Top five tips for bookkeeping with Xero
At Linford Grey, we’re getting ready for Global Bookkeeping Week next week (18-20 November).
So we thought it would be useful to compile our top bookkeeping tips for you. But before we get into those tips, ever wondered who actually invented bookkeeping, where bookkeeping originates from and why bookkeeping is so important to you as a business owner?
The first published descriptions of the bookkeeping method were first printed in 1494 in Venice, Italy. Written by the ‘Father of Accounting and Bookkeeping’ Fra Luca Bartolomeo de Pacioli an Italian mathematician, Franciscan friar and collaborator with Leonardo da Vinci. At the time known as the double-entry accounting system, Venetian merchants used this during the Italian Renaissance.
Good bookkeeping is of critical importance to the sustained success of small businesses. Understanding the implications and machinations of financial transactions can help business owners better understand their business and facilitate optimal decision-making.
With Xero, collaborative bookkeeping and accountancy in the cloud has never been more exciting. Over the last couple of years we’ve seen our role as accountants transform from technical gatekeeper to trusted advisor.
Now, back to our top five tips for bookkeeping with Xero.
1. Pay suppliers at regular but not frequent intervals It is easy to succumb to creditor pressure and we all want good relationships but once your suppliers know that they can count on a regular pay run perhaps once or twice a month at set intervals, they’ll settle down and you will have less to reconcile. Don’t pay anything that isn’t on the system awaiting payment.
2. Pay invoices not statements
The chances are that if you pay an invoice Xero will recognise that payment, match it against the invoice and Voila! The bank reconciliation is all but done for you. If you pay a statement balance you have to keep the piece of paper hanging around the office to be sure you’re ticking off the items correctly, it’s time-consuming and can get messy.
3. Update the ledger frequently
Use the Xero Expenses to snap receipts, email supplier invoices, use the Xero folder or snap them straight into Hubdoc, whichever method you use, use it a lot. Knowing what you’re spending and being able to reconcile the bank is critical to receiving meaningful financial information.
4. Keep cash to a minimum
When cash can’t be allocated to transactions it has to go somewhere and it often ends up going against directors’ drawings and being taxed as dividends. When you transact something through the bank there is always a tangible record of who was paid.
5. Go paperless
It doesn’t just help the environment it helps you. Tell your contacts you only accept PDF copies of documents. Those documents will be sat in your email and available to you within a few clicks. From there you can forward them to Xero, Hubdoc and anyone else that might need them. Use the extra office space for something you’ll enjoy!
A professional bookkeeping and accounting service is the cornerstone of a successful well-managed business. It sits at the top of a funnel that will deliver higher profits, better margins and lower taxes.
We hope these five tips for bookkeeping with Xero will help you better understand and grow your business. If you feel you need help with bookkeeping and accounting our team is more than happy to help.
Linford Grey Associates. An intelligent friend. A trusted advisor.