What Xero told the PM: accounting’s ‘new breed’ the key to cloud
Xero’s address to the Forum on the Digital Economy.
A “new breed” of accountants and bookkeepers could advise small businesses on the potential of the National Broadband Network (NBN) and cloud computing, Xero told Prime Minister Julia Gillard at the Prime Minister’s Forum on the Digital Economy earlier this month.
“Businesses don’t wake up Monday morning and decide that they’re going to change their accounting software and move to the cloud,” Ridd said during his nine-minute speech (an edited transcript of the talk follows this article). “We’re seeing a new breed of accountants and bookkeepers that are starting to come up to the fore to advise small business customers on how to move to the cloud.”
Ridd said three-quarters of Xero’s sales were through the accountant or bookkeeper. “It’s incredible but a lot of the young, innovative accounting practices that have the technology skills are now providing IT consulting services. I think there’s a lesson in how we can take technology to small business using that trusted adviser. It’s a lot easier to reaching the 11,000 accounting practices than it is to reach the 2 million small business owners around the country,” Ridd said.
Xero was one of 40 companies asked to present at the forum. Invitees included the Commonwealth Bank, Australia Post, Vodafone, eBay, Microsoft and Google.
Ridd outlined the main points in his speech in a post on Xero’s blog.
Two industries Ridd highlighted were trades, where tradespeople were cutting back on paperwork by sending invoices while still on the customer’s site, and bookkeepers, many of whom were mothers wanting to return to the workforce and could use Xero to work from home instead of needing to travel to the client’s office.
Ridd encouraged government departments to turn their compliance websites “into services” so that Xero users could automatically submit information without the need to fill out forms. This would help reduce the five hours of compliance work that up to half of small businesses carried out each week, as reported by the Australian Chamber of Commerce and Industry.
Ridd also suggested the government develop a Code of Practice to help business owners find reputable cloud software companies. Similar codes, which provide a minimum set of disclosures and standards, have been launched in New Zealand and the UK.
The full list of private sector companies invited to the Forum on the Digital Economy: Cisco, Woolworths, BikeExchange, Object, Xero, Telstra, Prysmian Cables & Systems, IBISWorld, Medibank Private, Aussie Farmers Direct, eBay, Transfield Services, IBM, Google, Walls 360, Microsoft, Commonwealth Bank, Nicko’s Kitchen, Deloitte Access Economics, SingTel Optus, Virgin, Brabham Group, Birdsnest, Paypal, Australia Post, Atlassian, Pollenizer, Shoes of Prey, Facebook and Vodafone.
Xero’s Chris Ridd address to the Prime Minister’s Forum on the Digital Economy
(Begins at 2.06)
Why the momentum for cloud? The things that we see, it’s the simplification of IT. Small business owners don’t want the hassle of having to managing software, patch updates, backups, firewalls, antivirus software, security. To be able to provide them with a service much akin to Foxtel where they just pay for a subscription and they can be up and running in hours.
We’ve heard from a number of customers that have saved significant costs. So we’re talking in the order of customers spending 10 to 20 percent of what they used to on IT, which is obviously significant.
The really interesting statistic is the accessibility that the NBN and cloud computing provides to small business. About 40 percent of our customers are coming from no software. That’s quite a substantial insight in that we’re creating a market of small business owners that are deciding to automate, and for the first time they see the cloud as a very simple and low cost way to automate their business.
We’re also building around us an add-ons marketplace very akin to an app-store type model where we have fantastic, innovative Australian and New Zealand companies that are building software that plugs into Xero, and that we interconnect using cloud because the great thing about cloud is it’s a beautiful interoperability platform.
So there’s a whole ecosystem of partners. We have over 100 developers who are building apps to service small businesses. And that’s fantastic because technology years ago was a real barrier of entry. You had to spend a lot of money to compete with the big guys. Now a small business owner can plug together solutions using the cloud and it seamlessly talks together so it’s a wonderful development.
