“Businesses are better with an accountant”

It has been a big year for Xero. With 463,000 subscribers in the UK alone, the software company is now no longer a niche small business product and fast becoming a household name.

In its yearly results, announced recently, the company cemented its position as the largest provider of cloud accounting software in the UK, notably taking share from some more established providers.

In part driven by Making Tax Digital, Xero subscribers increased by 151,000 in the past year, with revenue growth of 50%.

Speaking to Accountancy Age at Accountex, Xero’s director of partner and product Damon Anderson said: “Cloud accounting is now absolutely mainstream.”

And while TV adverts targeting small businesses may have led some accountants to fear that technology will cut them out of the process, Anderson is clear that accountants remain central to the Xero business model.

“We are accused of not understanding accounts, but 30% of our employees are AAT qualified accountants,” he said.

“We believe this industry is crucial to the future of the UK economy. We want to enable accountants.”

Five big challenges

Xero research has uncovered some worrying figures however. Of business owners surveyed by the company, 70% said they wouldn’t recommend their adviser. Twenty-seven percent are actively looking to switch. Reasons given include that they want more proactive advice from their accountants, and crucially, business owners said they wanted more industry knowledge from their accountants.

Xero has identified that accountants themselves face five big challenges as the profession moves forward:

• Finding good clients
• Finding skilled staff
• Keeping up with apps and tech
• Making sense of the advisory role
• Lack of cloud-based practice tools

But Anderson does not believe that the transformations being wrought by technology and the move to a more advisory role will cut out the compliance accountant completely.

“Small business owners don’t get into business so they can be accountants,” he said. “All the errors they would typically make are so they can get on with running their business.”

Xero’s position is that compliance, as new regulation comes into force such as MTD, is growing rather than diminishing. The company is working on products which will assist with filing other kinds of tax, including corporate and personal tax, directly to HMRC for when digital record keeping and filing becomes mandatory.

One model he suggests that accountants could adopt is to use the time efficiency savings being made possible by technology to take on more clients.

“Technology is changing all industries – people have to adapt,” he added.

Making sense of the new skillset required is one challenge; figuring out which technology to use in a complex and ever-changing landscape is another.

More than 750 apps feed into Xero, and more than 50,000 developers are using Xero data and building new products.

“The biggest challenge is how do you keep up with that,” Anderson said. “If you look at Netflix, they serve up the best entertainment and change the pictures according to what the viewer has watched before.”

This personalised approach has been adopted by Xero, which has created an App Integrator Programme. The programme can build bespoke packages of apps for particular clients with particular needs.

“The marketplace is integrated into the product. Everyone gets a personalised list of recommendations, which shows the right apps for their clients,” Anderson explained. Downloadable playbooks and courses are also on offer for accountants looking to navigate the technology landscape.

With the announcement of UK revenue of £62 million in its yearly results, adding to £286 million in global revenue, Xero looks set to be at the centre of this transformation for some time to come.