When we designed Xero we took a design-led approach and followed hundreds of small business owners around. We discovered the first business activity almost all of them did each morning was to head to their online bank account - simply to see who had paid them overnight. We also noticed that business owners don't process those transactions at the time; rather, they work late at night often right before a GST return is due and have the horrible task of back-loading all their bills and invoices. That is the horror of small business.
Our design process awoke us to the idea of "automagically" loading bank transactions into accounting software each night. Your bank's servers can send your statements to us and we can put those transactions in the right place, and do much of the dreary bookkeeping work for you or reduce data entry to a simple confirmation "click".
As we gained customers in our small market, we found ourselves in an exciting position. As we approach 100,000 customers in New Zealand, we have been able to get a glimpse of the massive small business economy. Our customers sent and received 20 million invoices totalling $30 billion in the past 12 months, a meaningful portion of GDP.
The impact of this has been remarkable. We've seen many businesses that used to balance their books only every few months, now having an accurate view of their money every day. People are "bank reconciling from bed" with their mobile phones.
Thanks to Xero, businesses are more productive and business is more fun. ASB was the first New Zealand bank to support direct bank feeds into Xero and we now receive live data from thousands of banks around the world. This single feature, developed in New Zealand, has had huge impact on the world of accounting. Direct bank feeds are a must-have feature for any accounting software.
As we gained customers in our small market, we found ourselves in an exciting position. As we approach 100,000 customers in New Zealand, we have been able to get a glimpse of the massive small business economy. Our customers sent and received 20 million invoices totalling $30 billion in the past 12 months, a meaningful portion of GDP.
That sort of information just hasn't existed before, but over the next few years we'll begin to surface those insights to our customers, allowing them to opt in to anonymous benchmarking allowing them to map their performance against their peers.
Another exciting development as we get to scale is that the traditional industry leaders, like the banks, are now taking us and innovation seriously and collaborating on new services.
Our insight that online banking and online accounting are intimately related is now obvious to the banks and together we're able to invest in defining the next generation of banking - where business and banking systems communicate directly. For example, the ability to set up bank feeds from inside internet banking, have an accountant or bookkeeper process your payables so you only need to approve them on your mobile, and businesses making payments electronically without having to re-key data.
These are projects all in progress. This linking will save small business millions of hours in productivity.
What is super-exciting is that the progress we're making in New Zealand is being noticed by the Australian, British and American banks. New Zealand is being seen as the global leader in business connectivity.
Business-to-Government interactions are also lining up for a strong period of innovation, and this is "move the needle" stuff. If you look at the IRD's $1.3 billion project, you can see immediate savings.
Why should the Government develop tax return software? The private sector already does that and is competing for the same development resources. A better model would be for the Government to become a wholesaler of services and just publish the rules. The private sector would be more than happy to invest and is well-placed to cost effectively host the free public access forms at a fraction of the cost to Government.
Each Government department website is a compliance silo. Having business software talk to Government servers reduces Government investment and dramatically reduces compliance costs. For example, when GST changed from 12.5 per cent to 15 per cent recently, the impact on our customers was minimal; the software could do all the hard bits.
New Zealand is uniquely positioned. We are already leaders in the cloud and our big institutions and Government already work well together.
Our vision is that, working together, New Zealand will become the reference model for how businesses connect. We're already well along on that journey and the opportunity is ours to take.
• Rod Drury is chief executive of Xero.
For more on NZ business ambitions go to www.nzherald.co.nz/businessambition
