Anna Curzon, Chief Product Officer at Xero, reflects on how Making Tax Digital helped the accounting software company grow in the UK market over the past year.
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What have been your company's stand-out events or notices from this year?
In 2019, Xero is focusing our product innovation on providing fast and accurate data, streamlined tax and compliance workflows and deeper insights to help our customers not only understand their current data but move into a new era where we can predict what will happen in the future.
We want to build products that will stand the test of time but also support our future growth. So we’re constantly balancing solving problems for today with building products and features that will allow our broad customer base to benefit well into the future.
In the UK, these have been some of our key product innovations:
- Since April 1 businesses over the VAT threshold have had to submit tax digitally. We worked closely with HMRC to get SMEs and their advisors up and running and launched our Making Tax Digital functionality at no extra cost.
- Another area we’ve focussed a lot of our attention on is how we make getting paid and making payment processing easier. This year we launched a deep integration with Stripe to help small businesses get paid faster and recently launched Pay with TransferWise, to enable business to manage and pay bills more seamlessly.
- We also made it easier to get ready for card or direct debit payments. Seamless onboarding now makes it even more simple for small businesses to accept credit card payments, as well as, debit card or Apple Pay payments through Stripe, or Direct Debit payments through GoCardless, helping them get paid faster.
How has Xero grown in the UK in 2019?
We’ve been fortunate to have seen strong continuous growth in the UK for a decade now. We’ve been investing heavily over that time to grow what is now a substantial business.
Being developed specifically using cloud services has helped us hugely, and by offering a different way of doing things, subscribers can benefit from Xero’s smarter, smoother and more efficient way of managing their finances.
Our accounting and bookkeeping partners have built whole businesses around Xero and our ecosystem as Software as a Service (SaaS), which is incredible. This means we have built strong relationships and advocates across the accounting industry, helping us to get more small businesses onto the cloud.
But we don’t want to become complacent. We are constantly looking ahead to the future and innovating our products to support SMEs and their advisors. As part of this, we listen carefully to the needs of our customers who have invested their time and resources so heavily into Xero.
How has the government's roll-out of Making Tax Digital affected your business?
The roll out of Making Tax Digital (MTD) has meant that a lot of businesses who weren’t already using MTD-compatible cloud based accounting software have now made the switch.
You don’t necessarily need to be on the cloud to submit digitally to HMRC, but doing so is definitely the most time-effective and pain-free solution.
Cloud based platforms like Xero means less paperwork and fewer mistakes, but more importantly it gives businesses a real-time view of cash flow. Since the roll out of MTD we’ve certainly seen an increase in sign up numbers and interest in the products.
Do you see your UK customer demands changing as more financial activity goes online?
Traditionally the relationship between accountant and small business was a long-term locally based one, focused on tax accounting. Whereas for big businesses, with bigger teams and more resources, they have had the luxury of looking beyond tax returns.
As more financial activity has moved to the cloud, we are going to see more small businesses moving away from purely wanting help with their tax returns. They want more access to information that will help them to make decisions about growth and the direction of the business.
This demand for data driven decision making is what will drive the next generation of online finance software and financial technologies and level the playing field between big and small businesses.
SMEs and accountants are also looking for tech-focussed partners to help build their businesses. With this in mind, we’re also working on further expanding the Xero platform. We already have over 800 business apps integrated with our customers increasingly leaning on the scale and power of our ecosystem to support growth.
How does the UK compare to other markets when it comes to embracing new services and solutions?
Globally, in markets like the UK, we estimate cloud accounting penetration to be relatively low at around 20%, and in many cases we think it is far lower than this. Digitisation of tax and compliance (via Making Tax Digital in the UK), the disruption and innovation going on in financial services and the wider adoption of cloud storage technology are all contributing towards demand for cloud accounting across the world and these are also driving take-up in the UK.
In AU and NZ markets, the penetration of cloud accounting is far higher, estimated at above 50 percent.
What do the next 12 months hold for Xero?
As a growth business Xero is continuously testing and reviewing its strategy. Over the next 12 months, we're focussed on three strategic priorities; drive cloud accounting, grow the small business platform and building for global scale and innovation.
In the next year Xero is bringing integrated, holistic compliance to our customers through Xero Tax as a 100% cloud-based tax preparation tool. This will give UK accountants smarter, seamless tax preparation workflows.
We have completed our integration of Hubdoc into the Xero platform which as an integral part of our data automation vision. All customers will now have access to this world-class technology that captures information from bills and receipts, eliminates manual data entry, and makes bank reconciliation easy. This functionality saves them significant time which they can focus on working on the business instead of in it.
We believe data capture tools like Hubdoc do a critical function that all small businesses and advisors need for success with increasingly new government requirements to report and hold digital records. We wanted to make this technology readily available to all our customers due to the impact the time saved can have on their success.
We’re also working on further expanding the Xero platform in areas such as fintech, where we see huge potential for growth in services such as payments and lending.
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