To Xero CEO Sukhinder Singh Cassidy, small business owners are among the biggest hustlers in the world — who also happens to be incredibly paranoid about anything going wrong.

They have good reasons to be. The margins in a gas station, convenience store, or — in the case of Singh Cassidy’s parents — a medical practice aren’t always high. Recruitment is always a struggle. And when sales are down, many small business owners can’t turn to venture capital or a well-timed merger to bail them out of trouble.

“They live and die by cash,” Singh Cassidy explains.

As such, he says small businesses are surprisingly good at expanding and contracting to suit the economic climate of the day. And thanks to today’s historically high interest rates and stubbornly persistent inflation, they’ve had to do a lot of adjusting.

Xero’s mission is to help small businesses make those adjustments without worrying about all the receipts they’ve stuffed away in the proverbial shoebox. Between its software and its accountant and bookkeeper chain, the New Zealand-based firm boasts more than 3.7 million subscribers — in everything from construction to e-commerce.

Singh Cassidy spoke to the Star from Toronto’s Collision tech conference:

You did your father’s taxes when you were younger, and now you’re running a company that helps small businesses do taxes. Do you feel like you’ve gone full circle? Was this always the plan?

I feel like I am full circle, but like everything in life, there’s no way you could say this was the plan. My parents were doctors. They emigrated to Canada when I was really young. They ran a medical practice together for 30-plus years. My dad was a classic small business owner who didn’t trust anybody else, and he was never the guy who would do today what he could do tomorrow. Thirty days before tax time, my dad would pull out all of his check books for the year, bring them home, use a physical calculator, and have us handwrite every entry from his check book into his ledger.

That was the family business for 30 days. I must have been seven- or eight-years-old when I started filling in the ledger, just like my sisters. By the time I was 12 or 13, I understood most of his taxes. By the time I was 18, I built a spreadsheet in Excel because I was going away to college. My parents actually went to an Excel class at night just to make sure they understood how to operate the spreadsheet I set up for them.

I think the lessons I took away from that were less about expecting to end up doing accounting or bookkeeping, and more about understanding that entrepreneurship is in the details. I think my dad taught me a love of business, and he also taught me that your vocation and your purpose should be the same thing.

If your program had been around when your father was doing his business taxes, do you think he would have used them?

I don’t think so. My dad was not tech-savvy. He became tech-savvy later in life. He learned how to do Excel. By the time he passed away and I had to clear up all of his paperwork. I was at home, opening different desk drawers, and I realized he had a password for Raging Bull. He had a password for the Motley Fool. Keep in mind that my dad was 77 when he died. So my father was endlessly curious. I think he loved technology, but I wouldn’t have called him an early adopter.

What’s Xero’s plan for Canada? Are you trying to expand here?

We’ve been in Canada and the US for a number of years. In fact, in Canada, we’ve made two native acquisitions. But in accounting, Canada and the US are really behind when it comes to cloud adoption. The way to think about our business is that we’re big in the southern hemisphere, but the reality is the southern hemisphere, and the Nordic countries have deeper cloud penetration when it comes to accounting.

We’re still here to drive market adoption of cloud services for accounting. But we also have a pretty full-service presence in Canada. We bought a company called Hubdoc based out of Toronto that helps us do document extraction — getting your data into our system. We bought TaxCycle, which is a long-loved desktop software that gives us tax coverage as well as bookkeeping. Canada is our tech center for North America. So our investment isn’t just business — it’s also staff.

There’s been talk of the CRA creating a self-tax filing system.

I wish it would happen.

Really? You’re in the business of tax filing software.

Keep in mind that we’re in the business of enabling a cloud solution for tax and bookkeeping to be easier. You could spend your time where you really want to spend your time — which is running your business. And if you’re an accountant or bookkeeper, you also want to save time on all these things.

Tax and bookkeeping are table stakes. So we’re not worried if the biggest thing that drives the adoption of things like accounting software is when governments tell small businesses they need to digitally file their taxes. Our biggest competitor is not QuickBooks. It’s people offline. The vast majority of small businesses are still doing their taxes offline.

What do you think is keeping a small business up at night, more than any owner?

First and foremost, we have different conditions around the world. But generally, you’ve got rising inflation. Sometimes, small business owners can pass that on through their own prices. There’s cost pressure from your supplier, but it’s unclear if you can pass that on. You’ve got rising interest rates. Our customers are worried about their cash flow and access to credit. I would say we’re in a murky environment.

Now, on the other hand, unemployment is low. So everywhere you look, people are asking whether we’re in a recession are not. I would say consumers are still spending, but people are wary. In many industries, like the service industry, there’s still a scarcity of workers. I think it’s a pretty mixed-signal environment. I think, in times of uncertainty, our job is to make sure our customers have visibility. We want to help them manage their employees and we want to help them get certainty and access to capital.

Wages are also going up. On the one hand, that could be difficult for small businesses to manage, but better paid employees are often more loyal. Do you see raises as an asset or a liability for small businesses?

First of all, if you think about employee welfare and happiness — those people need to earn a living wage. I would say, generally, that it is good if that’s what it means for your employees to be able to combat inflation. The real question is whether you can pass it on at your prices.

I think that is probably the most core limitation. If you’re like Xero — we’re running a software-as-a-service business. Every day, we think about pricing as a science. I don’t know that the average small business thinks about pricing as a science. They might need to. When inflation is going up and you want your employees to have economic mobility and you want to keep prices affordable — I think the key question is how to make sure that your pricing can hold both.

Do you think of pricing as an art?

I think pricing is an art and a science. I just don’t think the average small business thinks about it. They think about cash flow in, cash flow out, wages — but I don’t think they step back and think about it.

Do you think it’s because they’re so emotionally invested that they can’t separate their vocation from their business?

I think so. Part of that is just training. My sister went to school to be an optometrist. She didn’t go to school and get a business degree. Many small business owners started with passion projects and not necessarily with an MBA in their back pocket. They learned all of the tools of business on the job. That’s why I think tools like Xero have an important role to play in giving them insight into decisions.

A lot of small businesses have a real problem chasing invoices. What are your plans to help users with that?

Outside of our core business, the fastest growing business we have is payments. That’s not bill payments — that’s bill collections. We’re trying to make that an even more seamless experience, and our core platform growth is up 25 per cent a year. Our cash collection business is growing 40 per cent a year. Our job is to help people get cash faster.

First of all, that starts with electronic invoicing. Take it away from paper. AI can really help with invoicing. We can read your bank records and understand what invoices a small-business owner could auto-generate and shorten the amount of time it takes from sending an invoice to getting paid.

But the second thing we’re trying to do is make payments a very seamless experience. Already, we have embedded multiple pay options in our electronic invoices. At Xero, we think cash collection is the job to be done that we care about with small businesses.

This interview has been edited for length and clarity.

Brennan Doherty is a former staff reporter for Star Calgary and the Star’s 24-hour radio room in Toronto. He is now a freelance contributor.

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