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Zeroing in on Xero: How to use your accounting tool to its fullest

By Martin Sestakov, Senior Consultant, and Alex Talia, Consultant, Private Client Services 

There’s a reason we use and recommend cloud-based accounting software Xero for all our clients: It’s effective.

Xero is more than just a simple accounting tool; instead, it’s a powerful platform that helps you monitor, manage and analyse your company’s financial health – all in one place.

There’s no more switching back and forth between software programs or entering data multiple times. Xero works across multiple devices and access points, ensuring your entire team stays abreast of budgets, invoices, bills, and other important financial data. 

New to Xero? Want to use the available tools to their full advantage? Here are five features that we recommend:

1. Take advantage of the dashboard – customise it.

Each Xero dashboard can be fully customised to your needs. Use it to track and chase debtors and creditors, monitor profits and losses, keep an eye on bank balances, or watch specific areas of your business operations. Use this to your advantage, and tailor your dashboard to the exact goals you’re trying to achieve.

Xero dashboard image

Your Xero dashboard may be fully customised to your needs.

For example, if you’re on a tight budget around the holiday season, you can use the “account watchlist” feature to configure your dashboard to specifically track entertainment expenses. Then, once the season comes to a close, edit your dashboard and move your next goal (or watchlist) to the forefront. This puts your current concerns front and centre every time you log in, keeping you focused and helping to ensure that your financials stay on track.

Xero watchlist feature image

Watch what you’re spending this holiday season with the ‘watchlist’ feature.

2. Track aged debtors/creditors, and start following up.

Cash flow is crucial when you’re running a business. But so many of our clients are cash-strapped – and it’s often because customers, partners or clients aren’t paying their bills in a timely fashion.

Xero can help solve these challenges by both monitoring your cash flow, and making it easier to track and follow up with aged debtors and creditors. Track owed balances in a variety of time frames (<30, 30, 60, 90 days, etc.), and create regular reports to ensure you follow up with those debtors as soon as they’re overdue.

Xero invoices owed image

Follow the money. Xero helps you to stay on top of invoices owed.

We recommend that you set up monthly aged debtor follow-up reminders. We appreciate that you don’t want to create any conflicts with your customers, partners or clients, but don’t let them take advantage of you and use you as a bank.

Be sure to check out our recent blog for more advice on tackling cash flow problems or enquire about our virtual Chief Financial Officer (vCFO) services, which include monthly cash flow reports.

3. Run profit and loss performance reports.

Do you know how profitable your business is? Or whether those profits are trending upward or downward? What about how much you’ve gained or lost on specific products or lines of business? Xero can analyse your profits and losses on a month-to-month or quarter-to-quarter basis, helping you spot trends and course-correct before it hurts your bottom line.

Be sure to monitor your reports for any big variances. These could be a case of manual error or a cause for real concern. If you see something that looks suspicious, simply click the figure to see the list of transactions associated with the report. Then, make sure all items are coded to the right account. If they are, you may want to rethink your strategies to ensure your organisation remains in the black.

Xero profit and loss report image

Are your profits running on an upward trend?

4. Look for budget variances, and plan future budgets accordingly.

You can also input your budget, and track your business’ performance against these budgets over time. Budgeting can be a powerful tool in predicting future cash flow positions – especially if profits are low or a season of slow sales is impending.

As an example, let’s say that profit reports show December is generally a quiet month in terms of sales. Your fixed operating expenses are going to remain constant, regardless of what you bring in for the month. Find ways to boost your bank balance to protect your business before down times. If it looks as though the business will be running low on cash, the budget will give you an opportunity to consider opening a line of credit with a bank at the right time.

We help clients to use Xero and Futrli — a forecasting and reporting tool that integrates nicely with Xero  — to plan ahead and prevent financial mishaps before they happen.

5. Stay on top of your cash flow.

Running out of cash faster than you expected? Always hard up for money when it’s time to pay the bills? Use Xero’s cash flow statements to get a comprehensive look at where your money’s being spent. Analyse starting cash and ending cash balances, keep an eye on your investments, and spot spending trends that could be bringing your organisation down. Catching bad spending habits early is crucial to staying financially healthy.

xero cash flow image

Do you know where your money’s being spent?

Management and reporting services

At CharterNet, it’s no surprise that we recommend Xero to our clients. For some, this may require moving from a different accounting system, or it could mean migrating from old-school Excel and spreadsheet methods of accounting.

Regardless of the starting point, we help business leaders to fully leverage Xero’s tools for their own unique financial situation and goals. Here’s what that process looks like at a glance:

  1. We learn about your business and its financial health.
  2. We teach you to use Xero, set up the files and complete bank reconciliations.
  3. We work with you to establish realistic budgets.
  4. We produce a detailed report and provide analysis, calling particular attention to income, expenses, aged debtors and creditors.
  5. We clean up the balance sheet by running an analysis report on a monthly basis. We also look back to find duplicate and dormant accounts – something only a third-party can truly do effectively.

We create a custom dashboard report, using Xero and Futrli. We look at getting more out of your data by reviewing relevant ratios including product percentages of sales, wages vs. sales, and more.

Our management and reporting services also include the deep insights of our financial professionals. For organisations without a dedicated CFO or financial function, this guidance can be key to long-term financial wealth.

Want to learn more? Contact CharterNet today for a complimentary discussion.