Life changing technology for UK accountants

I’ve just spent a fortnight in the UK and by all accounts the UK economy isn’t in great shape. The Government is drastically cutting spending, which is creating much debate and idea generation over how to cut costs. Such ideas verge on the ridiculous at times. For example local councils are turning off street lights to save money. But whatever transpires, all public organisations will have to become more efficient and that’s going to involve technology and using the internet to interface with customers. UK citizens are adapting and changing.

Two interesting examples of this new ‘forced’ innovation are:

1.  Cheques will be gone in 2012 so everyone will have to use internet banking and payment gateways like PayPal to make payments.

2. Greater numbers of HMRC and Companies House filings must be made online, and from April 2011 some of them in the new iXBRL format.

All the accountants I spoke with are feeling pricing pressure on their core compliance work and are very interested in how to build efficiency into the processes so they can stay price competitive. This is no different from the situation in Australia and New Zealand. The reality is core compliance work is becoming commoditised and low cost operators are pushing the pricing for this work down. In order for the accounting firm to stay alive, it must evolve. The successful firm of the future will have higher touch points with its clients, bundled offerings, fixed fees and it’ll engage in more management accounting and general business advisory work.  At last the compliance and tax return monkey will be gone.

Electronic bank statement data capture (or ‘bank feeds’ as we call it) will be the single biggest technology improvement at a business level that accounting firms in the UK have seen since PCs hit our desks.

With Xero your clients’ bank statement data arrives automatically into their Xero accounting system every day. There’s no need to enter the date, amount or payee for every single bank statement transaction line. All you need to do is code the transaction to the correct ledger and decide on VAT. At Xero we’ve added a lot of additional functionality around the front-end data processing, so this process is incredibly fast. If you compare the way Xero works with traditional desktop software, the accounting firm stands to save more than 50% of the processing time. If processing is about 50% of the whole job, then the firm will save about 25% of the total time. In fact I spoke to an accountant in Bath who uses Xero bank feeds and he told me the time saving on transaction processing were “ridiculously high”.

Time saving and improved efficiency are fantastic because they create faster throughput, which means improved cashflow. But they will not result in short term bottom line profit improvement, because most accounting firms have relatively fixed salary costs. What will probably happen is you’ll recruit fewer new team members over time, so in effect the longer term bottom line will improve. The other thing is Xero’s bank feeds create ‘spare’ time for a firm. What you do with your spare time is the key to keeping your clients.

As an example, when completing the VAT, bank feeds within Xero enable the accountant to complete a management report as well. The VAT and Management Report with supporting work papers can be completed in about 1-2 hours. In the new world, where every person in business must know their cash position daily, the accountant is mission critical to the success of that business. So more frequent management reporting will be the new staple of accounting firms.

While the economic position for the people of the UK is ‘pants’, the Brits are a resilient bunch and will tough it out. The good news is the highly innovative new companies of tomorrow, which will help the UK grow again, are just getting warmed up.

Break-Even Analysis

In every business there is a certain level of sales at which costs equal profits. This is know as the break-even point. Its simple to calculate and can be plotted on a break-even chart.

Lets assume an event firm is running a champagne reception. The selling price per ticket is €10. Each guest gets one glass of champagne and each glass costs €5. (Ignoring waste). The other costs to consider are the cost of the band (€100) and the hotel room rental (€200). The variable cost is the champagne as the more guests there are the more champagne we need to buy. The fixed cost is the hotel room and band.

The first step is to calculate the contribution per ticket.

Price of ticket €10
Less cost of champagne €5
Contribution per ticket €5

Now thats calculated we can look at the fixed costs
Hire of band €100
Hotel Room €200
Total Fixed costs €300

We know that for each ticket sold their is a contribution of €5. Obviously to calculate the break-even point we need to divide the total fixed costs by the contribution per ticket. So thats €300/€5 – 60 Guests.

In general the formula for finding break-even point is

Fixed Costs/ Contribution per unit.

Simple UBL

As the SaaS accounting world matures a number of us have thought about how we send electronic invoices to each other.  It’s kinda crazy that you take an invoice out of an accounting application, flatten it into a pdf, and then someone has to retype it in to their accounting application.

We imagine a world where invoices and other business documents just appear in your accounting system.  No retyping, no errors. Major time saved.

We already have Xero to Xero transactions but it would be great to send invoices to any system.

