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Sage to Australia: Forget Sage Live. It’s A New Product, Partner Plan And Solidly Mid-Market

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Sage Live (renamed Sage Business Cloud Accounting) was officially dropped from the Sage lineup in Australia 12 months ago in the face of furious competition and a too-distant roadmap. A new-look Sage is now swinging its weight behind solutions for mid-market with the localisation of Sage Intacct, an ERP acquired in 2017.

However, the shakeup is not just on the product front, says Sage’s Asia Pacific chief, Kerry Agiasotis. The Intacct approach is a blueprint for a new channel strategy that asks a lot more of partners and will raise the bar.

In the interview below, Agiasotis explains why Sage bought the cloud ERP and how Intacct is changing the way Sage operates in Australia.

 

Digital First: Why did Sage acquire Intacct? Was this just about getting into cloud ERP as quickly as possible?

Agiasotis: No, it wasn’t just about product. Our CEO (Steve Hare) talks about how we have to be a great SaaS company. It’s about having the business model and technology leadership which, over time, has been a challenge for Sage. The new direction has been exemplified by choosing (former Intacct CTO) Aaron Harris as CTO of Sage.

 

Digital First: Did Sage buy Intacct to go downmarket and target small business, and compete against Xero and Intuit?

Agiasotis: No, we are not playing in the small business sector. It is a misconception to compare Intacct to small business accounting software. This is really for larger, more complex businesses that outgrow their first accounting package. 

In the US a strong proportion of Intacct’s customers have come from Intuit QuickBooks. Intacct is the graduation product for these organisations.

 

Digital First: How does Intacct do things differently to Sage?

Agiasotis: I spent a week in San Jose at Intacct’s offices understanding how they operate and what made it successful. It’s clear that they had a strong product but what was really impressive was how they competed. They saw that they had to build a strong ecosystem, with VARs (value-added resellers). 

They know where they win and where they’re not strong and they stay very close to those areas where they are strong. 

I really appreciated that Intacct’s business model as important to their success as the product. In Australia we have made sure that we replicated as much of that as possible. For example, making sure we had experienced resources in SaaS through to how we built the partner program and brought to market the broader ecosystem of tech partners. We spent the time to understand what worked there as well. 

 

Digital First: What exactly did you replicate?

Agiasotis: The go-to-market model. We stayed very similar in how we are going to market, through channels. That is a core part of their business. Intacct also sells direct in the US, but we decided not to do that in Australia. 

We did decide to bring their partner program here, which is very different. There is a very strong upfront qualification to be accepted as a Sage Intacct partner. It’s not about volume it’s about fit. It comes down to understanding that the SaaS world is that you’re building a recurring revenue model on software not just by selling services. 

 

Digital First: How is that different to the way the Sage channel operates now?

Agiasotis: The old ERP model was the complete inverse. Selling software could be lucrative but it was point in time and the vast majority of revenue in the partner model was from selling services. 

Then it’s qualification beyond that. Do you have both experience and a willingness to make this a successful business? It is the go-to-market aspect – sales people that understand the subject matter, they have marketing capability so that they can proactively market themselves, and that requires investment. 

There is also the commercial model – there is no preferential model for performance. You have a spirit of partnership and from the very first sale we treat all partners equally. There is no tiering. 

It’s philosophically different and really interesting. Of the eight partners that we are going live with, two were pre-existing ERP partners with a very different Sage partner program. They really saw the merit of this. 

Becoming part of the program requires an investment in bringing the partners up to speed and the required knowledge they need product wise. We invest resources for the first few implementations to help them get off the ground. 

Those things will differentiate what we are doing here. 

 

Digital First: What else does Intacct do differently?

Agiasotis: Subject matter expertise. Of all the things I saw this is what Intacct has done very well. I don’t know if it was from inception but it was how they grew up. They mastered winning in an industry and then moved onto the next. They did it by building strong relationships in the partner community and bringing those lessons back in to productise, while staying with a singular product and code base. They did that very well. 

Many organisations that have tried to go down a vertical path potentially compromise building into a common platform and sometimes they go off into other directions. Intacct was clever about what to bring into the product to address industry needs as well as (knowing what was) going too far. 

Segmentation was important and the key qualifier was finding subject matter industries.

