This week, I attended my first Xerocon, the user conference set up by the cloud-based accounting platform Xero. Although the company is not yet a known name in the United States for small businesses, it has more than 1.2 million subscribers and more than 1.5 trillion transactions have been made on its platform, according to Rod Drury, CEO and founder.
Trends in Cloud Accounting
Here is a transcript of my conversation with Drury during Xerocon. He shared with me why cloud accounting is an excellent platform for AI, why he wants to help account consultants become growth consultants for small businesses and why it's important for small businesses to become global exporters. To hear the entire conversation, click on the video or Soundcloud player below.
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Small Business Trends: There Are Many Things That I Would Like to ask you, we do not have enough time for each of them, so I will draw some that really come to my mind.
Rod Drury: Cool.
Small Business Trends: Now you said that there was 1.5 trillion trillion transactions that circulated on the Xero platform …
Rod Drury: Just in the last 12 months.
Small Business Trends: It's amazing. And you have just exceeded one million subscribers, you are at 1.2 million?
Rod Drury: Yep.
Small Business Trends: That provides a rich set of information. Can you tell us a bit about how this data, combined with what you do with machine learning and AI, provide you with interesting information that you can share with your advisors and clients. Perhaps you could talk about the importance of this for your business and for your customers?
Rod Drury: Google has a habit of modeling the world and everything that it contains, and they do an amazing job in machine learning and l '39; ; IA. But we think that small business computing and software for small businesses will probably be one of the major places where you will see that AI works for you.
And why is it? Well, because one, we processed $ 1.5 trillion of data last year, giving us a massive data set. And the taxonomy we need to take these transactions and code them is relatively small. We are already seeing a success rate of more than 90% if we take a raw financial document and load it into an accounting software.
So what does that mean? Well, what this means is that we can offer what we call accounting without code. Because the problem with accounting is that, like landscapers or tour operators, they understand their business, they may have done basic bookkeeping, but they are not really accounting professionals, and we ask them to do. Thus, traditional office software may have reached 5 to 10% market share in the addressable market. Cloud computing, we see in New Zealand now, where Xero is pretty mandatory, 38% of people use it. Cloud accounting has made life easier.
But how to reach 90% of people who use accounting? Well, by not doing accounting. You simply send your documents and we can view anything where the source data is not there to get the metadata in the document, and then we can use it to code it into the accounting engine.
And what this does is to massively develop the market for accounting consultants. So on the accounting side, we make sure that we give them the tools to enable them to adapt to all these new clients. While working to make accounting super easy, and then having accountants connected to a small business profitably, will see accountants become growth advisors, so we can create large-scale jobs in the small business sector.
This was my opening speech.
[youtube https://www.youtube.com/watch?v=s36M38JlX9k?rel=0]
Small Business Trends: Turn them from accountants into growth consultants, and using your platform to help with that. How important is it to your advisors? Take this information and allow them to provide better service to these customers?
Rod Drury: Obviously, there are things like comparative analysis, you wait, giving them ideas. What is the next action? We can use this machine learning data to alert an accountant or accountant: "Hey, it's a customer who needs attention." Or there may be an upsell opportunity. "
But we are going further than that. What we have done on the accountants side is that we have a set of applications in our ecosystem. So rather than trying to do everything as a single provider, we have a large community of applications. More than 600 certified applications and 40,000 certified developers building applications on our platform. So we said, "If you are an accounting firm, these are your main registration systems, your client list, your list of activities, your list of employees And we agreed to work with all these additions … to respect that, and then build their own features that encompass this key registration system.
We are able to add new tools, such as marketing tools, so that accountants can easily communicate with their customers. In addition, we can inject content and game books, so that we give accountants growth strategies and that these games can be broadcast on a segment of their customers. So it's really cool because we're moving from software delivery to an accountant, to a business partner, where we can do marketing, content, strategies, ideas, all kinds of good things
Small Business Trends: You also talked about wanting to turn your small business customers into exporters. And how do you have these platform partners like AWS and Alibaba to help with that. Can you talk a bit about it?
