Efficient Accounting with Xero E-Book

Jay Kimelman

• Herausgeber: Packt Publishing
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 216

Veröffentlichungsjahr: 2023

Beschreibung

Xero empowers business owners to gain insights into their business and performance and collaborate seamlessly with their accountants and tax professionals. This book goes beyond the basics and explores the more advanced Xero features, techniques, and best practices for managing sales taxes, budgeting, and reporting.
You’ll begin by diving right into Xero, setting up a bank feed, and exploring its power while experiencing just how easy it is to use. The book will guide you in setting up Xero the right way to ensure that you succeed in each of your transactions. As you progress through the chapters, you’ll learn what spend money and receive money transactions are and be able to easily send invoices and collect receivables or payments, collect and pay bills, and even track your business assets with Xero. Toward the end, you’ll be proficient at producing powerful reports, giving you the keys to running or advising any business.
By the end of this Xero book, you’ll have gained the confidence to add a company to Xero, set up the bank feeds, reconcile the transactions, send invoices, and pay bills, ending up with beautiful financial statements.

Leseprobe

Efficient Accounting with Xero

The definitive guide to optimizing your accounting with proven techniques and best practices

Jay Kimelman

BIRMINGHAM—MUMBAI

Efficient Accounting with Xero

Copyright © 2023 Packt Publishing

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First published: April 2023

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Published by Packt Publishing Ltd.

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ISBN 978-1-80181-220-7

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To my wife Wendy Kimelman and my daughter Abigail for keeping me going and encouraging me to keep writing on weekends after putting in long hours each week. Thank you for your patience and for being my biggest cheerleaders.

– Jay Kimelman

Foreword

Finding people in life to inspire you is a challenge. Finding people to both inspire and challenge your perceptions is even more difficult. Finding people to inspire, challenge, teach, and support you is the hardest. Jay Kimelman is one of the rare humans that has the ability to do all of those things. Jay’s passion shines through in his incremental innovations within the accounting world. He foundationally understands the industry, the technology, the mindsets of the people, and the needs of the small business world.

I first met Jay at a Xerocon almost 10 years before the publishing of this book. I was a young, queer, female business owner in my late 20s challenging everyone in sight for any reason. I lived the part of the “I know tech better than you” because I could program a basic API integration. I was strong-headed, arrogant, and skeptical – the worst combination. Jay had been around the Xero ecosystem longer than me. He was a Certified Public Accountant (CPA) long before me. He looked like a more traditional accountant, and I discounted him based on appearances. Boy, was I wrong. He took every challenge I gave in his stride and thoughtfully provided insight into a different perspective. He was genuine. He was authentic. He was kind in his approach. A few years later, I was asked to become a Xero National Ambassador and work alongside Jay in that role. He reintroduced himself humbly with, “I’m not sure if you remember meeting me, but….” Jay and I built a rapport based on mutual respect, an innovative mindset, and an underlying understanding that the tech we employed could do more. Fast forward a few years, and Jay and I now work side by side on the same team, building High Rock Accounting together.

Jay regularly finds ways to use the tools at his disposal, Xero being one, to build efficient practices. He challenges assumptions and builds logical solutions for firms to better service clients. Reading this book will provide the insights of an understated badass in our industry who brings massive value with his approach.

Liz Mason

Founder and CEO, High Rock Accounting

Contributors

About the author

Jay Kimelman is a CPA and is the director of technology and e-commerce industry lead for High Rock Accounting. Before joining High Rock Accounting in January 2022, Jay was the founder and chief executive officer (CEO) of The Digital CPA from its inception in November 2011.

Jay is a workflow process and workflow automation expert. Jay enjoys working with other accounting and tax professionals in building automation to create efficiency in processes.

Jay received the Xero Most Valued Professional award in 2016 due to his support of the cloud accounting movement. He has also served as a National Xero Ambassador since 2016.

I want to thank the people who have been close to me and supported me, especially my wife Wendy and my daughter Abigail.

