Expanding access to financial tools that simplify critical business operations with Andrew Kanzer

Speaker A: So speed and certainty for small business was a lesson, which is they already have to be expert on so many things to run their business. How can we take something off of their plate and just make it work, make it work so beautifully that it's almost doesn't even need to be thought of, not another thing to manage. And I thought that was a really powerful learning lesson on designing product and thinking about our customers from their perspective, not the other way around. And I think that was probably, that was probably a meaningful part of my time and payments.

Speaker B: Welcome to the SMB Tech Innovators Podcast. Powered by Gusto. On this show we explore the intersection of fintech vertical SaaS and how software combats the rising complexity of running a business. Our goal is to share stories, advice and best practices from the leaders and investors behind today's cutting edge platforms. This episode of the SMB Tech Innovators podcast is brought to you by Gusto Embedd. Gusto has spent a decade building and testing its payroll tax filing and compliance infrastructure, which is available as a robust set of APIs so you can develop custom tailored payroll solutions. For more information go to embedded.gusto.com here's your host, Brian Bush

Speaker C: on this episode of the SMB Tech Innovators podcast. My guest is Andrew Kanzer, Managing Director for North America at Xero, an accounting platform helping customers supercharge their business by bringing together the most important small business tools including accounting, payroll and payments, all in one platform. Andrew, welcome to the show.

Speaker A: Thanks Brian. Glad to be here.

Speaker C: Let's jump in. I'm excited for this one, but let's anchor the audience just a little bit. Could you share a little bit about your background and how you came to your current role with Xero?

Speaker A: Sure. I've been in the, uh, fintech space for probably about 20 years at this point. Helped start a small business lending company many years ago with the aim of democratizing working capital where the big banks weren't serving small business well enough. Grew that business, ended up selling it to PayPal. Then I spent about seven to eight years inside PayPal doing go to market transformation for payments Venmo Buy Now, Pay later credit products and then had an opportunity to work in the accounting space for about a year and a half and ended up joining Xero to help both with scaling the US and Canada business and then getting thoughtful around how we maximize the acquisition that's planned with Melio. So bring payments and an accounting software together in one place.

Speaker C: Well, I'm very excited to dive into a couple of those points and maybe at the end we'll circle back on the lending note because I feel like that's the proverbial small businesses always need a better credit solution and yet banks are still there. But first let's focus on the accounting piece. Account tech is a crowded space. So quickly how do you describe what Xero offers and more importantly, what's different? How does Xero stand out in a crowded space?

Speaker A: Both my time and payments in accounting software prior to Xero learned a lot about how small businesses operate, what they need from their tech stack to become efficient, to grow, to manage the business. I think the thing that attracted me most to Xero when I was joining was this concept that Xero prides itself on being an open ecosystem. So over a thousand different connected apps and so where a lot of the other large software providers are almost mandating that small businesses adopt different workflows to use their software, Xero allows both accountants, bookkeepers and end users to customize and build out whatever makes sense for their workflows. Times I've seen the show up is businesses that do things like time scheduling as an example, they don't want to have to break how their business works to use someone's software. And so really complimentary in that part. And then I'd say also just the relationship that we have. I think one of the things that's been most energizing to me joining Zero, and I heard a lot about this before I got here too, is that we're both operating at scale but at a very personal level. So finance is very personal to small business owners and as a result we have a lot of one to one contact with our customers and partners and I'd like to think that truly feel valued by the relationship we have and they're not treated like a transaction.

Speaker C: Andrew, I'm reminded of that phrase every business is unique and almost a universe unto itself. And I think that comes back to that comment of you don't want to force small business owners to adopt your way of doing things because I think it's easy to talk about small businesses as this aggregate homogenous group, but that's really not the case. So maybe say a little bit more there. You have deep experience not just working in small businesses, but with their specifically around their finance needs. Are there any key lessons, any key memories or experiences that kind of really brought to life that idea of you need to be adaptable and therefore an open platform like Zero offers really is a strength for small businesses going forward?

