Posts Tagged ‘xero’

Tutorial: How to Reconcile Your Bank Account in Xero

| Bookkeeping, Small Business

Tutorial: How to Reconcile Your Bank Account in Xero

You know that you need to reconcile your bank account in your Xero software, but you’re not sure how.

In this tutorial, I’ll give you a step-by-step process of how to reconcile your bank account.

4 Steps to Reconcile Your Bank Account in Xero

Step 1. Log in to your dashboard.

Step 2. Click the Accounts tab.

Step 3. Find the bank account / PayPal / credit card account and click on “Reconcile”. It will have state the number of transactions that need to be reconciled. For example “Reconcile 24 items”.


Step 4. You’ll see a list all of your bank statements on the left, and the Xero transactions on the right. If the right transaction is green, it means Xero has found a match with either an invoice or bill. You can click the “OK” between the two and match it.



TIP: Even though Xero will try to match your items, it sometimes get it wrong or doesn’t find a match at all. Read on to find out how to reconcile those special situations.

What to Do When Xero Doesn’t Find a Match

Step 1. Use the find and match feature by clicking on the last tab of the transaction box “Find and Match”.

Sometimes Xero finds multiple transactions with the same amount. For example, multiple invoices or bills with the same gross amount. When you click on Find and Match, a list of all unpaid invoices or bills will be shown by date which you can then match to the right bank transaction.

Step 2. Another situation can happen where a bill wasn’t paid to the correct amount and perhaps is missing a few cents to a few dollars. True story! Xero won’t know that and can’t match it. To find it, click on “Find and Match”, find the bill, and scroll down to “+Adjustments” and choose Minor Adjustment.

TIP: Don’t confuse this with an underpayment of an invoice – credit notes are used for when invoices are not paid to the correct amount.

TIP: You can also include bank fees in the “+Adjustments”

If you need to split the amount between different invoices, you can do that using the split transaction feature. Xero will automatically suggest a balance to split.

Step 3. If you received money for two invoices, in one payment, then you can click on “Find and Match”, find the two invoices, and click on both of them to reconcile the payment. The two amounts need to be equal to the payment for the transaction to turn green and click “ok” as usual.

Step 4. Lastly, you can have partial payments towards invoices and bills, and may have to “split” the invoice to match the payments. In the “Find and match” tab, if you have an invoice with a partial payment, click on “split” and Xero will split the amount to match the bank statement you are working on trying to reconcile.






What to Do When Your Transaction Isn’t in Xero

What do you do if the transaction hasn’t already been posted to your general ledger?

Step 1. Click the Create tab button.

Step 2. Type the name of transaction that shows up on the bank statement ie “Facebook ,Inc” (WHO) and name the account (what) “Advertising”. You can also add details, and receipts to the transaction. Many bank fees, or interest fees usually get “created”, because they only show up on bank statements. (you don’t get receipts for bank fees or interest paid on savings accounts).


Step 3. You can upload files, like receipts, to the transaction.

What do you use the Cash Coding tab for?

The cash coding tab is a more condensed view of your unreconciled transactions. You should only use this after you reconcile transactions using the Reconcile tab.

Once you do that, you can group similar transactions and reconcile them in bulk.

DIY Bookkeeping Takes Time

Learning the technical details of how to organize your books takes time, so if you’re confused or frustrated, I understand. It’s not easy. If you’re at a point where you’re too busy to learn these details and manage your own books, it might be time for you to hire a bookkeeper. Click here to read more about how I can help you.



Comments Off on Tutorial: How to Reconcile Your Bank Account in Xero

Is Xero Right for Your Business?

| Bookkeeping, Small Business

Is Xero Right for Your Business?

Xero believes in giving you — the small business owner — the power to plan ahead with your finances.

And truth to be told, I’m completely biased. (I liked the software so much I became a Xero-certified bookkeeper!)

If you’re in the market for software, consider Xero and then check out WaveApps, Zoho, Kashoo, and Freshbooks, too.

Overview of Xero

Xero is a robust accounting software that entrepreneurs can use by paying a monthly subscription between $9 and $70. It’s cloud-based, which means that it’s online and all of your information is kept on the Internet as opposed to your computer.

Is it easy to learn?

Since Xero is so robust, it’s not the easiest of software to get up and running. In fact, I recommend that you use it with a professional accountant or bookkeeper. If you’re looking for accounting software that’s free and easier to learn, check out WaveApps.

That being said, it can be easily navigated once your accountant or bookkeeper is keeping everything organized. You’ll be able to see your cashflow in real time, which allows you to make smart financial decisions, check reports to see if you’re on track with your revenue goals and send beautiful quotes to potential clients.

What are the downsides?

There are a few downsides to using Xero as a small business owner, and I’m going to break them down into three categories: limited multicurrency options, no recurring billing, and accounting jargon.

1) Limited multicurrency option – Unless you choose the most expensive subscription ($70/month), you won’t be able to receive or invoice using foreign currency, which makes doing business with people outside of your country really difficult. So if you’re a solopreneur who needs under 5 invoices but needs multicurrency, you still have to choose the most expensive option.

2) No recurring billing – If you’re invoicing many different clients the same amount each month, you don’t have the option to charge their cards automatically. While Xero will duplicate the previous month’s invoice and send it, the client will still have to enter their credit card information to pay it.

3) Accountant jargon – This software, like many of the others on the market, is made with accountants and bookkeepers in mind. That means that a lot of the feature I love about it (old-school style, journal-based bookkeeping) are things that won’t matter much to you. It also means that you’ll have a more difficult time navigating the software and being able to make the most of its features. It’s best used with a professional.

