Bookkeeping software like Xero was developed to track business expenses better and base company decisions on hard data. Used effectively, business owners can save time and set their business on the path to financial success.
Making small but recurring mistakes while using them, however, could keep you from maximising the advantage it affords your business. We’ve compiled common setup, administrative, and transaction errors and will show you how to avoid these pitfalls:
Xero Software Setup
Getting a shiny new tool to help you keep track of your expenses on the Cloud can be exciting — but make sure that you aren’t so distracted by it that you rush through and botch the setup. To avoid accounting and bookkeeping problems in the future, make sure you go through this part thoroughly.
- Connecting accounts with your bank
It might be a given to do this, but we’ve added it to be thorough: make sure that, before you start moving your funds around, your business’ bank accounts and credit cards are synced to your Xero file. This way, you’ll have an unbroken record of your transactions at the end of the financial year.
- Customising the Chart of Accounts
Your business’ Chart of Accounts provides all the details of your accounts (assets, liabilities, equity, expenses, revenue, etc., as well as identification codes and descriptions) on your general ledger (GL).
What you’ll find on your Xero file will just be default categories, however. You can customise the account details further according to your needs. Don’t miss the chance to take advantage of this simple but powerful feature and make the information on your ledger your own.
Administrative Issues
Administrative tasks are as unglamorous as they come, but they go a long way in ensuring your processes work (and keep working) seamlessly.
- Subscription ownership and user access permissions
It goes without saying that you should hold ownership of your software subscription. Not only will it allow you full control of who can and can’t access various levels of your Xero file, but it also keeps your business data secure.
Protip: Your financial information should only be shared on a need-to-know basis, so set up a system that reviews access and permissions regularly.
- Devising financial standard operating procedures (SOPs)
Another non-negotiable when running a business well is creating SOPs to fall back on in case of uncertainty. When you clearly map out what needs to happen in specific scenarios, you save time by avoiding the back and forth on how to proceed.
Every great SOP has two things in common: It identifies who is responsible for what and sets the parameters of the duration of their responsibility. Second, it describes what actions should occur to trigger successive actions in a clear step-by-step guide.
Transaction Reconciliation
The entire point of using financial tracking software is to make the process easier and more efficient. The concept won’t hold water if you don’t reconcile your transactions properly or regularly; you won’t be able to trust your numbers otherwise.
- Reconciling Xero accounts to bank statements
The only way for you to be able to be confident in your numbers is to keep a healthy mistrust of their accuracy — at least until you counter-check it against your bank statements. It’ll keep you on your toes and motivate you to do a reconciliation report in your Xero file.
Running this check regularly will help you ensure that your financial records are complete and accurate.
- Paying yourself and other personal transactions
The rule of thumb regarding mixing your business’ funds with your personal finances is not to do it. There should always be a clear line separating your business and personal accounts so it won’t muddle your data when it’s time to file business taxes or make important company decisions.
Additionally, you’ll have to create a slightly different process concerning how you pay yourself depending on your business structure. Xero software can accommodate these types of special categorisations, so you’ll just need to set it up.
To make sure that you make the most of your Xero software, get bookkeeping services from a trusted outsourcing company. Turn to Your Finance Department. We are a financial services provider serving clients in Brisbane, Sydney, and Sunshine Coast.
