Xero is raising their prices again, a move causing some consternation amongst bookkeepers and Xero users alike. This price increase will not only effect Xero’s small business users, it will also have an impact on bookkeepers and accountants.
Many bookkeepers have been exclusively Xero for a number of years, and feel that they have helped Xero to become the global success story that they are today. They’re not wrong. Xero’s success has largely been built on their strategy of getting onside the accountants and bookkeepers who have significant influence over which accounting software a business will choose.
This price increase makes life difficult for those who have helped Xero along the way. Fair to say they’re not exactly feeling the love right now.
Some carry the subscriptions for their clients and so a price increase means they have to get all their clients to adjust their automatic payment. In some circumstances the accountants and bookkeepers will end up wearing the cost.
When I sold my bookkeeping business I was glad to be rid of managing the subs. It was a pain and not really worth it financially other than the partner status points that it gave me (which admittedly, at the time, were valuable). Since then any client I’ve “sold” onto Xero has managed their own subscription. I don’t want them.
Even if bookkeepers don’t carry the subscription, clients have often bought Xero based on the recommendation and expertise of Xero Partners (myself included). We have sold this product to our clients and, rightly or wrongly, feel that decisions that adversely effect our clients will reflect poorly on us.
Earlier this year Xero released their new version of Expenses. It’s a standalone mobile app which is good for staff who need to submit expenses but whom don’t need access to the actual Xero file. By all accounts it’s quite good and has useful functionality and reporting for businesses who have staff submitting expense claims.
It was always going to be a pay per user app, which is totally fair enough and as it should be. You wouldn’t necessarily expect that level of functionality in a standard subscription, and there are many small businesses who just have no need for it.
We Xero partners have long been calling for an improvement to the Expenses feature of Xero which has been around since the beginning, or near enough to. I, for one, have always advised against using it. I found it to be clunky to use, easy to make errors, and not easy to correct. Better to go old school and submit an expense claim in the form of an Excel spreadsheet with receipts attached I thought.
I mention Xero Expenses now because, with the new price increase, Xero is including the new Expenses for 1 user, and using this additional feature as justification for the 9% price increase (on a standard subscription). For some businesses who are using the current expenses feature the increase could be much more, should they choose to use the new version, as the cost after the initial 1 user is $5 per Expenses user.
Clearly Xero feels that their software should include expense claims as standard. But this is not basic functionality and as I mentioned, there are many businesses, the majority in my experience, who have no need of it and will resent this enforced price increase for additional functionality that they won’t even use. It seems a more sensible idea to have it as an optional add-on in the same way that Xero Projects is.
Software prices will always increase over time as will everything else in life. It’s to be expected. But this does seem like an unfair hike for a feature that not many clients will see value for. At the new price a lot will consider Xero to be quite expensive and therefore a less attractive offer, particularly as there are other, less expensive options out there that will do the job just as well for many businesses.
Xero do have a starter version of their software, currently $27.50 + GST and this pricing will stay the same, but in all my years of selling Xero I’ve never put anyone on it because it’s very limited in the amount of transactions that are included, and for a business with such small needs as would suit it, there are better, more cost-effective options out there.
I’ve been saying for ages that even though Xero has incredible brand loyalty, it wouldn’t take that much for it to diminish. We’ve seen it during times where Xero has struggled with down time. Admittedly that doesn’t happen often, but the tide of loyalty would turn in a heartbeat if that were to happen for an extended time.
Pricing also falls into this category. There’s a limit to how much prices can continue to increase and at NZD 60.00 + GST per month for a standard subscription – NZD 720.00 per year – small businesses will start to question whether Xero is still worth it. I believe for many it will result in switching to another software in the next 12 months.
So what now?
Ultimately we all have a choice here. It is what it is and it seems unlikely that we can do anything to reverse the decision. Xero is a global business and must answer to its shareholders. After many years in this industry this is not the first time I have seen something like this happen, nor will it be the last.
The cost is what the cost is. If Xero clients still see value with the price increase then they’ll stay, perhaps begrudgingly, with Xero. If they no longer see value then there are other online alternatives such as MYOB Essentials, Reckon One or even Wave. Part of our role as independent bookkeepers and consultants is to advise our clients. What’s in the best interests of the client?
For bookkeepers, I’m not trying to diminish the impact that this will have on your businesses. I totally get it. I remember very clearly that first price increase I had to go through with Xero. The increase was only NZD 1.00 a month, but the work required to sort a change in subscription price is the same no matter how big or small the increase.
It’s not a good situation to be in. I feel your pain. Given the situation, what do you have control over? What can you do to minimise the disruption to your business, and ensure your clients are still happy? Focus on that.
For Xero clients, will this price increase mean that you will strongly consider changing to another accounting software provider?