About the reviewer

M.D. Khurshid Alam is a Xero partner, Pro-Advisor, and senior bookkeeping manager for a renowned bookkeeping firm in London, UK. He manages the firm’s accounting clients and businesses to provide cloud accountancy, VAT, payroll, tax, and year-end accounts. Khurshid graduated from Jagannath University, Bangladesh with a bachelor's degree in business administration, management, and accounting and completed an MBA from the same university. He has served clients ranging from small to limited companies for the last 5 years. He is also the founder and CEO of Khurshid Accountancy, a cloud accountancy firm. He currently provides consultancy to different cloud accounting apps and works as a reviewer.

Table of Contents

Preface

Part 1: Hitting the Ground Running

1

Xero Basics – Subscriptions and When to Use Them

A bit about Xero

Business subscription plans

Business subscription plan comparisons

Partner subscription plans

Partner subscription plan comparisons

Summary

2

Exploring Bank Feeds – the Heart of Xero

Why bank feeds?

Setting up your bank feeds

Balancing the bank feed

Summary

3

Setting Up Your Organization’s Financial Settings in Xero

Why are settings in Xero so important?

Your first major Xero decision – the COA

Importing your chart of accounts

Maneuvering through the Chart of accounts screen

Tracking categories

Setting up tracking categories

Other settings that require attention

Organizational details

Let’s add a user

Subscription and billing

Financial settings

Summary

4

Restarting with the Fresh Start Method

When to use Fresh Start

Where do we find our beginning balances?

Importing your beginning balances

Importing using the COA

Data entry using conversion balances

Bank feed time

Summary

5

Conversion to Xero Made Easy

When to convert versus using The Fresh Start method

Automating your Xero conversion with Jet Convert

Preparing for conversion by looking into the prerequisites

Preparing your QBDT file

Preparing your QBO file

Time to start the conversion

Converting your QBDT file

Converting your QBO file

Summary

Part 2: Handling the Day-to-Day Processes

6

Recording and Reconciling the Bank

The bank feed basics

No bank feed? Not a problem – import it

Rules, rules, rules

Using Xero to your advantage

Cash coding

Reconciling that account

Summary

7

Invoicing and the Sales Process

Products and services

Setting up invoices (and other forms)

Quoting your opportunities

Time to send the invoices

Repeat

Void

Copy to

Edit

Add Credit Note

Share invoice

Getting paid in Xero

Applying payments from the bank feed

Summary

8

Managing Bills and Purchases with Procure-to-Pay in Xero

Exploring the Purchase Order

Processing bills and the purchase process

Paying bills is super easy

Summary

9

Using Xero on the Go

Xero mobile on the go

Xero features on the go

Battle of the apps in different operating systems

Summary

Part 3: Closing Out the Accounting Period

10

Managing Fixed Assets in Xero

Exploring fixed assets

Adding assets to Xero

Depreciating those assets

Disposing of assets

Summary

11

All You Need to Know about Manual Journals in Xero

The manual journal

Xero’s rules for creating manual journals

Getting into the manual journal

Creating manual journals

The repeating journal entry

Importing your journal

Summary

12

Correct Your Mistakes with Find and Recode

The basics of Find & Recode

Find, the ultimate Xero search tool

Correcting mistakes with Recode

Summary

Part 4: Reporting – Knowing About the Performance of Your Business (KPIs)

13

Running and Customizing Basic Reports in Xero

Reporting in Xero

Saving reports in Xero

Summary

14

Business Analytics with Business Snapshot and Short-Term Cash Flow

Analytics in Xero

Short-term cash flow

Business snapshot

Summary

15

Creating Custom Reports in Xero Using the layout editor

Exploring the layout editor

Customizing the basic report

Starting from a blank slate

Saving your reports

Summary

Part 5: For the Advisor

16

Run Your Practice with Xero HQ

What is Xero HQ?

