Small business: Anthony O’Brien

A Xero package takes the tedium out of doing the bookwork

Notwithstanding a net loss of $NZ82.5 million ($76 million) in 2016 and a share price that has plunged by more than 50% from its March 2014 peak of $42.10, Xero has arguably been at the vanguard of cloud-based accounting solutions for a decade. From a standing start in 2006, it has gained 1 million subscribers worldwide. In comparison, its competitor MYOB, which launched over 25 years ago, services around 1.2 million businesses in Australia and New Zealand.

Fee structure

Xero is far from the cheapest service. If you’re seeking an entry-level accounting solution, Xero’s Starter plan costs $25 a month. This enables a small business or start-up to send customers five invoices or quotes a month, enter five bills and reconcile 20 bank transactions. It allows for a payroll of one person. MYOB’s Starter plan also costs $25 a month, while the best price for a start-up business is Reckon One, which has a $5 monthly subscription.

For those who’ve been in business a bit longer, the most popular plan offered by Xero is Premium 5. For $60 a month, a business can send unlimited invoices and quotes. There’s also unlimited bill entry, bank reconciliations and payroll for up to five employees.

Foreign currencies

For a global business, Xero can convert all foreign currency transactions into Australian dollars (or your local currency) in real time. Because it updates exchange rates hourly, you know almost immediately when currency fluctuations are impacting you.

Simplicity

A big drawcard is how easy it is to use Xero. “It’s very intuitive,” says Tony Haworth, senior partner at AAP Finance Brokers. “As an owner of a growing SMB, for me it’s the perfect tool because it makes accounting and bookkeeping easier. It also has the capacity to adapt to growth, which means I don’t need to look for a different accounting solution as my business expands.”

Haworth appreciates being able to customise the dashboard to suit his needs, as well as Xero’s invoicing and billing features and real-time profit and loss reporting. “I can easily see our financial accounts very quickly,” he says. “I’m also a user of the ‘discuss’ button that allows me to leave notes for my accountant about a specific transaction.”

Accountant Katarina Vencel, who has a number of small business clients, also gives Xero a tick for ease of use, especially for SMBs that have decided to switch from MYOB. She has experience at helping clients move from MYOB to Xero, and to its competitor Intuit. “I was trying to bring one client onto Intuit, and they had quite a lot of transactions and it wasn’t easy. But bringing data from MYOB to Xero is seamless.”

Time and cost savings

Xero transformed Haworth’s tedious monthly meetings with a bookkeeper into a fairly easy daily routine that takes minutes.

Financial transactions from credit cards, banks and PayPal accounts are automatically imported into Xero and linked to corresponding invoices and bills. “I just have to hit ‘OK’ after checking that Xero matched the right transaction, and it gets reconciled,” says Haworth. “I’ve also found it simple to make custom rules for transactions like payments to staff and payroll.”

Online invoicing is another excellent feature of the cloud accounting age. Instead of sending a bill in the mail or an email attachment, you send a link to a live invoice online that shows payment status and history. If you take debit or credit card payments, your client can pay you then and there. “I get to see when my invoice arrives in a client’s inbox and when they open it. And if they don’t pay by the due date, Xero sends them a reminder,” says Gary Reynolds, of IT firm Touch Technology.

Using a cloud-based package has enabled Reynolds to reduce his business’s total accounting costs. “I pay less for bookkeeping, which enables me to reinvest the savings into other business activities. And since ditching my unwieldy accounting desktop system and switching to a cloudbased service, I can focus more on my clients and less on the grind of bookkeeping.”