Starting a new business for the first time can be tough. You’ve always dreamed of making a living doing what you enjoy, and you expect to take the world by storm the moment they hear about your new venture.
Xero is a web-based accounting system designed for small and fast-growing businesses.
Described as ‘affordable professional-level accounting software for small businesses’ and ‘the best at what it does,’ it’s no surprise that the software has over 1,000,000 users and is the primary accounting solution for over 16,000 accounting firms.
According to your specific business needs, Xero can either save you heaps of time, energy, and money, or it can end up causing you more hassle than it’s worth. See the pros and cons below to make your own judgement.
Unfortunately, reality doesn’t always work that way. Chances are the world won’t fall in love with your business on day one, even if you could get the word out that quickly. And you soon realise that building a business involves a lot of stuff you probably don’t enjoy: hiring staff, finding IT solutions, and dealing with the dreaded bookkeeping and tax.
Fortunately, you can get help with those last two from another startup—Xero. Yes, the company that everyone loves and has taken the world by storm was once a startup just like yours.
And that’s just one of the reasons why Xero is the best accounting system for startups. Here are some other good reasons:
Every startup needs tools that will help the business grow and also grow with the business. And the Xero ecosystem provides exactly that.
By starting with Xero’s core accounting package, you can bolt on other programs to integrate with Xero as your business grows. Instead of having to toss out software because you’ve outgrown it, you simply add whatever you need to create a state-of-the-art platform that’s tailored to suit your business needs.
By integrating various add-ons you can create eCommerce sites, take online payments securely, build a customer database with an integrated CRM, become more mobile and even manage your team with rostering solutions and workflow management tools.
As your business grows you can quickly add and customise flexible reporting tools to generate reports for KPIs, departmental reports or whatever you need.
And if you find a particular add-on no longer meets your needs, just unsubscribe and bolt-on another one that does.
Xero is one of the most innovative cloud-based accounting packages on the market. With the ability to bring bank feeds directly into the system, they have created a simple way for your business to comply with its bookkeeping obligations.
Your financial advisor can also access the same data at the same time, so you can discuss issues as they’re happening instead of six or even 12 months down the track. And because the software is cloud-based, your accounting system will always be up to date. No more manual software upgrades to buy or install, and no problems with incompatible versions.
13 may be unlucky for some but if you follow these 13 top tips on how to use Xero and make the most out of your account you won’t need luck.
The next step is to set up your bank account feeds, including credit card and PayPal accounts, if you have them. This video shows you how to do that.
If you are switching from another accounting software, then you can import your chart of accounts into Xero, or modify the default chart of accounts.
If you have an accountant, you can seek their help with this decision. However, if you are your own bookkeeper then we recommend using Xero’s default chart of accounts. You can add, customise, or delete these accounts to match the needs of your business.
To make changes to your accounts, go to Settings > Chart of Accounts. For more information on customising your chart of accounts, click here.
Xero makes bank reconciliation easier than ever. Just a few minutes a week spent approving pre-matched items ensures your data is up to date. As Xero is connected to your bank, transactions are pulled through automatically. Xero remembers the last time you categorised a transaction, so you can simply click ‘OK’ if you want it to go to the same category.
You should reconcile weekly, if not daily, to ensure that your accounts are as accurate as possible.
Regularly updated invoices give you a clearer picture of cash flow. With a clear picture of your cash comes the ability to make better business decisions and avoid falling behind on outstanding payments.
Watch this video to find out more about Xero bank reconciliation.
If you have a limited company, ensure that you have a registration number and registered office address. This information needs to be displayed on any invoices you issue.
Go to Settings > General Settings > Organisation Settings to input or update your business’s contact details, including:
Go to Settings > General Settings > Financial Settingsto enter your company details:
You can add users at Settings > General Settings > Users. Add your accountant, bookkeeper, and other necessary stakeholders. This video can show you the roles that can be assigned to your users.
You can find more information on users here:
Next, you can set up your invoices with terms of payment, contract, and logo.
Nailing down your terms of payment can help you to improve your cash flow. Having shorter payment terms can help you to get paid earlier.
To set up various branding schemes, go to Settings > General Settings > Invoice Settings
You also need to link to any active payment services to your Xero account. These may include services like PayPal, Stripe, or GoCardless. With a larger variety of payment options, it is easier for customers to pay you.
This help video shows you how to set up a payment service that will allow you to create a ‘Pay Now’ button on your invoices.
To do this, go to Settings > General Settings > Invoice Settings > Payment Services
Getting paid quickly is crucial to any business. Setting up payment reminders and organising your credit control systems can help you to get paid faster.
Go to Settings > General Settings > Invoice Settings > Invoice Reminders
Only set up payment reminders when you get into the habit of reconciling receipts daily. Chasing payment from customers that have already paid can tarnish your reputation. You can come back to this step once daily reconciliation is part of your routine.
It’s important to learn how basic Xero reports work. Initially, when you’ve input some data, look at your Balance Sheet, Profit And Loss, Aged Receivables, and Aged Payables.
Go to Reports > All Reports to see the options available to you.
Xero Payroll can help you to monitor your staff costs. This function allows you to keep payroll costs in one place rather than having to pull in information from a separate system.
The payroll overview is a comprehensive guide to take you through each step of the setup.
If you are transferring payroll from another system in the middle of the financial year – don’t forget to add the opening balances.
This can be found at Payroll > Payroll Overview
Using Xero’s wide range of apps and add ons is a great way to streamline repetitive processes and save yourself some time.
Finally, if you work with one, ask your accountant to check your set up. They may need to add year-end conversion balances and can ensure that your year-to-date figures are as expected.
Float is one of the highest rated Xero apps available on the marketplace. It is an award-winning cash flow forecasting tool that creates accurate and visual reports for you, and your business. Float pulls through the bills and invoices from your accounting software, using them to populate your forecast on a rolling-basis. Float’s integration with Xero means no more manual data entry, and an always up-to-date and accurate forecast.
To learn more about how to use Float sign up for a free trial today.
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