A few years ago, we accepted that there were limitations to accessing the Web. However, this mindset has changed in a few short years thanks to the emergence of cloud computing and mobile technology. New businesses are now capitalizing on this recent technology to give us greater access to our assets stored online, with no strings attached.
Small business accounting has undergone a sea of change as a new breed of Web-based financial management tools has become available. These software providers have removed the constrictions of desktop software, allowing many accountants to work closer and more efficiently with their small business clients through the Web.
At the moment, the market is crowded with cloud accounting providers. Intuit is still the incumbent, but there are a number of alternatives to its flagship QuickBooks product.
I believe Xero will emerge from the pack and fortify itself as the must-have cloud accounting solution for small businesses in the future. Here’s what sets it apart from the other options and why it’s here to stay.
1. Connectivity with other data sources
A big reason for the cloud revolution is because online applications can connect and share data with each other. This allows for automation and minimizes data entry.
Xero has made huge strides in streamlining accounting through the connectivity of its software. Users can connect their online bank accounts to their Xero ledger so daily transactions can import automatically. When the data entry step is removed, the time it takes to do daily bank reconciliations is decreased drastically. (I’ll talk more about how Xero does bank rec in the next step.)
Xero also has integration partnerships with hundreds of applications regularly used by small businesses, such as Square, Constant Contact, and Google Apps. Information flows between these systems, revealing great insights about the company that previously would have been difficult to identify.
2. Usability and design
Ease of use, smart functionality, and a stunning interface are necessities for technology products in this cloud age, and Xero delivers in these areas. The interface and the way it interacts with the user is a big reason Xero is a viable QuickBooks alternative.
Xero’s dashboard provides a clear overview of a business’s key accounts, with additional detail revealed as you drill-down. You can log in and get a quick summary of your business’s financial health. If there is anything alarming, you can explore with greater depth.
Xero has also streamlined many functions of bookkeeping. It automatically matches bank and accounting transactions for reconciliation. All the user has to do is click a button to confirm a match is correct, reducing the time traditionally required for bank reconciliation.
3. Accessibility from anywhere
Xero was one of the first accounting software products built purely for the cloud, so collaboration has been part of the company’s philosophy since the beginning.
Many cloud accounting providers charge their customers for additional user licenses, but every Xero subscription comes with unlimited users. This can be a significant cost saver for companies that have multiple people participating in bookkeeping activities.
Xero also has a variety of built-in features that make it simple to work together from remote locations. Messages can be left in the app and files can be attached to pertinent data. There are also useful mobile apps for Apple and Android devices that are constantly improving.
4. New features in the cloud
Xero rolls out new updates every few weeks. They normally consist of small tweaks, but new major features seem to arrive every few months. Since the software is hosted online, the updates are automatic and have no effect on the individual user or their personal computer.
Many of Xero’s recent features have been quite innovative. Smart Lists lets users build targeted marketing campaigns using their accounting data. The Google integration allows reports from Xero to be exported and shared as Google Docs. Xero doesn’t just focus on improving accounting but rather how accounting can be used to improve the business as a whole.
5. It’s here to stay
The future for Xero is looking bright. Xero has received a few large rounds of funding from respected VCs and recently floated the notion of an IPO. (Xero is already publicly traded in Australian and New Zealand – the company’s base of operations.) Its financial backing and success in the Southern Hemisphere is evidence that Xero should continue to establish itself as a major player in the U.S. accounting software space.
The partnerships Xero has entered into over the last few years are another positive sign. Major technology and banking companies like Google, Square, Constant Contact, and Silicon Valley Bank have all built integrations using Xero’s API. If these companies endorse Xero, it affirms the decisions already made by thousands of accountants and small business owners. I believe we’ll hear much more from Xero as time goes by.