This CEO wants small business owners to throw out the receipt shoebox

For Xero CEO Sukhinder Singh Cassidy, small business owners are among the biggest scammers in the world – who also happen to be incredibly paranoid about anything going wrong.

They have good reasons for that. The margins in a gas station, convenience store or – in the case of Singh Cassidy’s parents – a medical practice are not always high. Recruitment is always a struggle. And when sales are disappointing, many small business owners can’t turn to venture capital or a well-timed merger to get them out of trouble.

“They live and die with cash,” explains Singh Cassidy.

As such, she says small businesses are surprisingly good at expanding and contracting to suit the economic climate of the day. And thanks to today’s historically high interest rates and stubbornly persistent inflation, they’ve had to adjust a lot.

Xero’s mission is to help small businesses make those adjustments without worrying about all the receipts they’ve put in the proverbial shoebox. Between its software and its accountants and bookkeeping chain, the New Zealand-based company has more than 3.7 million subscribers – from construction to e-commerce.

Singh Cassidy spoke to the star of Toronto’s Collision technical conference:

You did your father’s taxes when you were younger, and now you run a business that helps small businesses do taxes. Do you feel you have come full circle? Was this always the plan?

I feel like it’s come full circle, but like everything in life, there’s no way you could say this was the plan. My parents were doctors. They emigrated to Canada when I was very young. Together they ran a medical practice for more than 30 years. My dad was a classic small business owner who trusted no one else, and he was never the guy who would do today what he could do tomorrow. Thirty days before tax time, my dad got all his checkbooks for the year, brought them home, used a physical calculator, and had us write every entry from his checkbook into his ledger.

That was the family business for 30 days. I must have been seven or eight years old when I started filling out the ledger, just like my sisters. By the time I was 12 or 13 I understood most of his taxes. By the time I was 18 I was building a spreadsheet in Excel because I was going to college. My parents actually went to an Excel class in the evenings to make sure they understood how to operate the spreadsheet I set up for them.

I think the lessons I learned from that weren’t so much about expecting to eventually do bookkeeping or bookkeeping, but more about understanding that entrepreneurship is in the details. I think my father taught me a love of business, and he also taught me that your calling and your purpose should be the same.

If your programs had been around when your father did his business taxes, do you think he would have used them?

I do not think so. My father was not tech savvy. Later in life he became tech savvy. He learned Excel. By the time he passed away and I had to clear out all his paperwork. I was opening several desk drawers at home and I realized he had a password for Raging Bull. He had a password for the Fur fool. Please note that my father was 77 when he died. So my father was endlessly curious. I think he loved technology, but I wouldn’t have called him an early adopter.

What is Xero’s plan for Canada? Are you trying to expand here?

We have been in Canada and the US for several years. We even made two native acquisitions in Canada. But in accounting, Canada and the US are really behind when it comes to cloud adoption. The way to think about our business is that we are big in the southern hemisphere, but the reality is the southern hemisphere and the Scandinavian countries have deeper cloud penetration when it comes to accounting.

We are still here to drive market adoption of cloud accounting services. But we also have a pretty full-service presence in Canada. We bought a company called Hubdoc, based in Toronto, that helps us extract documents — get your data into our system. We bought TaxCycle, a long-loved desktop software that gives us both tax coverage and accounting. Canada is our technical center for North America. Our investment is therefore not only business, but also in personnel.

There has been talk of the CRA creating a self-tax filing system.

I wish it would happen.

Real? You are engaged in tax reporting software.

Please note that our job is to make tax and accounting cloud solution easier. You can spend your time doing what you really want to spend your time on: running your business. And if you are an accountant or bookkeeper, you also want to save time on all those things.

Tax and accounting are table stakes. So we don’t worry if governments tell small businesses to file their taxes digitally. Our biggest competitor is not QuickBooks. They are people offline. The vast majority of small businesses still do their taxes offline.

What do you think keeps small business owners up at night more than anything else?

First and foremost, we have different conditions around the world. But overall you have rising inflation. Sometimes small business owners can pass that on through their own pricing. There is cost pressure from your suppliers, but it is unclear whether you can pass that on. You have rising interest rates. Our customers are concerned about their cash flow and access to credit. I would say we are in a murky environment.

Now, on the other hand, unemployment is low. So everywhere you look, people are asking if we’re not in a recession. I would say consumers are still spending money, but people are wary. In many sectors, such as the service sector, there is still a shortage of workers. I think it’s a pretty mixed signal environment. I think in times of uncertainty, our job is to make sure our customers have visibility. We want to help them manage their employees and we want to help them gain security and access to capital.

Wages are also going up. On the one hand, that can be difficult for small businesses to manage, but better-paid employees tend to be more loyal. Do you see raises as a benefit or an obligation for small businesses?

First of all, if you think about the well-being and happiness of employees – those people need to earn a living wage. Overall, I’d say it’s good if that’s what it means for your employees to be able to fight inflation. The real question is whether you can factor it into your pricing.

I think that’s probably the main limitation. If you’re like Xero, we run a software-as-a-service company. Every day we think about pricing as a science. I don’t know if the average small business considers pricing to be a science. Maybe they should. When inflation rises and you want your employees to have economic mobility and you want to keep prices affordable, I think the most important question is how to make sure your prices can accommodate both.

Do you consider pricing as an art?

I think pricing is an art and a science. I just don’t think the average small business thinks about it. They’re thinking about cash flow in, cash flow out, wages — but I don’t think they’re stepping back and thinking about it.

Do you think it’s because they’re so emotionally involved that they can’t separate their calling from their business?

I think so. Part of that is just training. My sister went to school to become an optometrist. She did not go to school and did not get a commercial degree. Many small business owners started with passion projects and not necessarily with an MBA in their pocket. They learned all the tools of doing business on-the-job. That’s why I think tools like Xero play an important role in giving them insight into decisions.

Many small businesses have a real problem chasing invoices. What are your plans to help users with that?

Outside of our core business, payments is the fastest growing business we have. Those aren’t bill payments – those are bill collections. We’re trying to make that an even more seamless experience, and our core platform is growing at 25 percent per year. Our debt collection business is growing by 40 percent per year. Our job is to help people get money faster.

This starts in the first place with electronic invoicing. Get it off paper. AI can really help with billing. We can read your bank details and understand which invoices a small business owner can automatically generate and shorten the amount of time it takes between sending an invoice and receiving payment.

But the second thing we’re trying to do is make payments a very seamless experience. We have already integrated several payment options into our electronic invoices. At Xero, we think collecting cash is the job we care about with small businesses.

This interview has been edited for length and clarity.

Brennan Doherty is a former staff reporter for Star Calgary and Star Toronto’s 24-hour radio room. He is now a freelance worker.

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