Learning Xero is a big shift from what you might be used to from older, more traditional accounting systems
To really grasp Xero, the way in which you think about accounting workflows needs to change. Even if the underlying principles of accounting remain the same. This shift in thinking is something we see bookkeepers and business owners struggle with. Especially if they've used another accounting platform for many years.
- Grace Hopper
Once you embrace working how Xero is designed to be used, you'll appreciate the levels of automation, ease of use and simplicity that it brings to your books. Today, let's look at how Xero encourages you to think differently about accounting. How it changes your accounting process and workflow.
Xero is bank reconciliation driven
In traditional accounting systems, the workflow is typically to enter in transactions during the month via the sub-ledgers. You reconcile bank accounts at the end of the month in line with the statements. You identify and create any missing transactions. It's a lot of manual work!
Xero imports statement lines from the bank daily. The focus of your workflow changes to be driven by regular bank reconciliation, rather than transaction entry.
At the time of bank reconciliation, Xero also takes care of one side of the debit/credit entry for you. All you need to do is either match against a transaction you've previously entered into Xero (like an invoice), create a new transaction at the time, or treat it as a transfer between bank accounts. Xero will create all the balancing entries in the background.
There isn't a need to manually reconcile all accounts - a lot of it takes place auto-magically. This decreases the amount of data entry you may have typically done.
Xero promotes one ledger, and supports collaboration
The concept of one ledger means that accountants and bookkeepers both work on the same set of accounts. Instead of having several sets of books at different points in time. It encourages collaboration, which improves our ability to provide relevant real-time reporting to business owners. It reduces the time spent in communication. Going backwards and forwards with accountants and business owners, accessing and updating the information they need. It's available at the click of a button.
It's searchable, and easy to find what you need
This might seem like a simple thing, but Xero has fantastic search features! It's very easy in Xero to search for invoices, bills, payments, credit notes, and other transactions. This reduces the need to keep detailed ledgers to reference information.
For example - where you may have kept a ledger in the past with numbered receipts in order to look it up later, that way of maintaining the relationships between pieces information is no longer necessary.
Xero in the early days nearly did away with account codes since the number itself is typically arbitrary. All that really matters is what the account represents, and how to treat that account in the reports (Xero uses report codes for that). They decided in the end to keep account codes (fearing backlash from accountants), but the principle remains.
It's clever, and saves you time
Clever tools like Find & Recode help you recode source transactions in bulk rather than relying on a journal entry. It's time to let go of manual journals being the only way to adjust accounts! Auto suggestions help guide reconciling bank statement lines based on past treatment. Rules help guide reconciliation based on pattern matching. Data is more predictive, and there are even shortcut keys for those times you do have to key in data - allowing you to spend less time on data entry.
Xero is built around productivity, and steamlined efficiency; Making accounting easier.
Xero integrates with the other tools your business uses
In the past, bringing information in from other systems might have required manual imports of data. You might have even used manual journals. Connecting apps that can post information directly into the accounts reduces this need to manually bring information in.
Those are just a few of the ways in which you need to think differently about accounting when learning Xero.
If there is one key takeaway point, it's this - with automation gradually replacing data entry, the role of an accountant and bookkeeper also shifts. It's not about data entry. It's about auditing and validation of that data. Putting processes in place to ensure the integrity of your accounts, and your reports. If you would like some Xero Training, or more information around how it can work for you, get in touch with us today!