Date posted: 4/06/2019 10 min read

The secrets of Xero growth: CFO Kirsty Godfrey-Billy’s global goals

Kirsty Godfrey-Billy CA joined cloud software provider Xero in 2016. Now its CFO, her aim is $1 billion annual revenue.

In Brief

  • Xero cloud-based accounting software is a New Zealand success story. Registered in 2006, it now has 2000 staff worldwide and a market cap above A$8 billion.
  • Former PwC New Zealand partner Kirsty Godfrey-Billy joined Xero in 2016.
  • She says managing really fast growth across Xero is “a continuous balancing act because there’s so much opportunity everywhere” for cloud-based accounting.

Story: Deborah Tarrant

Photos: Graham Jepsom

In January 2016, Kirsty Godfrey-Billy CA faced a choice. The New Zealand-born chartered accountant thought she’d already climbed a career pinnacle when she was made a partner at Big Four firm PwC, but then she received an enticing offer.

Xero founder and then-CEO Rod Drury invited her to join his rapidly growing cloud accounting software company as chief accounting officer (CAO). It was a role that seemed tailor-made for Godfrey-Billy.

During her time at PwC, Godfrey-Billy was the leader of the cloud strategy for the NZ regions within PwC New Zealand. She headed the firm’s regional cloud strategy, working with many of New Zealand’s most innovative medium-sized enterprises. Earlier in her career she’d had roles with tech companies including Jade Software (another New Zealand success story) and Siemens Information Systems in London.

As Xero’s CAO, Godfrey-Billy would run the finance team and work alongside Xero’s CFO/COO Sankar Narayan (formerly the CFO of Virgin Australia, Fairfax Media and Foxtel).

It may have been the toughest decision of her career, but Godfrey-Billy made her move swiftly. By late March that year, she was leaving PwC and Taranaki on the North Island’s west coast and was on her way to Wellington to head up Xero’s finance division.

“I think Xero is the only company I would have done that for, because it is such an iconic New Zealand success story that’s changing the profession going forward in a really positive way,” she says.

“I love tech because it’s shaping the future and improving the way we work. Companies in tech tend to have dynamic and adaptable cultures and move at a rapid pace which creates a great environment to work in.”

Another big source of the appeal was Xero’s global growth ambitions in the cloud accounting space, and the chance to be part of a world-leading company while still being based out of New Zealand.

Going for growth

Kirsty Godfrey-Billy CAKirsty Godfrey-Billy CA

When she sat down with Acuity in the first half of 2019, Godfrey-Billy had taken over from Narayan as Xero CFO in October 2018, and was exuding confidence that she’d made the right call.

“We’re doing so many exciting things,” she said, pointing to a jam-packed schedule for the company’s 80-plus finance and facilities teams over the previous 12 months.

That included two acquisitions, with Xero snapping up Toronto-based data capture company Hubdoc and the UK’s tax filing solution Instafile.

“We also assisted with a strategic partnership, Gusto, in the US, for payroll and launched a convertible debt instrument, the first of its kind for an Australasian technology company listed in Australia or New Zealand,” she added. (In September 2018, Xero raised US$300 million via five-year convertible notes to fund future growth.)

Yes, the past year has been huge for Xero. The digital disrupter revealed operating revenue up 38% and its first-ever positive result in earnings before interest, tax, depreciation and amortisation (EBITDA) for the full year in 2018. It introduced a new CEO, former Microsoft Australia chief Steve Vamos. And in December 2018, it notched up a million subscribers in Australia and New Zealand.

This all gives heft to its ambitious global push to woo and transform accounting practices and small businesses across South-East Asia, South Africa, the UK and North America.

In a controversial move, the company also quit the New Zealand Stock Exchange in early 2018 and moved to a sole listing on the Australian Securities Exchange, with the aim of increasing liquidity (it’s up significantly, the CFO reports), capturing the right analyst coverage (about 12 analysts in Australia now have their sights on Xero) and maximising its shareholder base (which has been boosted by Xero’s entry to the ASX 100).

“The share price speaks for itself,” adds Godfrey-Billy. Shares have zoomed from the low A$30s in February 2018 to an all-time high of A$61.82 in May 2019, amid predictions that Xero could eventually hit A$100 a share and potentially brow to be a A$100 billion tech giant.

