Cloud accounting software such as Xero can significantly improve your accounting processes — but what happens when your business outgrows the functionality it provides?
Has Your business grown beyond Xero? Xero is a cloud accounting platform that, since its launch in 2006, has become the go-to accounting suite for over 1.3 million businesses and users around the world. Xero is a powerful accounting solution that can automate many time-consuming tasks — but is it the right choice for a business undergoing rapid growth?
Can Xero Keep Up with Your Business?
If you’re currently using Xero as an accounting solution, it’s important to determine whether the functionality of Xero is going to meet the needs of your business as it scales. Cloud accounting delivers a wide range of benefits, but there is a limit to the functionality of the Xero suite. As your business grows, so too does its complexity, necessitating more in-depth accounting solutions.
The functionality of the Xero platform is primarily designed for the small to medium enterprise market. Early stage businesses, startups, and single entities typically find that the solutions offered by Xero are ideal for their needs, but many business owners find that their accounting processes demand more sophisticated features as they enter new markets, launch new products, or increase their workforce.
Implementing new accounting practices is complicated and time consuming — many business owners are hesitant to stress the capabilities of Xero any further, concerned that delicately balanced accounting flows will be disturbed.
How can you tell when it’s time for your business to move beyond Xero, though?
There are five key factors that you can use to identify the current accounting software needs of your business — if any of the following points describe your business, this may be a sign that your business is outgrowing Xero.
Your Accounting Needs Have Escalated
If your accounting needs have escalated that may be a sign that your business grown beyond Xero. Business models and processes grow in tandem with the growth of a small business. A growing business is likely to develop more complex inventory and product needs, hire new employees, or capture new customers, customer types, and channels.
Businesses that reach critical growth stages often encounter bottlenecks caused by the limited configuration capacity of the accounting software they use. While cloud accounting software suites such as Xero are suitable for small businesses, they are often unable to deliver the complexity and functionality necessary to cater to the accounting needs of a complex business.
Xero offers third party plugin and integration functionality that can overcome this configuration capacity shortfall. As businesses become increasingly reliant on third party applications, however, more functionality is directed away from the core Xero suite — creating an accounting environment that is difficult to manage.
How Adaptable is Your Accounting Software?
If you find that the accounting needs of your business are rapidly expanding beyond the scope of your current accounting software, it will become increasingly difficult to adapt your accounting software and associated third party solutions to the changing needs of your business.
In this scenario, it’s likely that your accounting software solution will become error-prone and demand a time investment in the form of maintenance and workaround development.
Accounting software is generally the first software solution that any small business purchases. Implementing a cloud-based accounting software solution such as Xero delivers automation benefits and reduces administrative friction.
Small businesses in growth stages encounter industry specific challenges outside those presented by accounting processes, however. A retail business, for example, may seek to open a new ecommerce channel. A manufacturing business may need to develop a comprehensive inventory management system or automate core shopfloor processes in order to facilitate expansion and growth.
It’s important to take industry-specific requirements into account when assessing your accounting solution. Small business owners planning on implementing an accounting solution must identify accounting software that supports industry-specific requirements and successfully supports long-term growth.
While Xero is a powerful cloud based accounting solution for developing small businesses it is, in most cases, incapable of meeting the financial management needs of larger organizations. Factors such as multi-entity, multi-location, multi-books, support for various different depreciation categories, consolidation, budget roll-ups, total organization budgets, credit limit management for customers and suppliers, and subscription billing are examples of complex processes that are difficult to manage with cloud software solutions designed for smaller businesses.
If your business is reaching a point at which the cloud accounting software you’re currently using is falling short and demands the implementation of third-party applications or manual interventions, your accounting processes are likely to create unnecessary overheads and introduce critical errors.
Your Business is Becoming Increasingly Complex
Business growth is not a linear process. Scaling and growth is an ongoing journey of trial and error, adaptation, and analysis. Small businesses are able to rely on the standardized reporting functionality of cloud accounting platforms such as Xero — a monthly report, for example, often delivers sufficient business insight for a small to medium enterprise.
As a business expands, however, both business model and business complexity increases. The increasing complexity of a business model demands increasingly complex business reports in order to provide business leaders with sufficient insight.
Business leaders require deep, detailed analysis on a regular basis in order to ensure that the right insight is delivered at the right time during critical growth stages.
Increasing business entity complexity also has a significant impact on the accounting requirements of a business. Platforms such as Xero are primarily designed for use by single entity businesses. A growing business is likely to add more outlets, stores, or other entities that demand individual Xero instances in order to keep accurate records.
Accessing real-time insight across multiple business entities managed via separate Xero instances is virtually impossible. Businesses that develop a complex structure of disparate entities demand more robust accounting solutions that are able to deliver top-level real-time insight across all related entities.
Data complexity increases in tandem with business complexity. Accounting systems that rely on multiple third-party applications and plugins regularly develop data islands or silo data, preventing a consolidated view of the business as a whole.
Accounting Operations Become a Time Sink
Business growth impacts operational requirements in many different ways. A business in a growth stage will experience increased operational requirements across transactions, employees, customers, and departments, rapidly increasing the demand placed on cloud accounting software solutions.
Growing businesses will create workarounds or implement third party solutions in order to keep up with expanding operational requirements, which can impede growth and result in process exceptions in order to ensure accounting solutions remain functional.
The IT architecture of a growing business evolves based on adaptation to changing requirements, often without sufficient oversight to ensure that it does not impede operational efficiency.
A business that managed accounting requirements through spreadsheets in early development stages, for example, will find that Xero solves a wide range of compliance, reporting, and automation issues. When the same business attempts to manage stock flow across multiple sites or warehouses in a more efficient manner, however, it’s likely that Xero will present operational challenges.