Speaker A: Yeah, there's probably a couple Lessons I have one is I'll, uh, reference a research study that I was part of a couple years back and this was when I was working in payments and we went out to about 2,000 different small business customers and put a uh, named list of probably many payments companies you would know by name. And we're all fishing in the same pool to work with these small business owners and all these different value props and claims that are coming out about just the efficacy of the solution, how well it works, all of these things. And as we asked 2,000 business owners to separate us one from another on like where they found like the most value, they couldn't tell the difference. So they basically said you all do the same thing. So it reminded me in that place that like internally we were really proud of ourselves for what we were building. But it made you question, are you really building it for the end user in mind if they can't tell the difference between you and your three nearest competitors? And really what it boiled down to was they just wanted it to work, it had to work really well and it should be relatively fast. It should make their life easier. So speed and certainty for small business was a lesson, which is they already have to be expert on so many things to run their business. How can we take something off of their plate and just make it work, make it work so beautifully that it doesn't even need to be thought of, not another thing to manage. And I thought that was a really powerful learning lesson on designing product and thinking about our customers from their perspective, not the other way around. And I think that was probably a meaningful part of my time and payments.

Speaker C: So, Andrew Xero has some really interesting innovations coming. So as we look to the future, part of what that means is changing some traditional workflows, sometimes some decades old workflows for accountants and small businesses. So maybe talk to us a little bit about what's coming from Xero. You mentioned the acquisition with Melio, but then let's connect it to how do you think about bringing this solution to market and fitting in or selling the value of why folks should change and why folks should adopt a more comprehensive platform.

Speaker A: It's a great question. There's a lot of questions in that question. So I would tell you the things that I'm most excited for that we're bringing to market. One is just on the topic of AI and I know that's like a buzzword at this point. It seems to exist everywhere and zero's been really again thoughtful of thinking customer back from how we're going to use AI. Where I've seen AI in financial technology can be sometimes scary, sometimes overwhelming. Especially for businesses that are in business for a long time and have workflows and practices and just how they run right how this becomes an amplifier, not a disruptor. We had built out a tool called JAX and so JAX is meant to amplify both the accountant, the bookkeeper and the end user performance by the ability to just aggregate information faster. I have a question about what's happening in my finances and my books. Instead of spending 30 minutes combing through data to research uh, that have the ability to actually mine that information and bring the information forward in a meaningful way so the people who know what to do with that information can actually spend more time on that instead of for the administrative work. And so AI is a big piece as we think about the most important jobs to be done in a small business. It's focused on accounting software, payments and payroll. Three of the largest jobs to be done and our ability to put them together in a meaningful way that allow for a business or an accountant group of keeper to think of our software as the cockpit for their business layered with the AI which makes pulling the insights together in a more meaningful way possible. And then we had a really exciting partnership we announced with OpenAI just about a week ago which will allow us to actually start bringing in third party benchmarking data on things like what do others in your industry look like? How are you comparing to your peer set? Want to make an investment decision? How should I think about that and really start bringing like full world intelligence to how that business operates. And lastly just to hammer home the point, I love the fact that we have over a thousand different app partners and we continue to add new ones all the time that add value to allowing these businesses to remain custom and bespoke for what works for them which is traditionally reserved for enterprise sized clients. Most fintech companies will build something custom if it's large enough. I think we've made that capability accessible to all. And that part's I'm really proud about

Speaker C: that what I hear there and I love that analogy of the cockpit for running a small business accounting payroll payments all in one place. I think what's interesting if I'm hearing you correctly around some of the innovations with AI it's first how do I just save time getting insights about my business but it's moving towards how do I run my business better? Am I understanding that correctly?

Speaker A: That's right. And I like to think of it as like practical Application of AI. And so again, in a world where AI seems to be everywhere and it does some of the silliest things, like you see pictures, how do we actually harness the intelligence and the data, make it friendly enough for people to use and very practical. So we keep the expert, human piece of this. So it's like human and AI working together, tech as a teammate instead of another thing to manage.

Speaker C: You mentioned some of these new tools are really powerful, both for the small business owner themselves, as well as an accountant or bookkeeper who's working with them. Um, but maybe let's talk a little bit about that dynamic and specifically where you think some of what Xero offers shows up more beneficially for the small business owner themselves or for that accountant or bookkeeper. What I want to get into is a little bit that dynamic between them and how you see accountants and bookkeepers continuing to support small businesses as these intelligence tools get much more powerful going forward.

