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- Often I start with a really bad dad joke. You want a very bad dad joke, Danielle? - Sure. Go on. - What did one fish say to the other fish in the tank? - I don't know, Danny. What did one fish say to the other fish in the tank? - How do you start listening? - [LAUGHS] Oh, Dan, that is bad. - It's so bad. - It is bad, yeah. [LAUGHS] - And it actually took me quite a few times to get that joke. It was that bad. I was like, what? Oh. - [LAUGHS] And then it clicks. - Yeah, it clicks. Do you want another dad joke? - Go on. - Ask me if I got a haircut. - Dan, have you had your haircut? - No, I got them all cut. - You got the what cut? - I got them all cut. - Got them all cut? - They're like, a haircut. No, I got them all cut. - Oh, OK. [LAUGHS] I was going to pretend I got that. And I thought, not very genuine, so-- [LAUGHS]. - Over the head. For those are tuning in, we're just now starting early. We start at 12 o'clock on the dot. And so we're just having a little chat before. And I try to always have a few bad dad jokes on the go. And for those of you from Auckland today, it's growing wet. That's good for our dams filling. 57% capacity, which is a long way off where we need to be. Because, don't know if you-- but around here the buds are already sprouting on the trees for spring. They're starting to already come. - Yeah. - So we need to know a lot more rain. All right. The participants are in. The numbers are swelling. It's 12 o'clock on the dot. So a bit more. So shall we start Danielle. - Let's start. - OK, well to those who are here, welcome to our webinar today, Going Paperless. Today I've got a special guest Danielle Ball, Director of Education New Zealand at Xero here with me. Thank you for joining us today, Danielle. - Thank you. - Before we get started, a few housekeeping things to cover off. Your lines had been muted to avoid background noise. But if, at any point, you have a question, simply type it into the Q&A box. And we'll answer your questions as we go or at the end of the session. But for those of you who don't know us, are new I suppose, I should talk about me for a minute, and then you, Danielle. So I'm Dan Pollard, founder of Fergus. But before Fergus, I was a Tradie. I've been a Tradie since I was 17, in business since I was 22 years of age. So I've to four or five staff by the time I was 23, 24. And they had to close that business for tax reasons and stress. And then another go when I was about 26, and got that just a couple of people. Once again, closed it. That one just from the stress of operations-- trading, invoicing, cash flow, working with data, all that sort of drama. And then I started again at 30, which was just me and nobody. And in eight years, I had 25 staff and two branches in Auckland. And I'd also done software at the same time, and had 12 or 14 staff in software, and then made the pivot to sell the plumbing company and do software full-time. And so I think Fergus has got 48 staff in two countries now. So in my 20s, got a lot wrong. And then, in my 30s, kind of got it all right, once I understood how to do business. So that's my story in one minute. Yours, Danielle? - Sure. Hi, everyone. My name's Danielle Ball and, as Dan said, I'm the Education Director for New Zealand here at Xero. So my story is left school, went to university and studied accounting, and so am trained as a chartered accountant. And I did that for about nine years. Always wanted to be a teacher. And decided that time was of the essence, so I gave up the accounting and went into secondary school teaching for a couple of years, and trained, and did that. Loved it, but missed the accounting, which really surprised me. So I jumped back into practice for a couple of years. And then decided, no, I'd enough. And then this role came up at Xero. I'm going into education, so it was a combined best of both worlds. So in my role-- I've been here coming up six years-- my team look after creation of education, content, training content webinars, workshops for our small and medium-sized businesses, as well as our accounting partners, our accountants and bookkeepers. So really our remit is to really help people to understand the benefit of Cloud, and accounting software, and to really get the most out of it to save time, and give you time to do all the great things you need to do with your business. - Hm. Now essentially I was going to start on the title for everyone-- Going Paperless. But I really believe there's a hyphen missing between "paper" and "less." It's paper-less. You can't actually ever get rid of paper, and I don't think you should think like that. I think it's just about going paperless. It's a constant of trying to handle each piece of paper or each piece of data just once. That's sort of my thoughts on it. What are your thoughts on paperless, or paper-less? - I agree with you, Dan. I think, in an ideal world, it would be lovely to operate without paper. But we're just not in an ideal world. I think, for me, it's around working out a way to manage, and store, and be able to retrieve documents for your business in a really efficient way. And a lot of people on this webinar probably come from a time when everything was paper-based. And trying to find an invoice was just like trying to find a needle in a haystack. So it's really about how do you, as you say, touch things once, and you're able to find information when you need it, and using technology to do that. - Hm. Good. OK, so, just to let the audience know, I'll not be giving Danielle a free pass on this webinar. But I actually have some sort of focused or direct questions to ask you. - OK. - As I kind of-- as I actually feel-- well, and know-- accountants at Xero have kind of missed the mark with Tradie. - Yeah. - So we haven't had a pre-chat. But Danielle is kind of going in blind with the questions I've written down. So she still doesn't know what I'm going to ask her actually. But let's see how it pans out because I do like when it's sort of more real. Right. So working with technology, what's your understanding of where Tradie are at with technology adoption? - OK, so coming at it from our numbers, we can see that, in terms of our currency Xero, customers, we have got-- we've got a large proportion of Tradie customers that are currently using Xero. And in terms of the sectors in New Zealand, trades to come out as I think number one for us. I would agree with you, though. We probably-- Xero itself has definitely not come up with a solution that is ideal for just tradies to use all the time, primarily because there's a lot of job costing, and time management, and scheduling, and all of that kind of stuff that we just haven't packed it into the product. It's just not where our sweet spot lies. Personal experience, I've dealt with a lot of Tradie just at home. And I am always staggered at the number of tradies who are still whipping out an invoice book, or a quote book, or some-- recently, you know, they'll bring out a quote book, but then they'll send me an invoice, an online invoice. So I know they're using a product, an online product, but they're not using the full capacity of the product. So I think is really a real mixed bag. And where does it come from? I think there might be a mindset that it's a bit too hard. Technology is a bit tricky. I won't be able to learn it. But I can tell you, you can learn it. It's not hard when it's set up correctly. And give your staffs more credit. It's well worth a shot because it will-- - You