Q&A: Xero’s UK MD, Alex von Schirmeister, on empowering small businesses

On the side lines of Xerocon 2024, an event known for gathering the brightest minds in accounting and bookkeeping, Alex von Schirmeister, UK MD of Xero, shared his thoughts on the economic challenges facing small and medium-sized businesses (SMBs) in the UK.

With a palpable energy in the air and a backdrop of exciting announcements, von Schirmeister also provided a deep dive into Xero’s latest efforts to support and empower SMBs and where accountants can step up to help their clients further.

State of the UK Economy for SMBs

Discussing the broader economic environment, von Schirmeister shared a cautiously optimistic outlook. “Certainly, there seems to be a certain degree of optimism among small businesses,” he said.

Despite challenges such as high interest rates and policy changes, there are positive signs, including a reversal from net business closures to an increase in new business births.

However, von Schirmeister highlighted ongoing struggles, particularly with late payments. “The late payment situation for small businesses hasn’t fundamentally improved,” he remarks. This issue continues to plague SMBs, impacting their cash flow and overall financial health.

According to Xero Small Business Insights, 50% of small businesses are paid late, costing an estimated £1.6 billion in 2023.

Productivity in flux

Von Schirmeister also touched on the productivity challenges faced by UK SMBs compared to their counterparts in Australia and New Zealand.

“When we look at our Xero small business index, the UK index is below the Australia and New Zealand index. We have not recovered as well post-pandemic as they have,” he says.

Xero’s recent productivity report showed an urgent need for targeted government action to support and enhance productivity across small businesses in the UK. The report highlights significant productivity declines in traditionally strong regions such as London, the East of England, West Midlands, and the South East, while previously lagging regions like the East Midlands, Yorkshire and the Humber, Wales, and the North West have shown improvements.

This equalisation of productivity, while positive in some respects, indicates that high-performing regions are losing ground. To address this, comprehensive government strategies are needed to ensure balanced and sustained productivity growth across all regions.

Improving transport infrastructure and digital connectivity can bridge regional gaps, facilitating smoother business operations and market access. Similarly, establishing local business hubs can foster innovation and provide essential support.

Offering grants, low-interest loans, and comprehensive workforce development programs can help small businesses adopt new technologies and upskill workers. Streamlining regulatory processes and providing tax incentives can spur innovation.

Additionally, enforcing strict payment terms and strengthening the Prompt Payment Code can improve cash flow and financial stability. Finally, encouraging digital skills training and the adoption of AI and automation can further enhance efficiency and productivity for small businesses.

Supporting Small Businesses

Xero announced a suite of new product innovations aimed at streamlining key accounting tasks for UK small businesses and their advisors.

In response to late payments, Xero is the first major accounting platform to offer Tap to Pay in the UK and Australia. This feature enables small businesses to accept payments directly from their smartphones, making it easier for businesses to get paid instantly. Initially, this will be available to UK Android users in a beta program starting in August.

Xero has also expanded its partnership with Stripe to offer additional payment methods, including bank transfers and buy now, pay later options. This provides small businesses with more ways to accept payments and enhances their payment processing capabilities.

Xero’s support for SMBs extends beyond product features, however. The company’s strategic use of AI aims to save time for business owners by automating routine tasks.

“For these small businesses, their most precious asset is time,” von Schirmeister explains. Innovations like issuing and chasing invoices on the go significantly enhance efficiency. Moreover, Xero actively equips accountants and bookkeepers with the tools and knowledge to better serve their clients.

“We have dedicated teams that specialise in equipping our accountants and bookkeepers to package and educate their customers,” von Schirmeister says, emphasising the importance of comprehensive support and education.

This approach ensures that the benefits of Xero’s innovations are effectively communicated and utilised by the end users—small business owners.

Regulatory delays

Addressing the delayed implementation of Making Tax Digital (MTD), von Schirmeister says “Xero has already been very involved in developing and working with HMRC on the MTD deployment.”

Despite the postponement to 2026, Xero continues to prepare its ecosystem, ensuring that accountants and bookkeepers are ready for the transition well in advance. “Most of the accountants and bookkeepers we work with know MTD is coming and it’s on their mind,” he adds, highlighting the importance of early and ongoing preparation.

Looking ahead, Alex discussed the impending transition to Making Tax Digital (MTD) legislation more generally, and how Xero is preparing for it.

“Xero has already been very involved in developing and working with HMRC on the MTD deployment,” he states. While the delay to 2026 gives more time, it’s essential for businesses to start preparing now to ensure a smooth transition.

Being a tech pioneer

Advanced firms are also leveraging Xero’s open APIs to develop custom functionalities, showcasing a trend towards more sophisticated use of technology.

“The beauty of having open APIs in the app ecosystem is that other people will come up with ideas that you couldn’t possibly have thought of,” Alex remarked. This collaborative approach allows for innovative solutions tailored to specific needs, driving the industry forward.

Expanding on the future of AI, von Schirmeister noted that for most, they were at the “very, very beginning of the journey.”

Within Xero, AI is already being utilised for code quality and product road mapping, with plans to expand its application to gather feedback and generate data-driven insights. This proactive use of AI demonstrates Xero’s commitment to staying at the forefront of technological advancements.

Skills Development

One of the significant challenges discussed was the need for skill development among SMB owners, accountants, and bookkeepers.

“A lot of these accounting bookkeeping practices are small businesses in their own right. They serve small businesses but they themselves are small businesses,” von Schirmeister says.

This dual role often means that practice owners need to develop skills beyond their core expertise, such as marketing, communication, and technology management.

Reflecting on the diversity of needs among small businesses, von Schirmeister says “You may say so and so many thousand accounting bookkeepers in this country, so and so many million small businesses, but they’re not all alike. The beauty is it’s just the most colourful fabric of individuals and individual stories with individual needs.”

This nuanced understanding underscores the importance of tailored support and resources to meet the varied requirements of different businesses.

Product Innovations and Announcements

Xero’s commitment to innovation was on full display at Xerocon, with a series of product announcements designed to streamline operations for SMBs.

“There was a very good and warm reception to a lot of the product announcements we made,” Alex noted. Key highlights included advancements in core accounting, payroll, payments, and the integration of artificial intelligence (AI).

“In the payroll space, many of our announcements come as a result of very specific requirements and requests from small businesses,” von Schirmeister points out.

“Features like handling irregular working patterns and the ability to transfer payroll from other providers were directly addressing SMB needs. Additionally, the new tap on phone payment function generated significant buzz for its potential to simplify physical payments and reduce reconciliation steps.”

Expanding on the AI capabilities, Alex explained that “some of the artificial intelligence use cases, such as being able to issue a new invoice on the run or chasing an invoice on the run, may look like they’re not a big deal, but for small businesses, their most precious asset is time.”

By enabling tasks to be completed quickly and efficiently, Xero’s AI tools are helping business owners focus on what truly matters—growing their business.