Adrian pearson is A VETERAN UK CHARTERED ACCOUNTANT AND the founder of ledgerscope - A SOFTWARE COMPANY MAking great tools for accountants in practice.

Xero–more funding required?

Having been a fan and user since 2008, I am really pleased to see that online accounting software company Xero are reporting strong customer and turnover growth in their most recent interim announcement.  The announcement covers the 6 months to 30th September 2011.

The key number for me is what they are calling “annualised subscription revenue run rate”, with a value of $18 million.  They currently receive $1.5 million per month from over 50,000 paying customers.

These are fantastic numbers, looked at in isolation, numbers that most of their cloud accounting competitors can currently only dream about.

However, the company continues to make losses and recently put back the date for its commitment to break-even (in favour of expansion, primarily into the US market).  Accumulated losses at 30th September 2011 stand at $32 million.

Expenses are disclosed at an annual rate upwards of $23 million which is, of course, $5 million more than the $18 million revenue figure.

With $11.4 million in the bank and future commitments to a $2.3 million new office re-fit, my concern is whether revenue growth will come quick enough to cover the ever-increasing operating costs – or whether growth plans may need to be scaled-back.

Does the company need to pause for breath and allow its coffers to refill a bit, or should we expect another funding round to finance a continued push into the US?

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