Accounting Software And Application Software Essay

Question:

Discuss about the Accounting Software and Application Software.

Answer:

Introduction

Accounting software is application software that is used by accounting professionals to keep an account of financial transactions with the help of computer instead of papers (Lam 2015). This literature review has been focuses on analyzing an accounting software namely XERO that allows the company in keeping track for online bookkeeping. The main discussion part for this study is the history of XERO, development and adoption of the software, current market size of the applications, the competitive advantages as well as challenges.

Accounting software packages (XERO): History, Development and Adoption, Market Size, Leaders, Advantages, Challenges

‘Xero’ is a cloud based accounting software company based in New Zealand. The target segment of the company is small and medium business enterprise.

History of XERO

Xero started its journey way back in 2007 with the basic services. The basic services included balances, editable bank accounts and transactions, default invoice texts, GST returns and invoicing for both account payable and receivable. The company is listed in both New Zealand Exchange (NZE) and Australian security exchange (ASX) (Computerworld 2016). Xero is functional in NZ, Australia, UK and America. Xero Australia was launched in 2008; the company entered UK in 2007 and entered US market in 2011 (Xero Accounting Software, 2016). The products of Xero are based on Software as a Service model and are sold on subscription based on company requirements.

Xero was established by Mr. Rod Drury and his personal accountant as they felt that desktop accounting software has become obsolete. The company had been taking small, sure but firm steps, it spent five years in local New Zealand market before going public on ASX in 2012 (Pando.com, 2016). Xero has acquired numerous companies from its inception, in 2011 an Australian payroll provider called ‘Paycycle’ which allowed the company to integrate payroll into their offering (Stuff, 2016). It acquired ‘Spotlight Workpapers’ in 2012 and in the same year Xero acquired one more company related to online job, time and invoice management solution named ‘Workflowmax’.

Development and Adoptions of XERO

Xero started with basic services in New-Zealand in 2006 (Xero Accounting Software, 2016). The company has developed from a start-up to a market giant over nine years. In March 2007 reports were incorporated for generation and viewing of interactive reports based on real time information. In the same month, manual journals for accountants and bookkeepers were introduced for posting manual journals. In the same year of 2007, budget manager, billing, My Xero, Recurring invoices, Expense Claim, bank reconciliation, credit notes were included and Xero was introduced to UK market (Xero Accounting Software, 2016). In the following year 2008, tracking for tracking performances, Xero-2-Xero online services, comparative balances, Google doc integration, statements, provisional tax payments, report layout for better UI, contact groups were included into the system and the package was launched in Australia.

Finally Xero Global Version was launched in December which was meant for everyone without any country specification. Further in 2009, management of accounts for depreciation of fixed assets was incorporated under fixed Assets, Multi-Currency enabled banking in all 160 currencies, Freshbook and Paypal integration was done in the same year and finally batch payment was merged in the software. In 2010 customizable Bank rules, ledger edition, invoice branding and various templates were blended into it. 2011 saw minor changes in the software and the business was expanded to US. Xero community was launched in 2012, other add-ons like, online invoices, multiple budgets, online invoices, employee time sheets were launched in the same year (Xero Accounting Software, 2016).

The major update of 2013 was incorporation of calculator and Xero profile for promotion of accountants and bookkeepers. The mobile version of Xero too was launched in the same year. Further in to future the company got more diversified and versatile with incorporation of other services like uncoded statement line report, payroll reports, apps with enhanced security, time sheets, Xero Me, advanced authentication, etc (Xero Accounting Software, 2016).

Market Size of XERO

Xero has over 1400 employees and over 700 thousand subscribers and is one of the fastest growing SaaS (Software as a Service) accounting solution providers. The target segment for the company is the small businesses (Ma 2015). Hence the company thrives to provide a better solution, to the small and medium business, regarding tools, information and connections. The organization has more than 1200 product updates, 16000 partners and records more than 1 trillion NZD in its records (Xero Accounting Software, 2016). According to Xero Blog (2015), Xero is the fastest increasing, financial and accounting vendor in the world. Apart from fastest growing provider, the company also ranks in payroll service provider (Xero Accounting Software, 2016). The organization grew 74.7% in payroll accounting space and 80.3% in financial application sector. Xero’s 90% of Quick BooksOnline base is in USA and 94% of Xero’s clients are in NZ, Australia and UK.

According to Fool.com.au (2016) the company gained around 500% and promises more. The growth of the company has been exponential and the recent half yearly results show revenue of 30.3 million NZD. Xero’s current capitalization is nearly 5 billion NZD, although competition is very high from the peers the aggressive tilt at client acquisition has won many supporters which have resulted in a market cap of 1.58 billion NZD (The National Business Review 2013).

