.
The company’s first five years was spent perfecting the SaaS architecture, building the accounting engine, and acquiring customers in New Zealand, the U.K. and Australia. This year they are entering the U.S. with a great product. In the U.S., they’ll find a market that is hungry for better solutions, and ready to take the SaaS plunge now that so many accountants and small business owners understand the huge benefits of moving accounting to the cloud.
Xero is a full online accounting system that connects to major banks and pulls bank transaction data directly into the application. Xero also has online invoicing, payables, fixed assets, employee expense management, and nearly all of the functions that most small businesses need from their accounting system.
One of the biggest reasons I’m so excited about Xero is that they view the role of the accountant as a collaborator with small business owners in managing their accounting data in real-time. This is a key philosophical difference from the old desktop software world because it helps accountants reclaim control of the general ledger while at the same time providing a much higher level of service to their clients.
You will be hearing more about Xero from us in the future.