It’s not just small business to small business.  Having small businesses using online systems makes it viable for large businesses (like Telco’s and Electricity companies) to produce electronic invoices that small businesses can now receive. That saves big business a lot of money.

One of the building blocks of business to business data interchange is to come up with an standard format.

Fortunately, other people with large brains have already done a lot of this work in the OASIS Universal Business Language specification.

Practically though, this is a big specification with lots of business documents. It’s hard to get your head around it.  And we really just need a simple subset to get started.  We could start again, but that would mean reinventing the wheel.

So what we’ve done is create an industry website for vendors to navigate through the UBL specification, starting with invoices, and to collaboratively define the minimum invoicing standard we should support.

You can check this out at

Please let us know what you think, if this is useful and what we should do next.

100% Xero

Chris Reid‘s practice first dipped its toes in the world of online accounting a while back when instead of following their default route of advocating Sage, he managed to persuade his staff and a small group his clients to try out Xero.

Last month Chris informed Sage that he would not be renewing his Sage Accountant Partner programme membership next March, and his team is now finishing off the process of flipping all his clients across to Xero.

Chris is a smart accountant running a forward looking, progressive practice. As well as gaining the efficiencies of servicing all his clients online, he’s also seen a significant uptick in new client enquiries since he modified his Xero Partner Directory entry to reflect his practice’s now total focus on Xero.

Smart indeed.

Pay and file deadline

Pay & File 2010
The final filing date for submission of the paper version of the 2009 Income Tax return (Form 11/11E) is the 31st October 2010. As this date falls on a Sunday, Revenue has put the following arrangements in place:

Over the course of the weekend, returns and payments may be dropped in to the post boxes in Sarsfield House, Francis Street, Limerick. There will not be any facility to acknowledge receipt of deliveries. Customised receipts will issue in all cases when payments have been processed. All such returns received by 9:00 am on Monday 1st November will be deemed as meeting the filing deadline.
As in previous years, returns with a postmarked date of 31st October will also be deemed as meeting the filing deadline.
Customers using Revenue On-line Service to both file and pay have until midnight 16th November 2010.

There is still time to register for ROS to take advantage of the extension mentioned above. ROS is the easiest and quickest way to meet all your tax obligations.

Unlocking the beauty of the web

In recent years Internet Explorer has been this wonderful utility built into Windows that allows people to download a web browser – usually Firefox. Probably due to the fact that they still dominate in market share, Microsoft has been pretty absent from the browser wars that have been raging over the last few years. But as more and more users switch to better, faster browsers (Firefox, Chrome, Safari, Opera), Microsoft has finally stepped up its game with the release of the public beta of Internet Explorer 9.

I’ve been playing with IE9 since the early preview releases. Even in the previews it was very impressive, and the beta certainly puts the oft-maligned browser on a par with the remainder of the browser landscape. The first thing that strikes you about IE9 is that Microsoft has finally committed to standards, both standards that they seem to have forgotten about in previous releases of IE, as well as the emerging standards based around HTML5 and CSS3 (all the stuff that’s very important to HTML/CSS geeks). It pretty much supports the bulk of the CSS3 working draft and has almost full CSS3 selector support and supports an increasing number of the HTML5 working spec. All I’m really missing now is some more HTML5 APIs, WebGL & CSS transitions & transforms.

But the biggest improvement in IE9 is based on one of their stated goals for the project: “performance, performance, performance”. They’ve completely rewritten the engines behind IE9 and there is lots of stuff in there – a new layout engine, a new JavaScript engine (including mutli-core background compiling to native code), lots of networking improvements, and the biggest thing they’re touting is completely hardware accelerated graphics (for everything from CSS through to animations and video).

You can find out more and download the beta at the slightly ironically named

As I stated above I’ve been playing with IE9 for a while now. The hardware acceleration is definitely impressive – some of the demos on really sparkle on IE9 (and lag in the other browsers).

The user interface feels very much like Google Chrome, so the Chrome minimalist approach has now been copied by every major browser. It makes sense: to be fair there’s not a lot you can do with the browser UI. I don’t like the tabs next to the location bar though (actually it’s a “one-box” bar like Chrome – integrated search and location). Yes I have a widescreen monitor. In fact I have a 30″ 2560×1600 widescreen monitor – but I don’t want to run my browser full screen just to see the url or see all my tabs. I know some reviewers like it – but the Chrome way feels more natural.

