Xero is much more than a piece of software your bookkeeper and accountant use to magically produce financial statements, tax returns and BAS. Many business owners see this powerful software as a glorified bookkeeper. Used to its full potential Xero:
- Eliminates the need to keep paper records
- Has automations that extend beyond what your bookkeeper and accountant require
- Integrates seamlessly with payment services
- Makes managing cashflow a breeze
- Most importantly, can be used for real time decision making
Here is a deeper look at some of the cool features in Xero that will change the way you run your business:
Xero recently purchased Hubdoc which is software that collects and manages your receipts and invoices. This is as easy as taking a photo or forwarding an email. With a little background wizardry in Hubdoc, the invoices and receipts are automatically imported into Xero and either matched with the transaction, if it has been paid, or sits in accounts payable until it is ready to be paid. The invoice or receipt is then stored with the Xero transaction.
Accounts payable/creditors management
Save time on individually entering supplier payments individually into internet banking, by using the accounts payable function. Running accounts payable is a breeze when it works hand in hand with Hubdoc as your invoices are imported into Xero and are sitting there ready to be paid. With due dates set you will know exactly what is coming up for payment and how much you owe. You just need to make sure that the bank account details for each of your suppliers are set up in contacts and you are then ready to select the suppliers you wish to pay and upload their payment details, as one batch, into your internet banking account. If you bank with NAB then the process is made even easier as you can transfer your payments directly through from Xero to be approved in your internet banking app.
Accounts receivable/debtors management
Automate your invoicing in Xero Invoices. If you have standard pricing for your products and services, set these up in Products & Services so that you don’t have to key the same information in time and again. Recurring invoices and reminders on overdue invoices can be automatically sent. You will also be able to see at a glance who owes you money, due dates for payment and the invoices that are overdue and may need an extra follow-up.
Making it easy for your customers or clients to pay is essential in business. Xero integrates with a number of payment solutions including Stripe for credit card, PayPal for payments from PayPal accounts and credit card, and Go Cardless for direct debit. Stripe and PayPal payment options are accessed by customers and clients by clicking on the payment option on your emailed invoice, it is that simple! Fees do apply so you need to weigh up if getting cash in the bank quicker is worth the extra cost. Some of the fees are transferable to your customers or clients.
Xero’s accounts payable, accounts receivable and payment integrations all result in better cashflow management for your business. You can see at a glance on your Xero dashboard what money is in your bank account/s, what money is coming in from your receivables and what money is going out in your payables. If you want to take your cashflow management to the next level we recommend the Profit First methodology. By periodically setting aside customer/client deposits in predetermined proportions into the various profit first accounts, you know exactly how much you have available for expenses, taxes, super, profit draws and emergencies. You can read our Profit First case study here.
Many small businesses, with only 1 to 2 employees try to save money by using the $50 Xero subscription which does not have the auto super functionality. It is worth the additional $15 per month, upgrading to the $65 per month plan, to have auto super turned on. The time you will save is more than worth it. Within a few clicks your super will be paid all from within the Xero software, so no going to your bank account to make a separate payment.
Real time decision making/Xero dashboard & reporting
Used to its fullest potential, Xero is a powerful tool that enables real-time decision making. The dashboard can be further customised to extend beyond bank accounts, receivables and payables. You can set up watch accounts with key accounts such as your sales accounts, GST account, wages paid and cost of sales to monitor your income and key expense items. It also allows for KPI (key performance indicator) and reporting. There is also a whole host of reports that are easy to run from the detail of account level to profit and loss and budgets. Multiple time periods can be compared to assess business performance. If something is not tracking as it should then you can take corrective action, adjusting your business strategy, before it is too late.
The key with getting the most of Xero is to be consistent. My tips are:
- Set up memorisations in Hubdoc
- Email or upload a picture an invoice to Hubdoc as soon as it is received
- Log into Xero each morning when you turn on your computer and reconcile what is there (10 mins max, min takes 2).
- If using Profit First, do your account transfers every 2 weeks and if you pay your employees fortnightly do it on the days that you pay your employees. You can also work this in with either Monthly or weekly payrolls.
- Pay your suppliers on a set day. Depending on the size of your business this might be done weekly, fortnightly or monthly. Again try to tie the payment cycle to your payroll, so that you set aside a dedicated time for making payments and money transfers. It will save loads of time. I do supplier payments fortnightly when I do my payroll.
If you would like specific advice tailored to your business and circumstances, Accounting Heart offers customised service packages where you can work with Sonia one-on-one to help you get with your business. Book your FREE Discovery Call to find out more.
Disclaimer: This is general information only and is not advice of any sort. No warranty or representation is provided by Accounting Heart Pty Ltd as to the accuracy, currency or completeness of the information contained in this blog. Readers of this blog should not act or refrain from acting in reliance upon any information contained herein and must always obtain appropriate taxation and / or other advice as may be appropriate having regard to their particular circumstances.