How cloud software is revolutionising accounting solutions for SMEs

Cloud accounting has become central to business as the paradigm shifts from traditional and inherently expensive outsourcing into a platform-based approach.

These customisable programs attract small businesses and their accountants, enabling efficient collaborative workflow from one platform.

And for companies like Xero (ASX: XRO), this efficiency fuelled by the work-from-home economy is set to push the cloud market beyond $45 billion by 2028, growing at a whopping 20 per cent a year.

The Australian cloud technology company is at the top of its game by offering a one-stop platform for beginner to advanced users to seamlessly collaborate with creditors, debtors, institutions and accountants.

Artificial intelligence is a critical component of cloud technology and assists in mitigating a range of errors in accounting, including the most significant and detrimental to SMEs: fraud. Losses issued by copy often amount to billions of dollars, meaning that small businesses often fail due to the mounting costs.

Xero is heavily investing in big data and artificial intelligence to reduce errors further and mitigate them by giving its users autonomy. Its intuitive possibilities provide an opportunity for growth beyond the Australian consumer to relatively developing markets overseas.

Growth Targets

Xero anticipates 30 per cent growth in the next financial year, with the latest results showing a 28 per cent increase in $1.285 billion in earnings and a profit of $212 million in the latest quarter.

It hopes CAGR could reach 35 per cent in Australia and New Zealand and 50 per cent in global markets, which is why investors continue to put such a high premium on the stock.

The forecast holds Xero’s valuation in good standing at a P/S 10, based upon future expected earnings and healthy profits.

Like most tech companies, the risk of R&D cost blowouts remains everpresent, with unexpected operating costs potentially hacking into sizeable profits.

But Xero’s custom-made business model seems an excellent fit for the times as investors look closely at its performance in the next fiscal year.

Please note the following valuable information before using this website. 

Independent Research 

Market Open Australia is intended to be used only for educational and informative purposes, and any information on this website should not be taken as investment advice or guidance. It is important to conduct your own research before making any investment decisions, which should be based on your own investment needs and personal circumstances. Any investment decisions based on information contained on this website should be taken in line with independent financial advice from a qualified professional or should be independently researched and verified.