see, I think that's the question I'm going to get to. So where do you think accountants at Xero-- it seems to me they accountants at Xero want the Tradie to move more to where they are at, rather than the accountants at Xero going, actually we've got to move the trades where they are at. - What I think that comes down to is making sure that you have an advisor, an accountant, a bookkeeper, understand your industry, right? Because there are lots of advisors out there, not a lot of them are probably specialized, and have a lot of clients in the trades. Those that do understand-- - I agree with that. - Yeah, understand that it's not just about here is Xero. Here is an app. You need to adopt it. They are very collaborative. And they will want to understand your business, and work out what that's in. It should not be about you having to change every process under the sun to fit the technology. - Yeah, I think for those who are listening, I think that is, to me, that is one of things I'll talk a lot about, is you actually have to choose an accountant that actually understands a trades business. - Exactly. - And they truly actually understand. And so I'm going to slides four and five before I talk about that more and more. Because there's sort of-- these next two reports form the foundation of why Xero is amazing, and Fergus is amazing. But I need it set up well. Because there's no point-- like the old saying, data in, data out, right? If it's crap data in, it's crap data out. And it's critical that the data going into Xero is good. So let's just jump onto this classic P&L. So why don't you explain a P&L to trades business listening, and why this is so important. Then I can flick over to executive summary. Why are these two reports are critical? - Sure. So when you're running your business-- and business, but I'll talk specifically about trades-- you know, most of the-- the key figure that most people will think about is, oh, what profit have I made for the year? So your profit and loss really shows what are the income sources. Where are you actually earning your money? And it's about the money that you're earning, not about the cash that's coming in. That's one thing to consider. So what are your sales? What are the lines of revenue? Are you receiving any services and things you're charging for? The top part of the profit and loss we call as the "trading statement." So what's the income you're earning from trading? What are your actual direct costs that are directly attributable to you being able to earn net revenue? And then we come down to-- once we take out income in this cell-- track direct costs-- we come to our gross profit or gross margin. And that really indicates to you how profitable your operations are. Because underneath that line, you've got what we call operating expenses. Now, they are absolutely required to run your business. They are what you might have heard of overheads-- so everything-- rent, power, admin wages and salaries, if you have admin staff, rubbish removal if it's non-operating-- kind of thing. And that then focuses down to your net profit, which is what you're paying tax on. But having spoken to Dan as well, your understanding and your appreciation is that gross profit line is absolutely critical. Because if you are not generating enough gross profit, you're not managing your direct costs sufficiently. You're not getting enough revenue in the door. And you're just not going to be profitable enough to cover all the rest of those costs. And who will end up suffering is you, because you're the one who needs to be able to draw a wage or salary from this business to actually survive. - Yeah, I think it's really important. I know from my journey from being unsuccessful to successful, it truly was understanding gross profit and gross margin and actually understanding that I have to make enough income to actually pay my overheads first. Because you can always make enough money to cover your direct cost of material and wages, because you will bill those to your customers, so that's easy. But then everything else you are doing is to cover your fixed costs. And over the course of a year, they don't change that much. Rent, power, phone, telecoms are pretty fixed. You know every month, pretty much, you've got whatever, five grand to pay, whatever it is, 10 grand. And so once you understand what your fixed cost is every month, you can then work out, well, I now need this much turnover at this much margin to pay these overheads to give me any profit. And, for me, once you truly, truly go, oh my goodness, I need-- I still love the term sales income myself, personally. And I still love the term cost of sale. I think it just tells you exactly what it is. So I'm old-school there. And I think once you've got that down pat-- OK, I now need 15 grand a month gross profit to pay my overheads of 10 grand. So I get five grand. And once that light bulb-- I mean, I talk about this all the time, all day long for years, and years, and years-- and still very hard to get through to the industry. Yes, I know, some people go, well, we're only budget-based. I'm like, yeah, only past a certain revenue once you're big enough to talk about volume-based and budget-based. But for most tradies, just going for gross profit is enough. So this is a critical report. And then this next executive summary is a critical report, which I also love. This is an executive summary in Xero. And in my mind, it's a top report, critical report. The ones that are highlighted in red, I want you to touch on those, because I think most people don't know the-- well, especially in a trades audience. I don't think they know this report exists. - Yeah. It's a report that's been around for a very long time. It's one of their old style reports. And it's actually-- oh, the lights have just gone off around me. You can still see me. It's all right. It's a peck of reports. So right within Xero, you can run this yourself for you business. And this is the front page summary that you get. And then there's profit and loss, this balance sheet, these other reports fall in behind. But this is really good, because it gives you a very high level view comparative. And as you can see, we've also got a variance column in there. So I mentioned when we talked about the profit and loss, that it's what you earn and what you incur in terms of expenses. But really important, and it's at the top of this report, don't forget about cash. Don't forget about cash. If you focus on anything, focus on cash. It's really important. Gross margin is super, super important. I've just done some training on cash flow. And if you're not getting the money earned, if you're not collecting what you're charging out to your customers, you are going to get yourself into a cash flow hole very, very quickly. - Yeah, I mean, if you don't know, Fergus is solely built around cash flow and profit, making it easier to invoice. Without cash, you've got nothing. - You've got nothing. - And for those of you who haven't seen his report, highlight and read these average [? data ?] days. And to me that is the single most monumental thing you have to just know. And so I remember when we first discovered this in first getting the business, my average [? data ?] days was 78 days, which is why I was always broke and like-- I mean, that was because the fundamental rule is the longer you take to invoice the longer they take to pay, right? - Yeah - If you invoice four weeks later, they take a month to pay. If you invoice a day later