Any business-leader cynical about the exponential pace of Moore’s law – broadly defined as the idea that computing power and technology doubles every two years – should probably consider this observation by Nick Houldsworth, executive general manager for ecosystem at the cloud accounting software firm Xero.
“A small business today has access to the kind of technology that was only [recently] available to multinationals,” he says. Now the systems that help the Amazons and eBays of the world streamline and simplify everything from payroll to billing, are at the fingertips of any startup. “You can launch a small firm in your garage with a couple of people and some apps, which will handle your payments (Stripe), forecast cashflow (Float) and take care of payroll (KeyPay),” says Houldsworth.
There are more than 1,000 apps that connect to the Xero platform, many of which are available through the new Xero App Store. By integrating these apps with Xero’s accounting software (the process can take as little as two minutes), businesses can manage transactions, schedule meetings, chase invoices, keep track of receipts and develop fresh insights into their customers. Being automated, it removes the risk of human error too. Houldsworth adds: “The apps on the Xero App Store continually surprise with how they innovate and help businesses save time; you just can’t predict what solutions will pop up next.”
With a recent OECD report finding that 70% of SMEs had intensified their use of technology during the pandemic [pdf], small firms are developing an appetite for apps. “[Covid-19] has forced many companies to rethink the way they do business,” says Houldsworth. “Those businesses that were connecting to the cloud could work with their customers and workforces remotely, which meant they were a lot more resilient [and could] manage job flows and workflows through apps on our platforms without going into the office.”
Using apps to manage business may be having a tangible impact on the bottom line of many firms. Last year was a difficult time for many SMEs, yet Xero research found that companies with five or more apps connected to their Xero account saw jobs decrease by only 1.8% year-on-year in December 2020. Businesses with no apps attached recorded a decline of 5.1%.
One of the biggest advantages of using apps is that it helps relieve some of the administrative pain (think soul-sapping data entry) that swallows up huge swathes of businesses’ time.
“Most organisations don’t want to do accounting; they want it to happen automatically, behind-the-scenes, which is why they get financial advisers or bookkeepers to do the work for them,” says Houldsworth. “But they still need to do the compliance. With apps such as Hubdoc, they can streamline the whole process, linking it with their accounting ledger and bank statements. If you get into the habit of photographing a receipt through Dext Prepare every time you buy a coffee, when it’s time to do your VAT, you don’t need to spend hours pulling out shoeboxes of receipts and manually uploading them. All the info is already there: all you need to do is push a button.”
Houldsworth estimates that such apps can save businesses four hours’ work a week. But what can they do with this bonus time?
While it might be tempting for CEOs to take Friday afternoons off, or head down the pub, they could investigate some of the data analytics solutions that apps can provide.
“Once businesses make that first move with app software, the floodgates open for a range of possibilities: they can analyse what’s happening to their organisations, getting a snapshot not only of current performance, but also what their business could look like in the future,” says Houldsworth. “Once you get a three-month picture of what your typical trends look like [through your bank data], it’s easy to model 30 or even 90 days into the future. You can start to see what could happen [to cashflow] if you employed an extra person or increased profit margin by 10%. That [scenario-planning] is critical in small businesses, because these decisions can determine whether you meet payroll or not.”
There are even some apps that could help solve a perennial worry for most SMEs: getting paid on time. By collecting credit card or direct debit payments on your behalf, apps such as GoCardless, Stripe and Chaser are all doing their bit to outlaw unpaid invoices for good.
“When small businesses add digital payment services [to their Xero accounts], they get paid up to twice as fast,” says Houldsworth, who believes that e-invoicing will revolutionise the world of digital payments. “With these apps allowing your clients to drop the amount straight into the ledger, it bypasses the need for you to send your invoice to [email protected] email addresses. The benefit for SMEs could be massive: it could level the playing-field between the smaller firms at the mercy of payment terms, and those bigger players who can afford to set them.
Adopting app-based technology for your company can also future-proof your firm, especially with the Making Tax Digital programme mandating that all businesses with gross income above £10,000 will need to shift their tax processes online from April 2023. Meanwhile, as many companies migrate to hybrid working patterns, payroll apps such as Planday and Deputy can help them manage staff, whether it’s finding colleagues to cover shifts for sick co-workers, or ensuring remote employees clock in on time.
With apps constantly evolving, Houldsworth would like to see more businesses realise their potential by using them. “There are many businesses still working in pen and paper, so we feel there’s a tremendous opportunity to help these businesses become digitally-savvy,” he says. “If those businesses can be matched to [app] solutions, they’ll have much better outcomes …”
Find, choose and buy the right apps to run your business in the Xero App Store. Visit apps.xero.com