Cloud accounting saving time and improving information
Xero is making a big difference in my business. I wrote a few weeks ago about my decision to move from spreadsheets to cloud accounting software, and you can read why I chose Xero in that article. Since then, I’ve been implementing Xero, and cloud accounting has saved me time and is supplying better information. Don’t just take my word on it. You can find out yourself by giving Xero a 30 day free trial, actually using a cloud accounting package is the only way you are ever really going to find out whether it’s for you.
What are the 5 big benefits of Cloud Accounting?
Benefit 1 – Cloud accounting eliminates manual data input
Eliminating manual data entry is the biggest single advantage of cloud accounting. Manual data entry is time-consuming, and is the source of most accounting errors. My experience is that finding those errors can often take ages too. Data input without re-keying any information and getting it right first time is a huge benefit. It’s the key to making sure the time you spend on your finances is all about making use of good and up to date information and not processing data.
From Internet Banking
As soon as you initialise Xero, it asks you to link a bank account. Once the account is linked, the Xero API takes care of automatically importing the latest transactions on the bank statement. Many of my transactions recur every month and Xero makes handling these very easy. I’ve been able to set up rules for these so each time Xero sees a particular entry on the bank statement it posts it to the same place in the accounts. So, every month when there’s a mobile phone direct debit Xero places it in the telephone charges account.
From Credit Cards
It isn’t just bank transactions that Xero can import automatically. It does the same with my business credit card. I use credit card for nearly all my business spend, so 99% of all my business transactions arrive in Xero without any manual re-keying from statements and receipts. This is a huge time saver.
From Payment Processors
Linking accounts extends further, and Xero can talk to Paypal and other payment processors such as Stripe. I’ve implemented Xero for our local sports centre where I’m pro bono finance director. The sports centre uses both PayPal and Stripe to collect monthly membership fees. I’ve integrated the sports centre accounts with Paypal, and anything paid in that way arrives in the accounts on a daily basis. I don’t need to integrate Stripe, as those transactions go straight to the bank account anyway. These are picked up each time Xero imports bank transactions.
Benefit 2 – Cloud Accounting creates and sends invoices
Raising invoices when you use spreadsheets is a messy business. In the world of cloud accounting invoicing is built right in, as is the ability to email the invoice to the customer from within the Xero app. Xero provides an invoice template that is very easily customisable with your own logo, company details and payment information. The big plus is that it will also generate automatic invoices for recurring billing. So if you have a client that you bill the same about every month then Xero will raise the invoice and email it to the client each month without you even logging on to the system.
Benefit 3 – Cloud accounting makes taxes easier
VAT returns with a single click
Making sure everything was ready for the quarterly VAT returns for my company and for the sports centre has always been a full day activity. Last quarter I spent less than an hour. Xero raised all the sales invoices, so all that information is already in the system. Xero imported 95% of expenditure automatically from bank statements and credit cards. All I need to do is make sure everything has been fully posted. I still need to enter any cash transactions, but there aren’t many of these. After that producing the VAT return is a mouse click on a report, and submitting it to HMRC is only a matter of adding the login to Government Gateway.
Making tax digital
I’ve not arrived at year end yet, but I’m expecting corporation tax to be easier to submit. Within 18 months spreadsheets aren’t going to be an option for producing accounts. The UK Government’s white paper “Making Tax Digital” is going to mandate the use of accounts submission from an accounting package, and will move away from annual submission of accounts to HMRC to quarterly submission. Cloud accounting and Xero will be invaluable once Making Tax Digital is enshrined in law.
Xero gets rid of HMRC basic PAYE tools
I hate HMRC’s basic PAYE tools. The only reason I have used them up to now is that they are free. In my opinion it’s just as well its free, because the quality of the package doesn’t warrant a payment! A payroll package that can’t produce a pay slip is really not on. It’s somewhere else that Xero is going to save me time as we enter the new PAYE tax year. I’m implementing Xero’s payroll for the sports centre, and I’m hoping that theres no more manual preparation of pay slips. Data entry will be easier too, I won’t need to keep time sheets in Excel to calculate the number of hours each member of staff has worked and the amount due. Instead this information will go straight into Xero and Xero can crunch the numbers, issue the payslips and submit the monthly information that HMRC require.
Benefit 4 – Cloud accounting is the first step to employing a book keeper
I’m a Chartered Accountant, so I’ve always done all my accounting and tax. As the business owner this really isn’t best use of my time. While I was using spreadsheets handing over the book-keeping role to someone else was always going to be messy. Xero puts proper process and structure around all the financials.
Xero allows access to the company accounts by multiple users. The use of a spreadsheet confined all the accounting to just me. With a cloud accounting package such as Xero I can get other people to help me. At the sports centre I can set up access for the centre manager so that she can enter the day-to-day cash transactions directly rather than supplying me with the information on paper. I’ve saved quite a lot of time already, so the need to employ a book-keeper isn’t quite as pressing as it was, but the system is there ready for me to do it.
Benefit 5 – Cloud accounting gives better data analysis
Spreadsheets are great for creating reports, graphs, pivot tables and so on. You can export data from Xero into a spreadsheet if you want to use these functions. Where spreadsheets aren’t good is with the source data. Xero can record the source data in a much more structured way which opens up many more possibilities when you want to report on the data.
Let me explain. There’s a practical limit on the number of columns of analysis you can have when you input your costs to the spreadsheet. many more than 10 or 15 and it becomes quite cumbersome. Xero, on the other hand, has a structured chart of accounts. This structure will allow you to have several hundred different account codes if you are so inclined. Automatic posting means using a large number of different codes is easy to handle.
This year I’ve increased the sales analysis for the sports centre to show a separate income for each sports activity that takes place. In Excel it was only practical to post a single figure. With Xero I’ve got a full breakdown of every activity that uses the sports hall. With this level of detail it becomes much easier to spot trends and see what might be driving them.
Xero has lots of built-in reports, that means you don’t waste time reinventing the wheel in a spreadsheet. You only export data outside Xero when you want to do some reporting that really needs customisation.
Xero can benefit you too
You can check out why I chose Xero over the other cloud accounting packages in the marketplace in this article. But in all honesty, the best way is to find out for yourself by opting for a 30 day free trial. You can use the free trial to see what Xero can do first hand, either by setting up some of your own business, or playing with the demo company.