Rod Drury: If you think you have a small town in the United States. Maybe it was a manufacturing city in the 70s and 80s, and this factory could be closed, is not it? So it is very difficult to see for all these cities, these factories will never reopen, these types of jobs are very unlikely to come back. In fact, most large companies use technology to reduce their workforce. Therefore, if you want local and regional jobs, it has to be in small businesses.
But you're only selling so big, is not it? So we have to take all our people, whether you want to live in this beautiful little rural town, or this little village, rather than just globalize and have to be in the big city. We need to make sure that we give our small businesses the tools they need to do business on a global scale. And it's as simple as being able to do an online demonstration on a live meeting or to participate in a virtual videoconference.
But what we are seeing now is that marketplaces already exist. So, if you want to deal with Asia, there are Alibaba, millions and millions of consumers. If you are a tourist operator, you have the Chinese market that will fetch, and googling, find you. They may want to communicate and ask questions with WeChat. They may want to pay with Alipay. They might want to buy niche gifts to send them to you, and run all that logistics.
I think it's our job as business consultants to show our local customers how to use these tools and platforms to penetrate these large markets that already exist. And so we can turn small businesses into export, and there is something magical when you see that overseas money arrives on your bank account, is not it?
Small Business Trends: All right. We are in 2017, what surprises you today about small businesses?
Rod Drury: What surprises me is the overall level of their becoming. You take our accounting channel, which bothers me … I go to Hong Kong chat with a partner, and they talk about another partner that I saw in London, and they formed a company collaborative on these platforms. And we have Australian accountants here in Denver, who have come here to build relationships with American accountants because they have customers who could export, or maybe a sports star who operates from there. right here. They want to find a relationship with someone who shares the same ideas.
It's really cool. We have many mothers who may even be single parents who are now struggling to be part of big companies because they are trying to balance their lives, but they are becoming global experts who can now collaborate with a lot of people all over the world. And it's just awesome.
Small Business Trends: So, you've been in the US market for a while now?
Rod Drury: Yep.
Small Business Trends: But many small businesses do not really know who you are. Take a minute or two just to tell those who do not know, what should they know about you guys?
Rod Drury: Xero with an X. We are a global accounting product for small businesses. Only one version of the code we host on Amazon Web Services, so everything is here in the United States, and we are the largest provider outside the United States. And we have seen how economies are changing absolutely now, with a focus on small businesses. So, if you are the first time at accounting and traditional products do not work for you, I think you will really love Xero. You will love our community, and if you still use this old, ugly, office software, Xero's where you should be.
Small Business Trends: There are still so few small businesses in the cloud using business applications. What do you think it will take to get them?
Rod Drury: Yes, they just need to know. What we need to do is not only provide a better mousetrap, we must offer a different experience fundamentally.
And these are the human stories. We have accountants here who say, "You changed my life. I wanted to go back to my state, but my clientele was here. "Now, the location does not matter – it's a very good thing – or we have accountants who have not taken a vacation to the city." because each week they have to do the customers' books, they can travel to Europe with their iPad and keep on going.
For accountants to have this experience, we need to transfer that and show our small businesses the freedom they can have by having tools in the cloud. And I think that even now, security is a major problem. We all cloud providers live and die on it. And if something goes wrong, or if there is a security problem, we normally know it. We do a lot of abnormal connection detection, and if something goes wrong, 30 pages of people go off and we are everywhere. Compared to this hard drive that dies under the desk and then stayed alone for two weeks, these are the platforms where successful businesses thrive.
And we see it in all the numbers. People who use cloud accounting and a combination of apps pre-connected to cloud accounting simply earn more money and have more free time.
Small Business Trends: One last question, you mentioned that you thought your industry is best suited to really take advantage of AI and pass it on to the masses. Can you talk a bit about it?
Rod Drury: This is because we have a lot of data and a small taxonomy, and we have raised more than 400 million dollars in investments. So there is so much energy in professional applications for small businesses, it is a hot and hot area. And because it's relatively simple to get the benefits of machine learning, it's there that people will see it first. So, it really means that for the next 10 years, the technology space for small businesses will be very much fun.
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This is part of the series of one-on-one interviews with opinion leaders. The transcript has been edited for publication. If it's an audio or video interview, click on the built-in player above, or subscribe via iTunes or via Stitcher.