Speaker A: We've seen a, uh, mass shift over the last two years in advisory in the accounting space. And as automation makes some of the repetitive tasks more streamlined and potentially even not needing to be done by a person, it frees up capacity to have again, some of those deeper conversations about how do you improve the business performance, how do you think about investing in the business or getting to that next level intelligence that, uh, oftentimes people don't have time to actually think about, to move forward. And so actually spent time with an accounting partner of ours. And I thought one of the neat ways that they had built this was if 75 different partners in the firm, tons of clients, and they actually set up an AI chatbot where their clients can ask questions about their returns, about, um, their books, 24 hours a day, seven days a week. And the AI layer will actually go into the data and pull the information to answer the question. It won't send it to the client, it actually forwards it as a task to the accountant to actually look at the information, understand it. But it took them out of the gathering phase of that altogether. And it really has increased the client partnership, if you will, because the conversations are richer, they're more in depth about how the business works and less about just the time it takes to actually get there. So it's freed them up to do much, much deeper relationship building with their clients and become a more strategic partner. And that's been a unique trend for us to watch.

Speaker C: And an interesting example of, as you mentioned, is the human in the loop side of this. The AI is informing a more strategic conversation with that Client not just answering the question immediately for them. That's fascinating. Andrew. Let's come back to some of the go to market pieces. Obviously Xero is growing. You now have the Melio acquisition, you have payroll in the U.S. although Xero's offered payroll internationally for quite some time. Maybe. How do you bring some of the lessons of what's worked for Xero internationally to the US market now that you have a very different solution versus just six months ago?

Speaker A: It's a good question and I'd say just from my experience prior to Xero, our ability at uh, PayPal and when I was in the accounting space, the ability to put together solutions that help each other work better in a package is super meaningful for our business. And so when I think about the overall go to market approach as we can work with businesses in an integrated way to do probably three of the most important jobs, but still allow for them to customize it to uh, whatever works for them, it really puts us in a position to be a partner to that business and not necessarily selling to that business. We're hopefully bringing to market a more intelligent way for those three jobs to be done. Back to my earlier point, just want it to work and we want to work fast and it's got to be accurate. And I don't want to manage all of this stuff. And I think I was talking to someone, you know, that's probably from payroll too. People who work in payroll, sometimes their lives revolve around those payroll cycles. It's such a critical task in the business that has to be done and it has to be done on time and it has to be done well and all of these things. Our goal has been to bring together some of these meaningful jobs to be done, just make it easier. One last thing to think about. It should work excellently, should be priced fair and I think the value that we'll be able to provide will far outweigh any of the implementation or cost of doing so.

Speaker C: Andrew, before, early in the conversation you mentioned one of the things you appreciate about Zero is the ability to connect very directly with clients. I'm curious, in a world of AI and more of these digital tools, do you actually think bringing folks together, the in person connection, does that change in terms of how you build community or how you connect with folks? Does it become more important to connect with people in person as you think about deepening those partnerships but also growing the business?

Speaker A: Absolutely. I firmly believe like the human connection, especially in financial services, is really important. And again, I think one of the differentiators that Xero has is, is that human component, the value we place on partnership with partners, with accountants, with bookkeepers, with our direct customers. And also we rely on all of those different people in the equation to help inform us like what we should be building and what value can be created by ideas solutions that can help propel this platform forward as we think about AI. Uh, back to my point about calling it like a practical implementation. It's meant to speed up and allow for deeper connection, not to actually separate that connection. That's something that, you know, I think we value quite a lot at zero. And it has been a competitive differentiator. The times that I've heard either partners or customers say it's just a Reddit post, I can share it with you if you're interested of someone saying that they were shocked that they had left another platform, they came to zero, they were having some trouble with implementation, but they're still happy because they're able to call us and talk to someone and get on the phone and actually problem solve instead of just waiting in a queue or waiting for a response from a bot or something like that. And so that's special and we should actually lean into that as a strength. Empower that with the AI to make it scalable, but maintain every part of that. That's goodness.

Speaker C: Please do share that thread and we'll link to it in the show notes. And personally, having had the opportunity to connect with folks in the Xero community at a couple of the roadshows, the energy there is palpable and it's a compelling community. Andrew, before we start to wrap up, I want to come back to the point you mentioned about lending. So to the extent you can give us just a bit more a couple bullets on what that company was and what exactly you were doing, but more I'm curious where is lending evolving? And by that platforms like Xero are combining more fintech products, banks themselves are trying to be more agile, offer more uh, software type solutions on top of sort of the traditional just accounts, payments, some of the traditional financial services. I'm curious where you see the lending aspect going for small businesses.

