Every business needs to keep on top of its finances.
Ensuring you are in control of what’s going in and out of your small business’s bank account is critical to survival.
So, how you will handle the bookkeeping of your small business?
There’s the option of using software, but many accounting software have a steep learning curve and expensive.
And for small business, which is low on funds, you must get the most bang for your bucks.
So, what a small business can do to handle its finances without breaking the bank?
The solution? Xero accounting software!
If a small business is looking to take on accounting tasks themselves, then Xero is a cloud-based accounting software made for those small businesses.
Read on to know what makes Xero Accounting Software a better choice for your small business than other accounting software,
What is Xero Accounting Software?
Xero was founded by Rod Drury and Hamish Edwards in Wellington, New Zealand, in 2006. It was initially called Accounting 2.0. By 2020, the company has over 2 million global subscribers and a market capitalisation of over £10 billion.
Xero is entirely a cloud-based accounting software for small and medium businesses.
You can perform bookkeeping functions like invoicing, recording bills, bank reconciliations, VAT returns, including MTD returns and payroll. You can connect your bank account directly to Xero- bank feed.
Xero allows for cash-based and accrual accounting systems, so it is perfect for companies adhering to UK GAAP or IFRS.
What makes Xero a good choice?
Many business owners find the Xero user interface customer friendly and easy to navigate.
Since the Xero is cloud-based, you can access it from wherever you want, whenever you want, without being limited to a single PC.
Xero accounting software can be accessed on your Smartphone and does not require any type of IT maintenance or software installation.
To get started with Xero, all you need to do is purchase the monthly package as per your small business needs and then insert the username and password.
Any information you add or change can also be accessed by other users when you add them to the user’s list.
- A Clear Business snapshot
One of the most excellent benefits of Xero software is that it provides a clear financial overview of your business on one screen- A business snapshot
You can access this report here: Accounting>Reports>Financials>Business snapshot.
Business snapshot is the single most important financial report for you if you are a business owner or key decision-maker. Yet, it is the most underused Xero report.
A picture is worth a thousand words. You can see 5 charts on a single screen- profitability, efficiency, financial position, income, and expenses. You can also see the average time it takes to receive cash and the average time it takes to pay your creditors. By using this, you can compute your business’s cash cycle!
Once bookkeeping is complete, you should be checking this page at least once a month.
- Xero dashboard
Xero’s dashboard provides quick links to the most crucial parts of your business’s accounts and also provides you with a snapshot of overall expenses, bank balances, creditors, and debtors.
The dashboard is the default landing page however did you know that you can customise what to include on your Xero dashboard?
What does Xero Dashboard include?
Dashboard by default has 6 sections:
- Bank accounts- it lists all the bank account connected with Xero
- Cash in and out – a Histogram of cash in and cash out
- VAT return- this will show how many days before a return is due
- Account watchlist- list of individual ledger codes selected to view here
- Invoices owed to you- Unpaid invoices
- Bills you need to pay- Unpaid bills
- Expense claims- expense claims launched by employees
You will find a customise option at the bottom of the page to customise the information to your liking by arranging the different cards around. This will make a more personalised experience.
Xero can be modified to fit all your business needs perfectly.
- Use Hubdoc
Xero completed the purchase of HUBDOC, a data capture tool, in 2018. It is included in all business editions free of cost.
Hubdoc integrates with Xero perfectly.
HUBDOC also has an app. You can now scan a bill or receipt, and HUBDOC’s Optical Character Recognition (OCR) will automatically fetch all relevant data. It saves time on bookkeeping and reduces the chances of errors.
This way, HUBDOC also acts as a second layer of control- first, you check in Hubdoc and secondly in Xero.
- Create and track invoices easily
Those days are gone when businesses used Excel spreadsheets to track all incomings and expenses and then create invoices in a Word Document.
With Xero, your invoices are not only customised for your business needs but creating, and tracking those invoices is also fast and straightforward.
You can also create multi-currency invoices, and Xero will keep track of exchange gain/ loss resulting from movement in foreign currency.