Overall it’s a partnering philosophy rather than reseller philosophy. We won’t end up with hundreds of partners here. We will have tens of partners that will be very focused on the industry that we believe will be successful. 

 

Digital First: Partners? Just VARs or other types? 

Agiasotis: We classify them as VARs as well as ISVs. The nuance is that it’s different to the way we have traditionally seen them. It’s not that we provide a product and off they go and resell. There is an ongoing and tight relationship with these organisations. The engagement on our side means we stay much closer. Not one partner manager for 50 partners, it’s a much lower ratio. 

What partners bring to the table is more than product knowledge. It’s their ability to solve business problems in key industries. That’s been a key part of the selection process.

Nunzio Giunta from Giuntabell. His business is focused on the not-for-profit sector. He walks in and lives and breathes NFP. He understands intimately the problems of an NFP. That’s the only type of company he will sell to. 

 

Digital First: Where does this leave Sage One? 

Agiasotis: Sage One or Sage Business Cloud Accounting was built and has proliferated in the UK. We haven’t taken that product out of the UK. (Ed: Sage Australia was selling a South African version of Sage One.) I made the decision 12 months ago that that wasn’t going to be a primary focus for us in Australia. 

The product categories that matter in the mid-market sector – financials and ERP, HR and payroll. We are not there to serve small business (directly), we are there to serve accountants who serve small business. 

When I think about the product that we have had in this market (Sage One), it has been far more attuned to the professional user. Someone that gets accounting. And we have provided it to our accounts as a tool to use for their customers, but we are not actively out there trying to win in that category. 

 

Digital First: Has Sage One in South Africa been killed off?

Agiasotis: In South Africa Sage One is the leading product in that segment and they continue to sell that. We have an install base here that bought it from Sage. That’s how we delivered our payroll offering. So we support it. 

But in terms of actively winning in the market, you won’t see us actively pursuing small business. The product continues to be invested in from our South African market.

Sage is differentiated – you still have this combination of organisations that in local markets have capability. At the same time as Sage moves its portfolio to be cloud native, it becomes a single, unified, cloud native product. The first examples of that are Sage People and Sage Intacct.

 

Digital First: When Sage launches productivity and efficiency tools in the UK will you do it here?

Agiasotis: This marketplace has a heavy concentration of very advanced competitors. Xero has done a great job, it has captured a lot of market share and MYOB is chasing that and Intuit is going hard as well. That segment is very well served. 

How do we serve our customers and extend capability to serve those customers? We see an opportunity and have taken a payroll product and extended it to our customers and that’s how we think about addressing the needs of small business here, through accountants. 

 

Digital First: How are you planning on plugging the payroll with Intacct?

Agiasotis: We are a market leader in payroll with MicroPay (an on-premise payroll app). Twelve months ago we added the cloud-based Sage People product and those have been doing really well for us.

Even with this launch we have built an integration to MicroPay which is integrated to Sage People. So we will be offering an integrated suite across HR, Payroll and Accounting. MicrosPay is on-premise, but we have segregated capability. It’s a back-office engine that is cloud hosted. We have spent the energy to open it up with APIs. There’s a payroll admin (desktop) that would worry about making sure the data is correct around payroll, but all of the front of house and engagement with employees is cloud native.

Full Product Wrap for Xerocon Brisbane 2019 – The Real Xero Stands Up

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Xerocon Brisbane 2019 felt like a watershed in a couple of ways. The first in maturity – Xero looks and sounds much more like a global software company developing operations in multiple geographies, rather than an Australasian success story punching above its weight.

Second, in the way Xero talked about its software and the focus of its product development. 

I spoke to a couple of long-standing Xero firms at the end of the first day. They agreed that the show lacked the features razzle dazzle that former CEO Rod Drury usually delivered to enthusiastic applause.  

I went back and had a look at what was actually announced and it’s clear that more R&D is going to the broader vision – creating a data platform connected to many and varied real-time sources, of which the accounting software is just one part.

The majority of the value in Xero isn’t going to be in building the best accounting software. It will be in the quality of its insights, more commonly known in technology circles as business intelligence. 

This has always been the game plan, it’s just taken a couple of iterations to get there. Follow the slogans: “Beautiful accounting” became “Beautiful business” and now it’s “Simple (collection of) data, seamless workflows and smart insights”. 

No mention of accounting, business or compliance. 