The cash-flow balancing act

One of Godfrey-Billy’s major goals is getting the fast-growth company over the line to be cash-flow positive for operations and investment – “we’re close, but not yet,” she says.

And things seem to be heading in the right direction. In May 2019, Xero chalked up its first-ever half-year profit, announcing a A$1.4 million profit for the second half of the financial year (although it posted a full-year loss of A$27.1 million).

Since she signed on to Xero three years ago, Godfrey-Billy’s objective has been about ensuring “we have a sustainable business model with financial discipline across the organisation. The drive towards cash-flow breakeven for operations and investment is important for us.”

Future-proofing is the name of the game, making capital allocation a high priority. “I walked into an organisation that had grown so rapidly but needed to ensure it was going to be able to continue to grow,” Godfrey-Billy recalls.

“I did a project where we looked at finance processes and systems to ensure they would still be fit for purpose when we’re at $1 billion revenue and beyond.” Company-wide, that’s a benchmark.

“We’re constantly looking at how we can continue to grow at pace, looking at all the tools, making sure we’re ready for today and tomorrow.”

Firmly in the financial driver’s seat for scaling up, Godfrey-Billy describes managing really fast growth across the business as “a continuous balancing act because there’s so much opportunity everywhere” for cloud-based accounting.

There’s the intricate calibration of entering and growing new markets while developing products that the regions need and will need in the future.

Canada, for example, where cloud adoption is less than 10%, is just starting to move on from desktop accounting software. It offers massive market potential for Xero due to its similarities to Australia, New Zealand and the UK.

In the UK, where Xero now has more than 355,000 subscribers (as at 30 September 2018), it used the 1 April 2019 launch of Making Tax Digital for Value-Added Tax (VAT) as a catalyst for attracting new customers. Godfrey-Billy says Xero’s recent Instafile acquisition helped it leverage this opportunity, noting that the company drew on lessons learned in Australia, where the Tax Office’s digital-by-default program has been in place since the goods and services tax (GST) was introduced in 2000.

“The drive towards cash-flow breakeven for operations and investment is important for us.”
Kirsty Godfrey-Billy CA

The global outlook and local focus at Xero

The finance chief is working to a cracking pace as one of the fresh public faces of the company beside recently appointed chief executive Vamos.

When Vamos was engaged to bring his global big tech experience to the Xero leadership team as a consultant in mid-2016, he prescribed three areas of focus: ensuring connection between the strategy, the operating plan and the budgeting process; always taking a customer-led approach to product and within regions; and establishing the right operating model for regional versus global concerns.

“Steve wanted to maximise the benefits of operating in a global way while still allowing enough autonomy within regions, depending on maturity levels, to be able to get on to do what they needed to do for their particular market,” Godfrey-Billy says.

One way that has materialised is Xero now has playbooks to share experiences, insights and processes across teams in different markets.

As Vamos sought to hone the business for global domination, Xero’s founder Drury recognised that his true passion lay with product and innovation rather than operations, Godfrey-Billy says.

In March 2018, Drury moved into a non-executive director role, and Vamos transitioned into the chief executive’s role. Godfrey-Billy says this outcome provides “the best of both worlds”.

In terms of her own corporate shift from CAO to chief financial officer, she says the biggest change has been in delivering results and talking to investors and analysts worldwide about the company and its prospects.

Putting a value on SaaS isn’t simple

A sticking point among many investors is how to truly value software-as-a-service (SaaS) companies like Xero, which typically have market capitalisations based on expectations of high future earnings but no or little track record of profitability.

“Profit and loss statements are relevant for consistency in the way financial statements are prepared, and for standardising accounting information for shareholders and investors,” Godfrey-Billy concedes.

But she doesn’t hold back when making her case that other indicators are more relevant measures of success.

“When looking at SaaS businesses, additional metrics are required,” she explains.

“When I speak to the investor community, in the financial statements the only numbers discussed are revenue, revenue growth and cash. All of the other things we talk around are SaaS metrics, like subscription growth, average revenue per user, the monthly recurring revenue (MRR), customer lifetime value to customer acquisition cost (CLV:CAC), churn… All these things are incredibly relevant for a SaaS business.”

Since being promoted to CFO, Godfrey-Billy has been on investor roadshows across Australia, New Zealand, Asia, the UK and the US. In these presentations she stands out as a finance leader who is particularly good at engaging on topics beyond the numbers. Personal experiences with Xero’s product, from both an accountant’s and a customer’s perspective, pepper her anecdotes. 

