I spend my days looking at the Xero files of business owners. Xero is an amazing accounting software programme that helps business owners be more efficient, keep on top of their finances and enable them to make better business decisions in real time. Let me be clear, there is no doubting that. But like anything, there can be some traps and pit falls for the less experienced when starting to use it.
From my experience, here's the top 4 things I see new users get wrong that can result in inaccurate files, the need for someone to conduct a fix up and, well, a solid dash of frustration for all.
1. Applying payments to an invoice AND coding from dashboard.
In some other programmes a payment needs to be applied to invoices to mark them as paid. This is not the case in Xero. With the automagical bank feeds, items can be matched and reconciled once the payment hits the dashboard. There are times, for example when doing batch payments, where a payment is applied before the payment hits the account. In reality, payments can be applied to individual invoices if that's the preference of the business owner or their Advisor- but where people get in to trouble is marking as paid AND coding the payment or deposit straight from the dashboard. Here's an example:
Client pays two of your sales invoices $1000 + $2000 - happy days. Business owner finds those two invoices in their unpaid invoices and scrolls down and marks them as paid individually. They then code the $3000 on their bank feed dashboard directly to their revenue account. Effect - overstating GST collected, or in hurty terms, giving the ATO the tax owed twice and I am yet to meet a business owner keen on doing that. This error is easily identified by looking at the Account Transactions, and clicking on Status. If you've got pesky orange transactions you might have a problem (NB: it doesn't always mean an error to see orange items, eg it is completely normal if you've done a batch payment and the money hasn't shown on the dashbaord).
2. Not doing a Reconciliation Report each month or quarter to see unreconciled items.
The bank feeds are an awesome way to keep on top of reconciling, but things (such as point 1 above and point 3 below) can sneak in without being realised if a Reconciliation Report isn't done on a regular basis. It can be found under Manage Account > Reconciliation Report (below). This is another way to find the pesky orange transactions.
It's also a great idea to check the bank balance is correct against the actual bank balance and publish a copy of the Reconciliation Report.
3. Using the (uh-mazing) Xero Touch app but paying from the wrong account.
The Xero app is a great way to snap your receipts and allocate to an expense account on-the-go BUT I've noticed many business owners don't realise that if they have more than one account, they need to choose the correct account that the receipt was paid from . Otherwise, it all arrives beautifully with a copy of the receipt attached BUT to the wrong account, creating more, you guessed it... more orangeness. There are work-arounds and ways to fix but life is much easier if you choose the right account in the first place.
4. Not engaging the services of a Certified Xero Advisor.
Get it right from the get-go. An hour or two assistance with a Xero Advisor that can ensure your file is set up is correctly, and that you understand how to drive it is money well spent. It's far better to get it right in the first place, than wait til you have one red (orange) hot mess of a file! You can find your nearest Xero Advisor by clicking on this link here
Disclaimer: I have nothing against the colour orange. I rather like orange.
Gabrielle Osborne (BAcc) is a small business specialist who loves to help business owners focus on what they do best. An innovation enthusiast and determined problem-solver, Gabrielle can change your life too.
m: 0410 546 000