Accounting war heats up as Xero questions MYOB figures

The battle for cloud accounting supremacy continues to heat up with New Zealand firm Xero slamming industry rival MYOB’s latest financial results.

The battle for Cloud accounting supremacy continues to heat up with New Zealand firm, Xero, slamming industry rival MYOB’s latest financial results.

As reported by Computerworld New Zealand, MYOB reported lifting revenue for the year to December 2014 by 16 per cent to NZ$298 million and delivering EBITDA of $144 million, up 15 per cent.

Yet in a quick fire rebuttal by Xero, Chris Ridd, Managing Director A/NZ, said Xero believes that although MYOB’s revenue growth is “positive and shows clear demand” for Cloud-based accountancy products across the region, the sustainability of this growth is “questionable”.

Claiming that Cloud-based accounting is the future, opening opportunities in new markets, Ridd says that in the last 24 hours Xero has received investment of more than NZ$146 million giving the company a positive cash balance of $284 million.

“This investment will continue to help us to grow on a global scale and attract the best talent from around the world,” he claims.

“Focusing on one market is no longer an option for companies who want to be sustainable in the future and continue their trajectory of growth.

“This can be seen if you compare Xero’s and MYOB’s growth rate, with Xero growing at 82 per cent and MYOB only at 16 per cent for the full year.”

As a result, Ridd claims MYOB’s growth rate is “only going to slow down”, as single markets like Australia and New Zealand will reach a point of saturation.

“What’s more,” he explains, “we are seeing over a third of our new customers switching across from MYOB.

“In Australia alone, Xero is adding over 300 customers every business day, of which more than 100 are coming from MYOB's installed base.”

To continue Xero’s rapid growth, Ridd says the company is not restricting itself to one market.

“The U.S. and UK​ ​are fast emerging as key market​s​ for us moving forwards, where we have the potential to take market share of an estimated 29 million small businesses,” he adds.

“Our ambition is to be the number one global cloud accounting provider among more than 100 million small businesses worldwide.

“This is why Accel and Matrix Capital have​ invested $146 million to back our expansion​ - it recognises not only the value we will create, but also that we've created to date​.”

But Ridd says it’s equally important to note that the company “did not need this cash” - “we had $NZ170.8 million in the bank as of 30 September, 2014, and are continuing to invest heavily in expanding our business and improving our cloud accounting software,” he adds.

“Accel approached us with the interest to become a shareholder. It would be ridiculous to say no to a firm known as one of the smartest investors in the businesses, thanks to their big bets on Facebook and other technology firms.

“We think we’ll be their next massive success.”

In response to Xero's claims, a MYOB spokesperson told Computerworld New Zealand that "the comparison is made between two very different styles of business. We would note however that MYOB’s cloud users have grown by 88% annually over two years."

This story was edited at 16:20 on March 1.

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