Cloud accounting company Xero has hit monthly recurring subscription revenues of $NZ8.6 million ($A7.93m), passing $NZ100m ($A92m) in annualised revenue for the first time. Full year operating revenue to March 2014 was $NZ70.1m. Xero CEO Rod Drury says passing the $NZ100m annualised revenue mark is a huge milestone for any tech company. “We’re so proud to have got there so quickly,” he says. Xero has also announced it is expanding its presence in Australia with a new office opening in Canberra and the hiring of additional staff. Staff numbers in Australia now total 144 across five offices. Xero says in a statement that it is committed to creating employment opportunities in Canberra, at a time when many public sector jobs are under threat in the ACT following this year’s federal budget. “We see the value in investing in our ACT Partners and customers, and continuing to grow our presence in the region” said Chris Ridd, managing director for Xero in Australia. “We are dedicated to providing localised support across Australian business hubs, such as the ACT, that have shown a real eagerness to adopt cloud-based accounting software.” Xero’s new Canberra office will open on Monday, June 16 and will be located at 10 Rudd Street, Canberra.
The end of the financial year is fast approaching and small businesses need to get their tax affairs in order. Chris Ridd of online accounting software provider Xero outlines strategies to help your business minimise its tax bill. Tax time takes it out of the best of us. A small saving grace is the general rule that you can claim deductions for any expense your business incurs while generating its income. Many of these deductions are straightforward – rent, materials, wages, supplies – but here are five you might not have heard of. Interest – don’t overlook what you can deduct You can deduct any interest on money your business borrows, including interest paid on business loans, overdrafts and other finance facilities. This might sound obvious, but there are other interest expenses you can deduct that can easily be overlooked. Firstly, any interest that is accrued on a business loan but not paid by June 30 is potentially deductible. Secondly, many small business owners fund their business through personal loans or with their personal credit card. And because the interest costs aren’t being incurred by the business itself, but by the business owner, you can claim a deduction on the interest in your own personal income tax. Depreciation – take advantage of the $6500 cap Small businesses shouldn’t forget to claim for depreciation – getting a deduction for the loss of value and wear and tear on the business’ assets. Assets usually have to be depreciated bit by bit over several years, but special rules for SMEs mean that they can get an immediate tax write off for any asset with a value of up to $6500. For example, if your business bought a $4000 computer in the current tax year, the business could claim an immediate 100% tax deduction when you do your tax return. The federal government has signalled it wants to drop the limit to $1000, backdating the change to 1 January 2014. This denies SMEs to take advantage of this concession before it goes out the window (although it remains to be seen if this change will be passed by the Senate). Nonetheless you can, at the very least, take advantage of the $6,500 cap for assets purchased before 31 December 2013. Motor vehicles – drive a better deal with the tax man There are also generous depreciation concessions for small businesses when they buy motor vehicles. SMEs can depreciate cars, trucks or vans and so on more quickly than other businesses. They receive 100% deduction on the first $5000 cost of the vehicle and can then depreciate the rest at 15% in the year they bought it. So a $14,000 car would attract a tax deduction of $6350 in the year of purchase. (If the vehicle cost less than $6500, the whole amount can be claimed as an immediate deduction under the instant asset write-off provisions outlined above.) But, as with the general depreciation rule, the government wants to remove these concessions; the initial deduction on a $14,000 car would then drop to $4200. But, as with the general depreciation rule, the government wants to remove these concessions and backdate them to 1 January. If this happens the initial deduction on a $14,000 car would drop to $4200. Trading stock – profit from your losses Tax time is a good opportunity to do a stocktake to see if you qualify for any deductions on your trading stock – anything you produce, manufacture, purchase for manufacture or sell for your business. You can write off any lost, damaged or obsolete stock for a tax deduction. If your stock level changes by more than $5000, you must take into account the change in value of your trading stock when you work out your taxable income for the year. If the value of the trading stock is higher at the end of the year than at the beginning, then the rise counts as part of your taxable income. But if your stock is worth less you will qualify for a deduction. There are three different methods of valuing stock: the price you bought it for; its current selling value; and its replacement value. You can choose which you use for which piece of stock, giving you the opportunity to maximise your deductions. Bad debts – there is some good news It’s always bad news for a small business when debtors fail to pay for the goods or services you’ve sold them. But at least there’s a small silver lining – you can claim a tax deduction for the bad debt. A bad debt is any debt which has been outstanding for 12 months or more and which you have made a reasonable effort to recover. It pays to go back through your outstanding invoices to find bad debts and write them off before the tax year on June 30. Also, if you calculate your GST on an accrual basis, don’t forget to claim a refund for the GST you paid to the Australian Tax Office when you issued the original invoice. So there you have it: five small business tax deductions to start looking at before the end of the financial year. Chris Ridd is managing director of Xero, an online accounting software provider which helps small businesses get their financial affairs in order. This article was updated after changes were announced in the budget.
