Just 10 years ago, doing business abroad was a huge undertaking for a small business owner. Now, the digital revolution has made the whole world accessible. In just about every industry, there’s been an increasing worldwide reliance on cross-border trading. Even the smallest service or product can now expand on a global scale.
Triggered by the 2008 recession, generational changes, and globalization, a massive shift is underway in the business community. This shift is leveling the playing field among small, medium, and large businesses. Small businesses in particular are using technology-based solutions to improve business productivity, increase revenues and profitability, and drive innovation in ways that large, slow moving corporations can’t keep up with.
Thanks to the proliferation of Software-as-a-Service (SaaS) models, there’s little upfront investment needed to start a business, particularly one that provides a service or a digital product. With SaaS, businesses only pay for what they use, and since all upgrades are automatic and seamless, they derive continued value over time without large maintenance costs.
Whether your business is using Harvest to track billable hours, Slack to communicate internally, or Trello to manage workflows, cloud technology has made having a team and communicating with it more accessible and affordable than ever. Access to technology no longer requires an office, and small business owners are able to manage almost any business process no matter where they are.
Xero takes accounting into the cloud
The big push into the cloud began about 20 years ago with Salesforce. It makes sense that CRM software would be among the first areas to be disrupted by the cloud. Many sales people work outside the office, so it isn’t practical or easy for them to log in to on-premise solutions.
My field, accounting, took a lot longer to make the leap to the cloud, partly due to the lack of competition in the United States in small business accounting software. It’s only in the past five years that cloud accounting has surpassed on-premise solutions as a superior option for most small businesses. A lot of this is thanks to Xero, which was founded and developed for years in New Zealand and Australia, before coming to the United States.
Thanks to Xero, you can now access your accounts and run your finances from any device — Mac, PC, tablet, or phone. From managing inventory to paying employees, everything is possible from virtually any location with Internet access. Because Xero designed an open API to their software, just about anything you can’t do with Xero you can accomplish with an application from Xero’s “add-on ecosystem”, a directory of 500+ apps that sync with Xero to eliminate data entry and make cloud accounting more effortless.
The proof is the quick growth of cloud accounting. Since its start in 2006, Xero has reached annual subscription revenue of $120.9 million at the end of 2015, with over 500,000 subscribers worldwide.
At HPC, we’ve consolidated all of our client accounting on Xero. That’s because we feel it’s the best option for cloud accounting for the vast majority of small businesses, and in particular for companies doing business in more than one country.
How Xero accounting software and Xero add-ons help
Xero works all over the world
For global small businesses, Xero is the perfect accounting software solution. At HPC, we work with many businesses that started in Australia, New Zealand, and the U.K. They are now doing business in the United States, or are looking to get started with an expansion to the U.S. markets.
These international firms are typically already using Xero at home, so it makes sense to use Xero for the U.S. subsidiary as well. There is no need for the owners, staff, and other stakeholders to learn a new accounting software package.
Many of the top add-ons, such as Receipt Bank, also work globally. This means that we can set up the same accounting workflows for each country, increasing operational consistency and efficiency for our clients.
Collaboration is simple
Our accountants love the “Discuss” tab on Xero’s reconciliation page. This simple feature allows our clients and accountants to leave each other notes that are directly associated with a transaction in Xero. When you’re working with clients and staff all over the world, little features like this help speed up communication and improve understanding in measurable ways.
As accountants, we appreciate that Xero gives us a single dashboard from which to access and delegate permissions for all of our client Xero organizations in any country. This is a huge improvement from the QuickBooks Online Accountant Dashboard, which only allows U.S. accountants to access U.S. files. The only way to get access to files in other countries is to set up another accountant dashboard in that country. This is not very practical from a practice management standpoint when you have clients in dozens of foreign countries.
Xero is great at handling multiple currencies
One of the really neat things about Xero is that it provides real-time reporting on currency fluctuations. As Greg Lam points out on the Sleeter Report, of all the small business accounting software out there, only Xero automatically adjusts the financial statements on a daily basis for unrealized and realized currency gains and losses.
This means that you can pull up a balance sheet report and see where you stand at any moment with currency fluctuations taken into account. For global businesses with significant holdings and invoicing in foreign currencies, this is an important feature.
As a bonus, you can see the exchange rate on any invoice or bill in Xero in a foreign currency, making it easy to decide when it is most advantageous to pay a bill or collect an invoice based on the daily exchange rate.
Xero add-ons allow for instant consolidations
At HPC, we are big users of Spotlight Reporting. For global SMBs, one of the big benefits of using Spotlight is that we can instantly consolidate multiple Xero files in multiple currencies into a single set of financial statements.
This is a gigantic improvement to doing consolidations in Excel, which used to take days or weeks to put together. Now our clients can get a complete picture of their business on a global scale on a timeframe that lets them take action when the data is fresh.
Are you looking to expand your business to/from the United States?
Whether you’re a business abroad looking to start doing business in the United States, or you’re a U.S. firm looking to expand outside our borders, HPC can help. From setting up Xero, to outsourced accounting services, to tax and compliance, HPC and our network of international Xero advisors have you covered. Schedule a free consultation to find out how we can help.