they pay a day later. It's a weird rule that happens, right? - Uh-huh. - It took about three or four months, but we got that 78 day down to 28 days. - Hey, Dan. What were the terms at that point? - It's just normally, you know, 30 days. - 30 days, OK. Yeah. - But it doesn't matter, right? Because you have to have processes in place to form good habits for everyone to know when you want to get paid. I mean, it's we digress. But these reports are useless. And so this is the next sort of hard questions. I mean, this data is amazing, right? So that the P$L, the cash flow forecasts, the executive summary, these reports are amazing. But I spent my life basically consulting and talking to businesses, and I reckon I got a real passion for helping tradies to do well. I am surprised, well, first of all, I think setting up Xero is actually really hard. I actually think it's really hard. And I think in my opinion I think Xero just needs to own it and say actually it's very tricky, get you accountant to do it. It's really going to cost you at least some $1,200. Look, it's actually, it's actually for an accountant it's super simple. - I think, I mean, you're absolutely right and it's, let's put some perspective, all right. This is an accounting system. If you don't have any understanding of accounting book keeping, finance, anything that will be like trying to set something up in a different language. Because it is, we've got our own language. Now, we have resources available. We have some on-boarding in the product. But ultimately, if you really don't have any background I would not waste my time trying to learn it when you're going to set up one organization. - Yeah, I think there's-- so everyone knows I love Xero but it doesn't mean they get a free pass. And the other thing that I would-- like I've been on Xero probably for at least-- I've been in Xero for like 15 years. And I think I said [? 203. ?] And so for those-- if you set up Xero you got it for 10 years. Don't spend a minute learning something you will never need to do for 10 years again, just pay the accountant $1,200 and be done with it, move on, right? So that's one big thing. So-- [INTERPOSING VOICES] - --I'm sorry. - Can I just add to that Dan. One other thing to say is that, because it's not just about setting up and be getting your accounts in there and everything. It's around setting up your reports in the format that you want them to be. - Now, OK-- [INTERPOSING VOICES] - --so this is the next thing that I was going get you to touch on. So first of all get the accountant to bring what the bank feeds in. Like I'll tell you the classic I made when I tried to set up myself the first time. So this is a-- I believe everyone has a good laugh. It says put in your bank balances, right? So I've got my bank statements, I put those in. But you realise you got to put those in as a negative not was a positive. So the whole thing was whack, and the accountant just laughed at me because I just couldn't do it, had to give it up. So it's like I've learnt just don't spend a minute. But I've learned a lot since in the last 10, 15 years or so. And I always check people's chart of account codes. I can't believe the amount of chat of account codes I see that are wrong. Like, fuel is classed as an overhead. They often group all the wages for the tradespeople in the office staff as just wages. Rubbish removal is overheads. Cell phones is all just classed as overheads when actually cell phones in many ways, it's kind of a cost to sell. It's a little bit of a gray area but the business owner whose wages aren't split between if he's working 50-50. But I wanted you to take a couple of minutes to explain chart of account codes just in case our audience don't know just how crucial chart of account codes is for the basis of well, all accounting nowadays. - OK. So when we talk about a chart of accounts I like to explain it's like a filing cabinet. Basically, it underpins how information is displayed and how your financial information shows up in your financial report. Now, the easiest way to explain it is like a filing cabinet. So I mention I've got a five drawer filing cabinet in front of me, and I open the top drawer and I call that my revenue drawer, my income drawer. So this is where I would categorize all of my different revenue titles. So I might, as I say, sales income. You might have interest income. You might have a particular service that you're offering. That's all different types of revenue. So if you open the filing cabinet and look inside, you've got little dividers. The dividers are the different types of revenue that you've got. And it works down, right. The lights have just come back on. That's odd. It works down. So we've got a drawer for your revenue, we've got one for your expenses. We then go into your balance sheet, which are the things that you owe, your assets, and the things that you own, your assets. And what you owe your liabilities. And so the chart of accounts basically as a list. It's a numerical list of all of the accounts in your business. You can have as many or as few accounts as you like, but you need to have enough accounts there so that when you get an expense-- so let me just say you pay for fuel, just saying. And you want to be able to code that to your business accounts, you have the right account code set up as you're saying, and it's about being categorized in the right place. And I'd go back to having someone who understands a trade business to do this properly. But fundamentally, if you don't have, if your chart of accounts is an absolute miss, if you've got 10 accounts when you actually make 20, the information you get out the other side when you try and run reports it's just not going to be of any use to you. - Yeah. - So-- - Yeah. And it's a really good explanation the filing cabinet. So the reason I left this report out is for those who are looking-- like I cannot stress strongly enough, whether you pull a chart of account code, or a tag, or whatever, it's just so critical that you know. Now, the reason it's so critical for the tradies you truly, truly need to know your direct costs. You really, really need to know the stuff that you-- so the easiest way to explain it that I found out for the audience is a direct cost is what you can charge the property owner for. So if you've bought something and it's chargeable that's a direct cost. But if you buy something and you can't charge it to the property owner that's an overhead. And for tradies out there you 100% need to know exactly where your overheads are. Because from year to year they will be fixed. Because like I really hate ITC because like in January you get the bill for a whole year. That's really bad right from ITC. But for tradies if you look at last year's all your overheads and divide it by 12 you can then get a pretty good feel for what your audience will be for the coming year, right? It's a pretty fixed base. It's going to be $10,000, $15,000. And then you can then keep in track per month per month exactly if your overheads are sort of stabilizing or blowing out. Especially like health and safety, you might go, well, why I'm I spending $5,000 a month more on health and safety, what is going on? But if it's was not coded correctly or your health and safety practices might get lumped in as supplier purchases that you think you've charged to the customer when you haven't. And so this is why chart of account codes are really critical, really, really critical, and you have an accountant who knows what they're