So what does the end goal look like? Xero will become a repository for an immensely broad range of data, validated against source documents and data feeds through machine learning and accounting partners.

This will create a very valuable pool of anonymised benchmark data. Xero can create all sorts of services that are essentially showing individual versus the benchmark. 

It is right there in the Xerocon Brisbane press release. 

Together with our bookkeepers, accountants and BAS advisors, Xero is determined to build the most data-rich, insightful and trusted global small business platform anywhere. 

And again in the blog post from Xero CEO Steve Vamos.

Xero is evolving from a single ledger in the cloud to a platform rich with data, where workflows are seamless and small business insights are delivered with speed and accuracy.

As we do so, we’ll build on the applications, tools and connections that simplify how data is captured and flows into the platform through advanced AI and machine learning capabilities. This will help unearth insights that we’ll put in the hands of our partners, so they can advise and guide their small business clients.

“Workflows” in this context is about how the data flows into the platform, and not just how accountants and business owners use the accounting software.

This shift explains some of the confusion in the audience. When accountants and bookkeepers at Xerocon hear the word “Xero”, they think about this:

When Xero’s executives get up on stage and talk about Xero, they are talking about this:

See that sign in the middle of the circle, the infinity symbol? That’s the real Xero. Hello! (/waves)

So with all that in mind, let’s take a look at the announcements for Xerocon Brisbane 2019.

Ledger – AutoPay, Cashflow and Data Collection

The reason why you thought there weren’t many product announcements at Xerocon is because… there weren’t. Not at least for the main product, the cloud accounting ledger. 

This may be because Xero is keeping the powder dry for the bigger Xerocon London in six weeks, as Anna Curzon hinted heavily in our interview. 

There were only three announcements relating to the accounting software; recurring payments and bank feed with Stripe, a pilot of cashflow forecasting that won’t launch until early 2020, and better processing in HubDoc. (And I’m not really sure if that last one qualifies.)  

 

AutoPay

The biggest announcement by a mile was the addition of autopay for sales invoices via a deep integration with Stripe. A business can turn on autopay to receive recurring card payments for repeat billing customers directly through Xero. 

Xero says that Xero businesses are sending over 1.6 million repeating invoices in Xero every month. “Imagine if all those invoices that are automatically sent, could automatically be paid.” 

A native way to take recurring payments is a fantastic addition. The implementation looks excellent and, as an accountant who was involved in the beta said in the Xero blog post, it means you don’t need to use third-party apps. 

How it works:

  • To add auto-pay, tick the ‘Offer auto pay’ check box on your repeating invoice templates. When your customers go to pay those invoices, they can opt in to be automatically billed on the same credit card the next time the invoice is due.
  • If your customer’s card changes (i.e. they are replacing an expired, lost or stolen card), Stripe will work with card networks to automatically update the saved card details. This lowers the risk of payment failure and reduces the need to collect new card details.

Stripe charges 2.9% + 30 cents in the US for all cards. (It’s the same rate in Australia for international cards and a cheaper rate 1.75% + 30¢ for domestic cards. The UK is the cheapest at 1.4% + 20p and 2.9% + 20p.) 

I wonder what the dollar value of those 1.6 million repeating invoices is? I asked Xero if it is getting a cut of Slack’s fees. The answer is yes, but Xero won’t say how much.

 

Stripe data feed

Xero has added a new data feed from Stripe – a globally exclusive feature, no other accounting platform has invested the time and money with Stripe to do it, apparently. As a Stripe user I’m very happy about this one.

Back in 2017 Xero announced it had automated Stripe reconciliation for online invoices. When a Xero business added Stripe as a payment gateway and sent an online invoice to a customer, the customer’s credit card payment was automatically reconciled in Xero.   

The new feed automatically recognises payment transaction data made via Stripe anywhere, whether on an invoice or in an e-commerce store. That means it will split out the Stripe fee from the payment for the product or service. 

How it works: 

  • Users connect the Stripe feed in the same way they connect other bank feeds within Xero. 
  • Users who connect Stripe on invoices will see a feed set up automatically on their behalf.

 

Cashflow Forecasting Tool

Cashflow forecasting is one of the first exhibits in the cloud ledger of the Xero platform benchmarking at work. It visually projects the user’s bank balance 30 days into the future, showing the impact of existing bills and  invoices that are paid on their due dates. 