Recalling her time at PwC, Godfrey-Billy laments seeing too many small-to-medium businesses struggle.

“They didn’t have the level of automation and insight, or the benefit of everything being in real-time,” she says. “With Xero and its [now] 700-plus app marketplace, you can create something really specific that can often outstrip the capabilities of ERPs used by large corporates.”

Her enthusiasm is almost evangelical in tone.

From the viewpoint of an accountant in practice, Godfrey-Billy believes Xero’s compelling selling point is the closer client relationships it enables, along with the opportunity to become a virtual finance office.

So does Xero use Xero? Only as part of its billing process, its CFO explains. The company that primarily targets businesses with up to 50 employees is now way too big to use its own product; it uses Netsuite.

From cashbooks to AI

Since stepping up to the top finance job, Godfrey-Billy has needed to find ways to free up time for lots more meetings and associated travel, given Xero’s board and leadership team are dotted across the globe.

Xero’s finance and facilities team is spread between New Zealand – where it has offices in Wellington and Auckland – Melbourne and Sydney in Australia, London and Milton Keynes in the UK, and Denver in the US.

The CFO says she works flexibly across time zones. When possible, she links family holidays with work travel. To help her manage her time better, Godfrey-Billy recently implemented a change that reduced the number of staff reporting directly to her from 13 to eight.

It’s all a far cry from the serenity of Diamond Bay, south-east of Christchurch, where Godfrey-Billy grew up. From the age of seven she was doing the cashbook for a trust set up by her schoolteacher dad. Later, she focused her talent for mathematics into a Bachelor of Commerce and Management at nearby Lincoln University and becoming a chartered accountant. “I wanted a profession,” she emphasises.

And while her training as a CA remains the bedrock of her skills, Godfrey-Billy is excited how her career has gone in a high-tech direction she never imagined as a graduate.

Artificial intelligence (AI) is significantly changing the role of accountants, she says, including those in the finance team at Xero where developers recently built an algorithm that can identify transactions that are subject to fringe benefit tax (FBT) or the entertainment tax rules.

“Rather than someone trawling through multiple general ledger breakdowns, now our robot can sweep through and identify transactions that are subject to different tax rules,” Godfrey-Billy explains.

Across the industry, AI-powered software is taking over many menial processes and allowing accountants to become more efficient in how they deal with data. Last year, Xero announced it had delivered more than one billion machine-learning recommendations to its accountant and bookkeeper subscribers.

“Providing insights for trusted advisers is freeing them to have more clients and do higher value work. They can have conversations rather than get bogged down in the detail,” says Godfrey-Billy. “Embracing AI is essential for the future of the accounting profession.”

The CFO unmasked

While moving to Xero was a major career decision for Godfrey-Billy, around the same time she made another decision that’s been professionally pivotal.

“For too many years in my career, I tended to morph or shape myself into what was required in a particular environment,” she confesses.

“I don’t know whether it’s an age thing or because I did the Global Women Breakthrough Leaders Programme in New Zealand prior to joining Xero and the key message was to be yourself.”

How did she change? “I didn’t. I just took the masks off. I noticed an incredible difference in myself. It was so energising. It’s incredibly draining trying to be someone you’re not.“I went into meetings with Xero not thinking: ‘what do they want?’ I thought if the culture and values don’t fit mine, then it’s not the right place for me.”

Now what you see is what you get.

“I just took the masks off… It was so energising. It’s incredibly draining trying to be someone you’re not.”
Kirsty Godfrey-Billy CA

Kirsty Godfrey-Billy’s tips for making it to CFO

  • Be yourself: “Being an authentic leader matters both for yourself and the organisation you work for. First, it gives you confidence. Second, businesses need diversity to thrive, and you can only bring your best to the situation if you are being yourself.”
  • Seize chances: “I’ve always said ‘yes’ to opportunities that are put in front of me, even if they are outside my comfort zone. Pushing yourself is how you learn the most, so you need to go there.”
  • Networking is vital: “The last few roles in my career have come through connections, people I have already known. It’s important to network, to get to know different people. In particular, don’t burn any bridges, because Australia and New Zealand are small and people talk.”

Read more:

Xero founder Rod Drury on AI and the future of accounting

Why tech is an accountant’s friend