Xero's Data Entry Tricks You Did Not Know About
Transparency is wonderful and yields better decision making. On the flip side, it also bubbles up the marketing rubbish we all have been preached. Such is the case for Xero when CCPA data privacy regulations rolled in (January 2020) and Xero had to dust off some cobwebs and come clean to their customers on how customer data entry is being handled by their magic expense app.
tl;dr Xero uses CloudFactory (cloud labor platform) for data extraction of customer business receipts & bills in order to provide automated data entry as an expense management solution.
It’s worth a listen to learn more about the work CloudFactory does outside the scope of the work they do for Xero. The interview covers how Expensify (a famous SF expense management company) also uses CloudFactory and a host of other companies. Mark has built an interesting company worth learning about. Hats off to Mark!
You are sending your business and personal activity offshore. That data in the wrong hands is a gold mine for social engineering. Not the type you see in movies with Russian hackers bouncing traffic around satellites but the local domestic type like identity theft and anticompetitive business behaviors.
There is also the Internal Revenue Code Section (IRC §) 7216. According to the IRS, IRC § 7216 is “a criminal provision enacted by the U.S. Congress in 1971 that prohibits preparers of tax returns from knowingly or recklessly disclosing or using tax return information.” … “A convicted preparer may be fined not more than $1,000 or imprisoned not more than one year or both, for each violation.”
Finally, if you serve in California or Californian customers and not disclosing offshore labor then you fall out of compliance.
But don’t worry, there are options. That’s the idea behind transparency forcing functions like CCPA, GDPR, HIPAA et al.
Review privacy policy especially the subprocessors section to see who is tied into the loop. Then google those names to find out what they do.
Don’t sell your soul through clever marketing or fancy gifts. I’d think your data is more important than the few hundred dollars these companies use to buy your soul with.
Let me know what you think...
Are you concerned that a 3rd party is looking at your receipts?
Is data privacy on your mind?
As an accountant (if you are one) do you value your customer's data enough to recommend Xero as a smart solution?
tl;dr Xero uses CloudFactory (cloud labor platform) for data extraction of customer business receipts & bills in order to provide automated data entry as an expense management solution.
Marketing vs Reality
As competition in the cloud became fierce, accounting software firms needed to release new features to give them a competitive advantage over competitors deploying daily into the cloud and directly into customer hands. With that was born the MVP (minimum viable product): marketing making bold claims for features barely matching those claims.
Xero Expense App Data Entry Tricks
Such is the Xero Expense app which claims to automate receipt scanning, data entry and a host of other bookkeeping duties using “a trusted third party”. Who is this mysterious 3rd party? I thought I was trusting Xero and now there is another party in the loop?
Behind this facade is CloudFactory. San Francisco based cloud labor platform where businesses get instant access to virtual workers for tedious and repetitive tasks. Businesses like Xero use CloudFactory to manage an offshore human labor team typically located in Africa and Nepal working for pennies to extract data from your business receipts and bills.
Due to transparency regulations like CCPA in California, we now know about this trusted third party by checking out Xero’s Privacy Policy under Xero’s Subprocessors: https://www.xero.com/us/about/legal/xero-subprocessors/
How this works
The company behind Silicon Valley’s dirty little secret
Andrew Warner from Mixergy did a great interview with Mark Sears (CEO of CloudFactory) titled “The company behind Silicon Valley’s dirty little secret”.It’s worth a listen to learn more about the work CloudFactory does outside the scope of the work they do for Xero. The interview covers how Expensify (a famous SF expense management company) also uses CloudFactory and a host of other companies. Mark has built an interesting company worth learning about. Hats off to Mark!
Why Care?
If you use Xero Expenses for small claims then this might not be of concern to you. However, if you are a business owner, an accountant or a bookkeeper then take note.Business
If you are a business owner or process bucket loads of expenses through Xero to offset your profits, job costing, and employee reimbursements then take note.You are sending your business and personal activity offshore. That data in the wrong hands is a gold mine for social engineering. Not the type you see in movies with Russian hackers bouncing traffic around satellites but the local domestic type like identity theft and anticompetitive business behaviors.
Bookkeepers & Accountants
As a trusted advisor for your clients you are responsible for the advice around accounting or bookkeeping. If your clients use Xero it’s time you told them what’s going on with their data. Especially if they are based in California where tight CCPA data privacy regulations are finally putting a stop to these shenanigans.There is also the Internal Revenue Code Section (IRC §) 7216. According to the IRS, IRC § 7216 is “a criminal provision enacted by the U.S. Congress in 1971 that prohibits preparers of tax returns from knowingly or recklessly disclosing or using tax return information.” … “A convicted preparer may be fined not more than $1,000 or imprisoned not more than one year or both, for each violation.”
Finally, if you serve in California or Californian customers and not disclosing offshore labor then you fall out of compliance.
But don’t worry, there are options. That’s the idea behind transparency forcing functions like CCPA, GDPR, HIPAA et al.
How to avoid getting caught with your pants down
The golden rule to remember is that if it takes time to process something like invoice data extraction then 99% of the time it's done in a human-powered back office. The other 1% of the time it could be a bug since extracting data from receipts isn’t rocket science really. Well maybe.. But unlike self-driving cars that process millions of transactions per second you have to really ponder why would receipt processing takes minutes to hours.Review privacy policy especially the subprocessors section to see who is tied into the loop. Then google those names to find out what they do.
Don’t sell your soul through clever marketing or fancy gifts. I’d think your data is more important than the few hundred dollars these companies use to buy your soul with.
shout out to the VCs that funded the $500 gift card Brex just sent me— Celine Halioua (@celinehalioua) January 7, 2020
Possible ways Xero can fix this
Replace the Xero Expense App backoffice receipt / bill / invoice data extraction serviced currently handled by CloudFactory with a real-time machine powered service. There are plenty of interesting 3rd party API solutions that can address this problem immediately. Saying that, Xero's $70m acquisition of HubDoc is NOT the solution; more on that in the next blog.Let me know what you think...
Are you concerned that a 3rd party is looking at your receipts?
Is data privacy on your mind?
As an accountant (if you are one) do you value your customer's data enough to recommend Xero as a smart solution?
-Ari
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