Even though it seems very solid for a beta it does crash a bit and the crashes are ugly. Again Microsoft should take a usability leaf from Chrome here.

What about performance? I love to run benchmarks so that’s what I did. Using the new Kraken benchmark from Mozilla ( IE9 does very poorly against its beta rivals (Firefox 4 Beta 6, Firefox Minefield & Chrome 7). Running other tests (such as Google’s V8 or WebKit’s SunSpider) the field was pretty much flat (Minefield easily beats Firefox 4 beta though – Firefox’s brand new Jaegermonkey JavaScript engine kicks arse). Here are some pretty graphs courtesy of Engadget’s review where they compared IE9 to the current release versions of Chrome and Firefox:

SunSpider: Lower is better

Futuremark PeaceKeeper: Higher is better

To be honest all these benchmarks tell us is that IE9 is not the new champ – just that it’s catching up to the field. Yes – the IE9 demos are amazing, and right now if you were wanting to push the boundaries of graphics or video performance in the browser then IE9 looks to be the winner. But by the time developers are switching from Flash to using Canvas or SVG the other browsers will have released their GPU-powered versions, so any advantage IE9 currently has will have gone. Ironically the website runs much smoother for me in Chrome 7 than in any other browser (including IE9).

So yes – it feels fast. A LOT faster than any other version of Internet Explorer before it, and faster than the current release version of Firefox (3.6). Even in normal use, web browsing in IE9 feels very snappy, but Chrome still felt a little faster in most “normal” scenarios. When comparing the use of Xero between the current release version of Chrome and IE9 beta, Chrome still felt the smoothest.

As far as new and unique features probably the most interesting is the ability to pin websites to the Windows task bar as “apps”. This is particularly cool in Windows 7:

The menu is completely customizable in the HTML of the web site (this was done using our staging site – don’t try it at home). Unfortunately the HTML to do it is fairly awful – lots of meta tags with ico files. It’s a great idea and as web apps become more integrated into the OS it makes sense for a web developer to have access to this kind of feature but it would have been nice for them to try to utilize some standards (hopefully someone from Microsoft reads this:

Obviously I’ve played with Xero extensively in IE9 and to be honest almost all the Xero apps aren’t working very well on it right now. It is a beta and while we do have a clear policy on beta browsers, we usually don’t have the problems we’re having with IE9. We know why most of the problems are occurring but while we are looking at we can’t spin our wheels on it too much while it’s in beta. We will definitely have Xero working perfectly in IE9 by the time of its official release (and probably a lot sooner).

Still no word on when that official release date will be. And then once it is released will Microsoft keep the release frequency up like its rivals? In the 18 months between IE8 and IE9 there have been multiple versions of Safari, multiple major point releases of Firefox, and 5 versions of Chrome. If Microsoft wants to keep pushing the beauty and the boundaries of the web then I think it needs to employ the same aggressive upgrade policies that the other vendors do.

And now for the let down: IE9 only runs, and will only run, on Windows Vista and Windows 7 (I installed in on Windows 2008 Server but it’s not running very well). Is this a problem? Yes and no. IE6 and IE7 are still dominant players in the market (especially in the enterprise) mostly because of Windows XP, so it’s a pain for web developers like those at Xero that want our users to be on the best, the most secure and the fastest, that Microsoft isn’t giving our users a better option. I totally understand and actually support the whole “a modern browser requires a modern operating system” objective but if Mozilla and Google can do it then why can’t Microsoft?

Oh – and for the 60% of Xero users that don’t have Windows 7 or Windows Vista do yourself a favor and get Google Chrome

My beautiful polychronous workstyle

We take our technology enabled working lives for granted these days but anyone over the age of thirty five will recognize that the typical working day has changed quite profoundly in the last twenty years.

Whether through the growth of remotely networked laptop usage from the late 90’s, the mobile email revolution of the last five or so years, or today’s generation of web apps such as Xero – many business people are as much unshackled from the old nine-to-five office cube culture as they are free to dip in and out of work during our personal time or to momentarily attend to what were previously deskbound tasks from behind the wheel of a pick-up-truck between jobs.

So, I thought it would be cool to try to visualize an abstract of how much a day in the life has changed over the last twenty years. I threw a bunch of fifteen-minute time slots into a spreadsheet and estimated how much of my typical attention was spent focused on personal activities versus business activities from when I awake at six thirty in the morning through to hitting the sack at night, with the maximum focus on one kind of activity being 100%.