doing, which leads us into the next topic, which is choosing the right accountant. So who do you think needs to take ownership though of like this? - In terms of making sure you've got the right advisor on board? - Yeah. - Well, look I-- now, that we're dealing with a world where we're remote, we can work remotely and things. No longer-- like, gone are the days where you have to look for an accountant that's close by. - Yeah, that's true. - But down the road it's convenient I can go in and see them, get rid of that thinking. - That's true, agreed. - And look for someone who is a right fit. It's not just about someone who's experienced with other trade businesses, it's someone that you click with. It's someone that you trust. It's someone that is going to respond when you need to contact them and talk to them about something. It's someone that actually cares enough about your business to actually ring you back when you expect them to. So I would sort of say don't worry so much about geographical considerations when you're looking for someone. Really, the onus is on you, it's your business, you want to be successful, and you need to have people around you that are going to support you, and are going to do all that they can to make sure you have the information you need. So I would put the onus back on the tradie to be honest. - Yeah, no, I have to-- I'm being difficult on purpose. But I agree in that the onus relies on the trades business owner going-- I have to be professional and it's actually up to me to choose a person that can actually provide the help to fill the gaps that I don't have. It was actually a good point actually talking about virtual. I mean, I'm so used to being virtual that I just took that as a given, but you're right you don't actually need to be in the same city anymore. - No you don't. And there are some fantastic providers who are like fully online now. They don't do that. Everything is on zone or other-- but everything is online. - That's true. - Right, yeah. - So my next question is accountants have been talking about moving into consultancy for revenue, I feel like I've been hearing it for like a decade now, right. Do you think that's actually it en masse, do you think it's actually ever going to happen? - It's a really good question. En masse, I mean, we try and encourage it but there are a lot of advisors out there and it tidies up the business that really just want to do compliance. They want to do the regular financial statements, tax returns. And I think a lot of it, you know, when we talk about-- we've always talked about advisory, and when Xero has talked about advice in the past it's usually been around apps. Now what we're hearing back from the advisors now is they're actually quite concerned. They're quite worried about how they actually transition into that space. Because some apps are really nice and easy you can understand, they've got great feedback, they're quite easy to connect, they are intuitive. Others are actually fairly complicated. They really need someone with a systems background to be involved in. - Yeah. That was my next question. Sorry to cut you off. So I want to keep us on time. Because you touch-- I'll get you to explain compliance in a second. Because I've written that stationery question. Like, accountants, by nature, focus on compliance is the mandate, right? Like, I think it's hard to change, because do you think, I'm not sure. Do you think tradies know they have no client privilege with accountants, and actually accountants are actually required to disclose to IRD. And in many ways an accountants allegiance is actually to IRD, not to the customer. So their allegiance is to make sure you comply with tax law and meet your obligations, because the accountants don't want to lose their-- what's your accreditation? - Yeah. You've got filing statuses and things with-- - Yeah. - I mean they are. - What do you-- first, do you want to explain the difference between compliance and consultancy in case our customers don't truly know the difference. And then as you talk about an accountants obligation to comply with IRD first and just as-- I don't know if the tradies know, if you tell your accountant you've been taking [? cashies, ?] they are required to disclose that. - Yes, I'll start with the compliance first. So compliance, when we talk about that, we're talking about sort of the what needs to be done in order to meet sort of legislative requirements. So filing GST returns for example. Calculating GST, filing them. PAYE, your payroll returns now. We talk about creating your year end financial statements and filing tax returns for you, your business, partners and the rest. So that's what we talk about when we told about compliance. In the not too distant past a lot of businesses, still might be the case now. A lot of businesses would only hear from their accountant once a year. - Yeah, absolutely. - And then they would, yep. Then they would say send in all your information will get your tax return done. You might have to wait 3 to 12 months, depending on how well you fit into the business, but that's what we talk about we talk about compliance. Now, when we talk about consulting or advisory, I said Xero is coming at it from an app perspective, but we're wiping that now. Advisory really is, in consulting, is really sitting down and understanding your business and planning what the future looks like for your business. Where you want to be. It's about providing regular reporting to trading businesses. Trading business should be getting regular reporting from the system, from their advisor. Because how on earth can you make decisions about the future when you don't know what's happened, and based on decisions you've made how business has been operating. So that should be a given and that's not always a given. But it's around actually understanding, right, as a business owner, where do you want to be in five years time? What do you need to put in place now in order to support your business tomorrow? - Yeah, OK. I still got more questions and I'm going to ask you the hard question. - Yeah. - Because I do think that biased towards compliance and disclosure will make it a little bit impossible for most accounts to move into consultancy. - Yeah. - So and I remember because I've been in business for 22 years now, right? 23 years is a long, long time. But when I started it seemed that nearly every accountant used to offer a low cost bookkeeping services as a cool part of the offering, right? So that they could just do their general day to day stuff. That doesn't seem to be every practice seems to offer. But what happens in the industry that that sort of changed? - Well, I've been-- I was in charge of accounting, I started out in the early 2000s. And I've worked for big practices. And a lot of the time we never had bookkeeping arms. We had staff-- I mean the charge-out rates were usually the issue. Because if you had even a graduate working on doing bookkeeping our charge-out rates were $150 an hour. No one's going to want to pay for that. We're seeing now actually some practices, not a lot, but some practices actually adding a bookkeeping arm, because what happens is if they're trying to get information through from someone who they haven't trained and really doesn't know how to use the system. It takes so much time to actually get that information correct, fix up all the errors, and all there is. It's much more cost effective for them to actually pay just a monthly charge to someone who's going