Xero is a global small business platform with 4.2 million subscribers that offers a core accounting solution, payroll, workforce management, expenses, and projects. Pulse 2.0 interviewed Xero CFO Kirsty Godfrey-Billy to learn more about the company.
Kirsty Godfrey-Billy’s Background
What is Godfrey-Billy’s background? Godfrey-Billy said:
“My love of numbers started when I was seven doing the cashbook for a trust set up by my Dad, who was a school teacher. I started my career as a chartered accountant, and I’ve had roles with technology companies like BBC in the UK, Jade Software in New Zealand, and Siemens Information Systems in London. For a number of years, I was an advisor within Xero’s partner community, including as a Partner at PwC. I saw first-hand what a difference cloud accounting can make for accountants and bookkeepers, as well as small and medium-sized businesses.”
“In 2016, Xero founder and then-CEO Rod Drury invited me to join his rapidly growing cloud accounting software company as Chief Accounting Officer. In October 2018, I was appointed Xero’s Chief Financial Officer.”
“What attracted me to Xero was the future vision for the accounting industry and small businesses and the work we were leading to pave a new path for how accountants and bookkeepers work and how Xero helps their clients. To this day, Xero’s firmly focused on our purpose of making life better for people in small businesses, their advisors, and communities globally. Being part of this is incredibly personally rewarding.”
Primary Responsibilities
What are Godfrey-Billy’s primary responsibilities at Xero? She shared:
“The Chief Financial Officer role has been evolving for years, and mine is no exception. Of course, one of our core responsibilities is overseeing financial and operational reporting. But CFOs nowadays must do more than crunch the numbers. We’re an essential trusted advisor to the business.”
“I work as part of an executive team managing a growing global portfolio. I need to be a trusted advisor to these leaders and the business, helping shape and deliver on strategies — including balancing our growth and profitability — while tackling short-term challenges. It’s not enough to provide raw financial data. I also need to harness my deep knowledge of the business and the wider environment and provide data-informed insights into the numbers they present. And then give meaningful input into current and future investments. In other words, a valuable CFO needs to know the data, why it matters, and what to do about it.”
Favorite Memory
What has been Godfrey-Billy’s favorite memory working for the company so far? Godfrey-Billy reflected:
“Over the past 18 months, I’ve been supporting the business in its pivot to better balancing growth and profitability. We also need to continue to be well-positioned to take advantage of the significant opportunity ahead and deliver value for all stakeholders. Helping to guide this strategy is rewarding and exciting.”
“I’ve been working with all teams across Xero, including our global leadership team and, of course, our CEO, Sukhinder Singh Cassidy, to ensure we’re pulling the right levers to do that. This comes back to those all-important data-driven insights a CFO can provide.”
“It was awesome to see Xero’s hard work highlighted in our strong FY24 results we announced in May this year. This included free cash flow increasing to NZ$342.1 million and a free cash flow margin of 20.0%, improving from 7.3% in the prior period. As a result we delivered a Rule of 40 outcome, which is a useful measure used by SaaS companies, demonstrating our ability to drive both growth and profitability.”
Core Products
What are the company’s core products and features? Godfrey-Billy reflected:
“Xero was founded in 2006, bringing cloud accounting tools to small businesses globally. Our launch meant accountants and bookkeepers for the first time could collaborate with their small business clients in real-time, to manage their businesses more effectively. Xero has evolved into a global small business platform. As well as accounting, our platform extends to payroll, payments and other solutions. Xero’s ecosystem of connected apps and connections to banks and other financial institutions helps small businesses access a range of solutions within our platform.”
Challenges Faced
What challenges have Godfrey-Billy and the team faced in building the company? Godfrey-Billy pointed out:
“Xero is a global company with an internationally dispersed team, including our finance team. So, an example is managing time zones. We run our business in the cloud, which means shared documents, collaboration tools, flexibility, and trust between teams allow us to work efficiently, even if we’re time zones and geographies apart.”
“Keeping lines of communication open and really living our values and purpose is also important to keep our teams engaged and focused. As is having clear processes and procedures in place. This means people across our organization can act fast and be responsive to diverse needs across multiple regions.”
Evolution Of Xero’s Technology
How has the company’s technology evolved since launching? Godfrey-Billy noted:
“Since launching Xero in a humble Wellington, New Zealand apartment in 2006, we’ve grown from a handful of cloud accounting subscriptions into a global small business platform with 4.2 million subscribers. Today, Xero’s smart tools help small businesses and their advisors to manage core accounting functions like tax and bank reconciliation and complete other important small business tasks like payroll and payments. Xero’s extensive ecosystem of connected apps and connections to banks and other financial institutions provide a range of solutions from within our open platform. These help small businesses run their business and manage their finances more efficiently.”
“Our product vision aligns with our strategy to create winning solutions for the three most critical jobs to be done for small businesses — accounting, payroll and payments. We’re also supporting adjacent jobs to be done, such as expenses, projects and inventory, through embedded capabilities and strategic partnerships. Many of our products use artificial intelligence to streamline tasks, deliver insights and help our customers get the answers they need.”