All you have to do just a few clicks, and you can easily create an invoice on your PC or mobile device for a client and then email it.
As soon as you create the invoices, they are recorded and saved, making tracking payments so easy.
One of Xero software’s best features is that the invoices can be “payment-enabled.”
So once it is received, the customer can click and pay immediately with any major credit card.
This allows outstanding receivables, instant reconciliation of customer payments, and quicker cash flow in your Xero register.
You can also create recurring invoices in Xero.
- Automated daily bank feeds
A great convenience in Xero is that you can link your bank account to the Xero software.
This feature will allow a business owner to set up a bank feed that automatically updates and imports your bank statements to Xero Software.
This daily bank feeds mean the immediate tracking of sales invoices, which matches payments against purchases, thus reducing the bookkeeping time and costs.
Again, with technology comes certain risks. It is an excellent practice to keep reconciling your Xero bank balances with your bank account every month. Sometimes, Xero can skip a transaction or two!
- Payroll and pensions
Xero payroll feature will allow you to track, manage and process staff pay and pension in one place.
Xero also provides access to employees so they can request leave online and submit timesheets.
Besides, You can manage and modify any aspect of your payroll and pension using Xero payroll. The information can be sent directly to HMRC or pension bodies from the system, removing yet another job from your ‘to do’ list.
- Free product updates
Another great benefit of Xero software is that when an update comes out, it pushed to all users immediately without the need to wait for a download to your PC, install the latest version, and then restart it.
In the case of Xero accounting software, they release new product updates frequently and are already installed the moment you log in.
- Xero learning
Within my Xero section, you will find unlimited resources to master using this software, and there are many on-demand video, article and very active Xero community and support here.
Xero has a very active app marketplace. You can connect your favourite apps directly to Xero, like payment gateway, CRM, time tracking tools, inventory and much more.
- Interactive credit control
Last but not least, Xero makes it easy to manage sales invoices with the use of many graphs and diagram options.
Plus, Xero even allows you to share financial information with your professional advisors and colleagues, and the best part of it is that there are no limits on users.
You can add as many users as you need without having to worry about paying extra.
How can Xero help run your small business?
Once you’ve your bank feeds working and have reconciled transactions, you’re ready to explore all the reports available to you.
The following reports are just an overview of those available:
- Balance sheet
- Profit & loss
- Cash summary
- Account transaction
- Budget manager
- Statement of cash flow
All the Xero reports have fully customisable features, which enable you to run a report in seconds for whatever period you need.
All the reports are printable and can be exported to PDF, Excel or Google Sheets.
How much does Xero cost?
No matter how your small business grows or what your small business is, Xero pricing plans will fit your every budget.
Xero accounting UK comes up with starter plans beginning at just £10 per month and standard plans going for as little as £24 per month; there’s something for every budget and price range. The premium plan is £30 per month and includes multi-currency functionality. All prices are VAT exclusive.
But each price range offers various features.
For example, the £10 starter plan gives you a monthly limit of 20 bank reconciliation, 5 invoices, and bills, while the £24 plan contains unlimited transactions, unlimited bills and unlimited invoices.
Premium Plan includes everything in standard plus multi-currency options.
Besides, Xero also provides optional extras such as,
Expenses: get the first three months free for 1 user, then £2.50 per month + £2.50 per additional user.
Payroll: get the first 3 months free for up to 5 employees, then £5 per month + £1 per additional employee.
Projects: £5 per user per month + £5 per each additional user.
What support is offered for Xero?
Xero has a complete set of support features, including video tutorials, FAQs and online customer support.
But it currently not has a chat function or phone inquiry support.
This means that solving a query regarding any issue can take a few hours.
With all such features, Xero accounting software has made accounting and bookkeeping easier for small businesses.
These features will give your small business a leg up on the competition in a world where 50% of small businesses fail in the first four years.
Overall, Xero is a very easy-to-use, flexible accountancy package that can grow with your business.
You can speed up the preparation of reports and tax submissions by giving your accountant access to your business accounts through Xero.
You can also find some alternatives of Xero here to help you manage your small business accounting.