At Xerocon New Orleans, one of the world’s premier events for cloud accounting leaders, Xero announced software updates to expand its tax preparation capabilities to better serve Canadian small businesses. A business partnership with BMO was also announced.
Xero, a global small business platform with 3.3 million subscribers, provides accounting software and tools for accountants, bookkeepers, and small businesses.
Building on last year’s acquisition of TaxCycle, a leading Canadian income tax preparation software company, Xero accounting and bookkeeping partners have a deeper capability to advise and assist small businesses in accounting management from data input to tax filings.
Specifically, the expanded TaxCycle integration will include key forms required to complete T1 income statements, which supports fast, accurate, and efficient completion of the Statement of Business or Professional Activities (T2125) before tax season, with additional T1 statements to follow.
Xero and TaxCycle customers can now access a newly available Xero integration with TaxCycle’s desktop tax solution through the Xero App Store in Canada.
I asked Cameron Peters, CEO TaxCycle, Emily Hoult, Partner, Rice & Co LLP and Western Canada Xero Ambassador, and Aaron Doucet, Partner Success Manager, Xero, about Xero’s acquisition of TaxCycle, what it means for accounting management automation, and the impact for small business customers regarding compliance and tax filing.
Based in Calgary, Alberta, TaxCycle was founded in 2010 by Canadian tech industry veteran Cameron Peters. Cameron created some of the first tax software for electronic filing in the mid-90s and has been continually innovating in the space since then.
TaxCycle’s software provides a full Canadian income tax suite, with almost 4,000 tax firms and over 16,000 individual accountants, bookkeepers and tax preparers using its solution.
The acquisition increases Xero’s presence in Calgary, in addition to its existing Toronto office and presence in Vancouver. It is hoped to help develop the wider cloud proposition over time.
“TaxCycle is my third company,” shared Cameron Peters, CEO TaxCycle. “We named it Trilogy Software in homage to that. Previously, I created a company called CanTax, which I sold to Kevin O’Leary in 1991.”
Peters explained that TaxCycle began with, “a team of committed and passionate professionals who wanted to make professional tax software better. And we focus on making it easy and efficient to file all the different types of tax returns that you need to file in Canada.” Added Peters, “it’s designed for the accountant or bookkeeper who want to help prepare … returns correctly and efficiently.”
Workflow: Then and Now
Accounting management workflow manages data intake, accounts preparation and reporting, working papers, and income tax. With the acquisition of TaxCycle into Xero’s solution, this last step is now called, TaxCycle From Xero.
Xero also announced Hubdoc Bank Statement Extraction, a new feature that makes it easy to extract transaction data from digital PDF bank statements and import data into Xero. With coverage for several leading Canadian banks, and more to come, the feature will reduce the need for manual data entry and speed up time on year-end bookkeeping tasks.
Peters explained, “Using Xero’s accounting software is now [as easy as a] click of a button to take … all the raw materials that have gone into the books of a small business and getting that into your tax return so that you can then file it with Canadian Revenue Agency.
In context to her accounting firm, Emily Hoult, Partner, Rice & Co LLP and Xero customer, remarked, “The process for every file goes through four steps. The first step is getting information. In the old days that’s getting a pile of receipts, bank statements, whatever. The second step is getting that data into the system inputted somehow. The third is manipulating it. So, if they haven’t done their amortization entries or there’s errors, you’re fixing it and you’re preparing their financials. And the fourth step is the tax. And traditionally all four of those steps happened in different software. And so, there was no transfer of information in between.”
Historically, Hoult explained her accounting dilemma as, “I would prepare the financials and then I would have that in one window, and I would’ve had the tax software in another window, and I would manually type it in. And then I would spend time searching for the error that I inevitably caused when I typed it in.”
“Now we open the tax software, go import, it pulls everything in and starts the return. And then if I do my invoice [with] TaxCycle for the return, it exports that back to Xero as well. So everything is connected there.”
Interestingly, Hoult gravitated to accounting after an undergraduate degree in computer science and so leveraging an end-to-end software solution is in her wheelhouse. About tax automation, Hoult added, “Accounting is automating so much and having the computer background is critical. [such that] at our firm I can be the expert. When we have problems, we do implementations. I can oversee all that and help clients with the same. So yeah, I loved Xero because they were all online and really easy to use and really forward looking.”
User-centric decisions about keeping to known keyboard commands in Xero’s now end-to-end accounting solution, has helped accountants and bookkeepers with transition. Said Hoult, “When I picked up the software for the first time, it was like, ‘Oh yeah, I don’t even have to relearn anything, because all the keyboard commands still work,’ and so off to the races we go.” These commands were borne from Cameron’s earlier tax software solutions and remain the course.
Drivers and Adopters
In terms of other factors that drove the acquisition of TaxCycle, Aaron Doucet, Partner Success Manager, replied, “I think it was a lot of things. Xero is really committed to the Canadian market…. It allows us to go end to end with products here in Canada, and it was a massive signal to the Canadian market that we’re here.”
“We’re investing in Canada, we’re investing in the Calgary tech scene,” added Doucett. “And, it’s just a massive vote of confidence for our Canadian Customers.”
Doucett remarked, “I’m a tax accountant by trade … So, tax returns are very near and dear to my heart.” Adoption of Xero’s expanded offering is resonating with Canadian customers explained Doucett. He referenced the sentiments expressed at Xerocon by Shayne Dueck, partner at MNP LLP Saskatoon, who provides tax planning, business advice and financial solutioning for owner managed businesses.
Said Doucett, “[Dueck] runs their national outsource practice. And they’re a big TaxCycle customer. Originally, he said he was surprised, but then said it all made sense.”
“I got similar sentiments from another customer who has used TaxCycle and is an avid Xero user. She said she was not surprised at all, because TaxCycle like to call themselves the human tax software. They’re great people. Their support is awesome. They’ve always stood by very strong human values, which is something Xero also shares. So, it felt like a perfect coming together of two software companies that have the same values.”
Cloud-based accounting software has disrupted accounting management and so I asked Doucett to comment.
“I think it’s just sheer innovation. And I know when I’ve talked to Cameron, when we talk about some things that are coming down the pipe, we’re just excited about where the industry is going.”
“It’s no secret that cloud is disrupting the small business landscape in the first place. I think over the last couple of years, cloud adoption has gone from nine to 15%. Canada is a laggard in cloud accounting technology, when we compare ourselves to say New Zealand or Australia, where Xero is from. We have so much to learn and do.”
In terms of where Doucett places the biggest emphasis of disruption, Doucett said, “To disrupt status quo. And really make sure that we can be as efficient, make the staff accountants’ life a little bit better.”
“I would say to someone, this is for the staff accountant out there, because I was one. I used to be in a very forward-thinking firm, but there were still some manual processes. And they were so forward thinking at the time. So now with Xero and TaxCycle together, I’m really excited with how we’re trying to disrupt.”