BY A DA M G R E E N E C PA

CLOUD ACCOUNTING FOR SMES WITH XERO

CLOUD ACCOUNTING FOR SMES WITH XERO

Xero is a company from New Zealand that offers cloud and web-based accounting services. With affordable monthly prices, depending on one of the different plans available, it may be what your company needs to have a better accounting with updated financial information and one which is easy to analyze. This process can help many entrepreneurs who also want to have detailed information about their business in an efficient and modern way. Xero has hundreds of thousands of users distributed in countries like New Zealand, Australia, England and the United States, but the system can also be used to handle the accounting of companies in countries of other regions of the world.

CLOUD ACCOUNTING FOR SMES WITH XERO

So you can, in fact, have your accounting in the cloud, with a nice, well-structured system that is easy to use and efficient in the context of companies with different economic approaches and currencies.

Image courtesy of David Terrar at Flickr.com

CLOUD ACCOUNTING FOR SMES WITH XERO

However, it’s always a good idea to talk first to your company’s lawyers, accountants, managers or partners before making decisions related to accounting, which may affect your business in legal terms. Xero is not the only cloud-based system out there. Other systems include QuickBooks and MyAbakus. Xero is notable for having a robust functionality, a large community, an effective help section on their website and an API to integrate with other systems and various add-ons. Above all, one of its main attributes is that it is very nice-looking. The interface feels light, easy to use and it’s a pleasure to work with the system.

CLOUD ACCOUNTING FOR SMES WITH XERO

Basic requirementsIt's exciting to embark on the road to a fresh and good looking accounting, but first it’s important to have these points in mind: • You must have notions of accounting and administration. You

don’t need to have a degree in economy or similar disciplines, but it sure helps to know the basics.

• It is necessary to recognize the value of a well-managed accounting and its importance in the management of a company. This helps overcome the frustration of the first steps.

• Being a web-based system, interaction with it requires an Internet connection. Xero works on mobile devices (it has apps for iOS and Android) and in different browsers. You can also export reports to Excel or plain text files (CSV).

CLOUD ACCOUNTING FOR SMES WITH XERO

Why switch?Many companies have at least one of the following problems: • The financial statements come weeks after the transactions

are made.• Adjusting or auditing records is a delayed process.• The accounting system can’t be permanently seen by the

team. It is administered by a select group.• Information can be stored insecurely, and it may not have

effective backups. Usually the oldest computer in the office is the one that stores the most important information.

• Billing is a tedious process. For service companies there isn’t a recurring billing system or an integration with time tracking systems either.

CLOUD ACCOUNTING FOR SMES WITH XERO

• Reconciling banks, the process of loading and comparing bank statements with accounting, is repetitive, tedious and inaccurate.

• Small business accounting systems tend to be closed, making it difficult to interact with new services through plugins.

First stepsIt is difficult to completely migrate the accounting of a business overnight. You can start with small steps that have great value. For example, start managing billing and collection using Xero. Then you can start managing expenses and payable invoices and finally, after weeks or months have passed, the entire accounting of the company.

CLOUD ACCOUNTING FOR SMES WITH XERO

Heading towards accounting in the cloudThe process to have your entire accounting in the cloud is basically as follows:

• Get an account with Xero.• Prepare the chart of accounts.• Load the initial balances (Conversion Balances) of the previous

system. If the accounting is new, this is not necessary. • Enter customers and contacts.• Adapt the templates for invoices if you want your own design (this is

known as invoice branding). You can export a Word file and adapt it or use the default format that Xero offers.

• Get a resolution from your country’s tax agency for digital billing.• Bank Reconciliation: In the United States, Xero has direct integration

with banks to synchronize statements in real time.

CLOUD ACCOUNTING FOR SMES WITH XERO

Xero-related resourcesHere’s a handy list of websites that can be useful if you need help: • Xero Business Community - A good place to find help about

Xero.• Xero’s official website - It includes prices and product features. • Xero Developer Community - The site for developers who want

to use the API. • App marketplace - A page with add-ons to integrate Xero with

different systems. • Xero TV - Videos to help you use and understand Xero.

CLOUD ACCOUNTING FOR SMES WITH XERO

Analyzing the resultsOnce your company’s accounting is being handled by Xero, it is easy to do financial analysis with the default reports. These include payments per contact, balance sheets, income statements, cash flow, and detailed transactions. The executive report provides indicators of portfolio turnover, invoicing, profit and loss, among others. Another advantage is the possibility of connecting Xero with external analysis services such as Fathom. Recent contentsRead Adam Greene's "Some of the best accounting websites for start-ups"