If you've just started working with Xero, it is normal to make a few mistakes while you're learning. Below are some of the most common and unfortunately costly mistakes that you should be aware of if you want to get the most out of Xero's powerful cloud accounting system.
Not connecting all the bank and credit card accounts dedicated to your business
Make sure that you keep all your business bank and credit card accounts synced to Xero to ensure that you don't miss any sales or expenses in your reports.
Also, make sure that you separate your business accounts from your personal ones to avoid hassles during tax season. Trust us your accountant and bookkeeper will thank you! Doing this also helps you make accurate business decisions.
Not reconciling the bank account in Xero to bank statements
Run a reconciliation report in Xero regularly and then compare it to your bank statements to ensure there aren't any errors or duplications.
Many business owners miss this critical step, which means that they are looking at inaccurate or incomplete data when they check their reports.
Not checking user access and permission levels
Many business owners give key team members full access to their business Xero system and don't review the user permissions at all.
However, the best practice is to provide access on an as-needed basis and review who has access to the system and what permission level they have every quarter.
Also, when your staff members leave, remember to revoke their Xero access immediately.
Not setting financial SOPs (standard operating procedures)
Create a proper financial SOP that describes who is responsible for what and by when, as well as the step-by-step process on how to get things done.
For instance, you can assign your operations manager to run the aged receivables report in the system so you'll know who owes your business money. Then, map out a clear action plan of what happens in specific scenarios such as a payment that's 2 weeks late. You can also have standard replies that the team can send as needed.
Mishandling transactions when you paid with your money
We find that many business owners don't know how to handle transactions when they've paid for a business expense using their accounts. There are ways to capture such expenses paid on the wrong card in Xero so you can still claim the tax deduction.
Avoid Xero Mistakes
At The Back Room, we are Xero Certified specialists. We are always happy to work with you to ensure that you're taking full advantage of all the features in Xero and avoiding costly financial mistakes. Contact us today and let us help you save time and make smarter decisions.