Clients in Xero HQ

Explorer details in Xero – what is it exactly?

What is Ask, you ask?

Staff in Xero HQ

Practice

Summary

17

Exploring Practice-Wide Report Templates

What are Report templates?

Editing Report templates

Assigning report codes

Using Report templates

Summary

18

Exporting Your Data and Reports Out of Xero

Exporting Xero reports to expand their role

Exporting accounting data to make your life easy

The Schedule C report for sole proprietors

Using Trial Balance apps to make tax time easier

Summary

19

Increasing Your Powers with Apps and Xero

What are apps that are built for Xero?

Why use apps with Xero?

Connecting apps to Xero

What apps should I use with Xero?

Summary

Index

Other Books You May Enjoy

Preface

Efficient Accounting with Xero is the ultimate how-to guide to get started using Xero for your small business or using Xero as an anchor in building your bookkeeping or accounting practice. I have used Xero since the early days in the US, starting my Xero journey in 2012. I have watched Xero grow since then and have been a participant in guiding the direction of the product. I can say without a doubt Xero is the best accounting software for your small to medium business (SMB) or your accounting/bookkeeping practice servicing SMB clients.

Who this book is for

This book was written to guide SMB owners in performing their own bookkeeping and accounting professionals who will build or expand their businesses using Xero. There are no technical prerequisites, but I assume you have a basic understanding of accounting and bookkeeping principles if you are performing services for clients.

What this book covers

Chapter 1, Xero Basics – Subscriptions and When to Use Them, is a primer on Xero subscriptions, the costs, and when to use each one.

Chapter 2, Exploring Bank Feeds – the Heart of Xero, discusses what bank feeds are and how central they are to Xero operations.

Chapter 3, Setting Up Your Organization’s Financial Settings in Xero, talks about setting up the basics in Xero and is a good foundation for a fast start.

Chapter 4, Restarting with the Fresh Start Method, explores the best conversion method in most cases.

Chapter 5, Conversion to Xero Made Easy, discusses how you can fully convert to Xero from QuickBooks if you need transactional history.

Chapter 6, Recording and Reconciling the Bank, explores reconciling the bank, the core process in Xero.

Chapter 7, Invoicing and the Sales Process, shows you why invoicing is the number-one key to cash flow.

Chapter 8, Managing Bills and Purchases with Procure-to-Pay in Xero, discusses how bills and payments are also key to the business cash flow picture.

Chapter 9, Using Xero on the Go, talks about using the Xero mobile app on the go and how it is easy and efficient.

Chapter 10, Managing Fixed Assets in Xero, talks about managing your assets, from addition to disposal and all that comes in between.

Chapter 11, All You Need to Know about Manual Journals in Xero, talks about how Xero makes journal entries easy.

Chapter 12, Correct Your Mistakes with Find and Recode, shows how Find and Recode was a game-changer and it is a staple for a Xero advisor.

Chapter 13, Running and Customizing Basic Reports in Xero, talks about Xero reporting basics and creates a good foundation.

Chapter 14, Business Analytics with Business Snapshot and Short-Term Cash Flow, explores the business analytics and cash flow tools every small business owner must use.

Chapter 15, Creating Custom Reports in Xero Using the Layout Editor, teaches you about taking Xero reports to the next level with Layout Editor.

Chapter 16, Running Your Practice with Xero HQ, shows how Xero HQ is a powerful tool.

Chapter 17, Exploring Practice-Wide Report Templates, shows how report templates are powerful firm-wide reporting tools.

Chapter 18, Exporting Your Data and Reports Out of Xero, focuses on how getting data out of Xero is as important as getting the data in.

Chapter 19, Increasing Your Powers with Apps and Xero, shows how while Xero on its own is great, Xero with apps is amazing.

To get the most out of this book

First, relax; Xero is going to make your life easy. If you are a business owner and you do not already have Xero, start a trial. It is free for 30 days and is fully functional. If you are an accounting professional, you too should have Xero set up, but if you do not, you should start a trial but do sign up to be a partner and gain access to your free firm account. It will give you all of the tools we will explore in the book. Remember that not all feaures will work if you are using a Xero Demo company.