to get the information in at the right time. Back when I was in practice, very few of our trading businesses were actually being given monthly reporting. It just wasn't something that we did. It was something, it was OK for them to just be told six months later how they did. - I remember I used to use-- gosh, what was the name? Haines-Norton. And they were great at having little bookkeeping arms. But from that book keeping arm, my accountant John [INAUDIBLE], long-- he would every few months and I would go se him, he'd give me the insights to what I needed to do. - Right. - And so that was great for me. So this is a hard question, right? - Yeah. - This is the-- - Uh-oh. - Yeah. It's OK. But it's kind of pointed actually. - Yeah. - I'm curious to know actually what you think with the general knowledge of the accountant is-- at how to achieve operational change to affect the changeover-- the change in turnover, cost of sale, and overheads. So many accountants have the book knowledge, but why do you think they lack the technical, technical knowledge to actually bring the change management plans into practice, especially in a trades business? They actually don't know the levers for what a trades business needs to do to actually affect the performance of the business. They say, yeah, well, this is wrong, but I don't think they actually need to know how to tell trades to improve your time, improve the materials, sort your overheads out, and give them the financial plan to work towards. But what's your thoughts on do they have the technical knowledge? - I think one thing I've very much learned is until you walk in someone's shoes, you really don't have the understanding. So I think it's a very fair point. As an accountant who-- when I was in CA environment, I hadn't ever run a small business. So I haven't been in the nuts and bolts of the detail. That wasn't where we sat, right? So no, we just-- we worked out the overall position and that what's right, what's wrong, correct it. So that's probably a fair point, and that wouldn't just be for trades. That would-- that might be across the board, and that's why it's so crucial to make sure that the person you choose understands. It's not just about, oh, yes, I have a couple of people that I do work for. It's like, well, what background, what's your experience to actually understand what will drive my business success? - Yeah, and so this is-- so yes, I had a go at the accounts but then this is me coming to defeat. Is that like-- I wouldn't actually know how to run the manufacturing of a joinery workshop. They would have different challenges around in supply chain management than I would know. And running a corner dairy versus running an import business, like, there's no way an accounting practice can be an expert at what must be probably 50 domain specialists' businesses. - Yeah, there's a lot, yeah. - It's too many disciplines for any one personal practice to ever get across. So the most important thing a tradesperson or trade business must do is actually choose an accounting practice that truly actually has trade business understanding, that actually understands our levers of how to effect gross profit. This is single-book-- so I don't know if you know, Danielle, that all trade businesses lose-- pretty much lose most of their money on this inefficient labor. Most of them charge at right about 70% and they'd need to get around 90%. And most of them overbuy materials, so they end up buying too many materials and it just ends up getting lost or left on jobs. Because their-- average net profit in the construction industry is just under 4%. - Wow, OK. - That's average. - Wow, that's-- - Average. So yeah. So a very few companies are at 10% net profit. Most are at 1%, 2%, and they need an accounting or a business advisor to actually help. Because I've been on the road for years training, and I now believe the answer is for trade businesses-- I've done education a lot, and I'm now changing a lot and going, actually, no. It actually costs not a lot to get-- like if trades could get bookkeepers in to do-- reconcile the accounts daily, weekly, depending on the size of the business, and then talk to your accountant once a month, that's actually not a bad cost. - Mm. It's not. - And yet, the gains they could make with good advice would just outstrip the cost probably 10 to 1. - Mm. Right, when we get further on we can talk about some of the tolls that actually are available within Xero that can actually help to save time when it comes to getting information into the system. Because you talk about getting a bookkeeper in, again, they don't need to be in the same place as you. They can be online, if you can get information to them in an online way. - Oh! - Yeah. - 100%! - It's well worth the time. It's well worth the money to get somebody else to get your information in and keep it up to date. - Oh! - Because-- yeah. No-brainer. - It's a no-brainer. So the next big one is-- this next slide is to-- sorry, ugh. Let's do that. I always do this, go too fast. Sorry. My bad. Now, I know you have to be diplomatic. I don't. - [LAUGHING] - [LAUGHING] Xero versus MYOB. - OK, so let's-- I'm going to talk more generally, Xero versus other accounting packages-- - Oh, man, nice work. [LAUGHING] - [LAUGHING] Do you like that? I think the main difference to me, and look, I've used a couple of different packages, including MYOB. Now, the main difference between Xero and other packages is that Xero was built for small business customers in mind. So 2006, when Rod and Hamish sat in a Wellington apartment and decided, god, this-- it should be much easier than this, they-- Rod was a small business owner-- or a large business owner-- and he designs it so that he could understand it as a small business owner. - Yeah. - Other software out there was designed for accountants, and has been modified, moved to the cloud, but it's really-- you can learn it. As I say, you're smart people. You can learn these things. But in terms of ease of use, understanding language, Xero is hands-down the most-- the easiest software to use once it's set up correctly. So usability, visibility over your business, your numbers, your cash flow, it's-- there's a lot of visual aids within Xero to really-- it's not just about spreadsheets and numbers and lists. And I guess, all of it, all of these systems allow you to sort of have real-time-- I can have my advisor on the phone, I can be looking at the same information, but just in terms of being able to get information out of Xero, to make decisions, I think it's hands-down the easiest system to use. - Yeah. Yeah, I'm a Xero advocate by a long shot. Also, technically the API is just-- it's easy because for those of you who don't know-- software that's web-based from Day 1 is just designed to integrate. And as you say, MYOB, they're still battling desktop, moving to cloud, being easy to connect to. So technically we like it because it's just much easier for us to maintain as as well. And as you say, it's designed for small businesses to use intuitively, and visually it's just-- it's a [INAUDIBLE] product. And what was I thinking then? Ah, yes. So the other thing I've seen is customers that are on Fergus and Xero do better than Fergus and MYOB. - Interesting. - Just because the sync-- the way we exchange data is much better between the two and it just allows us better reporting. And so literally we have thousands and thousands and thousands of customers now, and so there's a formula-- like, there's always this