Xero User Guide – Beginner Guide on How to Use Xero Effectively for Your Small Business
A couple of years ago, when you needed bookkeeping and accounting service, you had to hire an accountant or bookkeeper. While this is still an option, you have more alternatives today. There is a new revolution that is taking the world by storm in the realm of bookkeeping. This revolution is the advent of virtual CFO service. Cloud based bookkeeping systems like Xero are making bookkeeping not only faster but simpler and more efficient. The service is particularly great for small and medium-sized businesses. Before we look at the pros and how to setup Xero for Your Small Business, let’s first understand what it really is.
What is Xero?
The best way to think of Xero is as a solution that solves most problems that come with bookkeeping. The solution is designed to put an end to:
- Long nights going through accounts,
- Losing track of invoices and unpaid debts,
- Hours spent manually entering data
- Payroll headache
Designed by a New Zealand domiciled public technology company, Xero offers the ultimate cloud-based accounting software platform that makes bookkeeping a bliss. Being cloud-based means you don’t have to install anything on your computer. The platform can be accessed from anywhere.
Xero also automates bookkeeping in Sydney. You simply need to plug in the numbers and the software will take care of the rest.
Using Xero for the First Time
As we mentioned earlier, when using Xero as your virtual CFO service, you don’t need to install anything. There is, however, a setup. The good news is there is minimal setup requirement. You will also be able to find Xero accounts near me to help with the set up. Here are the steps you need to take when using Xero for the first time.
Setup Your Account
The first thing you will need to do is set up your profile. Once you have created your account, you should take time to watch the ‘Getting Started with Xero’ video. You can access it from the top right of the dashboard or through this link.
When setting up, you will be required to provide the following data:
- Display, legal and trading names
- Email address
- Physical and registered addresses
Xero offers expanded functionality for businesses that wish to allow multiple people to use Xero simultaneously. In addition to creating your business profile, you can create customized roles for anyone with a legitimate reason to access your bookkeeping. You will need to create an account for your bookkeeper and accountant in Sydney. You may also need additional accounts for employees and staff members so that they can use Xero to log hours as well as request leave.
Xero allows you to assign roles based on the role of every team member in your company. This means once you create a role, the team member will only have access to the functions and information that is available to the role you have assigned them.
To set user roles, you need to:
- Navigate to Settings and click General Settings
- Click on Users then ‘Add a User’
- You will be redirected to the user management page. Here you can pick from a variety of roles. You can also pick specific user roles and customize them.
Link Bank Accounts
Now that your profile is set up, you need to create a direct feed between Xero and your bank accounts. As a first-time user you will be presented with a banking transaction prompt. Click on ‘Securely connect to my bank’. You will be presented with a search tool that enables you to search for your bank. Once you find it, you need to provide a name for the bank account as well as your BSB and account number. You can add multiple accounts under a single bank. For automatic transaction updates, you have to set up bank feeds through your online banking service.
Doing this allows your bank activities to be imported to your Xero profile automatically. Xero will then input data from your statements on your behalf. This helps eliminate manual data entry almost completely.
To avoid mix-ups, ensure that you create different feeds for each of your credit cards, PayPal accounts and bank accounts. The best thing is that Xero supports a wide range of cards and accounts. If the feeds don’t start working immediately, give it a few days.
Set Up Chart of Accounts
Your business needs a chart of accounts which outlines your various financial accounts on the ledger. This will include the following:
- Savings accounts
- Credit cars
- Machinery & equipment
- Buildings & vehicles
- Liabilities owed
Xero comes with default chart of accounts which are ideal for most businesses. However, if you have unique accounts, you can modify the default chart by adding or subtracting accounts to match your needs. If you already have existing chart of accounts that are tied to another bookkeeping platform you can simply import.
If you are switching from another bookkeeping platform to Xero, you simply need to import the existing data to Xero. This is possible because most bookkeeping software allow you to export and import data in the form of Excel Spreadsheets.
First you need to export the data from your current software as .CSV and then import the file into Xero. However, if you run into problems because your old software doesn’t support .CSV or your data is not digitized, you can seek the help of Xero accountants near me.
Modularity is the best feature on Xero. In addition to the default bookkeeping functions, you can get more features and functions by installing plugins and add-ons. The most popular apps and add-ons include:
- Stripe and PayPal for payment methods
- Hubdoc for automated document entry
- Waddle for invoice financing
- Chaser for automated collecting
- Expensify for expense tracking and reimbursement
Your accountant in Sydney will help you understand the features and functions you need for you to fully automate bookkeeping using Xero. It is always good to consult the team that offers bookkeeping and accounting service so that you don’t leave anything out when setting up Xero.
Things You Can Do with Xero for Your Small Business
Now that your Xero account is ready, it is always good to understand the various things you can do with it.
The best thing about Xero is that it allows you to set up invoices so that you get paid much faster. You can setup invoicing by going to the ‘Business’ tab on the dashboard header and then selecting ‘Invoices’. You will get a streamlined interface that makes it easy for you to add the receiving party, invoice number, reference number, issue date, due date as well as currency.
Set Payment Reminders with Xero
One of the purposes of bookkeeping in Sydney is to make sure you get paid on time. With Xero you can set up a payment reminder on your invoices. To do this you need to go to Settings from the dashboard and select ‘Invoice Settings’. The reminder allows Xero to follow-up on overdue invoices automatically.
Xero for Your Small Business has an amazing reporting feature that makes it easy to generate reports on equity movements, cash summaries, profit & loss statements, balance sheets, sales reports and a lot more. You need to enter additional data to take the full advantage of this reporting feature. You need to enter such data as expenses, invoices and bank feeds. To see the available reporting options, go to ‘Reports’ which is an option under ‘Accounting’ on the dashboard header.
Set Up Payroll
The payroll functionality will reduce payroll management time and costs significantly with Xero for your Small business. Once it is set up, Xero will collect payroll costs in a single location thus streamlining the process and eliminating the need for having separate systems. Setting up the payroll function is a lot more complicated. You may have to consult with Xero accountants near me for this.
Mistakes to Avoid When Setting Up Xero
While it is relatively easy to set up Xero, small mistakes can keep you from taking the full advantage of the software. Here are the most common mistakes clients make in Xero bookkeeping in Sydney.
- Failing to allow immediate online payment. By default, invoices sent by Xero will not be paid online immediately. Adding an online payment only takes 5 minutes.
- Failing to set up Xero chart of accounts properly. Users forget that they can customize the default chart of accounts.
- Not having multiple PayPal accounts set up. Payment using PayPal can be problematic when you accept payment using multiple currencies. To solve this issue, you need to add PayPal accounts for each currency.
- Not following up on the unpaid invoices automatically.
- Not locking dates for previous financial records. Locking accounts prevents users from making changes to the data on and before a selected date. Locking dates prevents errors or deletion in finalized reports.
There is so much that using Xero cloud accounting software can help you achieve. However, how much you achieve will depend on how you set things up. If you are interested in bringing Xero into your business, this guide will help you get started on the right foot. You should also not hesitate to liaise with Xero accountants near me.