Software/hardware covered in the book

Operating system requirements

Xero

Any web browser; however, Chrome is recommended.

Sign up for a Xero Trial here: https://www.xero.com/us/signup/.

Sign up to become a Xero Partner: https://www.xero.com/us/partner-programme/sign-up/.

I suggest reading through the book, and then grabbing your laptop, tablet, or phone, and then going chapter by chapter, using the examples, and then seeing how they apply to your business.

Download the color images

We also provide a PDF file that has color images of the screenshots and diagrams used in this book. You can download it here: https://packt.link/xyXh2.

Conventions used

There are a number of text conventions used throughout this book.

Bold: Indicates a new term, an important word, or words that you see onscreen. For instance, words in menus or dialog boxes appear in bold. Here is an example: “To get to STCF, we click on the Business menu, followed by the Short-term cash flow option below it.”

Tips or important notes

Appear like this.

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Part 1: Hitting the Ground Running

The objective of this section is to familiarize you with the different parts of Xero, as well as the subscription plans that meet your needs the most. Here, we will lay the foundation of using Xero within a business setting so it is set up to succeed when we start posting transactions. 

This section comprises the following chapters:

Chapter 1, Xero Basics – Subscriptions and When to Use ThemChapter 2, Exploring Bank Feeds – the Heart of XeroChapter 3, Setting Up Your Organization’s Financial Settings in XeroChapter 4, Restarting with the Fresh Start MethodChapter 5, Conversion to Xero Made Easy

1

Xero Basics – Subscriptions and When to Use Them

As we embark on our Xero journey together throughout this book, we are going to review the ways to use Xero on a daily basis in your business. By the time you have finished this book, you will be able to fly through your daily transactions and be an ace at running the reports you need to run your business.

Using the right subscription level is critical to your use of a Xero organization. Here, we will review each of the Xero subscription levels, compare them, and give you an opportunity to find the right plan for your business. You will find the right mix of features and cost to maintain your books while cutting down on expenses.

In this chapter, we’re going to cover the following main topics:

Popular Xero subscription plansXero subscription plans only available as a partnerDetermining the proper subscription for your Xero organization

A bit about Xero

As we embark on our Xero journey together, I think it is important to detail how my Xero journey began. I started the Digital CPA after a breakup with my partner at my former company. That company was built using QuickBooks for the first 5 years of its existence. Later, in 2008, I implemented a full ERP system that was e-commerce-enabled due to the inconsistencies and issues relating to our on-premise use of QuickBooks. No, this system was not cloud-based, but what I learned over the next 2+ years really helped shape me, as I built the Digital CPA a few years later.

I was approached by a prospective client about 6 months after starting the Digital CPA, who was looking for help selecting a cloud -based general ledger software that would integrate with FreshBooks, which was used to track contractor hours and perform their billing. They had one stipulation – it could not be QuickBooks. I found two viable candidates, Xero and Kashoo. After digging a little deeper, I found Xero to be the definitive winner. In my opinion, it had everything to provide my new client with the financial statements and related reports they required.

Within 2 weeks, I found myself Xero-certified and working with my Xero rep and partner consultant to fully immerse myself in the full Xero experience. I was truly excited about this switch to Xero, but I found that most of my prospective clients had never heard of it and were solely focused on using QuickBooks. When I say QuickBooks, I am referring to the desktop version; most of the business owners I encountered were not aware of using the cloud or were nervous to the point of being paralyzed in fear about putting their business data in it. As you are probably aware, this is not an issue today.

Through the years, Xero has received many enhancements, improvements, and additions. We will cover the most up-to-date version we can in this book. Keep in mind Xero releases updates on the fly and the features discussed here may change. For now, let’s see the two main subscription plans available in Xero.

