Xro - xero

[Toasty]

A good recovery so far this morning. I am very keen to go to the AGM. Always a good show and they generally release the customer volumes to the day of the meeting. So far has been quite a significant increase over the year end everytime.

Lack of earnings doesn't worry me too much at this stage as long as the customer acquisition rate remains high.

I must admit that I would be happy if a takeover offer came along. The problem is that these high risk companies give me heart failure everytime the share price surges up or down. At least if they were acquired I would have a result and not have to continually agonise if I should get out or stay in or take some or get some....

Maybe I should just buy bonds....

[maddog]

Hi Toasty

What should worry you is the other issue highlighted by Forsyth Barr a few weeks ago. As quoted in the Otago Daily Times:
"ARPU (average revenue per customer) was significantly weaker than Forsyth Barr had expected.
"The main issue is that New Zealand growth has been driven by 'ledger' customers, which are the lowest priced customers. Accountants have been switching their practices to using Xero's ledger product.
"Xero needs the business itself to switch to Xero to get higher ARPU. In essence, the customer mix is worse than we thought."


There is a world of difference between a top of the range $64 per month accounting client and a $10 per month cashbook client.

The problem that all online accounting products have is downward pressure on price - which is a natural result of their business and technical model and difficult to reconcile with Xero's extremely high cost management structure.

The fastest growing online accounting product internationally appears to be the Canadian Wave Accounting - which is free to users. They added in mroe than 100,000 users last year. Wave earn revenue from associated targeted advertising a la Google. Its functionality is very good, and includes automatic bank downloads.

I would be interested in hearing how Xero intends to compete with such disruption to its business model. You may want to ask that question at the AGM.

[CJ]

The fastest growing online accounting product internationally appears to be the Canadian Wave Accounting - which is free to users. They added in mroe than 100,000 users last year. Wave earn revenue from associated targeted advertising a la Google. Its functionality is very good, and includes automatic bank downloads.

I have had a quick look at Wave, signed up and will use them for my rental and investment companies. It also has a personal offering which is again free. Will be interesting to see the comparision to Xero which I also use for my Brothers retail business.

I already have a few niggles with it. I have a few bank accounts all accessed via ASB fastnet. Wave only seems to have access to the first one if they are the same type of account (ie. if you have an "omni account' for each entity it will only see the first one). I still haven't fully set it up so will report back once I have.

Wave just closed a $12m series B round yesterday and apparently has over 250,000 customers now. It is targeting micro and small businesses which while it starts below what Xero is targeting (unless you include the cheap cash book option only available through accountants), as those businesses grow, they will more likely stay with Wave.

It runs the same model that Mint (personal accounting) used in the US in that it is funded through targeted advertising. Mint was acquired by Intuit and the risk is Intuit will look to acquire Wave and own the US market, pushing out Xero.

[maddog]

Thanks CJ. It wil be very interesting to hear how you go with the product.

I hadn't caught up on Wave's latest customer numbers. That is very interesting and they are growing much faster than Xero. While you suggest that Wave is positioned lower than Xero, I'm not sure I agree. While Xero likes to focus on its full accounting product Forsyth Barr's analysis seems to suggest that in fact most of Xero's growth has come from its low priced cash book offering.

Wave's growth suggests there will be real pricing pressure in this market - this is backed up by the upcoming launch of Acclipse's iBizz service priced at just $5 per month.

[CJ]

I have had a quick look at Wave, signed up and will use them for my rental and investment companies. o.

Thanks CJ. It wil be very interesting to hear how you go with the product. .

Have had a bit of a play. Wave is fine for my purposes (less than 10 transactions per month) but there is no way I would run a proper trading company on it. I would say it is in a worse state than when Xero launched so they are many years of R&D ahead. Not a competitor in the short term.

[CJ]

In other news, Xero has made the NZX50: https://www.nzx.com/companies/NZX/announcements/223621

I thought their free float might have been too small since they have a number of significant investors but maybe they aren't big enough to effect the free float calcs (ie. Drury, Winkle, Theil, etc)

Wonder if there will be a bit of buying. They are still a loss making compnay so I dont imagine the big funds will be that interested just because it made the index (except true index funds).

[Toasty]

Have had a bit of a play. Wave is fine for my purposes (less than 10 transactions per month) but there is no way I would run a proper trading company on it. I would say it is in a worse state than when Xero launched so they are many years of R&D ahead. Not a competitor in the short term.

I recently changed to Xero for my rental companies and so far I have found it to be good. I won't say great because my accounting and organisational skills are sketchy to say the least. The main thing is that I actually look forward to logging on and reconciling the latest transactions and leaving discussion notes for my accountant so that stuff I am not sure about can be sorted. Definitely beats the mess of spreadsheets and word documents I was using. Thinking about integrating it with the Pocketrent app for the complete property investing package.

XRO up 18 cents this morning. I guess people still want in. Looking forward to the AGM.

[CJ]

I recently changed to Xero for my rental companies and so far I have found it to be good.

Do you think the total cost of accounting fees for the year (including xero cost) will be more or less than previous. (ie. by spending more on Xero, have you saved on the amount paid to your accountant.).

Your time should reduce and some of the time wont be as noticable as it is easy to go in quickly (and regularly) and reconcile a few items without really having to engage the brain. YOu can attach pdf scans of things(and JPEG's??) to invoices entries which may also help your record keeping (storing it all within Xero).

[Toasty]

Do you think the total cost of accounting fees for the year (including xero cost) will be more or less than previous. (ie. by spending more on Xero, have you saved on the amount paid to your accountant.).

Actually I think the first years fees might be a bit more expensive because I got the accountant to set it all up initially. (I am just using 2 x the $10 per month version). However I do expect subsequent years to decrease due to the fact that there is not the mad scramble by my accountant to sort through all my records and documentation and create the new years accounts from scratch. They have advised me that it will save me money so heres hoping.

For me the biggest benefit is being on top of my money management. I am not trying to catch up after a couple of months inattention because the Xero interface encourages you to log in frequently.

[CJ]

Actually I think the first years fees might be a bit more expensive because I got the accountant to set it all up initially.

Initial set up can take a while. I have only done one but it was enough to put me off. It didn't help that it had been a year since it had been reviewed by the previous accountant and their end of year journals hadn't been posted. Now the accounts for the company are fully upto date on a monthly basis and other than small unusual transactions, upto date on a daily basis. It can actually be used for management purposes rather than just for accounts and tax purposes.

Back to the share price, it has held up well so far today. UP 18c on the announcement of joining the NZX50 but on very small volumes. Doens't look like any fundies or short term speculators wanting to make a quick buck on entry to the index.