With the Xero dealer conference coming up in NZ next week Xero have released updated customer numbers, with total paying customers up from 50,000 just 4 months ago to 60,000 now. 

That is a pretty staggering growth rate - up around 20% in 4 months.  Customer numbers have more than doubled every 12 months for the past 4 years (don't have March 2012 figure just yet obviously, but I am pretty confident it'll be a bigger not smaller than today's). 

Xero Customer Numbers

It seems to me that there is a huge amount of growth yet to come.  Xero haven't released a geographic breakdown, other than to say that 50% of those numbers are outside of NZ.  My guess - and it is only a guess - is that in Australia they currently have a market share of not much more than 2% - that is maybe 10,000 customers out of more than 500,000 businesses running an accounting solution of some sort (MYOB, Quickbooks, Saasu or other - and my focus is really on SMEs, so I am ignoring the larger systems run by most larger businesses).  

These figures are reflected in Viridity's experience over the past 12 months (obviously on a much smaller scale).  We have more than doubled our Xero sites in the past 12 months, and every one of these has been a new client to Viridity - we are not simply churning existing clients to Xero from other solutions. It is tempting to think the growth is all about the technology - that it is just about being a cloud solution.   But the message I get most frequently from clients is that this is not of itself enough.  What clients want is good quality, timely, commercially focused financial information. 

Viridity's focus has always been on commercial accounting.  We take the view that whilst compliance is of course a requirement, it is never more than the essential minimum.  Rather it is the ability to deliver management information to assist business owners understand and control their business that is of value to our clients. And I have yet to find a better tool for this than Xero!

Yes Xero may be "the world's easiest accounting software", yes it may be "beautiful accounting software", yes being "in the cloud" is funky, but this is just the enabler.  What my clients love about Xero (and the services we provide them) is the shift in focus from backward looking tax and compliance to forward looking financial business management advice.

Right now I have to say I am enjoying what I do for a living more than ever before.  Xero is the key tool that Viridity needs to really add value to clients.  And it is just going to keep getting better.

Budgets & Forecasts

The budgeting module in Xero is easy to use and has some great time saving features – like that you can automatically copy data from one period to another, or that you can do so adjusting the amount (either by a percentage or a fixed amount).  Nice!

But there are some areas this could really be improved.  At present a budget can only be set up at a GL level.  Being able to create budgets at a tracking code level (where the sum of the tracking codes then automatically creates the GL budget) would be a great feature.  This would be especially useful for the many Not for Profit clients we work with (although I can think of lots of other clients who would benefit from this also).

It would also be great if a budget could be imported from Excel (hands up who doesn’t use Excel when creating a budget)!  I know Xero have on the drawing board the ability to “round trip” your budget – to export your current budget from Xero to Excel, to edit in Excel and then import back into Xero.

As this is a wish list (so I can wish away) I would also love to see multiple budgets (or forecasts).  Again thinking mainly of not for profits, where we frequently have to create a budget (that needs to be held as is for the whole year), but then also to set up and report against a forecast.

And finally enhancements to the integration with some of the add-on report writers.  At present we use a combination of add on reporting tools for reporting and forecasting to various clients.  Spotlight Reporting is a good tool for both board reporting and forecasting, and  Calxa is great creating budget plus a wide range of management reports.  But both of these are hampered by the Xero API not allowing (as yet) access to the GL by tracking codes, so we can only report / budget / forecast at the GL level, not by tracking code.

Would you make use of any of this?  Do you run a Not for Profit that needs to report at a more detailed level (acquitting funding, or reporting by program)?  Please leave your comments below.

I wrote an article some time ago (published at www.flyingsolo.com.au) in which I looked at some of the issues around measuring business performance.  In that article – almost as a throwaway introduction – I wrote:

“In other areas of life this [measuring] is taken for granted: think of how sportspeople obsess over their times run, heights jumped, runs scored and so on.”