Significant Milestones
What have been some of the company’s most significant milestones? Godfrey-Billy cited:
“We’ve reached a lot of significant milestones since launching in 2006. From our early IPO in 2007 to our sole listing on the Australian Securities Exchange, and from our first customer to more than four million subscribers today.”
“In 2014 we reached NZ$100 million in annualized revenue just seven years after our IPO, and then in 2017 we reached another huge milestone: one million global subscribers. In 2019 we reported our first positive cash flow and in 2022 we surpassed NZ$1 billion in operating revenue. In 2024, we delivered a Rule of 40 and ended the year with more than four million subscribers.”
“We’ve kept growing, and in the last financial year, we’re pleased we’re doing what we said we would do. This includes reshaping our financial profile towards more balanced, profitable growth, while also improving productivity and efficiency. In February this year we launched our FY25-27 strategy and aspirations for future growth, as we sharpen our focus and position Xero for the next chapter.”
Customer Success Stories
After asking Godfrey-Billy about customer success stories, she highlighted:
“I’m humbled by the resilience and ingenuity of our small business customers and accounting and bookkeeping partners. I love hearing stories from our customers about how using Xero has changed their business, from improving efficiencies to providing meaningful insights.”
“A specific example is the Xero Beautiful Business Fund (XBBF). We launched XBBF in 2023 to support the future aspirations of small businesses by providing more than NZ$750,000 in funding to small businesses globally. We granted 28 small businesses and non-profit organizations a share of the funding across four categories — innovating for sustainability, strengthening community connection, trailblazing with technology, and upskilling for the future.”
“One great example is Constantia Food Club, a community buying group in South Africa that sources directly from small local regenerative farmers. It was also our global winner for innovating for sustainability. Their Xero funding is going towards a larger clubhouse with more refrigeration, more storage and a bigger shop front, helping build an ethical, transparent and resilient food system.”
“We recently announced XBBF is returning for 2024. It’s an incredible opportunity to support the small business community beyond our core products and offerings.”
Revenue
Upon asking Godfrey-Billy about the company’s funding and revenue details, she replied:
“We announced Xero’s strong FY24 operating result in May this year which showed we’re doing what we said we would do. We were also pleased to deliver a strong and profitable result and Rule of 40 outcome. These results demonstrate our commitment to balancing growth and profitability and included revenue growth of 22% to NZ$1.7 billion, free cash flow increasing to $342.1 million and a free cash flow margin of 20.0%, improving from 7.3% in the prior period.”
“In June, we raised US$925 million in a convertible notes offering. This is the third time as Xero’s CFO we’ve issued convertible notes as part of our capital management strategy. These are huge pieces of work to deliver across our teams, and an incredibly rewarding process to be part of. We’re pleased with how we are managing our strong balance sheet and the optionality this provides as we continue to execute our strategic priorities.”
Total Addressable Market
What total addressable market (TAM) size is the company pursuing? Godfrey-Billy assessed:
“We have subscribers in more than 180 countries worldwide, and we offer deeper go-to-market and product offerings in seven markets. We play in large and growing cloud markets, and serve sizable core customer segments already, with a large untapped TAM of over $100 billion, that we can further unlock.”
“We announced our refreshed strategy earlier this year at our inaugural Investor Day, including our strategic focus on our three largest markets: Australia, the UK and the US. These three markets collectively offer the largest scale revenue opportunities for Xero.”
“Our other key markets are also critical to Xero and our long-term financial aspirations. In FY25-27 we’re focusing on delivering efficient growth across New Zealand, Canada, South Africa, Singapore and Rest of World markets. We’ll leverage third-party developers and our ecosystem to help our customers complete other jobs to be done beyond core accounting in these markets.”
Differentiation From The Competition
What differentiates Xero from its competition? Godfrey-Billy affirmed:
“Xero is an iconic success story that’s changing the accounting and bookkeeping profession and the way small businesses can operate in a really positive way. We created the cloud accounting category, and because we’re native to the cloud it gives us the edge when competing with other global players.”
“We’ve also built a strong global community of accountants and bookkeepers who have been on the journey with us since day one. Real trailblazers who we consider an extension Xero and who have been critical to helping us scale and grow globally.”
“I’m excited by our huge opportunity. We’re a critical platform that empowers small businesses and their advisors to grow.”
Future Company Goals
What are some of the company’s future company goals? Godfrey-Billy concluded:
“As I mentioned, we announced our FY25-27 strategy earlier this year. The strategy — Winning on Purpose — is simple, focused, and purpose-driven. We’re well positioned with solid foundations, a strong financial profile, turbocharged capabilities, and continued large global TAM to pursue as we seek to become an even more trusted platform.”
“We aspire to be a world-class SaaS business. We believe we have the opportunity to both double the size of our business and deliver Rule of 40 or greater performance. As we grow, we will also seek to be more balanced between subscriber growth and ARPU expansion.”
