I came across a tweet the other day that was really interesting (at least to
my small world). The official Xero twitter feed tweeted the following;
This is actually bigger and more exciting than initial consideration would
indicate. I was chatting with someone during a conference break the other day (as always the back channel
proving at least as valuable as the event itself) and he stated very simply that
business revenue and expenditure is just the same as personal income and
outgoings. Or in other words budgeting to buy a new piece of plant and equipment
for a business for example is the same as Joe Public having the ambition to buy
himself a new house, a new car or a shiny new Dell Adamo.
Given this fact, it totally makes sense for a vendor that already has a core
accounting engine (let’s call it a money management engine for the purposes of
this post) to extend that engine to work with all users – business or
It’s a combination that hasn’t really been explored to date. Mint and Wesabe are doing a great job of personal finance and
investment tracking. In Xero’s home market, New Zealand, PocketSmith is doing a
fantastic job of providing a personal money management tool. Their are
also obviously a plethora of business accounting applications – but no one has explored the
connection between the two.
Looking at micro businesses it seems to me that the distinction between
personal and business finance is pretty blurred. Almost all micro businesses I
know use a personal credit card for business expenses – sure that can be solved
via expense claims but that’s not really in keeping with the actuality.
Similarly most micro businesses that require funding achieve it by using their
personal equity to guarantee debt – again removing personal finances from this
business finance model ignores this fact.
So I see two great reasons for accounting vendors to offer a personal finance
- It provides for an upgrade path – users can migrate from a potentially
lightweight personal finance application to a fuller featured business one
- It leverages core functions of the app – Xero’s “secret sauce” is the
automatic import of bank transactions every night – this has real utility for
personal customers as well
- It can leverage central government strategies – in the current climate most
governments are looking at ways to build financial literacy for their citizens.
A personal finance application can help with this so there are some potential
funding streams outside of the paid application or advertising supported
- It more accurately reflects the financial reality for micro/small
Xero has around $20 million dollars to spend after its last funding round. Much of this will be squirreled away to cover
their not insignificant revenue/expenditure deficit but it wouldn’t be a bad
idea to earmark it for some strategic investments – personal finance would be a