formula now I can guarantee success, but the formula is actually this. It's Xero plus Fergus plus an engaged business advisor. - Getting success. Yep. - Yup. It's the third professional person who truly can provide the business transformation requirements based off the data between Fergus and Xero. And it's literally that if-- this would be the one thing I'm pushing hard now with-- to tradies is you need to get this business advisor into your business. They put the right tools in, Fergus, Xero, awesome. That kind of-- unless you're really business-savvy you need to get that third person to help you. So and so the other thing I was also going to talk about was like, changing tools halfway through, like changing system tools. - Mm-hm. - Like, I don't know. How much change management have you gone through trying to change an accounting platform or a job management platform after two or three years' data, oh my goodness. - Yup. I guess when we talk about moving systems, there are ideal times to do it, but you can-- if it's done-- if it's planned and you understand what-- that there will be, potentially, a little bit of downtime, and you can plan for that, done with someone who knows what they're doing, it's actually not too painful a process. It does also depend, though, on how much information you want, historical information you want to bring across. It's much simpler if you just say, hey, here is my-- this is where I'm going to start, this is my opening position and I'm just going to move forward from there and keep historical things in my old system. But yeah. Like anything, you need to remember that changing the way that you do business and moving onto a different system or systems, if it's Xero and Fergus, there's going to be a little bit different. There's going to be-- you've got to learn new things, and that takes a little bit of time. But if you get the right person who can set you up, who can train you up, it should be relatively seamless. [INTERPOSING VOICES] - I think that-- where I was going from, do you know that philosophy-- it was really big. I still kind of believe in it. It's that philosophy, if you build it, they will come. - Yes. - For those who you don't know what that means, it's like if you believe in your business and you've got the-- you can actually take a risk to build a factory or warehouse or build a business, and it will actually work. Like, if you deliver customer outcomes, your business will actually grow. Like, I still believe if you build it, they will come approach, if you get it all right, and that means-- we'll talk about customer outcomes, I talk about it all the time, but-- and so I think it's the same for your system tools. If you're truly being serious about your business, you need to put the tools in that you want to change in two or three years' time because I know changing job management platforms, running one out and a new one in [INAUDIBLE] staff, nightmare. Nightmare. - Well, why don't we just bring it back to a practical trade example. If you had-- your physical tools. If you had power tools that were four or five years old, were really not running that efficiently, needed a good sharpen, I'm sure things need sharpening, need new pieces to it, and you just left it and continue to work with it, what sort of outcome are you going to get? You're going to get the same-- - Just kind of wear out. - --inefficient, yeah. - Just break down. Yup. So I suppose the next one, just moving on is actually just talking about the integration. It's actually really easy in Xero-- sorry in, Fergus it's literally two clicks and you're done. But I suppose we're going to talk about is just how much-- what's the time like? 12:42-- oh, no, we're OK-- is-- so to connect into Xero is literally you press Connect To Xero and input your password in, username and password, and then it comes through. Because Danielle, how much do you know about what helped with the integration between Fergus and Xero and why it's such a big deal for our customers? - I'm not the best person to talk about that because I'm not-- I haven't played properly with Fergus. Yeah. - Yeah. So I just for-- this is for all those who don't use Fergus coming on. Like, our claim to fame is we're still one of the heaviest users of the API, of Xero's API because what we do-- you'll get this-- is you bring all your supplier invoices into Fergus, so every supplier invoice will come in, and then it must be assigned to a job before it goes to Xero. And so the reason we do it that way is if you know it's in Xero, you know it's been charged to a job. - Right. - So that way you know if it's in there, I can pay it because I know it's been charged to a job. Because this is-- that was one of the biggest things in my businesses, which why we do this way, we just never actually knew the bills that came because-- so here's the-- so at 25 staff, we were doing 6,000 new jobs a year. We were handling 30,000 supply documents. - Wow. - Right. Because we were just the maintenance business. It was insane. Like, the amount of paperwork a small business-- trade business can generate is literally-- it's phenomenal. And so 30,000 bits of paper, stuff would just go missing and that's just money that's gone. So by doing it that way with-- because what you can do is when the statement comes from the merchant, you can tally up and go, well, that says 5,000. What's not saying 5,000? Then you can actually hunt for the invoices that aren't there. So that's a massive-- but it's seamless. That's just the easiest thing you've ever seen. And the same is when you see in an invoice from Fergus to the customer that seamlessly posts an identical copy in Xero. But now when the-- but then this is when the magic of Xero takes over is when the customer pays the tradie, it automatically lines up with the payment and the invoice in Xero, and then you press Reconcile, and then it comes to Fergus, marks as paid, and it's done and it's all seamless. Then we do part payments, credits, all that sort of stuff, and it's all-- it's just such a seamless transition that the tradie never knows and this is where tradies-- this is more for you. I know you know all this, Danielle. If you're getting a bookkeeper doing your reconciliation every day, it takes them less than an hour to reconcile all the payments from your customers and all the stuff you've paid for, they reconcile it. It only takes less than an hour a day, but that then means all of your GST, your cash position, your due todays, it's all just automatically updated every day. It's just a game changer. - Mm. And when are you-- do you see a lot of trades using things like online payment services? - Yeah. - Things like Stripe and GoCardless. Attaching those. Yup. And that attaches just right from Fergus? - Yup. - Yeah. That's just-- those kinds of things are no-brainers in terms of getting paid faster. - Yeah, no-brainer. - If I get an invoice with a Pay Now button on it, I tend to pay it straightaway. If I don't, I tend to be one that forgets to then pay, and I'm a late payer. - Yeah, those Pay Now buttons are just-- yeah, they're a game-changer. Interestingly enough, I think about 60% of invoices are to businesses, business-to-business. You pay on 30 days or 20th of month. And-- but the single biggest issue affecting every trade person-- trade business is just timeliness to invoicing. - Right. Yeah. - They just take too long to invoice. And that's frustrating because you started with cash flow. Cash flow is everything. Now then, that's the one thing I