The quality of applicants involved in the first Carnegie’s Den event of the year is a significant improvement on those in the past, thanks to partnerships with startup incubators, according to event organisers. Venture capitalist Mark Carnegie says this is because incubators in the Australian startup ecosystem are doing their job. “This round of applications has been of high calibre,” Carnegie says. Created by investment firm MH Carnegie & Co, Carnegie's Den provides a platform for leading Australian entrepreneurs to gain media exposure and direct funding from prospective investors. The finalists hoping to woo prospective investors in Carnegie’s Den this Friday at The Church in Darlinghurst include: Liquorun; an appropriately named crowdsourced liquor delivery service. CricHQ; a cloud-based cricket administration program. APE mobile; a construction and engineering site information management system. TokenOne; a unique two-factor authentication platform that enables users to securely login to third party systems using a patent protected method. Digivizer; a service which searches, analyses, connects and maps the social web and the comments made on it in order to keep clients informed. Switch Automation; a cloud-based energy management and environmental monitoring system that gives users the ability to manage building energy usage online. Selera Labs; a software developer which has developed data analytics that improve financial governance, ensure transactional compliance and automates internal auditing processes. Qwilr; a web-based productivity tool that allows sales teams to create and send the best quotes and pitches to clients. Carnegie said he had noticed pitches geared toward software-as-a-service, which can be attributed to a number of other startups who had been successful in this area in recent years. One such success story is Xero, the cloud accounting software startup that raised $US150 million ($A162m) in capital from a range of investors last October. “They see the low cost to establish and the big prize at the end of the rainbow,’’ he says. For these startups the path to the pot at the end of the rainbow leads through Carnegie’s Den. “We shortlisted 35 startups and met with every one of them,’’ Carnegie and Co investment consultant Zachary Midalia says. “And I made the point of saying to them, we’re not here to humiliate you, we’re not here to create drama, we’re purely here to help an innovative segment of the community.’’
MYOB co-founder Craig Winkler among early investors, as Practice Ignition raises $650,000 seed funding2:08AM | Friday, 21 February
Practice Ignition, an Australian firm that helps accountants to streamline their interaction with clients, has raised $650,000 in seed funding from investors including MYOB co-founder and early Xero investor Craig Winkler. The new funding will go towards expanding the company’s development team and business team. “Our aim is that all accountants across Australia can use our platform by the end of fiscal 2014,” founder Guy Pearson, told StartupSmart. Other investors include New Zealand-based software developer Trineo, several accountants, and Xero’s vice president of payroll, Stuart McLeod. Pearson, a former accountant, is also behind cloud-based services advisor Interactive Accounting. He says the investors who’ve injected funds into Practice Ignition, which was formed in 2012, were people he’d met through his previous venture. “Pitch to people that know your industry or find someone that likes your solution,” he advises fellow entrepreneurs. “That might be 100 cups of coffee later.” The seed funding was in exchange for around 22% equity in the firm, valuing it at $2.5 million. More than 400 accounting practices in 20 countries around the world are currently using Practice Ignition’s platform to on-board new clients, the company says in a statement. The platform automates the creation and acceptance of legal engagement documents and provides tools to collaborate with clients, as well as giving firms the ability to offer real-time quotes and turn traditional websites into a service-based check-out system. Craig Winkler said in a statement that he invested in Practice Ignition because its cloud platform enables accountancy practices to scale up their businesses by automating workflow, invoice and payment tasks. “Practice Ignition re-invents and streamlines the collaboration between advisor and clients, while dramatically reducing administration costs for accountants,” he said.