I was reminded of this a few days ago when I went to see the movie “Moneyball” (which by the way is very enjoyable).  The movie charts the story of the relatively poor (at least by the multi-million dollar standards of US sport) Oakland Athletics baseball team in 2002 as they adopted a new system for selecting players (Wikipedia has good artciles on both the movie and the “sabermetrics” system the Oakland A’s adopted). 

Rather than relying on the “expertise” of club scouts, they turned to an analytical approach of assessing a series of skills – measures such as (and whilst I sort of get these measures I am sure they mean far more to fans of baseball) “walks”, “getting on base” & “avoiding strike outs”.  From this analysis they picked up players who were undervalued (based on these statistics).  For the record they got to the playoffs in 2002, although this article in not about the outcome but the process.

I have long been fascinated by the post-match analysis by sports people from a whole range of sports.  Their emotional state (in crude terms happy / sad) is determined by the outcome (win / lose), but when they are asked to comment on the game they have just played they almost never mention the result.  They talk about the things they can control, the things they are coached to do in the game.  They talk about yards gained, sets completed or tackles made (rugby league), first serve percentages and unforced errors (tennis), fairways hit and putts taken (golf) and so on.  Their focus is on the things they can control that – if done right – will lead to success.  They focus on a similar range of measures to those used by the Oakland A's.

It seems to me that this is a lesson that the business world can usefully learn from sport.  All too often when sport is discussed in a business context it is in terms of the result (winning or capturing territory) or about commitment (“taking one for the team”, going "that extra yard" and so on).  But this misses the point that these are not what the sports people themselves discuss – whilst any (team) sportsperson will trot out the cliché of how the team result is more important than their performance, you know that come Monday morning when they debrief on the game with the coach they will be focusing on their personal contribution to the result.

In my own business I am developing a series of metrics to measure the indicators of performance that I can infulence.  Website visits and enquiries from those visits, conversion rates on leads, client retention rates, turnaround times on questions from existing clients, meeting client expectations and so on.  I don’t think all of these metrics are quite right – I’ll keep on working on this – but I do know that judging my staff based on the profit the business makes (the result) does not make sense.  Even judging my own performance on the basis of profit doesn’t give me any insight as to why the business has done well or less well in any given period.

Instead I need to judge the team (and myself) on performance against those things we can control.  If I can get that right I can continue to attract and convert new clients, to provide great service to (and hence retain) existing clients and to provide an interesting and rewarding environment for my staff to work in (hence enabling all of the above) – and if I manage to do all of that the results will follow.

What are the indicators of success in your business (other than the bottom line)?  What do you measure to know if your business is performing well?

To quote Lonely Planet ‘One thing Burkina-Faso lays claim to is having the capital city with the coolest name – Ouagadougou. And here I am on my first day in the job for Viridity and our client SGSS. Hot and muggy and at 8am the sun is already high in the sky.

A driver from SGSS picks me up and he navigates the wide roads which are a chaotic mix of motor-scooters, bicycles and motor vehicles...scooters way in excess, reminds me of Rome transported to the dessert. This is certainly a long way from the ordered and reliable roads of Sydney.

Head office of SGSS is situated in a one-story spacious building which feels more like an old residence than an office. There is a full-time security guard standing outside ready to open and close the front gates, always with a beaming smile and ‘bonjour’. Outside there’s also a donkey with a cart attached full of tree-offcuts...they provide cheap labour.

We’re at the end of the wet season so everything is still relatively calm with most of the SGSS workers not due back for a few days. I have an office to myself and thanks to the wireless network I can easily work on XERO and Gmail using my Macbook. The hours of work for the office staff are 8am through to 6pm with 2hours for lunch, which is provided by the company.

I feel quite at home in this relaxed environment and after an initial meeting with the local bookkeeper I start work on spreadsheets to create upload files for the various Cash Advance accounts. Due to the nature of business in Africa, the geologists and engineering staff take cash advances with them when out in the field. Unfortunately, these various cash advances haven’t yet been reconciled in XERO but I’m relieved to find a well-ordered paper trail to support the payments and some excel summary spreadsheets. The currency in Burkina-Faso is around 450 XOF (West African French francs) to 1 USD which creates scary looking numbers from a large volume of small-value transactions - petrol, juice, SIM cards, lunch at Mummy’s Kitchen, road tolls and ‘Courtesy Payments’ to name a few. I decide to sort and sub-total by account type then use the sub-totalled amounts for my import to XERO rather than importing 100’s of transactions.