It’s only a pilot and a very basic implementation – more a guideline than a useful tool for forecasting. And it won’t launch officially until “early 2020”.

The question is how far Xero will take this? Anna Curzon said that Xero is only the beginning of the functionality it will build. Certainly Xero could do more powerful forecasting than anyone else in the ecosystem because it has the most data. 

I interviewed Colin Hewitt from Float, a cashflow forecasting app, at Xerocon (story coming soon), and he welcomed the addition as an excellent way to raise awareness of cashflow forecasting. 

How it works:

  • You need to sign up to the pilot to see this – email cashflow@xero.com.
  • Users will be able to choose a bank account and switch between a 7-day and 30-day view. They’ll also see the impact of paying a bill today versus next week, and know which invoices they should follow up on again to help with cash flow this month. 

 

A better HubDoc

Since the acquisition a year ago, Xero has doubled the processing rate of HubDoc by improving the way in which it reads numbers from printed invoices and receipts. 

Anna Curzon highlighted the information that HubDoc collects and automatically adds to invoices. Supplier name, due date, amount, GST (tax), date, invoice number  – all of which appears in Xero’s SMB Insights report as a benchmark for debtor days for all businesses. 

HubDoc is an app and not part of the cloud ledger, its technology is appearing in other parts of Xero, says Curzon.

“As we continue to automate the most laborious parts of the accounting workflow, we’re working towards enabling 100 percent of all data extraction to be powered by machine learning technology, as well as leveraging these capabilities in other areas of the Xero platform.” 

 

Xero Connect

I hadn’t heard of Xero Connect before. This is Xero’s name for the data interface that connects to enterprises that have thousands or millions of business customers. Suppliers in trades materials, stationery, fuel and so on. 

Or in marketing speak: “Xero Connect automates the flow of external invoices into Xero, saving small businesses time, eliminating manual data entry, and increasing the accuracy of their invoicing and bill payments.”

Xero has been building connections with these suppliers to automatically ingest supplier invoices into Xero by attaching each to a purchase order or job number. Instead of building individual connections, Xero has an API platform that enterprises can connect to. 

These networks exist in the enterprise world and are called an electronic data interchange, or EDI network. Xero is building a small business version. This should accelerate the number of enterprises globally that send bills through Xero. 

At Xerocon Brisbane Curzon announced the addition of global petrochemical company BP. The BP (Plus) Fuel card in Australia and New Zealand. This works like an e-invoicing solution that sends an invoice from BP’s billing system to the customer’s Xero file, which is linked to a BP customer ID.

How it works:

  • A monthly BP invoice will flow automatically into the Xero platform as a draft bill awaiting the business owner’s approval. When the invoice is paid, payment will appear in Xero and is matched to the bill for easy bank reconciliation

No need for HubDoc for your BP bills, then. 

 

Partnerships – Practice Software

Despite Xero’s intensifying focus on its data platform, the accounting partner channel is still clearly important to it. 

Xero has had a more effective practice strategy than the direct-to-business Intuit, particularly with the investment in Xero Tax, now up to 5,000 firms in Australia. The company line used to be that Xero Tax in Australia was a one-off and that it didn’t want to buy or build tax in every market it entered. 

The acquisition of Instafile shows that Xero may be prepared to make exceptions for critical markets. And right now, the UK is at the top of the pile.

Xero Practice Manager

Xero has had a more mixed run on its practice software. Xero Practice Manager – built on a patchwork of integrations – has languished for a couple of years to the point where it suffered some “stability issues” in the past 12 months. Not great for your line-of-business tool. 

Curzon announced that she had built up the XPM team and focused on making the platform more robust. XPM is also getting a couple of nice features such as WIP reports and practice templates for charts of accounts (with report codes pre-assigned). The latter will mean firms won’t have to use the Xero default or upload a CSV file.

Summary of new features:

  • Consolidate your invoice export to Xero, remove WIP, and update job status in bulk.
  • An all-new WIP dashboard will let you view your WIP at a selected date and see your aged WIP totals. 
  • In the works: a standard aged WIP report that you can run at a selected date with a number of grouping options to give you the flexibility and deeper insights you need. 

