What is the benefit of Xero accounting software for a small business?
Over two million people worldwide use Xero cloud accounting software. Xero benefits for small businesses include online access from anywhere, unlimited users, data security, and integration with hundreds of other apps. Small businesses can access state-of-the-art online software for a small payment per month and use it as a basis for a custom integrated financial system for their business.
Xero is the market leader due to its mature cloud accounting features. It is entirely cloud-based software, meaning you can ensure that your data is safe and backed up online. Small businesses can easily collaborate with their accountants and financial advisors by sharing access with them. At the end of the year, the accountants can process the year-end much faster than with traditional desktop-based software.
The real-time bank feeds mean that banking information is always up to date. Business owners get great real time management information. They can be on top of their finances at all times with the free Xero mobile app.
Read on to see why we think all small businesses should reap the benefit of cloud-based software. We believe Xero is the best online accounting software and why we recommend it to our clients.
Cloud accounting software
In the bad old days, a small business would purchase and download a bookkeeping package onto your PC and start to enter each transaction from your bank account by hand. Business owners would then enter sales and purchase invoices by hand one by one. If you wanted to collaborate with another team member, you would have to share access to the data. If your hard drive expired, you had to rely on having a good recent backup.
At the end of the year, you would back up your accounting software and send a backup to your accountant, who may have a different version of the software. While they were working on your accounts, your system would be getting more and more out of date.
Luckily in the 21st century, we no longer have this situation. Online accounting software like Xero fixes all these problems. For a reasonable monthly subscription, all your data is held securely on the cloud. You can access your Xero data anywhere you can run a browser from a PC, tablet, or phone.
Collaboration is easy with colleagues and professionals, and you can grant different levels of access to other users. Everyone sees up-to-date information at all times, and software upgrades are a thing of the past for the user. The software is continuously updated, and the end-user will always be using the same version as all the other users.
Xero Add Ons
The base Xero software includes all the standard features of a small business bookkeeping package. However, many addons can be purchased for a small monthly fee from Xero. These include payroll processing, expense management, project tracking, and CIS processing. These addons are purchase directly from Xero, and the functionality will appear in the same online interface. If additional functionality is required, then there are many third-party apps available that integrate with Xero.
Xero App Store
If the built-in functionality is not enough, then the Xero ecosystem includes integrations with hundreds of other systems through the Xero App store here.
The App Store features many different types of software that integrate with Xero. Our clients choose to supplement Xero’s core functionality in many areas and customise it for their particular kind of industry. There are hundreds if not thousands of apps listed on the app store.
Popular categories include debtor management, document management, payment systems, and job costing. It really cannot be stressed too much how the fantastic array of integrations available with Xero accounting software turn it from the best online accounting software to a fully integrated financial system for your small business. Small businesses using Xero like this can make impressive efficiencies and streamline their processes and get on with the essential jobs of sales and marketing and give excellent service to their clients.
Bank feeds and reconciliation
One massive benefit of Xero accounting software for small businesses is the live bank feeds. Once you have granted access to your bank, Xero can pull the bank statements directly from the bank every day. This means the system always has up-to-date bank information and that the bank reconciliation can be kept up to date. Automatic rules can be set up to automate reconciliation of most bank transactions meaning substantial time savings for the bookkeeping staff.
Another advantage of Xero accounting software for your small business is integrating the invoicing function with your financial information. Xero has a comprehensive invoicing module that allows you to email invoices straight from the browser. There is a repeating invoicing function, so this can be completely automated if you send out invoices monthly or quarterly. Once the invoices are sent, you can easily manage your debtors and send statements, thus improving your cash flow.
If the built-in invoicing functionality is not sufficient, there are many add ons available in the Xero app store. There are currently 182 apps listed under the invoicing section, so there will be one to fit your business needs.
Xero Payment System Integrations
One of the most critical functions for small business owners is getting paid! Many of our clients are using Xero to help with this process. Most of the major payment systems have integrations available with Xero. We have clients using Stripe, Paypal, GoCardless, and more. The tight integration means that it is easy to set up one of the payment methods for customers or set up monthly Direct Debit payments. This is another excellent way that Xero can help improve the cash flow for your business.
Hubdoc OCR Document Management
Hubdoc is a comprehensive cloud financial document manager that is included with Xero. Documents are uploaded to Hubdoc, and the sophisticated OCR software will read the information from the documents and enter it automatically into Xero for you. The documents will be securely stored for you, meaning that keeping paper versions of all your receipts and invoices is no longer necessary.
In 2018 Xero bought Hubdoc and integrated it into their accounting software. Hubdoc is bundled free of charge with business editions of Xero.
Hubdoc makes it easy to automate your document flow. There are many ways of getting documents into Hubdoc. You can email bills and receipts straight into your Hubdoc organisation. You can use the free mobile app to upload a photo. Alternatively, you can set up automated connections. Hence, every time you get a bill from a particular supplier, it goes straight into Hubdoc. The tight integration of Hubdoc with Xero makes it a fantastic choice to streamline your small business processes resulting in a massive time saving for your financial staff.
More details of Hubdoc’s integration with Xero can be found here.
Reporting and forecasting
Once a small business has an efficient and accurate data capture system set up, this can be leveraged to provide excellent financial information. Xero has a multitude of standard reports available at any time, not just month or year ends. If these are not enough, customised reports can be designed with calculated figures to give you precisely the up-to-date business information you require.
Xero has essential cash flow and business snapshot tools included, branded as Xero analytics. However, Xero has just launched a paid-for add on called Xero Analytics Plus that includes the following:
- A projection of your bank balance 7, 30, 60, and 90 days in the future to give you better visibility of your potential cash flow in the longer term and help you plan ahead
- See a prediction of future recurring transactions in short-term cash flow (such as Xero Payroll expenses), in addition to repeated invoices and bills that are already scheduled.
- Manually add or remove transactions, so you can see how specific changes might affect your cash position and do some scenario planning.
- Quickly analyse trends in your business performance by customising the date ranges and account codes displayed in the business snapshot.
- Drill down to a transaction level at any point to see how we’ve arrived at a particular prediction
As in every area with Xero, if these reports are not sufficient, there are many sophisticated reporting apps with additional features available in the app store.
Xero is not the cheapest cloud accounting system. The UK subscription costs can be found here. Most of our clients find the standard plan to be the best for them. From the end of September 2021, the price of this is rising to £26 a month. Competitors such as Quickbooks can be found with a lower payment per month. However, we have found that apart from the tiniest small business Xero is the best for our clients.
See our other article on Xero vs. Freeagent, where we discuss that while Freeagent might be a good fit for the micro business, we think Xero is a better bet for the growing business.
Sutherland Black are gold Xero partners
Sutherland Black has been using Xero for over ten years. The majority of our clients use Xero as their core accounting software. We are Gold Xero partners, which means we have passed the stringent training and certification requirements of Xero to gain this prestigious award.
If you are a small business using Xero or are thinking about using Xero, don’t hesitate to contact us here.
We would love to discuss becoming your Xero Accountants in Scotland.
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