Online accounting company Xero has made one of its biggest acquisitions to date after it paid US$4.1 million for Monchilla, an online accounting and payroll app.
The purchase was more for the technology behind the app and the software team that built it than the customer numbers, says Xero CEO Rod Drury.
“Monchilla do really well – they have built a great rules engine around payroll tax and the state filings for 50 states. We just saw they were a really smart group of people who were really keen to jump onto our curve,” Drury says.
Monchilla will no longer accept new customers and the existing users will be transitioned over time to Xero. The Monchilla technology, which includes the ability to pay payroll directly to bank accounts, will be built into Xero and the Monchilla brand retired.
Digital First asked Oliver Furniss, global vice president for product, how he planned to integrate Monchilla to Xero’s existing payroll.
Digital First: What will happen to the existing US payroll in Xero? Will it be retired?
Furniss: Not at all. The Monchilla acquisition is for some of their technology that we will integrate with payroll in Xero. This helps accelerate the rollout of payroll in Xero to more states in the US, it does not replace it.
Digital First: What date are you estimating for integrating Monchilla to US payroll? Which features will be ready and when?
Furniss: At this stage we are not releasing dates. We will begin rolling new states with payroll in support in early 2015.
Digital First: How will Monchilla’s e-file gateway work with Xero? Does it just become part of Xero Files?
Furniss: The electronic services component simply integrates with payroll to allow for payroll taxes to be filed and paid from within Xero. It is not linked to Xero Files. It would be similar to an Australian tax gateway to report to the Australian Taxation Office but the difference is that in the US you have to report to multiple agencies as each state has different reporting and filing technologies.
Digital First: Does Monchilla automate payroll for all states in the US?
Furniss: There is no easy answer to this as it’s not that simple. It’s not fully automated as a customer still needs to view the filings and initiate them at the correct time. Our vision is to provide payroll in all 50 states with electronic filing and payments to streamline the workflow.
Digital First: Does Monchilla also automate all US states sales tax?
Furniss: Monchilla is not a sales tax tool. It is payroll taxes. Monchilla currently supports payroll tax calculations for all 50 states in the US.
Digital First: Monchilla e-Pay lets users make direct deposits to suppliers from within Monchilla, without needing to log into their online banking site. How soon will this be part of Xero? Is it coming to Australia or countries?
Furniss: At this stage we are not releasing dates. We will begin rolling new states with payroll in support in early 2015. e-Pay is primarily a US feature for paying payroll tax obligations.
Digital First: (Xero CEO) Rod Drury says one of Monchilla’s strengths is that it doesn’t use hard-coded logic. Will Monchilla replace the Paycycle code (an earlier payroll acquisition)?
Furniss: As above. Not at all. The Monchilla acquisition is for some of their technology that we will integrate with payroll in Xero. This helps accelerate the rollout of payroll in Xero to more states in the US, it does not replace it. Paycycle is not hardcoded – that’s not a concept in development. The Payroll in Xero code supports Australia and the US and in 2015 will support UK and New Zealand payroll from one platform, one codebase.
Xero released a blog post about the Monchilla acquisition.