Improving customer relations, the optimization of human resources operations, or expansions into ecommerce are all requirements that emerge from business growth. In order to meet these demands while ensuring platforms such as Xero remain functional, businesses are often forced to purchase and integrate third party applications.
While this practice may work in the short term, the ongoing process of acquiring and integrating new third party solutions inevitably creates an accounting ecosystem that is difficult to maintain and error prone.
Your Application Architecture Management is Non-existent
The architecture of less flexible accounting solutions such as Xero will degrade to the point at which it is unsuitable for the continued growth and expansion of a business. If your business has already acquired and implemented third party solutions in order to expand the functionality of Xero, it’s important to ask yourself whether the accounting flow you have created is forcing you to invest an abnormal amount of time in order to keep it stable.
Mismanaged or unmanaged application architecture growth introduces application integration mismatches. Businesses that operate mismatched integration solutions within their accounting software are forced to address these deficiencies through code, or create manual workaround solutions. This could be a sign that your business has grown beyond Xero. Your accounting software should deliver the information and insight you need, when you need it, with minimal time spent on data reconciliation.
If you cannot quickly and easily make changes across the applications that integrate with your accounting software in an agile manner, it’s time to reassess whether it’s the right solution for your business.
You Want to Expand Your Business
Growth, for many small businesses, is driven by accessing new markets. In order to unlock the opportunities present in new markets, businesses must open new locations, develop new products, establish a foreign presence, sell to intermediaries, or access customers directly through channels such as ecommerce.
Businesses seeking access to new markets must identify, understand, and adapt to the unique needs and requirements of each market. This process presents a variety of challenges that can place stress upon accounting software with limited functionality.
Managing different currencies and foreign exchange or the regulatory requirements of foreign markets, for example, can quickly overwhelm the accounting capacity of a small business. Small business accounting software typically provides very limited support for businesses expanding into new markets and often creates operational friction that demands the development of workarounds in order to address deficiencies.
Your Current Solution Doesn’t Meet Your Expansion Requirements
If Xero doesn’t meet your expansion needs your business has grown beyond Xero.
If your business is expanding into foreign markets, you are likely to encounter language and communication challenges. In order for employees to operate in an efficient manner, it’s important that they are able to work in their native language. Your accounting solution should support all languages spoken in all locations you plan to do business.
Similarly, you may do business with customers and vendors that transact in a variety of different currencies. Multi-currency management accounting support is critical to the success of any business that plans to expand into foreign markets — currencies should be converted in real-time across the entire accounting process.
Your accounting software should also support varying financial, accounting, and tax obligations and regulations in the countries that your business operates in. Multi-country compliance support should be up to date and comprehensive.
Robust accounting software should also support the creation and management of multiple entities, and facilitate the consolation and reporting of them. Reports for these entities should be easy to set up and manage. If your business is deploying an individual instance of Xero for each entity due to the limitations of Xero multi-entity management, it’s time to reassess whether your current solution has a net positive impact on your operations.
Your Business Demands Operational Efficiency
Time management is critical to the growth of businesses of all sizes, but is particularly important to small businesses. While small businesses may lack size, they gain an agility advantage and are able to rapidly adapt to new opportunities or customer demands faster than larger competitors.
Effective time management, however, requires that small businesses deliver accessible, detailed, and responsive service when issues or challenges are encountered. Speed and efficiency are highly important when dealing with business-critical processes that are essential for continued business operation.
Downtime can have a significant impact on any business in the modern always-on economy, and can result in lost sales, brand image damage, compliance breaches, and other irreparable damage. Growing businesses rely heavily on business applications in order to minimize downtime and manage time efficiently.
While cloud-based accounting solutions deliver flexibility for small businesses, the potential damage of downtime cannot be overlooked. Many market-leading accounting software firms, including Xero, are criticized due to accessibility, responsiveness, availability, and support issues. These issues may be negligible for small businesses, but a larger scale business can experience severe issues due to slow support response times.
What Happens if Your Business Outgrows Xero?
Xero is a popular solution for small businesses that need to expand accounting software functionality and increase operational efficiencies. Successful businesses in critical growth stages or larger, more complex businesses, however, often outgrow the capabilities and functionality of the Xero platform.
The most common obstacle faced by businesses in this position is determining where to move from Xero. Some businesses choose to continue using Xero, accumulating third party applications and spreadsheets in order to overcome deficiencies, but this process creates greater complexity and operational friction that impedes further growth and expansion.
Oracle NetSuite is a popular alternative to Xero that is specifically designed for small businesses seeking a catalyst for expansion, scaling, and growth. The Oracle NetSuite platform provides growing businesses with detailed financials, customer relationship management functionality, inventory and warehouse management tools, professional services automation, and a broad spectrum of ecommerce capabilities in a single suite.
This approach to accounting software allows small businesses to interact with clients and customers in new ways and create more efficient accounting processes. Importantly, the Oracle NetSuite platform contains the integration complexity created by additional applications in a single service, delivering unparalleled insight across all capabilities and functionality through a single centralized data model, search function, and reporting system.
NetSuite Oracle has remained a market leader in accounting software for over 20 years, providing a range of benefits such as automating accounting in order to optimize core operations, or providing rich functional depth that supports complex business models and processes. The NetSuite Oracle solution is also highly configurable, allowing users to perform deep customization in order to meet individualized business requirements.
If you’re currently growing your business or planning to scale in the future, it’s important to consider the long-term benefits of a more robust platform such as NetSuite Oracle in comparison to low-cost entry-level accounting solutions such as Xero.
Determining which accounting software solution is the best fit for your business can be complicated. But if your business has grown beyond Xero or you’re interested in more information about the benefits of NetSuite Oracle for growing your business, reach out to Fullstack for comprehensive guidance today. Also check out these articles: