Cash flow problems are the number one reason why SMEs fail. Having true visibility over cash flow data is hugely advantageous for businesses trying to determine their financial health. This is particularly so, for SMEs, which generally operate on much slimmer margins. However, obtaining this visibility without comprehensive information from multiple data sources, including banks, customer invoices, outgoing payments, payroll and more, in real time is next to impossible. So, how can SMEs track their cash flows efficiently?

Xero’s global small business platform has such a solution. In Singapore, the cloud accounting platform has integrated with most major financial institutions from banks to payments and remittance providers, allowing transactions and account information for SMEs to be reflected in their Xero account in real time. This process automatically updates financial statements, giving SMEs a snapshot of their current financial performance and position, synced daily, if not hourly.

The banks and institutions Xero has partnered with in Singapore include DBS Bank, OCBC Bank, United Overseas Bank, HSBC, TransferWise, WorldFirst, Volopay and Aspire to name a few.

Kevin Fitzgerald, managing director Asia, Xero, notes that in the past, SMEs that have wanted to know their cash flow position had to spend significant time and resources to manually collate and process information from various sources across multiple platforms, including bank statements, paper invoices, receipts, etc, leaving themselves open to human error and incomplete information. But now, Xero can do all the “heavy lifting” on behalf of SMEs with accuracy, he explains.

E-invoicing (now known as InvoiceNow) is one example of this. Fitzgerald says Xero’s cloud accounting platform can help SMEs manage invoice payments. The platform sends friendly reminders to customers via email to fulfil their payments.

Delays in payments can have a significant impact on business continuity with immediate implications for payroll, solvency and potentially survival. As such, the ability to track and reconcile payments in real time is crucial. “When SMEs get paid, they can invest in and grow their businesses. Arming SMEs with that critical data gives them much more control and power over their business,” he says.

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“With Xero, every day, they’ve got the most up to date financial information for their business,” he adds. “Our platform provides key data and insights to help business owners successfully plan for their business’ future while taking stock of its financial health each day.”

While accounting and financial planning are often not part of SME owners’ core expertise, Xero is committed to providing every user, regardless of their background, a beautiful, intuitive experience and offers users extensive training for new features and solutions to ensure they get the most out of their subscriptions. This is part of the subscription that they pay for and available at no additional cost,” he says.

From a security standpoint, Xero’s cloud accounting platform is ISO certified and subject to an annual cyber audit by KPMG, assures Fitzgerald. Moreover, the platform is hosted on AWS’s secure servers. “We go through a rigorous security protocol to make sure that SMEs’ information and data stay safe,” he says.

Addressing SME pain points

Xero founder Rod Drury, an entrepreneur from New Zealand, developed the cloud accounting platform to solve a problem that he as an SME owner faced. Drury was frustrated that there was no simple and seamless way to view the financial movements of his businesses to better ascertain their financial health. He had to gather the relevant financial data himself each time, before getting his accountant to crunch the numbers to obtain the information he needed.

Drury also discovered that other SMEs were facing the same problem too. So, he seized the opportunity to make a business out of it.

Today, Xero has grown into a large corporation and is listed on the Australian Securities Exchange. Apart from its operations in New Zealand, the company has expanded to Australia, UK, North America and other countries around the world, such as Singapore.

For FY2020 ended March 31, its New Zealand subscribers grew by 41,000 or 12% y-o-y to 392,000. Revenue from the New Zealand segment outpaced subscriber growth, increasing by 19% y-o-y. The company’s Australia subscribers leapt by 188,000 or 26% y-o-y to 914,000. This was a new high for net additions in all of Xero’s markets. That lifted revenue from the Australia segment up 23% y-o-y.

In North America, Xero added 26,000 net new subscribers or 24% y-o-y to 241,000. The company says this is a strong indicator of the early progress from its renewed positioning in a key global market. Revenue from the North America segment jumped 25% y-o-y.

As for the ‘rest of world’ segment, which includes Singapore, subscribers surged 51% y-o-y to 125,000. Xero says it has maintained the momentum that this part of the business has reported in recent periods. Revenue from this segment climbed 43% y-o-y.

Overall, Xero has 2.9 million subscribers and over 200 financial service providers connected to its cloud accounting platform. For FY2020 ended March 31, the total value of transactions running through Xero’s platform was NZ$3.62 trillion. The total value of invoices raised via Xero was NZ$853.2 billion.

Undoubtedly, the company has performed well. During the year, revenue hiked 30% y-o-y to NZ$718.2 million. It returned to the black with earnings of NZ$3.3 million from a loss of NZ$27.1 million a year ago.

The Covid-19 pandemic does not seem to have significantly impacted Xero’s financial performance. For 1HFY2021 ended Sept 30, revenue increased 21% y-o-y to NZ$409.8 million. Earnings skyrocketed to NZ$34.5 million from NZ$1.3 million a year ago.

According to Xero, its positive half-year results were the result of executing its growth strategy, despite the ongoing challenges arising from Covid-19. “The resilience of Xero’s global business model has meant that, despite the impact of Covid-19 on Xero’s financial and operating performance, Xero can continue to invest in scaling its global business, developing new products, and driving quality subscriber growth,” the company says.

Although Xero has grown into a large corporation today, its focus remains on SMEs. Fitzgerald says the company consciously chose to focus on SMEs rather than large corporations, who have different needs. In addition, the market for large corporations is saturated with many players, while the SME market remains underserved, he adds.

“We wanted to bring an affordable, enterprise grade solution to SMEs that would not require a significant capital outlay and time commitment to implement. Xero plans start at just US$20 a month for unlimited users. Our mission is to support SMEs as trusted and insightful business advisors and partners, many of which have never had access to this sort of resource before,” he says.

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Passion for SMEs

Fitzgerald developed a passion for and deep understanding of SMEs over years of working closely with them. He has had a diverse career, spanning audit, recruitment and sales in four different countries across three continents.

Fitzgerald started his career as an accountant at a small accounting firm in Dublin, serving many SMEs. After five years there, he moved on to KPMG in Channel Islands – part of the British crown dependencies. Subsequently, Fitzgerald returned to Dublin to join a US bank, servicing hedge fund clients, before moving to Melbourne to join Robert Walters as a recruitment consultant, specialising in accountancy roles.

During his tenure at Robert Walers, Fitzgerald rose quickly through the corporate ranks before ultimately making the decision to move into the technology industry. While in Melbourne, he had also begun taking notice of Xero, particularly how they were serving SMEs.

Two and a half years after joining Xero’s operations in Melbourne, he accepted a promotion to join the Xero Asia team in Singapore as regional sales director, Asia. Fitzgerald was subsequently promoted to managing director, Asia.

“I don’t think I’ve ever made the decision to sell accounting software, but much of my career has been dedicated to helping and supporting SMEs. In fact, my first job was an accountant for SMEs when I was in Dublin. And I really, really enjoyed it,” he says.

“When I saw what Xero was doing and the impact they were having on the SME community, it was something that really resonated with me. SMEs are the backbone of every economy and community in the world. Our commitment is to bring world class solutions to SMEs at a very affordable price and help them become the most resilient, competitive and successful version of themselves,” he adds.