Xero Errors Can Be Costly – How To Avoid Them
Xero is a fantastic business tool and you want to get the most out of it to maximise your financial management. If you’ve just started working with Xero, it is normal to make a few errors while learning. We see mistakes that are quite common – and unfortunately costly to go back and correct at end of year. We want you to get the most out of the system giving you better financial records, real time financial data and streamlined invoicing and processing. The following errors are the most common and easily solved:
1. Not connecting all the bank and credit card accounts dedicated for your business
Make sure that you keep all your business bank and credit card accounts synced to Xero to ensure that you don’t miss any sales or expenses in your reports.
Also, make sure that you separate your business accounts with your personal ones to avoid effort in untangling the two. There is no value added when sorting between business and personal expenses – your focus should be on improving your business rather than shuffling paper. Doing this also helps you make accurate business decisions.
2. Not reconciling the bank account in Xero to bank statements
Run a reconciliation report in Xero on a regular basis and then compare it to your bank statements to ensure there aren’t any errors or duplications.
Many business owners miss this critical step, which means that they are looking at inaccurate or incomplete data when they check their reports.
Did you know that you can upload a PDF of your bank statements or other important documents into the Files section of your Xero file so they are accessible for later reference? Using Xero file library.
3. Not checking user access and permission levels
Many business owners give key team members full access to their business’ Xero system and don’t review the user permissions at all.
Best practice is to provide access on an “as needed” basis and review who has access to the system and what permission level they have on a quarterly basis.
Also, when your staff members leave, remember to revoke their Xero access immediately.
When you provide accountant and adviser access to us, we can assist you to get this right.
4. Not setting financial standard operating procedures
Create a proper financial operating procedure which describes who is responsible for what and by when, as well as the step-by-step process on how to get things done.
For instance, you can assign your operations manager to run the aged receivables report in the system so you’ll know who owes your business money. Then, map out a clear action plan of what happens in specific scenarios such as a payment that’s 2 weeks late. You can also have standard replies that the team can send as needed.
We’ll all get a better result when we know what we are doing – exactly what, by exactly whom, by exactly when.
5. Mishandling transactions when you’ve paid with your personal money
We find that many business owners don’t know how to handle transactions when they’ve paid for a business expense using their personal account. There are actually ways to capture such expenses paid on the wrong card in Xero so you can still claim the tax deduction.
Putting in an expense claim is a good solution. There are some steps to work through to make this work.
6. Not understanding how the system can make your life easier
Bank fees, ReceiptBank invoice recognition, Xero to Xero invoice management, add on apps. There are a lot of options to make your life easier, however unless you invest the time to understand the system you won’t get the benefits.
Avoid Xero Mistakes by Working with a Specialist Advisor
The best way to ensure that you’re taking full advantage of all the features in Xero and avoiding costly financial mistakes is to work with us where we have learned the ins and outs of this system.
We’re Xero Certified and would be happy to take a look at your file to give you some suggestions.
We’ve done this before and we do it well. You will get more value from your business when you focus on your unique skills and you engage us to help out with your accounting and bookkeeping support.
Get in touch with us today and let us help you save time and make smarter decisions that are supported by data.