 

Xero HQ

The launch of a notifications-driven interface called Xero HQ all the way back in 2016 appeared to be a refreshing take on firm workflows. However, the concept hadn’t been fully tested and accountants, overwhelmed by notifications, largely ignored it. 

The launch was clearly premature, as one team member admitted on the floor. 

At Xerocon we saw a reboot of Xero HQ where the activity feed is split into different areas by service line or role. Xero HQ Payroll will be available for Australian users later this year, and Xero HQ BAS is due next year. (NZ users will receive both these features next year as well.)

Presumably Xero HQ BAS is based on Xero HQ VAT, which launched in the UK a week before Xerocon Brisbane.

How it works:

  • You plug your payroll person into Xero HQ Payroll. They then use that dashboard to only see payroll notifications, and click directly into the payroll section for each Xero file from the notification. 
  • These function-specific areas will “see further into the future” than the current activity feed. You can organise and filter views, add notes for unusual details, and directly click on a link to the right place to complete the work in the client’s organisation
  • You can see the information in Xero HQ Payroll/BAS on-screen or as a CSV export

 

Large firms

Xero plugged a big hole in its practice strategy with the GreatSoft partnership. Firms with more than 100 staff are apparently using Xero Practice Manager. But XPM struggles with reporting for multiple partners, offices and service lines.

GreatSoft is a cloud-based practice suite built for large firms. Built in South Africa, it was built by some of the original founders of Reckon APS.

GreatSoft has some big name customers such as Deloitte South Africa on its books. It has been in Australia for the past 18 months or so building the connections to required applications in the accounting ecosystem.

Integrations are a major point of difference. Neither Reckon APS nor MYOB Accountants Enterprise play nicely with the accounting ecosystem, which has limited the pace of innovation for firms using those suites.

GreatSoft has few Australian customers as yet – reasonable given the complexity of migrating practice software for a very large firm. The Xero partnership is a strong signal that GreatSoft is now ready. 

GreatSoft’s integration with Xero Tax will be a key selling point for large Australian clients who are on legacy practice software.

“Many firms want to upgrade to Xero’s tax solution but are hamstrung by their outdated desktop suite, which doesn’t integrate,” says Brian Armstrong, Australian MD for GreatSoft. “That changes with this partnership.”

Will this be a global partnership? The UK market for practice software is apparently underdeveloped. Xero’s acquisition of Instafile for tax in the UK could follow a similar model.

 

The next generation

One last comment that is worth mentioning. Xero’s Australia MD Trent Innes said the most exciting development was the progress of Xero’s education platform. Starting from scratch, Xero Learn has added 10,000 students in 18 months attending 100 institutions in Australia, New Zealand, America and Asia.

Xero Learn is a training platform for universities, technical colleges and other registered training organisations. It is designed to replace the free CD of MYOB that was previously used by every single educational institution teaching bookkeeping or accounting in Australia.

Winning over these institutions is of enormous strategic importance. If every accounting and bookkeeping graduate is fluent on Xero rather than MYOB that will influence sales for years to come. 

Interestingly, I haven’t heard of anything similar under construction by Intuit or MYOB. (Apparently it takes a lot of work to build.) It’s a big advantage.

 

Ecosystem

The application ecosystem (filed under “Technology” in Xero’s platform) also had some noteworthy updates. Just as you have “Log in with Google” or “Log in with FaceBook”, soon apps will have a “Log in with Xero” option. 

This will reduce the number of passwords a firm or business requires to run their business – single sign-on (SSO) is great for security. However, it’s not the main attraction for Xero. 

“Sign in with Xero… removes friction and eliminates the onboarding steps to acquisition. It allows our app partners to demonstrate the end-to-end on-boarding process at the point of sign up, and makes it easier than ever for customers to connect their Xero to apps,” Nick Houldsworth, Xero’s executive general manager for the app ecosystem, said.

Xero’s clearly trying to increase the attachment rate for its ecosystem partners. To increase stickiness?

And Xero advisors will soon be able to create lists of recommended apps that their clients will see when they visit Xero’s new marketplace at apps.xero.com. The idea here is increasing personalisation and using Xero’s benchmarking data (Xero Insights) to recommend apps by industry.

While some Xero partners are all over apps, the majority aren’t. Will be keen to see how well this works in practice.

