Small businesses have adopted tech in varying degrees and capacities, but tech has become ubiquitous. Some businesses are e-commerce with a full suite of applications, mobile and cloud solutions, whereas others simply use Microsoft Office or Google applications to communicate, run calendars, book appointments, and manage expenses.

In Canada, small and medium businesses employ 88 percent of the workforce and contribute more than half of the country’s gross domestic profit, and so examining how tech continues to impact and transform such a vibrant part of our economy is critical.

How will cloud computing and emerging technologies, like AI and blockchain, for example, impact the next generation of small businesses?

I asked Mark Rees, Chief Technology Officer, Xero, about tech used by small businesses, tech/digital trends he’s observing for small businesses, and the impact emerging tech is having on Xero’s own customers. Xero is a global small business platform with 3.3 million subscribers, and provides accounting software and tools for accountants, bookkeepers, and small businesses.

“There’s a real mix of technology that small businesses use, and it varies between the market,” began Rees. Rees clarified that small business is 1-person up to 100 people.

“I think overall with small businesses that they have been under-served by technology,” said Rees, and explained how entry costs for tech in the past have been a barrier. Rees added, “[businesses haven’t] benefited from the technology investment as well. That’s one of the benefits of cloud software … you can deliver it to them without them needing IT staff. It sort of makes it more accessible, some people say democratize, but there’s really, there’s a lot of small businesses that haven’t moved to the cloud, yet.”

Rees summarized, “I think I would say the most direct impact today is probably cloud computing. That’s well-understood and it’s been rolled out.”

“I think there’s some new things that are having a big impact,” added Rees. “…Machine learning and artificial intelligence is probably the next big thing. That’s not the technology they would use directly, but it’s the technology that will improve the way they use the products that they access today, reducing the manual steps in labour.” From a Xero perspective, Rees added, “A lot of what we want for those small businesses is to have them spend less time doing accounting and more time on their core business.”

Rees also noted that “…digitization driven by government that’s happening around the world [is] a technology trend of note as well. What we’re seeing governments do is build more services like e-filing for tax, which is being adopted in heaps of countries, and that’s forcing small businesses to move onto technology solutions.”

AI and Business Insights

“I’d say AI is probably the other big focus,” stated Rees. “I think about small businesses today, most of them live in a world of email and PDFs.”

“[At Xero], we can use AI to suck all the data out of those documents automatically, and put it into Xero, to the software. So, you get this great software with well categorized high integrated data in the cloud. Then once you have that there, there’s just so many interesting things we can do with it. One example we have in the product today is we can look into the future and see when they’re going to run out of cash, so this is the cash flow.”

Using AI and its recently expanded Small Business Insights program, Rees explained “[Xero software] could encourage them to remind people to pay their invoices to bridge that gap, or just so many interesting things. Or, … you could see that your business is part of a group of similar customers and that some of them are paying 20% less tax or costing 20% less to buy something. There’s that kind of benchmarking comparison opportunity as well.”

“By creating insights that are relevant and easy to understand, we hope to help contribute to … improved profitability and growth for small businesses. In our very first Xero Small Business Insights special report for this region, Small business snapshot: United States and Canada, we tapped into aggregated and anonymized data from tens of thousands of our customers across the United States and Canada. The report highlights how resilient small businesses have been over the past five years ….”

Multi-solution Tech Small Business Ecosystem

Rees advocates for tech solutioning to come from multiple sources to best enable small business operations and growth.

“So, our approach to serving the needs of our customers really is not to be go alone. It’s about leveraging other people to help solve the problems on their behalf.” Rees then referenced the app providers and partners that accompanied Xero at its recently held Xerocon New Orleans conference.  “We have to build the product in a way that enables more places for third parties to show up in the product. That’s the key to building more solutions that help those customers. That platform or ecosystem is a big focus of ours.”

Shift to Remote Work and Virtual Collaboration

At Xerocon, several presenters addressed how the pandemic has created new challenges, but also new opportunities for tech to support small businesses.

‘Personally, I think that’s what the world is likely to be – a hybrid [work environment],” stated Rees. “We, ourselves, have moved from having our teams 100% in the office.”

I asked him about Xero’s remote workforce and the impact it’s having on connecting Xero employees, customers, and end-clients.

“We have such a healthy and vibrant accounting and bookkeeper channel, they help us communicate the value of the product to the small business,” replied Rees.

Rees added, “I think there is an element of our product strategy, which is enabling the small business and the accountants to collaborate and to facilitate conversations between the bookkeeper and accountant. One example is annotations and reporting, … [a] way to call out something, to mark out something to so a partner can communicate. There’s also this functionality we called “Xero Ask” as well, which facilitates a conversation between the bookkeeper and accountant.” Rees further explained how Xero is building to other parties, “The software that people are using to collaborate, to have calls, to manage documents, [it is important] that we are present in those.”

Blockchain & Bitcoin

I asked how blockchain is factoring into small business.

“A good example is maybe we have an inventory and e-Commerce functionality in Xero to help people manage the inventory and people are interested in supply chain and high integrity supply chain,” explained Rees.

“A blockchain is a good foundational piece of technology for being able to know that when you buy somewhere, it comes from somewhere in particular. A good parallel is the internet TCP/IP, the internet protocol. It’s very similar to that. You’ll use the apps on top of it and that’s what the customer, the users will experience, but it is an enabling technology. Payments, supply chains, identity … we think are the three most likely things that are going to be relevant to Xero.”

I also asked how small business is going to adopt or pay through Bitcoin.

“That’s something, that’s one of the most immediate things I think is that again, this is future facing stuff,” replied Rees.

In context to Xero, Rees shared its interest in supporting small businesses using Bitcoin, specifically if, “… there is a tax obligation that some small businesses get from Bitcoin. That’s something that in the future we will focus on helping them with, and that’s really adjacent to what we provide today.”

Rees ended with, “I think there’s more small businesses that are digitally native, like e-commerce businesses who it’s not so much their industry but their mindset, which causes them to be early adopters for cloud. There are lots of services businesses, too. Those are the ones that really do use technology.”

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