And the other thing is that business owners are truly mobile. We’re hearing stories about one of the fastest growing sectors in small business in terms of take-up of cloud is the tradesperson. The tradie with an iPhone or any mobile device can invoice on the road. They can send an invoice and it can be in the customer’s inbox before they’ve backed the ute out of the driveway.
Bookkeeping is an industry that we’re very close to, being in the accounting space.
Lots of mums that want to return to the workforce that have home duties can now work from anywhere. In the past they had to go to the client’s site to provide the bookkeeping services. Now, at a time that suits them, they can log in and access client records from home at any time of the day.
One of the big factors of having data in the cloud is the access to real-time data. We’ve seen a shift from small businesses using it as a compliance tool and now using it as a way of really running their business. One of the things that was very key to us was connecting to the banks. So having daily bank feeds coming directly into the accounting software so on a daily basis users of Xero can have a real-time view of their cash flow, which of course is gold for small business.
A great case study was a guy who runs a business called Globe Design who has a factory. He was running his business on Excel spreadsheets and had to go to the factory on a Saturday to do his books. Now he can do that from anywhere. In the case study he was standing in a queue at the airport and invoiced a customer using mobile phone. So there are some great scenarios.
A couple of lessons that we’ve learnt on our journey that I think that are really relevant for this discussion. The first one is that going online was really about how we engaged the adviser, the bookkeeper and accountant, in that ecosystem.
It’s very hard to get small business owners to change. They don’t wake up Monday morning and decide that they’re going to change their accounting software and move to the cloud. What we’ve found, and about three-quarter of our sales are driven through the accountant or bookkeeper. It’s the adviser that will go to the small business owner and show them a better way.
I think there’s a great lesson there as we think about adoption of technology within small business is to think about the role that the adviser can play. Because it’s a lot easier reaching the 11,000 accounting practices than it is to reach the 2 million small business owners around the country.
The other interesting development that I’ve seen, and a lot of my technology counterparts would agree with this, is the disruption that’s occurring about cloud technology, it’s the channels to deliver that technology. And we’re seeing a new breed of accountants and bookkeepers that are starting to come up to the fore to advise small business customers on how to move to the cloud.
It’s incredible but a lot of the young, innovative accounting practices that have the technology skills are now providing the consulting services as another service that they provide. I think there’s a lesson in how the NBN, and how we can take technology to small businesses using that trusted adviser.
I mentioned also the connectivity piece. What we’ve started to provide is a platform that allows small businesses to connect to advisers to connect to banks. We think there’s a much bigger role for government to play in that ecosystem. One of the things that we’re very focused on, and a lot of our partners are developers of software in this space, is how do you connect with government, because government is a big part of how small business owners need to operate their business.
We saw a report earlier this week from the Australian Chamber of Commerce and Industry saying that about half of small businesses are spending up to five hours a week on compliance tasks. We see as a key initiative to come out of this is for government agencies that are providing compliance websites to basically provide that as a web service. To provide it as an API, an application programming interface, that allows technology providers like us to integrate into those so you have seamless flow of information when businesses have to lodge forms or provide compliance data into government, I think there’s a huge opportunity. Granted, there is some really good work going on. We think there’s an opportunity to invest much, much more to start to accelerate some of that.
The other thing that we’re already in discussions with government, there have been some conversations already about education and certainly providing small businesses with more knowledge to understand what the opportunities are out there with things like cloud computing and technology is important.
The other thing which we’d like to see, we’re already in discussions with Minister Conroy’s Department, is a code of conduct. There has been a lot of press about concerns with cloud computing, and certainly there are risks associated with that. We’d like to see, as has been done in geographies such as New Zealand and the UK, a code of conduct that looks at a set of disclosures and other standards where if you’re a consumer or a business starting to look at moving from an on-premise world into the cloud and using some of these new technologies, that you can do so in a very informed way. And that there are disclosures that would help business owners to choose reputable cloud providers and really make sure that the industry continues to thrive.