Speaker A: When I got into lending business our goal was to serve the underserved. And so what the business problem that we took on we started this company, Swift Financial, was banks only want to give money to people when they don't need it. So they would use a credit score based model. The higher credit score, the higher likelihood you would be to get approved. And business owners specifically sometimes would have challenged credit because they would pay themselves last. They're last in the equation of things to get paid. They're making sure their employees are paid, their invoices are paid, they have inventory, all these things to put themselves last in a lot of scenarios. And so we built out a, uh, business cash flow lending model that actually challenged the conventional thinking of banks, scaled it up to about $100 million business, and then ended up being acquired by PayPal. And there we found a lot of really goodness in the fact that as businesses would borrow money, typically they were doing it opportunistically to invest in their business or to solve a cash flow problem. At the end of the day, it was all about maximizing the speed and reliability of your cash flow to operate a better business. So again, I think it's also one of those critical jobs to be done to the extent that service could be bundled with other things that they're interacting with on a daily basis. It made the whole thing more intelligent. I'd say my most humble experience on lending was I got to run the SBA PPP program at PayPal while I was there. And that uh, was really purposeful business. Not only just helping businesses grow, that kept people, kept people's jobs in place during the pandemic. So look, I would say as I think about this at Xero, we have a lot of things to tackle here in the short term. One piece is moving from Xero, the accounting software to start. We're excited for our partnership with gusto. We bring embedded payroll into the solution. We're super excited for the acquisition of Meio and we start bringing things like bill pay in. And so we're constantly expanding this offer to a full service financial services platform. No explicit plans on lending at the moment, but it's a critical item for businesses to run and grow their business. And so, uh, something I'm paying attention to as well.

Speaker C: Certainly you can see moving from just seeing the transactions to being the owner of the cash flow. For a small business, you can see how that sort of connects back to the cash flow only piece in the future. And I think that's what we're hearing across many folks in the embedded fintech space. Andrew, to wrap up, you have a long and very successful history in technology and fintech. Things are very different today for folks entering the industry. I'm curious, what advice would you give to somebody who, either entering the accounting space or the technology space in general, what advice would you give? How do you think folks should aspire to a career like yours going forward?

Speaker A: The advice I Would give would bring it back to that comment I made about the survey we did with the small business owners, which is solve problems, look for the things that are actually not ideal and work on those things. And I think sometimes those are like the least exciting things to go tackle. They can seem daunting, they can seem challenging. They haven't been worked on before. One of my prior roles, I had the opportunity with the leadership to do a lot of what I would call blue sky thinking, which is like, absent any constraints, like, how would you do this differently? And I think it's a powerful way to think about some of these problems, which is a lot of times we're solving within the confines of what we may have available to us. Resources time being a huge one of how much time. But at the end of this, I think anyone who's in a role where we're serving customers, it's really about thinking about that as a job interview. Right? So like we're interviewing for a job with a customer and if we do a really good job in that interview of solving their problem, adding value, we get hired. And if we don't, we usually don't. And adding value by finding specific problems and getting really creative in how we solve those. It's this like concept of this micro innovation that happens over time instead of these big unveils. It's the constant improvement and getting better every single day by looking for these small problems that make things work better and people appreciate.

Speaker C: I do love how the best executives seem to come back to the simple truths and some of the first principles and they're solving problems. You talk about accounting, you talk about payroll, you talk about payments. As you mentioned, folks in the back office are often very passionate because these things just have to work for the business to function. So really appreciate you and that's a great place to end this conversation. Andrew. Just re anchoring on that core principle. Andrew, thank you so much for joining us today. Before we wrap up, if folks who are listening have questions, want to connect with you, go a little bit deeper. Is there a way, say on social media that would be best for folks to connect?

Speaker A: Look, usually LinkedIn is great. So super active on LinkedIn. If anyone is interested in connecting or chatting, happy to send me a message and happy to make that connection. I think network building is an incredible skill as well. And happy to spend time and meet talented people as well.

Speaker C: Okay, Andrew, thank you again for sharing a little bit of time and especially your experience and insight with us today.

Speaker A: Sounds good. Thanks, Brian.

Speaker C: Thanks again for tuning into this episode of the SMB Tech Innovators podcast, we'll make sure to link to any resources that were mentioned in today's show in the show notes. Please also feel free to leave us a review where wherever you listen to your podcast, or to connect with the Gusto embedded team via LinkedIn. In particular, we'd love to hear any future guests you'd like us to have on the show. Thanks again, um, for listening and keep a lookout for the next episode. Uh,