don't know how Fergus can do, either. I don't know how we can effect improvement in timeliness to invoice. Bookkeeping, reconciling, trying to encourage you is about you can do, really. But the integrations, it's critical. They're so phenomenal, for those of you who've never experienced what it's like to have a deep integration, it's fine-- it's actually life-changing at how simple it is. So-- and it's simple. It really is simple nowadays. That's another big reason we're a fan of Xero as well. A few years ago-- this is going back like five or six years ago, we took Xero off for about four hours or so. One of our customers did a million-dollar payment claim for-- it was thousands and thousands of line items that-- and it was our claim to fame. And they asked us to limit the number of line items on the Xero-- on our invoices. - [LAUGHING] - It's like, yeah, we took Xero down! Yeah! And now-- but what we really wanted to talk about was-- this question is back to you because this is actually a really big deal, because I've sold a couple of businesses now and closed quite a few businesses. Why don't you talk about the Xero receipt document, like taking a photo, how that is a big deal? - Yeah, sure. So we've got-- - More on the peace of mind of like-- this is like the paperless. Like if you have the photo in the store of that receipt. You can now throw it away. - Yeah, totally. - And the PDF before-- because I don't know if everyone knows about the PDF. You can forward bills to Xero now, just the PDFs. - Well, I can talk about that if you like because we've got Hubdoc and then we've got Files as well. It's a separate thing. But one thing that we really talk about a lot when we go out and talk to small business customers is the fact we have a mobile app, as does Fergus. With our mobile app, though, if you're out and spending money on eftpos or cash or anything like that, from the mobile app you can, as Dan said, you can take a photo of the receipt from wherever you are. So get the receipt, take a photo of it, add in a few details. Where did you buy it? What's the date, what's the amount, and what was it for? Send it in real-time link through to Xero and annual bank reconciliation. It will generate a spend money, we call it. I've spent some money! The receipt is attached right to the transaction. But you know, as Dan said, the great news is you just grab the receipt and you throw it away. Now, the reason is we are certified from Inland Revenue to be able to-- you can store your documents online in the cloud, you can store it-- you've got to store them for seven years, minimum. And it's absolutely fine. It's right within Xero, so there's no hunting for-- when your bookkeeper or whatever goes through to do reconciliation, hm, what was that for? I can't find a receipt. The receipt is right there. So it's fantastic. You get rid of it. We've got a couple of other features. We've got-- so Dan, you talked about your supplier invoices coming in from Fergus. What about things like all the other overhead costs and things that you're getting invoices for? They wouldn't come through, would they? - No, so to be really clear, just for the audience. Fergus is really specific job management, so we deal with everything job management. We try to stay away from financial management and overheads that's like-- we try to keep it really clean and not pollute the two systems. - Excellent. So when you've got all those other operating costs and you're getting invoices in and things, we've got a product which is right within Xero if you're on one of our standard starter or premium plans. It's called Hubdoc, and what it means is your supplier would send you an invoice via email and you can send that email directly into Hubdoc. Hubdoc will extract the information from the invoice, and when I say extract, it basically reads it and it says, right, what's the date? Who's is the supplier? What's the amount? And you can actually automatically push that information through into Xero because one thing that I have heard, I just can't count the number of times, and specifically from trade businesses is I can afford to hire someone to enter all my invoices. - Yeah, it's crazy. - You actually don't need to because we have systems that will do that. And so it's really fantastic. It just sends the information through. It is seamless and it's in Xero for you to go, yup, I'm happy with that, and then the bill is in the system and it gets paid. - Yes, and I would agree with it. And this-- those of you who don't know about Hubdoc and Xero's cash receipt, it's-- my goodness, though. Once your head gets into it, it's game-changing. I don't think there's a supplier in New Zealand that doesn't send an invoice by PDF. And I actually have a-- quite strict with people. If your supplier doesn't send stuff via PDF or CSV, then change supplier. - Then change them, yup. - Then change them. It's so simple. And I also think just record-keeping for seven years, oh my goodness. It's actually a big deal. - It is. It really is. And if you've ever been subject to an Inland Revenue Audit, you know they can-- they do go back and they want to see particular invoices. Now, if it's all in a file and if you're not great at filing, you really-- logistical nightmare. - Ugh, nightmare. - It's just a nightmare. - Yeah, that's another really big-- it's a huge reason to get on Xero and Fergus, and particularly, actually, because we post all the supply docs into Xero. So as time goes by, it's only one place for your accountant or ID to audit so they don't have to go through the two systems. Yeah. It's just great. A question come from-- RE HubDoc. Is it possible to set up autoforwarding-type rules from your emails for particular suppliers? - Yes, it sure is. Some email systems won't allow you to do it, but if you can, absolutely. There's-- every organization has a unique email address in Hubdoc set up as an auto-forward. The other thing you can do with Hubdoc which is really cool is we have connections with a variety of suppliers. It's a global product but got a number of suppliers in New Zealand, and when-- if we have that connection with the supplier, basically when you set up the connection, any time that supplier generates an invoice for your business, you don't even get an email. It doesn't even forward an email through. Basically Hubdoc will go and fetch that invoice. It will grab it, bring it into Hubdoc, read it, process it. - Yeah. And how would you recommend-- like, this once again, with the training, I'd recommend talking to Xero or your accountant to help set it up. If you struggle, just talk with someone would be my-- because what's your take on the difference between training versus-- the problem-- so the issue is in a business, just talking about tradies, is-- like, I call it levers, right? Like I'm-- because when you're still studying and don't know, you don't know the levers. So the concept of levers is like, I can pull a labor lever, a material lever, an overhead lever, a marketing lever. I know the levers I have to pull to affect performance. And whereas training, I kind of like, I just need to learn how do you tailor an invoice better. So for me, I sort of-- there's training consultancy, and I-- for me, training is to use a product better. It's not about how to become better at business. - Yes. - And so is that how Xero approaches training, or you approach training? What's the approach for you guys for training, your-- - So when it comes to-- for us it's really, it's product training. It's around