6 Ways You May Be Using Xero Wrong and How to Avoid These Mistakes
If you’re new to using Xero, it’s completely understandable to make a couple of mistakes at first. However, some mistakes can be costly and it makes a huge difference to be aware of them in order to avoid falling into the same traps.
As a Certified Xero Accountant in Dubai and with over 15 years of experience in working with small- and medium-sized business owners, we’ve spotted some frequent mistakes that are rather easily avoidable.
Here are some of the most common ones:
1. Not all business bank and credit card accounts are connected
One of the most basic rules is to connect all bank and credit card accounts dedicated for your business to Xero. By keeping everything synced to this powerful cloud accounting software, you can be sure that you won’t miss any important sales or expenses when you generate your reports.
Another important reminder: keep your personal accounts separate from your business accounts. Not only will this make accountants and bookkeepers happy, but will also help you make sound business decisions according to the real financial situation of your business.
2. Not doing bank reconciliation in Xero and comparing to bank statements
Make it a point to run a reconciliation report in Xero regularly and then compare it with your latest bank statements. This is an important step to ensure that there are no mistakes and duplicates, and that you are looking at complete and updated data when you check your reports.
3. Giving full access to all team members
We were surprised to find out that many of the business owners we work with give out full access to their Xero account to team members.
As a Certified Xero Advisor, we would recommend that you carefully review the user permissions and provide access to your account on an “as-needed” basis only. From time to time, perhaps every quarter, find the time to review who has access and the permission level that you’ve granted.
When someone who has access to your system leaves, make sure to revoke access to Xero.
4. No Standard Operating Procedures (SOPs) in place
No matter how small your business is today, if you intend to scale it in the future, you need to have SOPs in place.
Many of our clients don’t have a proper financial SOP that outlines who is responsible for specific duties and by when. They also don’t bother developing a concrete step-by-step process on how to get things done.
You can establish an action plan on what should be done on certain scenarios such as late payments and prepare standard responses that a designated member of the team can send when necessary.
5. Not customising the Chart of Accounts in Xero
Xero has a Chart of Accounts tool which gives you a complete list of all accounts in your general ledger including Assets, Liabilities, Revenue, Expenses, and Equity.
Now, some people don’t know that this is highly customisable and that you can even create or change new and existing identification codes for these accounts. For instance, if you’re running paid ads on social media, you can track costs separately from the overall marketing expenses by creating a separate account.
6. No process for managing receipts
Another common mistake is that business owners don’t have a clear process for organising receipts.
As small business accountants in Dubai who work with hundreds of clients, let us tell you that doing a mass clean-up at the end of the financial year can be a huge hassle. So avoid the headache of losing receipts by taking advantage of Hubdoc which comes free with every Xero subscription.
What’s awesome about this receipt management app is that it has an auto-fetch feature that can extract data directly from its source.
Work With a Specialist Xero Accountant in Dubai
Having access to a powerful accountancy software is one thing, but using it correctly to your advantage is another.
The best way to ensure that you’re taking advantage of Xero’s full range of features is by working with experienced Xero partners.
As a trusted cloud accountant in Dubai, we know the ins and outs of Xero and can help you avoid costly financial mistakes.
Still using manual spreadsheets? It’s time to transform your business– get in touch with The Accountant today and let us teach you how to work smarter and more efficiently.