There are two ways to do SaaS accounting. One is to produce highly regionalised offerings in a small number of locations while the other is to produce a product that is sufficiently general and customisable to be used globally.
Until now, Xero (review here) had taken the former route – having released regional specific offerings in the UK, Australia and New Zealand. Their offerings have garnered significant praise – especially for their superb user interface and robust accounting engine. This attention has led to calls and requests for a truly international version.
As of Monday, Xero is delivering by releasing an international version of it’s offering. The move has necessitated the creation of a configurable tax engine to allow for regional specific tax rates to be entered. As Xero does not have a payroll offering sales tax is the primary difference between regions.
The way Xero has worked it’s tax rates is that as many tax rates can be set as a user requires. Each tax rate can have up to six components. Xero gives an example as follows;
So for example, in California you will create a tax rate that will contain 2 components (State Tax and City Tax). If you need to charge a different tax for cooked food, versus uncooked food, these can be set up as two different tax rates.
One of the tax components, per tax rate, can be compounded, that is calculated on the value of the invoice plus any of the other taxes. This is requirement for some states in Canada.
Our sales tax report makes it easy to get a summary of all tax paid and collected by tax rate and/or tax component.
Each account in Xero gets a default tax rate, which can be overridden. In the future we will allow each contact to have a default rate which suites some of the global markets.
The image below shows the tax rate editing window;
Entering an invoice and choosing the appropriate tax rate for each item;
And a report showing tax amounts for different rates;
Xero advise me that their strategy is to listen to feedback from global users and then add country localized versions based on that feedback.
Xero international is priced at USD29 per month – and (for this pundit at least) it’ll be incredibly interesting to see it go up against the best products that the rest of the world has to offer.
Along with multiple tax rates, Xero is releasing PayPal integration and thus knocking another SaaS provider off their salf-appointed post of the "Only accounting software with PayPal Certified Integration"