We’ve been involved in a few conversations recently where new clients weren’t aware of the full capabilities of Xero, and so far, had been unknowingly wasting time, money or resources.
In one example, a client’s previous accountant had done the year end accounts and asked them to post closing balance adjustments. The days of adjustments outside of the source software have gone! Xero can handle it all.
In fact, Xero (and cloud accounting in general) exists to solve the problem of handling the accounting in all different places. Everything can be sorted in one central place – that’s the beauty. It is the single source of truth for your business. Seeing this pop up a few times highlights to us that there’s some knowledge missing here!
So, these questions and confusions caused us to wonder what else business owners don’t know Xero could be doing for them.
We believe every business owner deserves to have the full understanding of what the tools can do. Many of you will have been walked through the basic functions of accounting technology, but haven’t been shown the bigger picture.
Cloud accounting is such a powerful tool when used correctly
It’s the real foundation to your finance function. Everything can be recorded within Xero to then either integrate with other apps for additional financial support (ie cash flow, reporting, credit control and so on), and for preparing year end accounts and tax returns.
When used to its full potential, we can get a meaningful forecast of your future cash position and that is a powerful tool. On the other hand, we’ve seen first hand how impactful it can be when the accounting isn’t done properly in Xero or hasn’t been kept all in one place.
A new client of ours was really excited about getting a cash flow forecast, but their Xero was so out of date we couldn’t even begin to get a meaningful forecast of her future cash position, because we couldn’t even tell her current position.
We also dealt with another client whose Xero was all over the place, and unfortunately, their accountant hadn’t done the necessary postings and adjustments throughout the year. This meant the client didn’t have a clue where they were financially! It had a knock on effect:
- Their salary had been double counted thanks to an outdated repeating journal automatically posting
- The client hadn’t been putting the payments to the right place
- Therefore the assumed profit was less than it actually was
- This resulted in the client getting an inaccurate view of their position
Now, don’t worry. Often things can be corrected – it’s not a doom and gloom story! We helped our client get everything up to date and now they know exactly what profit they have in the business at any given time. They know exactly what their expenses are, can plan accordingly and make the right decisions for their business.
But the point is, getting the fundamentals right and keeping everything in Xero will help you soar. It can handle the whole finance function.
- Prepayments and accruals can be easily accounted for and managed through journals.
- Find & Recode helps you move incorrect transactions quickly and easily.
- VAT returns prepared and filed to HMRC.
- Payroll prepared and posted correctly within the accounts (although granted I know Xero Payroll is not the right solution here for everyone, but many softwares are able to integrate and post the relevant information, you get where I’m going.).
- Xero has a fixed asset register – which records all your assets and handles depreciation, no need for a separate spreadsheet.
There isn’t any adjustment that can’t be done within Xero at the point it is needed.
Xero is the single source of truth, propelling your business further
To get the most value out of it, Xero should be your single source of truth. Everything should be in there. With the input and insight from a trained professional, you can use Xero as more than just a machine for the accounts. It’s the starting point for all the magical fun stuff that can really propel your business further!
- Real time insights will allow you to plan for the future
- You’ll be able to jump at opportunities and take calculated risks
- You’ll have a full picture of your finances at all times
- You’ll be able to rely on those finances to make decisions in business (and life!)
This is the beauty of using it correctly.
You don’t need different information in different places – and you don’t want that either, trust us! What’s filed at Companies House and with HMRC in your tax returns should reflect what is in Xero – ie what is actually happening.
If your accountant is still using old school methods, and asking you to post year end journals then maybe it’s time we had a chat to see how you can do things differently. Let’s help you see more of the magic.