Ollo Mobile has won a trip to Silicon Valley after beating nine other start-ups in the Small Team, Big Impact competition in Sydney last night. The pitching competition was coordinated by cloud technology computing company RackSpace. Ten start-ups with fewer than 10 team members were selected to compete. Ollo Mobile is a new device and system for panic buttons, which elderly or unwell people can use to alert family members and health authorities when they need help. The other finalists were OpenLearning, Food Orbit, Projectia, Annexium, AuthoPay, Revolutionise, Clipp, Digital Sorbet and Geepers. The start-ups pitched to a judging panel of Mick Liubinskas from incubator Pollenizer, Kim Heras from start-up network PushStart, Ruslan Kogan from Kogan Electronics, Chris Ridd, the country manager from Xero, and Robert Scoble, Rackspace’s international start-up liaison. Scoble told StartupSmart he was excited to see an ecosystem beginning in Sydney, but Australia needed to do more to support entrepreneurs. “San Francisco and New York have ecosystems, as do Tel Aviv, Beijing and Seattle. London kind of has one and Los Angeles is being built. It looks like Sydney has a good one underway. These ecosystems need to keep the geeks in town, or they leave and go somewhere else,” Scoble says. Despite the growing ecosystem, Scoble cautions Australian struggles with employee share schemes (ESS) are a fundamental issue that needed to be overcome quickly. “The laws here aren’t letting start-ups use their stock options and equity to motivate people to shelve their jobs at big companies and come and join start-ups,” Scoble says. “Australia needs to deal with this quickly to support your entrepreneurial talent, or they’re going to leave and take their value with them.” The federal government announced a review of ESS opportunities in June. Scoble adds start-ups need access to money, talent, public relations and business expertise to get their companies to the point they’re turning over billions. “When you’re in San Francisco there is such a strong future culture, you can see it in the streets with people trying new things,” he says. “You need access to the idea that your plans are possible and a city with a great culture that encourages that.”
Melbourne-based payment system start-up Pin Payments has acquired the subscription payment management service and customer base of US-based Spreedly. The acquisition opens up a global network of payment gateways and clients for the start-up which only came out of beta in May. Pin Payments is Australia’s first all-in-one payment system, while Spreedly is a subscription management system. Business development manager Chris Dahl told StartupSmart the acquisition was easier because the two company visions were aligned. “Spreedly is a US-based company following a similar mantra to Pin, in that they're trying to better enable online credit card transactions for businesses,” Dahl says. “Spreedly were working with a couple of global partners, but now they’re with us, it means our client base is global overnight.” Pin Payments was a customer of Spreedly, which was shifting its focus to other products. Pin Payment customers kept requesting a subscription system, and Dahl says the suggestion to buy Spreedly came up in discussions and made a lot of sense. This is the first acquisition for Pin Payments, which has also partnered with leading online store platform Shopify and is also working with accounting software company Xero. “The acquisition was funded mostly through existing capital, with a trailing revenue share between Pin Payments and Spreedly. We expect revenue generated through the subscription business to pay back the cost of the acquisition within a year,” Dahl says. Dahl declined to say how much the acquisition cost. Dahl says the rise of software-as-a-service style businesses has made subscription models increasingly common. While Spreedly managed the subscription model, it still required a payment gateway, so clients required a merchant account. “Our product removed the pain point of having to go and work with the bank and have an approved merchant account. But it didn’t make it really, really easy for businesses to build a subscription business model. But this acquisition means that now they can,” he says, adding that the acquisition means time to market has been drastically reduced again. Dahl says the strategic investment enables Pin to offer a comprehensive subscription management service on top of their existing system. He says Pin Payments will continue to invest and innovate in the service and will be launching the company in New Zealand in the next few months.
Reckon is aiming to shake up the Australian accounting software market when it launches its first cloud-based product Reckon One in the next quarter.
Dan Norris was inspired to set up Informly whilst working in his previous company, a website design agency.
A venture capital firm backed by PayPal co-founder Peter Thiel has teamed up with another investor to pour US$49 million into New Zealand-founded start-up Xero, increasing the total amount raised to date by the cloud-based venture to US$67 million.
Peter Thiel has set up a $40 million venture capital fund in partnership with the New Zealand Venture Investment Fund, which could be open to Australian start-ups prepared to relocate.
Accountancy software company Xero has raised $15 million to fund global growth and has made its first acquisition for the year, snapping up Max Solutions in a deal worth almost $5 million.
Xero investor and serial entrepreneur Rowan Simpson has invested an undisclosed amount in New Zealand start-up Go Vocab, which plans to internationalise its online language platform.
Australian tech start-up Paycycle, which provides online payroll services, has been snapped up by accountancy software firm Xero for $1.5m, just two years after the company was launched.