Why Xero is Not Not For Groups: The CFO Playbook

If you are looking for what we lovingly dubbed 'ERPeace of mind', then look no further. Our mission is to empower finance leaders to scale confidently with Xero without the stress of transitioning to complex ERP systems. Let's dive into it.

How many businesses use a cluster of accounting files to run multiple entities?

Millions.

Yet neither Xero, QuickBooks nor Sage Accounting have designed a platform for managing more than one file.

When tackling a web of financial entities, intercompany transactions, and consolidated reporting, multi-entity organisations require a solution that reduces redundant data entry and simplifies the reconciliation of spreadsheets across siloed databases.

Unfortunately, many cloud accounting software solutions don’t make this easy.

Meaning these businesses often end up either throwing people at the problem to handle the load of manual work – or pick up the ERP sledgehammer with its associated cost, risk and complexity.

The big 4 sticking points CFOs face...

1. Month end means manual data entry: Month-end processes using Xero often means exporting data and manually calculating recharges or trying to work out why intercompany transactions don't align, all whilst switching between multiple Xero files with one-sided postings. A very tedious, time-demanding monthly cycle that leaves plenty of room for error.
2. Lack of reporting efficiency and real time insights: Managing multiple organisations in a system that doesn’t support multi-entity month end can lead to the inability to see accurate and timely data insights across the whole organisation.
3. The inability to handle complex approval requirements and constraints: Xero does not meet the advanced needs of businesses with complex approval workflows, such as multi-tier approval processes or spend management for specific roles, departments or types of expenses.
4. Complex FX challenges when operating across international borders: As businesses expand and become multinational, they face difficulties in managing fluctuating exchange rates and different localised financial regulations.

To ERP or not to ERP?

There’s no denying it. Xero is not designed for multi-entity businesses.

Which is why it’s unsurprising that as companies grow larger, there’s building pressure to jump ship and implement a Enterprise Resource Planning (ERP) system.

Yet these solutions are notorious for their high upfront and ongoing costs, rigid nature and disruptive implementation processes.

The problem

The jump up from Xero to any big-name ERP system is huge.

Firstly, the cost. You could go from paying under £500 GBP / $1000 AUD a year to 50 times more than that, sending your software costs skyrocketing.

And then there are the implementation costs. Typically you'll spend the same amount on consulting fees for implementation as you do on the software in year one.

Secondly, the hassle. Migrating any system takes time and energy, diverting the finance team’s attention away from all of the more important action-orientated work they could be doing, like forecasting sales numbers or costing your next expansion project.

Let’s face it, no one ever said they were excited to migrate systems. It’s pretty stressful. Take it from someone who’s been there – Harriet Hope from Arbolus, a Mayday customer – who told us that her last ERP migration project was “horrible and hectic”.

What’s more, according to research from Gartner, 55-75% of ERP implementation projects fail.

That’s right, your migration project has up to a 3-to-1 chance that it will leave you worse off than you were before.

So, with all these new and costly challenges faced by multi-entity businesses using ERPs, what's the best option?

Xero is NOT not for Groups

The good news is groups can successfully scale with Xero and its ecosystem well into their growth phase, avoiding the need for a costly and complex ERP system.

While its primary route to market is through accounting and bookkeeping firms, Xero is absolutely capable of supporting in-house finance teams as they expand and scale.

And it's not just about avoiding the move to an ERP and the associated costs, many finance leaders upgrade to a more efficient system, with better automation, by utilising Xero and its ecosystem instead.

According to Tyler Caskey, Partner at TheBeanCounters:

“From using Sage Intacct for a global organisation recently, the consolidations in using Xero alongside Mayday, Syft Analytics, Joiin and Fathom are 50% faster. Plus staff like the interface a lot more. Way more intuitive.”

Whilst there’s limited built in functionality for multi-entities using Xero, there’s an app store built with best-of-breed technology to plug the pain points they experience.

And the result is three-fold.

#1 Groups no longer need to move away from Xero

Take Paul Gibbons, CFO at Townhouse, for example.

"I was ready to scrap Xero for our 34-entity business. It was clear from week 2 of joining my 34-entity business that the options open were improve and amend OR to scrap Xero. I was ready to find a new system, but luckily after 2-months I discovered Mayday and found it to be a perfect fit to solve our issues. Since using Mayday, we've managed to cut month end processes down from 20 to 10 days for 5 members of our team. This is a HUGE time-saver and gives me so much peace of mind knowing month end reporting is accurate and streamlined."

Or Natalie Brown, Group CFO at Z Software, who says you should... "Ditch the switch"

"We have 10 companies on Xero. Managing intercompany loans was super annoying and time consuming, until we found Mayday which has been a lifesaver".

And so the list goes on.

There are countless stories of finance leaders partnering with best-of-breed apps in the Xero ecosystem who are finding scaling with Xero is not only more cost effective, but also better for efficiency and ease.

Which brings us on to point number 2.

#2 Groups are moving back from ERPs to Xero

The switch to an ERP can be so complex, costly and burdensome, that even after taking the leap, some finance teams are moving back to Xero as their preferred solution.

Cathy Collins, Finance Director at Pure Escapes, is a great example.

Cathy said: "We were previously on Netsuite, but Mayday was instrumental in our decision to move to Xero to support our complex multi-entity structure. Their solution enabled the transition, allowing us to unleash Xero's potential for our business. Now with Mayday, we've automated countless manual tasks and eliminated inefficient processes. Mayday has saved us thousands of pounds and countless hours previously consumed by manual work."

#3 Groups are moving from Sage to Xero

And what about other accounting solutions?

Xero is commonly the preferred solution for multi-entity businesses according to experienced scale up CFO, Steve Jarvis.

Steve reflects: "A previous business had been using Sage 50 for a long time. I'd been so keen to implement a pure cloud based system. Xero is clearly a far superior product. But it's not as simple as that.

Our finance function had developed and built processes around Sage 50. Whlie these will take time and work to rip out, they can all be replaced with either native Xero functionality, or apps on the AppStore. These new processes will be far more scalable and save my team huge amounts of time, while providing better insights on the performance of my business.

Discovering Mayday made the decision to move from Sage 50 even easier. The benefits of its automation to a multi entity business are vast. And the fact that it only integrates with Xero makes our choice of which cloud system to move to even easier."

Getting started

So, if you are a business juggling multiple entities, fear not. In the words of Rob Buckman, thanks to best-of-breed apps like Mayday, "now Xero really is a multi-entity solution".

Next week we will delve into the details of some of these success stories, share practical tips, and explore what your group setup on Xero could look like.

Or dive straight into the good stuff by downloading a copy of our full 2024 report today.

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