Finovate Blog

A newly announced strategic alliance between payroll, benefits, and HR technology specialist Gusto and cloud accounting innovator Xero will bolster growth for Gusto, enable Xero to provide full-service payroll in all 50 U.S. states, and put competitors like Intuit and ADP on notice that a rival has arrived.

“We first began our partnership with Xero five years ago and, since then, they have quickly become one of the most popular integrations with Gusto,” Lexi Reese, Chief Operations Officer for Gusto, said. “We are confident that together we can help business owners manage the back-office complexities that can distract them from growing their companies.”

The strategic alliance will involve a deeper technical integration of the two platforms that is expected to be completed by early 2019. The new seamless experience for SME owners and accountants will provide a single sign-on enabling access to Gusto accounts using Xero credentials, automatically updated cash flow management, and the ability to provide permissions to trusted third parties such as outside accountants.

Other benefits include access to Xero’s business task automation, and a shared ledger that provides a real-time view into business data and cash flow.

“We’re partnering with Gusto because we have a shared vision for building innovative new solutions that help small businesses and accountants thrive in the new economy,” President of Xero Americas Keri Gohman said. “We’re both born-in-the-cloud companies working to build software that makes complicated business tasks more simple and human. By joining forces, we can help more small businesses and accountants find long-term success.”

San Francisco, California-based Gusto has raised $170 million in funding. and its investors include Kleiner Perkins, General Catalyst, GV, Emergence Capital Partners, CapitalG, and Ribbit Capital. The company, which demonstrated its technology at FinovateSpring 2014 as ZenPayroll, rebranded as Gusto in the fall of 2015. The rebrand included an expansion of the company’s services to include both health benefits and workers compensation management.

Last month, Gusto launched Flexible Pay, which enables workers to get paid on a day other than their regularly scheduled payday. Also in June, Gusto introduced its Partner Directory. Dubbed “Yelp for Accountants,” the directory is designed to help SMEs find the right accounting talent for their business. In addition to launching a freemium option this spring, the company began the year forging a partnership with accounting software provider Aplos.

Xero announced an integration with BBVA’s API Market for small businesses earlier this month. In June, the company introduced its Connected Accounting technology that automatically categorizes accounting data to give businesses insights that can help them better manage their finances. Back in February , Xero inked a partnership with IT management solutions provider Kaseya and announced ACH integration with Stripe

Headquartered in Wellington, New Zealand, Xero demonstrated the Business Identification feature of its online accounting system at FinovateSpring 2011. Founded in 2006, the company is publicly traded on the Australian Stock Exchange under the ticker XRO, and has a market capitalization of $3.7 billion (AUD$5 billion).