Keri Gohman is president of Xero Americas, the leading cloud-based accounting platform outside the U.S. She and her team are tasked with expanding the platform's footprint into the Americas. On this week's Tearsheet podcast, we spend some time talking about the financial web, a term she uses to describe the technology ecosystem forming around SMBs that includes interconnected banking, accounting, and advice.
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Below are highlights, edited for clarity, from the episode.
The impact of tech on accounting
Accounting is a really interesting space. For years, technology was lacking for small businesses and you can see that in where investments were being made in the past. They were primarily made in bringing new financial technologies to consumers. We've seen a massive change over the past 10 years. VC investment in small business financial technology in 2010 was around $600 million. In its peak at 2015, that number was around $6 billion.
Banks also have underinvested in small businesses. Having run small business at Capital One, I can tell you that most of the investment goes toward large commercial firms or consumers, where you have volume.
Our expectations as consumers are also changing. I expect my world to connect. When I'm on Google Maps, I expect to be able to access ratings and reviews, Uber, and everything else. Small business owners now expect technologies to work differently. About five years ago, only 20 percent of small business owners were using cloud technologies. Now, it's 70 percent. Our problem today is that there's almost too much choice.
Intuit's and Quickbooks' influence in the market
Quickbooks was around during the days where you bought a physical CD from a store and inserted it in your computer. Their business, as much as they're starting to incorporate technology, is still predominantly on the desktop.
Xero started about ten years ago and was born in the cloud. We started with this idea of how to take advantage of modern technology in the cloud and put the pieces of an SMB owner's financial life together. How do we help a business owner work seamlessly with her accountant? How do we make sure that banking data is going directly into the accounting system, reducing the manual work for a small business? How do we integrate all the apps a small business owner uses to run his business, like Shopify for ecommerce business.
We started out from the beginning with this idea of an open ecosystem and integration and that's how we're different from Quickbooks.
Integrating the online world with the offline
Technology is an enabler and lets us, humans, spend time on When we think about the online, offline paradox, we look at how technology plays alongside humans. There's no better place than that comes together for us than with the small business owner and the accountant.
Most small business owners are passionate about their businesses. They didn't start their businesses because they wanted to spend time on accounting or financial management. We've taken advantage of technology so that business owners don't have to spend time doing account reconciliation and management. All of that manual entry moves to the back end for the business owner and frees them up to do what only they can do for their business.
Same thing with accountants. We've recently seen that accountants started out doing manual bookkeeping and manual entry. We've taken that work off the accountant. We've automated all of that. The data from multiple bank accounts or ecommerce platforms comes into our app and accountants can now spend more time on higher level activities, like advisory.
Accountants that can act as a virtual CFO typically see twice the amount of revenue per employee and can handle 3x the number of clients. Technology is impacting what they do and enabling them to be more efficient and effective at what they're doing.