Conclusion

There’s a lot happening at Xero but not as much on the surface and not just for accountants, bookkeepers and SMEs. Quoting Anna Curzon again: Xero will “bring customers, employees, suppliers, banking, government and technology together, into one dynamic and connected community, guided by advisors.”

Even though Xero is stating out loud that it is a data platform, it will take a long time for people to accept that it’s more than the accounting software bolted on the front end.

Image credit: Xero

QuickBooks Online Adds Auto-Updating Insurance for Australian Users (w/ Interview)

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Australian businesses using QuickBooks Online can now buy 10 types of insurance through their accounting software at prices up to 20 percent cheaper than market rates, claims partner ExpenseCheck. 

This is only the second type of financial service that Intuit has offered through the QuickBooks Online platform, and the first outside of the US. The ability for businesses to buy auto-updating insurance, and through accounting software, is to my knowledge a world first. 

Expense Check says that the premiums are so much lower than market because the insurer can calculate risk much more effectively by analysing the businesses’ accounting data.

The insurance is backed by the largest small business insurer in Australia and New Zealand, CGU. QBO displays in-app messages offering plans to relevant businesses that are pre-qualified using the data in the accounting file. 

Premiums automatically update based on relevant triggers in the business. Insurances that cover employees will increase or decrease in line with the number of employees listed in QuickBooks Online payroll. Insurances that cover stock will rise and fall based on inventory. 

The word within Intuit is that QuickBooks Capital, which provides in-app loans backed by Intuit and a small group of anonymous lenders, has been a huge success. QBO analyses the accounting data in a file and knows when a business needs capital, for example to cover a shortfall in payroll. 

The in-app messaging is highly targeted and the loans are pre-approved. With a couple of clicks, a business can get a chunk of cash in its bank account the next day. And, Intuit claims, QuickBooks Capital has very low default rates. With 80% market share Intuit is very likely to know the credit rating of a business’s customers and whether they are likely to pay their invoices. 

Expense Check’s integration follows the same model. 

For Intuit this is a very attractive way to increase share of wallet – how much money each QBO business is willing to spend with Intuit. 

This will be a very attractive white label market for insurers because it should reduce the risk across a very risky category, small business. It also happens to be the largest in numbers of customers. The downside is that Intuit owns the customer. 

As far as I know this is a world first – auto-updating insurance premiums for small business. Effectively you never need to review and renew your insurance contract because it is constantly being reviewed and the premium adjusted in line.

Ironically, Xero previewed this back in 2015 at Xerocon when Rod Drury did an on-stage demo with an insurer – in fact, the same one backing Expense Check. 

Now that this global proof of concept is in the market we should see similar moves in other markets. Apparently the biggest blocker is upgrading the insurers’ systems so that they can calculate premiums on the fly. Upgrading systems costs a lot of money.

I caught up with Expense Check CEO Nigel Fellowes-Freeman to find out the backstory behind this major move for Intuit.

 

Digital First: When was the deal signed?

Fellowes-Freeman: The deal was signed about five months ago. We did a Beta trial in the last quarter of last year to get interest and buy-in. We proofed up all the theories of metrics in terms of how interested small businesses would be. So, that then progressed to a multi-year contract with Intuit Australia.

 

Digital First: When you say went to trial, was that with Intuit?

Fellowes-Freeman: With Intuit inside of the platform (QuickBooks Online). It was just a proof of concept really so it was not fully embedded but it was using some of the concepts and in-product display messages. It’s just a little message targeted at specific users to say “would this be interesting for you?”. 

We were asking: Would Intuit customers love to see fully automated insurance inside of QuickBooks Online? Yes. 

 

Digital First: It really shows the power of in-app messaging to sell financial services.

Fellowes-Freeman: It’s incredibly powerful, especially in terms of getting the right message to the right business at the right time. That’s the really important component, that contextual message. And you can do that with a really good view of that data.

 

Digital First: How long has Expense Check been in the market?

Fellowes-Freeman: Expense Check as a business has been in the market for three years. But the insurance proposition itself we have been building for 18 months. It takes a long time to get an insurance proposition up. The first release for insurance was in the last quarter of last year, and then the actual line product with Intuit has been in the market now about twelve weeks.

 

Digital First: I didn’t realise. So the first time it appeared in market was within QBO?

