Quick take: Xero introduces TaxTouch

A quick what, why and analysis of Xero's introduction of a product focused on the gig economy.

Uber X driver

What: Cloud-based accounting software vendor Xero is launching a U.S.-specific product aimed squarely at workers in the freelance economy. Xero TaxTouch is, according to the release:  

"...a new app developed specifically for anyone who submits a Schedule C form with their tax filings. An Easy Way to Track Income and Tax Liabilities Xero TaxTouch app allows a user to automatically download bank and credit card transactions from major U.S. banks and credit cards, and provides an easy way to track business expenses and maximize business tax deductions."

Why: The proportion of workers who perform tasks on a freelance basis is increasing. At the same time, many of these workers are becoming involved in digital freelance businesses such as ride-sharing, food delivery and personal assistance. These freelancers, whether by necessity or by choice, are becoming digital freelancers and are thus more used to working in a virtual/digital world. For these freelancers, the need to complete a tax return is burdensome and they're looking for a quick and easy way to track revenue and expenses. 

MyPOV: For Xero, this is a no brainer. The company has long articulated the U.S. market as its key focus but has been slow in gaining meaningful U.S. traction. Part of the reason for that is that traditional U.S. small- and mid-sized businesses, the target for Xero's core accounting product, are fairly well served by the market incumbent, Intuit. Add to that that those businesses' account advisers are also fairly used to servicing customers using Intuit's QuickBooks product, and you have a bit of a barrier to widespread U.S. adoption for Xero.

Freelance workers have a tendency to be more digitally savvy and keen to embrace new options. In the same way, graphic designers and software developers were a good source of early customers in Xero's home market of Australasia, so too are freelancers a possible way to unlock growth in the U.S.

It has to be said that this is also a reaction to Intuit's recent move into the freelance economy. QuickBooks Self-Employed targets a similar customer base and has seen success with a number of large freelance vendors (in particular Uber) jumping on board and recommending the application to its workers. There is a key sensitivity there -- Uber cannot dictate what application its freelance workers use lest it be a way to prove that Uber asserts control over freelancers and is, therefore, an employer. But recommendation is a strong driver for adoption and my understanding is that QuickBooks Self-Employed users is growing well.

The fact that TaxTouch is only available on iOS, and the web site at launch is somewhat spartan, indicates to me that this was a fairly rushed launch in order to take advantage of an opportunity that is there right now. TaxTouch is priced at $5.99 per month, with an introductory offer of $29.99 for the first year (thereafter reverting to $69.99 per year). This pricing is, perhaps not coincidentally, very close to that of QuickBooks Self-Employed.

Copyright © 2016 IDG Communications, Inc.

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