We lose the internet connection for a few hours but that’s Africa. It comes back up....eventually. Everyone seems to work at a slow pace which I find a bit frustrating - let there be no rush, besides it’s too hot. I’m hoping I can get through all the work...

The major issue in relation to my scope of work is the lack of confidence shown by the bookkeeper in relation to XERO and it’s capability to provide the necessary reports for TVA (i.e. the local version of GST) requirements. At present she and her assistant use SAGE for A/P, A/R, Payroll and reporting the TVA. One of my jobs is to train and encourage the bookkeeper to input directly to XERO rather than in SAGE but she’s very concerned that it won’t do the job and wants to speak to the Tax Accountant before committing to anything. Meanwhile time passes...

A heavy downpour belts hard on the tin roof but it’s wonderful and I stop to enjoy the sound and the smell. When I leave and walk back to Le Karite Bleu guest house the roadside verges are now muddy red with puddles of water everywhere and the humidity is at sauna-level. I have to remember to buy a bag of peanuts from one of the street vendors on my way...and another bunch of bananas.

A couple of weeks ago I wrote a blog post on the importance of management reporting, arguing that all owners or managers of small businesses should be demanding high quality information to help understand and run their businesses.

A few days ago I attended my first board meeting for a new client - who happen to be a Not For Profit with an external board but the experience of that meeting is equally applicable to all SMEs.  I presented to the board the standard Management Reports out of Xero, which they loved.  I then went a step further and provided them a few edited highlights using the Spotlight reporting tool.  Just a couple of the charts I put up were as follows.



Nothing all that fancy (though there were a lot more besides this), but far more informative than anything they had ever received previously.

A number of the directors present - who are on the board because of all sorts of great skills they bring to the organisation - would be the first to admit they do not have particularly strong financial skills.  I received a number of comments that they suddenly felt as though they really understood the financial information presented, which they never had before.  This both delighted and horrified me.

Delighted because I had acheived what I set out to (of demistifying their financials) and horrified me because of how vulnerable they had all been for the months and years prior to that day.

It is really important to remember that as a director or officer of a business you have a range of responsibilities that are not lessened just because you don't receive or understand all the information you require.  So if you are not receiving an adequate range of financial reports or you do not fully understand them DEMAND them now, and make time to understand what they mean.

If you are not sure what your obligations as a director are there is a good summary of these on the ASIC website, or talk to a professinoal advisor.  The penalties for getting this wrong can be very tough!

If you think more meaningful reports would help you gain a better understanding of your business please contact Viridity.

Those of you who invest time reading my blog posts or contributions to various forums (thank you) will know that I get pretty excited at times about who gets value from your accounts.  I am very firmly of the view that the number 1 user of your accounting database should be you, the business owner. 

Yes you have to keep the ATO happy (once a quarter), yes you have to keep your accountant happy (once a year so that he in turn can keep the ATO happy), but none of that adds value to your business.  At best it can reduce some of your compliance costs. 

Running monthly management reports, spending (just a little) time reading and understanding them, and then acting on that information can massively improve the performance of your business.  I am really looking forward to the release of a number of reporting add on products for Xero, that will deliver management information to the finger tips of small business owners.

Xero already has a great range of built in reports, but what we are now about to see - made possible by changes to the Xero API - is a variety of tools aimed at reporting graphically, at business intelligence solutions, and at budgeting and forecasting. 

This is why I became an accountant - not to worry about shaving a few bucks off last year's tax bill, but to work with business owners to help them run their businesses better.  And having the right tools available makes the job so much easier, not to mention so much more fun!

Watch this space for details of new products as they get released.  Exciting times!