Identification of Leaders in Software Accounting Market

The main competitor of Xero in NZ and Australian market are Sage50, SAP, Sage One, Dynamics, MYOB, etc and the main competitors out of them are MYOB (Mind Your Own Business) and Intuit. Cloud accounting constitute of 67% of the new generation registration which has doubled over the previous year. Since cloud has higher life time value compared to the desktop market, hence Xero has successfully eaten up a huge market share of MYOB. MYOB is now waking up and getting its foot fast on cloud computing and trying to shake off its desktop legacy (Businessinsider.com.au 2016). Xero values its company at 1.58 billion NZD whereas MYOB has a value of 2.34 billion NZD and Intuit is a fortune 2000 company. For winning the market share back again MYOB in investing heavily on innovation and expects to turn in revenues of around 280 million dollar.

Figure 1: The market Share of the different companies

(Source: Businessinsider.com.au 2016)

Competitive Advantages of XERO

Xero is a cloud based accounting and bookkeeping software. The cloud is online platform where data can be access anytime anywhere with the help of internet (Hossack 2015). The interface between user and the computer is not dedicated software but is general purpose browser. Since there is no software installed on any particular device, the data modification and updation can be done from any computing device including a Smartphone (Smith 2015). Since Xero is SaaS type cloud computing model, it allows more client support in lesser time on a single platform.

Collaboration moves to next level with cloud computation; it allows real time transfer of data and updation within the world. Since cloud is a centralized system and is not based on systems, the system updation is easier done and need not be updated in different systems. Since all the works are done on other platform, the data are always backed up (Rittinghouse and Ransome 2016). So Xero being cloud software offers all the advantages that has been discussed before.

Apart from the above advantages there are other services that are specific to Xero; they are, automated bank feeds, simple and fast invoicing, no maintenance of the software, dashboard is interactive, and the software is much faster compared to other software because of add-on available for different devices (Khaneja 2015). Hence Xero with all the designated features are fast accessible and provides peace of mind to the business as they need not worry about the software aspect of the services (King 2015). All an organization needs is an internet connection and a device to access internet.

Current Challenges of XERO

The services offered by Xero are not charged once but the user has to pay a monthly rental, which stands as a disadvantage for the organization. Every cloud system is granted access depending upon the authentication. The authentication can be of many types like password, biometrics, etc. If internet speed is slow or intermittent the services too become intermittent and working becomes a punishment, so financial data are prone to error and pose a great danger (Walther et al. 2013). Few features like stock control that are available in other software can be incorporated, the price is high for the amount of features available, the speed is lesser, lesser control on data hence Xero should work in these areas for a better customer experience.

Recommendations

Xero is great software for accounting professionals and has won hearts in a short span of time. Few recommendations that will further help in enhancing customer experience and help retain them are competitive pricing, better security and applications like stock control.

  • The customers of Xero have to pay monthly rental for the services that have been used, this creates a large payment slab for the large organizations hence the large organization usually avoid Xero, so a singular payment option is better way to charge for the large organization.
  • The security in the present scenario is single stage and can be further enhanced with multi-level security.
  • Finally, more updates should be incorporated in the system to make the system more versatile.

Conclusion

Financial and accounting software has helped in office automation and reduced the human errors that had been common in past. This work has discussed the various aspects of the cloud computing accounting and bookkeeping software named ‘Xero’. The literature review upon the software has discussed the history, development and evolution of the software, market size of the company, competitor and the leaders of the company and finally the advantages and the disadvantages of the software has been discussed in detail.

References

Businessinsider.com.au. (2016). [online] Available at: [Accessed 21 Aug. 2016].

Computerworld. (2016). NZ-based SaaS provider Xero lists on ASX. [online] Available at: [Accessed 21 Aug. 2016].

Fool.com.au. (2016). Xero is up 493% over the last year, is there more to come? | Motley Fool Australia. [online] Available at: [Accessed 21 Aug. 2016].

Hossack, S., 2015. Cloud-based accounting and productivity tools for practitioners and taxpayers. Taxation in Australia, 50(5), p.265.

Khaneja, S., 2015. E-Accounting in the Current Scenario: Impact of Information Technology. The International Journal of Business & Management, 3(9), p.290.

King, A., 2015. Xero soothes auditors on automation.

Lam, G., 2015. The Online Accounting Software Guide: An In-depth Analysis of Today's Leading Cloud Accounting Applications.

Ma, X., 2015. The adoption of cloud computing for small and medium accounting firms.

Pando.com. (2016). [online] Available at: [Accessed 21 Aug. 2016].

Rittinghouse, J.W. and Ransome, J.F., 2016. Cloud computing: implementation, management, and security. CRC press.

Smith, H., 2015. Xero for dummies. John Wiley & Sons.

Stuff. (2016). Xero aims to boost Australian growth. [online] Available at: [Accessed 21 Aug. 2016].

The National Business Review. (2013). Xero hits $1.58b market cap, Woodward sees it climbing to $6.4b. [online] Available at: [Accessed 21 Aug. 2016].

Walther, S., Sedera, D., Sarker, S. and Eymann, T., 2013. Evaluating Operational Cloud Enterprise System Success: An Organizational Perspective. In ECIS (p. 16).

Xero Accounting Software. (2016). About Us | Xero. [online] Available at: [Accessed 21 Aug. 2016].

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