Xero’s Damon Anderson: ‘We’re at the end of the beginning with cloud accounting’

Xero’s Damon Anderson: ‘We’re at the end of the beginning with cloud accounting’

Where is the accounting sector at with its journey to cloud computing and what are the key drivers of adoption? Austin Clark caught up with Damon Anderson, Director of Operations at Xero to find out more.

Xero’s Damon Anderson: ‘We’re at the end of the beginning with cloud accounting’

Cloud computing, digital transformation, accounting software, apps…talk of technology in accounting is never far from the top of the agenda these days. And, if the turnout for Xerocon, the innovative cloud accounting conference delivered by software giant Xero, the sector is really beginning to embrace the digital revolution.

Curious to hear the thoughts of the tech firm around digital change in accountancy, Austin Clark, Editor of Accountancy Age caught up with Damon Anderson, Director of Operations, UK & EMEA, at Xerocon. Here’s what he had to say.

Much is said about the development of cloud computing and digital transformation in accountancy, but how in your opinion is the adoption of the latest technology developing?

“It’s a big question, but Rod Drury, our founder says, ‘we are at the end of the beginning’. What we see in cloud accounting in particular is that we’ve really now got the tickets to the game, which is getting accountants and bookkeepers and their businesses connected together in the cloud on a single platform. Crucially, it means they’re using one source of truth.

“However, there’s a huge opportunity ahead. Cloud accounting is only used by 20% of the nearly 6 million businesses in the UK. That means there’s only 20% of businesses and their accountants enjoying the benefits that come from cloud technology.

“The killer feature that is accelerating the adoption of cloud is the opening up of APIs to banks. By connecting online banking into Xero you suddenly see a massive drop in time consuming tasks. With this underlying technology and real-time data capability in place you can start to actually file tax returns accurately and quickly, you can start to make payments quickly and accurately, and you can start to keep a tab on the health of your business in real-time, rather than using historical data that needs lots of human intervention. That’s a game changer.”

Given what you’ve said there, who is really driving the change? Is it businesses or accountants?

“I think it’s a bit of both. We drive a lot of demand from small businesses to accountants because they’ve seen and used Xero, and they’ve passed that to their accountants. But we also see it the other way around. You meet a lot of accountants who have been on the Xero journey for the last five years and they are really encouraging clients to make the move.

“That’s interesting because it shows how accountants recognise the benefits of automation and technology, rather than being threatened by it. There are many different types of accountants and if what you do is plug data into a system or a spreadsheet then yes, your role has been disrupted. But, for the most part, automation represents a huge opportunity. If a third of an accounting firm’s time is spent on entering data into the system – and who wants to do that – you can free up time so they can deliver more value-added services to their clients. They can actually use data and put it to good use to produce better business outcomes for their customers.”

What are the focal points of Xero’s solution for UK accounting practices?

“This starts with reliable and accurate data and that’s probably the reason why there is most interest in Xero. Then there’s our ecosystem, which supports bank feeds and integration with our Hubdoc data capture solution.

“Workflow is probably the biggest challenge accountants talk to me about. They say to me, ‘if Xero could do the final mile and actually file returns, not just a sales VAT return for MTD but annual tax returns with Companies House and HMRC then they wouldn’t be relying on taking information out of Xero and putting it into 30 year old technology that is basically a built-in desktop’.

“Finally, insights are incredibly important. We have a vast dataset now with 2 million customers and what we really want to be able to do is serve up those insights, based on the date we have, to the accountant at the right time. Accountants are the professionals and we want to say, ‘look, this customer, Christmas is coming up, they’ve got to give out bonuses, they’ve got lower accounts receivable for the month, so they’re going to have a cash-flow issue’. There are countless examples of insights whether it’s, ‘you need to reconcile these transactions,’ or, ‘you need to look at propping up some cash,’ you know, or ‘you might need a loan’.”

That shift from reactive to proactive accounting is interesting. To fully embrace this, do we need a mindset shift within the profession?

“I think it does, yes. The long discussed ‘challenge’ to the accountancy industry is AI and machine learning, and how it’s automated everything. And the reality is it cannot replace the interactions that accountants have with their clients. And as much as you can recommend and make those prompts mentioned above, we need a professional who can add that nuance, that empathy and their experience and judgement to basically make sure they get the best outcomes for their client’s business.”

With that in mind, what skills do accountants need to have in todays tech-led world that they haven’t had in the past?

“We feel really passionate about this. There are nearly 30,000 vacancies in the accounting industry and the biggest thing we hear from digital accounting practices is, ‘we just can’t get talent, we’re not getting the talent coming through the system, through the education system, through the accountants bodies and the accounting industries’.

“The sector needs to think about what it’s training its new starters in – and embrace technology. By technology I mean having the skills to advise people on technology because it’s so intrinsically linked to accounting now. And then we need people to become consultants, because being able to understand and empathise with customer needs and then use the technology to help the customer grow their business or achieve whatever they want to achieve. Those skills, the technology and advisory consultation, are the ones we feel passionately that we need to get into the education system.”

Would you like to see more help from industry groups and government when it comes to this education?

“Accountancy bodies play an enormous role and they need to think about how they view their role and the profession. On the government point, I actually think HMRC have made a difference to the technology view of accountancy. We’ve been living and breathing MTD for the last 18 months and I think as part of that it’s fair to say that HMRC has created technology, like APIs, to streamline the filing process, which has been fantastic. Having two-way connectivity with HMRC means we can do so much more in the Xero product.

“However, I do think the burden of education has fallen upon the software industry to really encourage and educate people why it’s actually a better way of doing things.”

Do you think regulation is a good thing for kick-starting tech adoption then?

“It can be, yes. One of the best examples of that is open banking. The Competition Market Authority made the nine biggest banks open up their data to innovative start-ups that are able to provide amazing use-cases. That’s benefitted us because we can now connect with all of those banks with a safe secure connection through bank feeds faster and better and more reliably.

“I absolutely think regulation done right can play a really different role in stimulating innovation, and I think MTD and open banking are two great examples, but you’ve got to have an ecosystem and companies like Xero that can help them harness that for the benefit of our customers.”

Some great work has already happened and more is in the pipeline, but where do you see Xero and the wider sector going over the coming months, years, and beyond?

“I think it’s more of what we’ve seen. Cloud adoption is one of our key strategic goals, because we know that helps support our customers, it improves the lives of our businesses, our accountants, and the community, and that’s our purpose, why we exist.

“Within the cloud products that exist, we’ll continue to automate the data capture process. Helping businesses get paid faster and make payments faster, and cracking the productivity puzzle that we have in the UK, are also key to Xero – and we’re passionate about solving the problems.

“If we can get the cash moving in the UK and hopefully start to see more businesses operate on a positive cash-flow basis month to month, it’ll be a real triumph.”

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