Fellowes-Freeman: Yes. The first time it appeared in the market was within QBO; it’s the only kind of software that can provide insurance to small business customers using their data to automate the entire flow. A small business can get a quote and buy the quote, i.e. get protected, in about 45 seconds.

 

Nigel Fellowes-Freeman, CEO of Expense Check

 

Digital First: What’s been happening since you signed the deal?

Fellowes-Freeman: We’ve built the full integration out from that trial phase into a full integration so it is inside the interface and accessible from the Tools menu (in QBO). So from a customers’ perspective it’s like they’re interacting with QuickBooks but it is obviously powered by us. 

We also built a part on the dashboard for advisors, i.e. accountants and bookkeepers. It gives them an insurance wallet for every client. They can help their client never miss a renewal day., have the right policies in place, and they can transition to an advisory role around insurance services as well as other services they offer.

 

Digital First: And who’s providing insurance on the back-end; are you using one supplier or multiple suppliers?

Fellowes-Freeman: We use one supplier. We partnered with CGU, the biggest business insurer in Australia and New Zealand. We had to get them to build a piece of infrastructure for us to have a dynamic insurance product. 

A key part of the product is that it changes with the business. So as your business insurance stands today, you buy a policy on July 1, and you guess what your business is going to look like for the next 12 months in terms of your revenue, your wages, and your number of staff, and your stock levels and that’s what you’d get insured for. 

The product we have created changes with your business. If your wages go up, or if your staff numbers go down, if your stock changes then the policy changes to match your business. So you never have to have a renewal date because you are always perfectly protected for your business. 

And so to be able to do that we had CGU work really close with us over the last 12 months to be able to deliver that product.

 

Digital First: If memory serves me rightly, CGU was the insurer that demoed with Xero in 2015. 

Fellowes-Freeman: Correct.

 

Digital First: They had an integration then. So how did this come about?

Fellowes-Freeman: Yes. So obviously the CGU-Xero deal fell over. There wasn’t enough buy-in from both Xero and CGU, I don’t think was deep enough, and so they did not get enough traction. 

If you looked at the user journey it was basically a click-bait inside the product and everything was managed outside by CGU. And so it didn’t really utilise the data or (the best) user experience. 

So we approached the innovation component in IAG that allowed us to (develop) a new business structure. They understood the value of data and how it could underwrite much more specifically and therefore price much more aggressively. 

From a price point of view we are about 20% cheaper just because we can underwrite so much more specifically. We know the exact revenue, and there is no margin for error, because we know the data in the small business’s file.

 

Digital First: Has CGU said that if businesses buy through Expense Check and QBO that the price will always be lower than going direct to CGU, because they have that quality of data?

Fellowes-Freeman: They can never guarantee anything, but we compare our data to CGU and all the majors (insurers) and consistently, over a period of time, our premiums are 15% to 20% cheaper.

 

Digital First: Is that purely because CGU can minimise risk the more data we have about a business?

Fellowes-Freeman: Exactly. Underwriting risk is all driven by data, so the better data you’ve got, the better understanding you have of the business, so the more aggressive you can price (your premiums).

 

Digital First: Can the insurers get the same quality of accounting data from anywhere else?

Fellowes-Freeman: From banks, potentially, though it’s obviously much harder to understand the transaction data. So accounting software is a gold mine for underwriting data for small businesses.

 

Digital First: Because of the overlaying the chart of accounts over the transactions?

Fellowes-Freeman: Exactly. It’s the heartbeat of a small business. That’s how you understand risk very well. There’s some things you need as an outsider you can’t understand so we use some other data sources to do that as well.

 

Digital First: So what types of insurance are available and what’s the roadmap?

Fellowes-Freeman: As it stands today, we have 10 products available. General public and product liability, Property and contents, General property (tools of trade), Business interruption, Glass, Electronic equipment, Theft, Money, Employee dishonesty and Tax investigation.

Two on the roadmap that are about eight to 10 weeks away are Professional indemnity and Auto commercial. Once we’ve got those two we’ve got a pretty robust set that small business needs. After that are Cyber and then Employee insurance, which insures against an employee suing an employer. 

 

Digital First: So, to date, there have only really been two products that have any deep integration with QuickBooks Online. Why do you think you guys were chosen? I presume that they’re running the same kind of in-app tests for other products, why Expense Check?

