Cloud accounting should be considered as a way to improve and run your business in a more cost effective and efficient way, especially in an environment where online technology can be used for pretty much anything.
Taking each of the major accounting feeds in turn, we explain how they can be used effectively with any cloud software application:
1) A Purchase Order represents the intent to buy a product or service and can be a useful process confirming authorisation of purchases, especially where your Finance Department is not in the same physical location. Specific access can be granted in Xero for authorised employees to create a Purchase Order or alternatively these can be generated using specialised Xero addons, e.g. Unleashed, an inventory solution.
2) A Purchase Invoice is the bill received from your supplier, this can be ‘matched’ to a Purchase Order if these are used, reducing the amount of data input, entered directly onto Xero within ‘Purchases’ or by using Xero Addons like Receipt Bank. We ensure the Contact (supplier) details are correct, and also upload the Purchase Invoice onto Xero against the appropriate nominal code (e.g. stationary). This enables the business owners and advisors to view the invoice directly wherever they are, providing an extremely useful audit trail.
3) Employee Expensesare processed via the ‘Expense Claims’ module, receipts can easily be uploaded onto a Claim via the Xero Apps for Iphone/IPad or equivalent for android devices in preparation for authorisation. Your Finance Department can then check the coding and ensure VAT can be recovered where appropriate as well as actioning payment once authorised.
5) A Sales Invoice is what you send your Customers as proof of purchase. These can be created within Xero (via Word) in a format of your choice, including Company logo’s or once again via Xero Addons (e.g. Vend) which either integrate directly with Xero, or with pdf/scanned invoices uploaded alongside the transaction by your Finance Department.
6) Payroll can be calculated directly on Xero via the ‘Pay Run’ function, although this is not as developed as more established payroll solutions such as Sage Payroll or Brightpay, and currently requires work arounds for the £2,000 Employers Allowance. Our preferred route is calculate via Brightpay, whether weekly, bi-weekly, four weekly or monthly payroll, emailing payslips to the employees and then entering a manual journal to the control accounts which is reconciled on a monthly basis.
7) Entering Bank Transactions is where Cloud Accounting really stands out. Automatic bank feeds by the majority of UK banks enables transactions to be uploaded daily without the risk of manual error. Rules can also be created to ‘suggest’ payments/receipts using payee details, to be coded to certain nominal codes, e.g. British Telecom to Telephone expenses. If invoices are added (Sales or Purchases) and are of the same amount, Xero suggests they might be matched against the receipt/payment.
8) Manual Journals are the last piece of the jigsaw to enable to view the complete financial picture and should be completed by a qualified bookkeeper/accountant. These can include adjustments for revenue if sales invoices are raised before/after shipment ensure sales are aligned with costs, depreciation, stock adjustments, accruals, prepayments etc. and should only be completed once all invoices have been entered onto Xero.
Once the journals have been completed, the Business owner can either review their financials direct on Xero, ask their Finance Department to forward the relevant reports for review, or utilise Xero Addons which provide tailored user friendly reports such as Spotlight Reporting.
All of the above need to be entered accurately to ensure meaningful financials, but with ‘real-time’ accounting now available to SME’s, should also be entered in a timely manner. With the majority of UK banks providing automatic bank feeds (Barclays being the noticeable exception), the challenge is receiving the purchase and sales information from the relevant departments.
Each of our clients are different in terms of resource, location and industry, and we will work together with you to review your current systems and processes to ensure the most effective route of inputting and storing the data in Xero. If your processes are not broken, we will not try to fix them, but we will try and improve them for you!
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