Why should I use it?

1) Better than a spreadsheet – While Xero isn’t perfect, it’s also a major step up from spreadsheet-style bookkeeping. That means tax time will be easier to manage because everything has already been captured and recorded.

2) Easily accessible and useful reports – The reports are one of my favorite features of Xero.

3) Constant updates and great customer service – Xero knows the value of listening to its customers. As a result, they’re always rolling out new features, fixing technical bugs, and generally making the software more beautiful and easier to use. Plus, if you do encounter problems, the customer service is fast and at your disposal 24/7 for free. They’ll get back to you almost immediately and explain how to solve whatever problem you’re facing with patience.

4) Openly available information – While this software is made for accountants and bookkeepers, Xero still offers a lot of information for the DIY entrepreneur. You can find tutorials in dedicated training, articles, videos, and their handy-dandy accounting glossary.

5) Able to track inventory – This is a built-in feature that’s great for business owners who sell physical products, like t-shirts.

Quick rundown of Xero

  • Started doing business in: 2006
  • Based in: New Zealand
  • Cost: Paid monthly subscription ($9 – $70)
  • Free trial: 30 days
    Credit card processing fees (via Stripe): %2.9 + 30 cents
  • Automatic billing: No
  • Payroll available: Yes (includes features like built-in timesheets, employee leave, and reimbursement of expenses)
  • Multicurrency: Yes
  • PayPal payment option: Yes
  • Etsy connection: No (only through 3rd party applications)
  • Shoeboxed connection: Yes
  • Freshbooks connection: No
  • Customized invoices: Yes
  • Mobile app: Yes (There are separate apps for Invoices / Receipts / Payroll)
  • Option to collaborate with team members: Yes

Still have questions about whether or not Xero is right for you? Leave a comment below or send me a message.

Comments Off on Is Xero Right for Your Business?

{Small Business Tutorial} How to Set Up Tax Rates in Xero

| Small Business, Taxes, Tutorial

{Small Business Tutorial}: How to Set Up Tax Rates in Xero











Xero is a fantastic cloud-based accounting software for small businesses, but if you’re not an accountant or a bookkeeper, it can get confusing really fast.

And if you really want to be able to use it to benefit your business, you’ll want to make sure it’s set up correctly. That way, your sales are accurately recording and you’re not overpaying at the end of the year in taxes.

One of the things I see small business owners struggle with when they’re managing their books DIY is setting up their tax rates in Xero.

This is something you MUST do before report your good and services tax (GST) and your harmonized sales tax (HST). Luckily, it only takes six steps to get it set up correctly. After that, we’ll go through how to fill out the government form for GST and HST step-by-step.

How to Set a Default Tax Rate

Before reporting GST/HST,  you must first set up your tax rates in Xero.

1) From the Dashboard, go to General Settings

2) In General Settings, click on Tax Rates

3) Click on New Tax Rate

4) A popup will appear where you can enter your tax rate. In this example, I’ve written GST 5% which is Canada’s Goods and Services Tax at 5%. Click Save.

TIP: If your business is in the US, you can enter your State and Federal taxes the same way.

5) What I like to do for myself is create separate tax rates for my purchases and sales. It will help when you look at reports. Stay tuned!

How to Look at a Sales Tax Report

6) From the Dashboard again, let’s take a look at the Sales Tax Report!

7) Here’s a Sales Tax Report for US and Canadian companies. The numbers on the far right are the ones that will go on the Sales Tax report (Canada).

Positive numbers are the tax attributed to sales. Negative numbers are tax attributed to purchases.  To lessen the confusion, I entered the tax rate for purchases and sales separately, so you can see them more clearly on the report.

How to Fill Out the Government Form

Click here to view the government form. It may be different for your province or territory. If you’re in a different country, like New Zealand or the US, I recommend consulting your accountant about this form.

1) Find out your total sales for the period. In this example, it would be Jan 1, 2017 to March 31, 2017. That number goes on line 101. You can find your total sales in the Profit & Loss Report

2) From the sales tax report, tally up all the GST/HST collected from Sales.  In this example, $73.06.  Enter that on line 103.

3) Enter any adjustments to tax on line 104.

4) Add lines 103 and 104.

5) From the sales tax report, tally up all the GST/HST from purchases (amounts in brackets). In this example, $14.02. Enter that on line 106.

6) Enter any adjustments to tax on line 107.

7) Add lines 106 and 107.

8) Subtract line 108 from line 105. $73.06-$14.02 = $59.04

9) If you have other credits applicable, enter them on lines 110 and 110. Add those amounts and enter it on line 112.

10) Subtract line 112 from line 109. Enter on line 113A. In this example, $59.04

11) If you have other debit applicable, enter them on line 205 and 405. Add them together and enter on line 113B.

12) Add lines 113A and 113B. In this example, $59.04.

13) For lines 114 and 115, if your amount is positive, like in my example, you owe the government $59.04. If it were negative, then you would be owed the balance. To have a balance owing to you, you would need to have more input tax credits, tax attributed to purchases for your business, that is greater than the amount you collected for your sales.  

So now you know how to set up the tax rates and how to fill out the form, but you may be wondering what kind of purchases you can claim for your business. If that’s where you’re at, enter your email address below and you’ll get access to an exclusive tax guide where I highlight common (and some little-known) deductions for lowering your tax bill at the end of the year. You’ll also get access to a worksheet for figuring out what to pay yourself.


Comments Off on {Small Business Tutorial} How to Set Up Tax Rates in Xero