Business subscription plans

You may have signed up for a Xero trial or you are currently deciding on which Xero plan fits your business best. The basic plans advertised for Xero fit the general consumer’s needs.

There are three plans you can choose from:

EarlyGrowingEstablished

Each plan is set up to meet the needs of your business. We will dive into the differences between each plan in the next section.

Business subscription plan comparisons

Xero is built on a simple platform. Each subscription level unlocks features based on the needs of your business, whether it is in start-up mode, growth or scaling mode, or your business has reached maturity.

The Early plan is perfect for start-ups. The cost is low, at $13/month, yet packed with features you need to run your business. The Early plan limits the number of sales invoices and quotes to 20 per month and purchase bills (invoices) to 5 per month.

Depending on your business, this might be the perfect fit. Most of the clients I have seen (small start-up businesses) fit this plan perfectly.

Should your business model require more than 20 invoices or 5 bills per month, then the Growing plan is the solution for you. The Growing plan is Xero’s most popular plan, as it is the “complete” package for most businesses based in the US. This is the plan that most clients are on, at least those that require invoicing and purchasing.

If your business operates globally, and in multiple currencies, the Established plan is an ideal choice. In addition to multi-currency, the Xero Established plan includes Xero Projects and Xero Expenses:

Xero Projects allows you to track time, costs, and revenue by specific projects. You can see project profitability, send bills by completion percentage, and even track project tasks in Trello.Xero Expenses gives you the ability to provide your team with an easy-to-use expense tracking and reimbursement system. Utilizing the Expenses mobile app allows a team member to snap a picture and submit expense details. You can approve expenses on the go on the mobile app and reimburse your team in the same way you pay your other bills.

All Xero business plans include Hubdoc, Xero’s bill and receipt capture tool. Using Hubdoc adds automation to a process, and I personally love automation. The following figure shows a side-by-side comparison of the Xero business plans:

Figure 1.1: Xero business subscription plans

Now that we have had a chance to review the Xero business plans, let’s look at the other options.

Partner subscription plans

If you run or are part of an accounting, bookkeeping, or tax organization, Xero has an awesome partner program. A main benefit of being a Xero partner firm is having access to its partner subscription plans.

There are two Xero partner plans you can choose from:

LedgerCashbook

Each plan has its own value and potential benefits for your firm. We will dive into the differences between each plan in the next section.

Partner subscription plan comparisons

The Xero Ledger plan is just that – a ledger. It has the most basic features, a reporting function, and the ability to post manual journals, which we will dive into later in Chapter 11.

Firms that use the Ledger plan are usually early in their Xero adoption, capture client financial details in order to use the Xero reporting function, or use the extensive app marketplace to add value or efficiency to their workflow.

Cashbook, the remaining partner plan, is one of my favorites and the other plan most of my clients use. This plan is similar to the Growing plan with the invoicing and purchasing functions removed. In the following figure, we can see the Xero partner plans side by side:

Figure 1.2: Xero partner-only plans

Xero has a subscription plan for you and your business, whether you work with a Xero advisor or not.

Summary

As we have seen in this chapter, Xero has several subscription plans, including partner plans (Ledger and Cashbook) and business plans (Early, Growing, and Established). Each of these plans meets the unique needs of diverse business owners, regardless of where they are in the business life cycle.

In the next chapter, we will jump right into the heart of Xero – bank feeds. This is where the fun begins.

2

Exploring Bank Feeds – the Heart of Xero

In this chapter, we will look at the bank feed, a list of the cleared transactions from your bank that are imported to Xero for you to easily record and reconcile. Xero puts a tremendous emphasis on the bank feed, even enforcing a no manual journal to a bank account policy. You will see how to set up your bank feed, reconcile your transactions, and your bank statement at the end of the period, keeping your accounts tied out and your business in the know.

In this chapter, we’re going to cover the following main topics:

Why bank feeds?Setting up your bank feedsBalancing your bank feed to the bank