Xero in on Pennsylvania

Xero has announced in a blog that it has released the functionality for companies in Pennsylvania to be able to pay their staff through Xero payroll.  Employees can either be paid through direct deposit or with instant paycheck. As with other locations for those companies electing to use the system, employees are able to enter timesheets themselves at no extra cost.

Pennsylvania is the 6^th most populous state in the US and according to the SBA (US Small Business administration) has around 1 million small businesses employing 2.4 million people. This makes up just under 47 of the Pennsylvania workforce and all of these are prime targets for Xero as they continue to build out support for US State payroll.  Pennsylvania had a higher growth rate in Q3 2015 than the rest of the US (2.5% against 1.9%) and it continues to grow its economy well after the demise of the steel industry.

There is still a bit of work to be done by Xero as they have not yet completed the work to support electronic filing and payments for Pennsylvania. This is slightly disappointing and the same seems to apply to most other states that Xero supports at the moment. However, once its added Xero have committed to delivering the functionality for no additional cost. So far the supported states include; Alaska, California, Colorado, Florida, Georgia, Hawaii, Illinois, Indiana, Maryland, Nevada, New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, South Dakota, Tennessee, Texas, Utah, Virginia, Washington, and Wyoming*. Of these electronic filing is supported in just California, Florida, New Jersey, New York , Texas, Utah and Virginia at present.

Like Georgia, which was announced earlier this month, Xero will remind employers when they need to file and pay their taxes for the employees and no doubt customers will hope that these are added soon. With the addition of Pennsylvania, Xero now supports over 70% of the US small business population. The question is where next for Xero? The most likely target would seem to be Ohio (926,977 small businesses) and Michigan (856,682) as they rank 8th and 9th in the table for the number of small businesses by state. They are the only two states in the top ten not yet covered by Xero and would be obvious targets.

Conclusion

Xero continues to make inroads into the Intuit client base across the US. It will now be interesting to see how quickly they can gain market share with their pure cloud approach.  As they continue to knock off the US states one by one, businesses will find that they not only benefit from the cloud based accounting system but it also takes away the headache of payroll from many. Xero is closing in on providing support for 50% of US states and one suspects they will make a bigger announcement when that landmark arrives.