We’re at an inflection point in the accounting industry. In the past 12 months we’ve processed more than $1 trillion worth of transactions and now, with the ability to leverage AI and machine learning, we can put all that data to work for our accountants, bookkeepers and small business customers.
“We thought there really was a once in a lifetime opportunity as accounting software went from desktop software to the cloud,” Drury told the more than 2,200 delegates, from accounting firms and add-on partners, at Xerocon South. “The nature of work has changed.”
Doc Searls, Author of The Second Coming of Double-Entry Bookkeeping, explains that “Double-entry bookkeeping is born of the same spirit as Galileo and Newton… With the same means as these, it orders the phenomenon into an elegant system.
“In our time, double-entry bookkeeping has fallen out of favor after a six-century run. Today accounting is done on computers with software packages… built for single-entry bookkeeping,” he said.
“If we bring back double-entry bookkeeping to business, to the commons, to the internet, to the marketplace, and to our everyday lives – we’ll start another renaissance.”
Drury explains that, “There is a mathematical elegance in accounting” and that the inherent beauty of accounting is that if you get information in, you should be able to pull information out.
“The magic of getting software and accounting working together is super important. A big part of why I love doing Xero is solving some of these accounting problems. We are moving the arc of accounting. We wanted to build the world’s best accounting system and solve some of the big problems so we’ve modeled accounting correctly and built a proper double-entry accounting system,” Drury said.
“Xero is the only double-entry accounting system of scale that is available for small business.”
Using the financial web to help small business
The evolution of bookkeeping and its move to the cloud is an example of how the financial web, which incorporates a network of organizations sharing financial data, is rewiring the small business economy. With more than 1,400 Xero product releases and feature updates shipped in the past 12 months, the pace of innovation is increasing.
Speaking at Xerocon, Drury explained that “the financial web is solving the big problems small business face” by opening up access to technology, capital and talent.
“Xero is where the rubber hits the road.” The data-driven nature of the financial web, where information flows between accounting and banking systems, is starting to unlock productivity and growth in small business markets, especially when it comes to accessing capital.
“We have the ability to use all this data to help small business owners access capital, make smarter business decisions and drive economic growth,” Drury said.
“We have delivered high integrity accounting on the platform that no one else has really done.
“At the heart of this change is a fundamental shift in the way financial services are created, delivered and managed. Before the power of open Application Programming Interfaces (APIs), connected platforms and free-flowing data was realized, information was tightly held by institutions, making it difficult to understand a business’ true financial standing.
“For the past ten years, Xero has been establishing itself as a small business platform, connecting the dots between small businesses, their financial institutions, and enterprise. As a cloud accounting platform, Xero acts as a connector for the highly fragmented small business market, helping owners derive true value from their data. By providing a clearer picture of small business performance, new services can be provisioned, products accurately served, and compliance commitments met,” Drury said.
Accounting, automation and AI
By automating key business performance data feeds, extracting insights and displaying them on elegant dashboards – such as those in Xero – an institution can start to deliver proactive advice and services. We’re starting to see financial institutions flag small business owners when cash flow looks tight – like if there’s a payroll shortfall – and offer them some interim financing so they have a little breathing room.
“Automation and machine learning are improving traditional services by streamlining compliance processes and creating new business opportunities, many of which are either no-touch or limited-touch,” Drury said.
“Bankers can see a full set of historical and audited numbers, and with a professional accountant able to review the numbers each day, the risk of lending capital to a small business falls substantially.
“Through a fundamental rewiring of how small businesses operate, we light a fire under the engine room of our economies. Millions of new jobs will be created. New categories of work will be established on top of these new platforms and new services will be born.
“Every small business and accountant now has a super computer working for them.
“We expect in the next five years, the pace of innovation will be quicker than the last ten. And unlike previous technology shifts, the benefits won’t be experienced by just big enterprise – they will flow to the smallest businesses, deep down in the engine room of our economies.”
An example of how machine learning will start to flow into small businesses and accounting practice is the Xero Chatbot which Drury demonstrated on stage. Xero has been working on further integrating our small business platform with products like Facebook Messenger so you can access the information you need, where you want it.
Every month, over 1 billion people around the world communicate with friends, families and over 50 million businesses on Facebook Messenger, interacting with customers, keeping them up-to-date.
Built on Amazon Web Services, the chatbot leverages machine learning technology and the $1 trillion worth of transactional data processed in Xero over the past 12 months to enable businesses to query their latest financial data, including who owes them money, when their next bill is due or how much money is in their bank account. It also connects to the Xero Advisor Directory and can recommend a suitable accountant or bookkeeper in their area. Xero subscribers will also be able to discover new apps in the Xero ecosystem.
What’s next for Xero? Well, according to Drury: “Now we need to make accounting magical. Machine learning is how you create that magic.”