this is what the product capability is, and this is where that would benefit your business, but we are more focused on that side of things. Levers-- someone who actually understands your business, knows your situation would be the best person to talk to about that. And so you can-- so on our Xero central site, you can go and look at articles around, you know, I want to learn how to use Hubdoc, and there's this easy plain, plain English written text here. You could do a little course on Hubdoc you could set up and run yourself. It's quite straightforward and we've got the courses on that. But again, if it's really not your thing, get someone to set you up. - Yeah, totally. - Don't waste your time! - Totally! - Time-- no one has enough time, especially people who are running their own business, so don't waste any more of it. - Yeah. I agree. So everyone's-- so for me the difference with training versus consultancy is training is how to use a product, not how to improve your business. - That's right. - And don't mix the two, and a lot of stuff we do is-- I'm trying-- we're quite clear on which ones are training versus which was-- all the stuff I do is about trying to explain levers, but all this stuff is training and the two aren't mixed. But we've got five minutes and then-- which is good, running on time, which is great. But it was your turn now to ask me questions or tell me your thoughts on what tradies should know about Xero or bits and pieces. - Excellent. Well, I think the main thing is look, I go out as part of my role, we go out and do a lot of training with small business and presentations and things, and I've seen it before, but I really think that we see a lot of people still trying to manage their business on spreadsheets, on-- with pen and paper, blows my mind that we've still got tons of people using that. - Yup, tons. - And I understand. Systems cost money. They're on a monthly subscription and you've already-- you're already trying to run a business and keep costs down. But what I really want to emphasize is when you move on to systems that are built for the industry that you're in, so Fergus is for tradies. Xero is accounting software for small business. When you move into that, you set it up, you train on it, you understand how to use it, the amount of time it will save you and your business to allow you to do actually more of what you want to do will just blow your mind. We had an example a few years ago, and we had-- it was a like a hire-a-hubby franchise. Hooked up Xero, thought that was pretty cool when they saved 10 hours a month on admin. Hooked it up, and it wasn't Fergus. It was another app. But it was-- hooked up another app, and they said that they saved 40 hours a month. Now, that was no exaggeration. 40 hours a month in admin, and it was because they had-- in their office they had four screens trying to manage scheduling, trying to manage purchases, trying to reconcile, god, who's paid or has done a part payment? Where's the rest of-- just a nightmare. And they said not only did it give them time to spend more time in the business, but they also got down time, which-- in today's environment when money is hard to come by and times are tight for people, well-being is so critical. - Yeah. - And we need to get away from the business and spend time doing things-- do you see that as an issue with tradies nowadays, that there's so much-- there's just so much to do, I don't have time to spend time on me. - Yeah, well, I'm quite tough on this. So my answer to that is like, those tradies have to take a really good look in the mirror. Every business owner, because we always talk about tradies. And they have to decide at some point-- well, this is a great question. I'm talking about it this afternoon as well. Like in my late 20s, when I looked at myself and go, would I employ myself to run this business? And the answer was no, I actually wouldn't employ myself. I mean, I wasn't professional, I actually didn't know about business. I didn't know about finance, sales, marketing, customers. I was just a very good plumber who was trying to make money. And so actually, then, no. Actually, I need to educate myself and take this seriously and do a businesship. We did apprenticeships so I said, you've got to get a businesship. Basically, you've got to learn about business and be serious about it. And so that would be my advice to everyone. If you actually are sick and tired-- because the thing is, you know that old saying, for there to be change the pain of inaction has to be greater than the pain of action? - Yes. - So I called it the pain journey. How much pain are you prepared to keep putting up with before you're actually prepared to make change, to look in the mirror and go, you know what? I'm not actually competent to run this business, so therefore I'm going to get some help. All I'm saying is don't-- why would you struggle? Things are quite cheap, really. Xero and Fergus, it's actually cheap. - They are, especially with what you get for them. - Hundred bucks a month. - Yeah. - Hundred bucks a month for the two systems, really. You know, for-- it's nothing, really, for what you get. And so you've got to get help. And so I'm really big on getting this-- the right accountant. It's on the summary. And we've touched on it over and over. So I-- I hope you feel like I haven't given the Xero and accounts a hard time-- well, I kind of have, but the onus is on the tradesperson to choose the right accountant, because then the thing works. But it's up to trade business owners to go, you know what? I'm tired of being poor cash flow, not profitable, stressed, core systems, and the answer is just I need to pay some money, and it's not a lot of money. So Fergus, Xero, and an accountant. It's not a lot. And then-- - It's like an investment. It's an investment because if you go to the right person, you get the right advice, you can see how-- what the right process is. You're setting yourself up for success. And if you're sitting there thinking, god, this business thing is just a nightmare, then why would you? Why would you? You need to reach out and get support. - Yeah, you need to reach out. - Yep. - You need to reach out. - And the other thing to mention, Dan, is that there are-- we talk about advisors a lot, but it's-- there are great business mentor programs around. There's [INAUDIBLE]. There are business mentor programs. - Yeah, tons of them. - If you're in business, get yourself a mentor. Get someone-- third party and they can help give you that sort of other perspective, too, of other things to consider. - I couldn't agree more, and I think that's a perfect place for us to finish, really. It's 1 o'clock on the dot. That's one hour. I've thoroughly enjoyed that, Danielle. I hope I didn't give you too much of a hard time. - [LAUGHING] No, it's fine. Happy with the hard questions. - Well, good. You did really well. This will get sent out to everyone to watch later on at the end. We run free webinars every-- I run them every fortnight on levers [INAUDIBLE] training. And that's about us. Email us feedback to firstname.lastname@example.org. I know, Danielle, we've a lot of interest in this, and I no doubt will have you back on. - Great. - If you've got questions for us, just email us and we'll all get back to you. And hopefully we will see you again, Danielle. - Lovely. Thank you, Dan. - All right. All right. See you, guys. Thanks for attending. - Thank you, bye-bye. MALE SPEAKER: Bye.
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