By Phil Ellerby
If you run a small or medium-sized business, Xero is a clever piece of cloud accounting software that will save you time and money. It will also make your life much easier – and far less stressful!
If it’s implemented correctly Xero will allow you to do:
For those who have never used or seen Xero in action, this article will aim to explain exactly what it can do – and why you should start using it ASAP!
The at-a-glance ‘dashboard’ is the main Xero hub page which displays all your business’ financial information – including the current balance, any transactions and outstanding bills or invoices which need to be paid. It automatically creates charts (as can be seen in the image below) so you can monitor cash flow trends in real-time.
Once Xero has been linked to your bank account feed, it will automatically prompt you about every transaction your business account makes. This means you can closely monitor any expenditure or keep track of bills which need to be paid. All you need to do is ‘reconcile’ them to the right place in your ‘Chart of Accounts’ by using a simple ‘match’ process (outlined below).
Initially, you will need to enter your customer or client details so that you can begin to create and send them digital invoices. Having done this once, Xero can remember the details so you never have to do it again – saving valuable time. This means you’ll no longer dread invoicing because the process has been simplified and automated. If required, you can even add a ‘pay now’ button to your invoice to speed up the payment process. Should you want to start using Xero, we will show you how to do all this as part of our initial training programme.
To make sure you’re paying the right people at the right time, Xero can help you to schedule payments when it’s convenient for you. It can also help to create repeat invoices for repeat customers – helping to maintain a steady cash flow.
Xero also allows you to keep a close eye on all petty cash purchases so that small expenses – such as business lunches or coffees with a client – are accurately recorded (as shown above). This ensures spending never creeps out of control and allows all ‘tax deductible’ purchases to be allocated to the right place in your End of Year accounts. No more unclaimed tax relief because of lost receipts - simply take a photograph and upload it via your smartphone. If required, credit card spending can also be tracked in your main Xero dashboard so there’s no need to keep an eye on two sperate accounts.
One of the best things about Xero is that you can publish VAT Returns and file them directly with HMRC from within the software. You need to have registered with HMRC for online filing to do so, but once this has been set up (we’ll help you to do this) you can file directly from Xero on a monthly or quarterly basis.
If you want to grow your business, create tailored reports (as shown above) to measure important KPIs. And because Xero uses real-time information, you don’t need to wait to find out how your business is performing. If this is something you’d like to do, we can show you how to use Xero’s pre-programmed formulas to make light work of financial reporting.
In my experience, business owners only realise how much time they’ve been wasting on administration tasks once they start using Xero regularly and I would definitely recommend using it.
Firstly, it will empower your accountant and enable them to adopt a business advisory role – using Xero’s detailed insights about your company to help you map out its future and unlock the key to making more profit.
It can also make ‘doing business’ much easier by aligning with loads of unique apps which are designed to help SME owners - whether you’re a farmer, a hairdresser, online retailer or business consultant.
Last but not least, it will ensure your head is no longer filled with numbers (and worry) – giving you space to relax without thinking about work. If that’s not worth an affordable monthly fee, I don’t know what is!
At Northern Accountants, we are Gold partners for Xero (which basically means our cloud accounting team know everything there is about it) and we’ll be happy to discuss it can help you manage your finances more effectively. Please don’t hesitate to get in touch and arrange an informal discussion.