Fellowes-Freeman: I think the proposition is very different to anything else in the market. None of the other accounting software can do this. All the accounting apps are sitting now on a pretty level playing field in terms of features so this is something I think that they saw as really setting them apart. 

Obviously QuickBooks Capital has been very, very successful in the US. Intuit has seen the value of having a financial service embedded in the product. Obviously they see this as an adjunct to that. I think that’s probably why we were able to jump up the queue from a feature and a revenue driver point of view. Obviously there’s a really good revenue opportunity for the insurer as well.

 

Digital First: Are you going to take the idea to the US and UK?

Fellowes-Freeman: Yes, it is in the pipeline, and we’re speaking with QuickBooks around both those options, yes.

 

Digital First: Fantastic. And, where does it go from here? I mean you say you’ve got the complete workflow already in the product. Is it just a matter of adding more products, or is there more development left to do?

Fellowes-Freeman: Yes, there is a heap more development in adding more products, the breadth of product. Getting even better at targeting the right product to the right customer and using the understanding that we have of small business in how we can put the right product in front of them. 

Employee dishonesty, for example. Generally, how you insure (against) employee dishonesty is that you have a number of staff and therefore some are part-time. But we can see from the data the employee contracts they have and the type of industry, how long the employee stayed with the business, how much they’re paid. Those things connect to the risk profile of that employee and therefore also to the premium that the business is going to pay. 

So we are doing a lot of work in turn using a heap of machine learning to understand how we can better understand risk and can therefore perfectly protect the small business. 

A really good way of thinking about it is that today insurance works on the model of protect and repair. So you protect a car and you repair it if it gets broken. 

We are working really hard to use the data to predict what’s going to happen in the future and therefore give advice to that business about what they can do. For example, they could install fire alarms, work with different employees, improve their employee tenure, so those losses don’t happen. 

And so that’s how we are thinking about insurance. We want to make insurance visible and avoid losses, not just provide protection to small businesses.

 

Image credit:

Apple Barges Into Banking And Accounting Software with Goldman Sachs-Backed Credit Card

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You have to give it to the team at Apple, they know how to stand out in a crowd. Check out the picture of that new credit card. No expiry, no CVV, no number.

Apple Card will automatically categorise transactions to Apple’s own chart of accounts

Just a blank slate of titanium with your name under the Apple logo (of course). Every other premium credit card looks instantly and completely out of date.

Apple Card works with Apple Pay on your iPhone like any other approved credit card, while the physical titanium card works in stores that don’t accept Apple Pay. Apple has removed almost every type of fee that you would usually find on a credit card – though if you’re late in paying the interest rate goes up.

There’s a fascinating interaction with Apple’s internal currency, Apple Pay Cash, which could move hundreds of millions or even billions of dollars onto an Apple controlled platform.

Apple Card tracks monthly spend by week

Xero and Intuit will be most interested in the software that goes with the digital/titanium card. It automatically categorises payments, adds map locations and colour logos to transactions, shows monthly expenditure in graphs, and has a dial interface to select the level of repayment and interest.

This is a very interesting story which definitely has implications for accounting software which I’ll examine in greater detail next week. It’s not the first time that big tech companies have edged in on accounting.

Microsoft threw a huge amount of cash with Microsoft Money but was trounced by Intuit. Apple is starting from a very different position – and a fan base far bigger and more loyal than any accounting software (yes, even Xero).

Apple Card gives you the power to choose how much interest you want to pay

One restriction for the Apple Card is that it appears you must have an iPhone to order one. And most likely a later model. One report expects that iPhone 8 will be the oldest compatible model. This automatically limits the market. It could either harm the potential market share for Apple Card or have the reverse effect and drive more iPhone sales.

It will also depend on a country’s existing iPhone penetration. For example, Apple has a very high market share in Australia; 43 percent of all smartphone users (8.6 million of 19.3 million in 2018) are holding iPhones compared to the global average of 15 percent.

In comparison, the figure in the UK and US is about 33 percent. Only in Japan does the iPhone enjoy a higher (45 percent) market share.

So I would hope we will get a close look at the impact of this essentially new technology combination.

A watershed in accounting tech for sure.

Image credit: Apple

About D1

Digital First covers news and opinions on accounting technology and is read by tech-savvy accountants who understand the importance of technology in establishing competitive advantage.
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