Cloud accounting software company Xero had built a financial records database of 400,000 small businesses in New Zealand that it would exploit for business opportunities, said Rod Drury, Xero CEO, at the company’s inaugural Australian users conference held in Melbourne on Saturday.
Xero had collected a wealth of data as its software was being used by over half the accountants in New Zealand to manage their small business customers.
“Our customers’ customers are in our database (so) we have every New Zealand company in our database. It’s effectively been crowd-sourced,” Drury said. “There is a massive amount of value by aggregating the business payment graph.”
The data, which included information such as cash flow, credit status and itemised expenditure, would be very valuable to organisations such as banks, large business, government and telecommunications companies, Drury said.
“Has the car lease expired? Do you need foreign currency features because you received a overseas invoice?
“That data belongs to the customer, so how can we be responsible custodians of it and also introduce them to services in such a way that make small business more productive,” Drury said.
He added that one reason Xero was established as a public company was to provide transparency and accountability for collecting the data.
“The only way business will consent to sharing that (data) is by getting business value” from services related to Xero, Drury said.
One potential for the database was to provide benchmarking for Xero users by industry and location. Drury gave the scenario of a Xero accountant forming an anonymous benchmarking group for 20 plumbers in the same region so that each plumber could compare cash flow and revenue to the group average.
Another possibility was organising group-buying syndicates, Drury said.
Before Xero could roll out benchmarking it needed to ensure that all its users were using standardised reporting codes “so we can compare apples with apples”, Drury said.
Xero also needed to know the industry to which each business belonged and to verify all business addresses to remove duplicate entries for the one business.
Xero was removing duplicate business entries from the database through a deal with New Zealand Post, Drury said. When New Zealand users added a company as a supplier or customer to their Xero accounts, the address field would automatically fill in the formal postal address of the business according to the mail service’s records.
Xero was in talks with providers in Australia including Australia Post to supply a similar service, Drury added.
Other steps to clean up the database included linking Xero users’ charts of accounts to Xero’s reporting codes.
“This provides the foundations for benchmarking and is going to make the most difference.
“In a world where every client is running their own file it’s hard to get efficiency there. We can get real process efficiency happening,” Drury said.
Another opportunity was using Xero as a commodity EDI (electronic data interchange) interface between large companies with thousands of suppliers. Xero had introduced an industry-specific sales team to target real estate, franchises and sporting clubs.
“Large providers are dealing with thousands of small providers and they have quite a lot of cost in managing that. So we’re effectively providing EDI end points,” Drury said.