The comparison is striking; while there’s still a broad general separation of work and personal time, the boundaries are much more blurred and blended. But what changes multiple times a day is the priority or intensity of focus on one class of task versus the other, and this happens all throughout the day. Business intensity is low when you’re tethered only by a smartphone and email becomes essentially a background task while you’re doing something personal or travelling, and then your business intensity peaks when you’re using your laptop, in a meeting or on a phone call when personal email then shifts down to becoming a background task. But neither class ever shuts down completely.

Compared with what I remember being a typical working day in 1990; before the mobile phone, internet, email or social media, and when in order to do any work at all you needed to be physically located with your all your cow-orkers, at a desk and near a landline telephone – the comparison is pretty stark.

In 1990 you would submerge into the office at 9am, essentially isolated from your personal lives unless there was some family emergency, sit with your co-workers and focus 100% to compress everything you needed to do into generally unbroken blocks of time. You’d then come up for air at 1pm – at the same time as everyone else to regulate the downtime efficiently – which was your only chance to visit the bank to pay personal bills (no internet or telephone banking then) or run any errands. You’d finish up around 5pm and if you ever took work home with you then you were considered either a workaholic or sucking up big-time for a promotion.

In 2010 you’re only totally off the grid when you are asleep.

You’re handling email 30 seconds after you’re awake, handling personal bills or ordering flowers for your wife between calls, dropping out for three minutes to wish a friend ‘happy birthday’ on FaceBook, dealing with email while waiting to pick your kids up from school or pushing a shopping cart around on a Saturday afternoon.

Of course, all this exercise did is visualize estimated attention or focus, not personal productivity. But it’s probably fair to say that if productivity could be charted, it would be several magnitudes greater than in 1990.

We’re always hiring!

Speaking at the New Zealand Computer Society 50th Anniversary conference today (twitpic’d below), I mentioned during a panel discussion that our biggest constraint was a pipeline of good talent.

A couple of people mentioned afterwards that …

  1. There were surprised that we were still hiring
  2. There was a perception that Xero was complete and so there might not be any interesting projects to do

At Xero we are always hiring and usually have a number of open jobs:

We’re always looking for great developers, from junior to senior and we can offer a wide variety of work as Xero has so many systems. From the Xero app, to our back office systems, websites, help, mobile community sites etc, etc. With breakeven in sight during 2011 we may have the opportunity to gas up significantly so we are keen to build a pipeline of talent we can tap.  Even if you’re not quite ready to move and want to see what we’re about please make contact.

Our biggest shortage right now is software testers.  There is a real shortage of these valuable people in New Zealand.  There aren’t many places that teach software testing but maybe people with a background in bookkeeping and preparation of financial statements might consider financial software testing as a new career.  Please make contact and we’ll help you set a plan to acquire the skills.  We know we’re going to need many more QA people in the future.

As far as Xero being done. Wrong, wrong wrong.  We’re just getting started.  The last few years have been about building the solid foundations and doing the huge amount of work to build a fully featured, horizontal, accounting application.  That’s just the ticket to the game.  Now that we’re got most of that done we can turn to the game changing stuff.  An example of recent new projects we’ve been working on include Yodlee feeds, Xero Personal, Xero Answers, API 2.0 with oAuth and lots of other stuff behind the scenes.  We’ve got lots of other stimulating projects we want to get into and a huge roadmap to work on. What you’ve seen so far with Xero is just the beginning.

I mentioned at the conference that it upsets me that so many developers in Wellington are working on fee for service type work, rather than using their scarce skills to building intellectual property and create ongoing value.  Building a product that 20,000+ companies work on every day is a blast.  As Xero expands around the world we have a unique opportunity to improve the productivity of the massive small business sector and make business easier and more enjoyable.  It’s pretty cool to be part of this …

So we are all always looking for good people.  Please make contact if you’d like to join our merry band.

Getting those bills under control

Today we’ve released some great new functionality in Xero Personal around planning for some of the bigger expenses you’ll face over a three month period.

Plans & Reminders lets you anticipate upcoming payments whether they be expenses or income. Not only does it give you better visibility of when money is going to be coming in and out of your accounts, but you can see in advance if you will have enough money to meet substantial regular or one-off  payments.  You can also opt to be sent a reminder email before the payment date.

So there’ll be no excuses for missing a bill payment or running out of funds just before the due date!  Watch this video overview to see just how it works.

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