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Xero Certified Advisor

Is Xero right for your business?

What is Xero?

Xero is a cloud accounting application that provides similar functionality as most of the standard accounting packages such as Sage 50 or QuickBooks.

Being a cloud service, the data resides in the cloud and the application is accessed via a web brower.   Xero is  an example of software that are classed as Software as a Service (SaaS) and you pay a monthly fee for the use of the service.  Being a cloud service it has some advantages that traditional desktop applications don’t have.

What are the advantages of Xero?

1.     User friendly

The first and the main advantage of Xero is that it is quite easy to use. The online accounting packages tend to be designed for non accountants and they focus on the key actions that the user needs to complete, for example creating sales invoices and logging purchase invoices.  Xero is designed so that its fairly intuitive to use.

2.     Accessibility

As the software is a cloud application, it is accessible anywhere. You can use Xero from your desktop browser.   You can use it from your tablet such as the iPad or an Android tablet.  You can have Xero on your smartphone.

This allows you to check your accounting information wherever you are.  I’ve had a TV documentary maker who was out on one of the Aran islands and needed to check a balance.  He had his iphone and a signal which allowed him to just go online and check it on his phone – that is a big advantage for some clients!

3.     Software is always up to date

The software is always updated, unlike a desktop where you buy an application which you may get as a download or on a disc, and then that application doesn’t change unless you choose to update to the latest version. With Xero, updates are being introduced regularly, so you always have got the latest, most up to date version and it is all included in the price. And every time new features are added, you have access to those features almost immediately.

4.     Integration with other Cloud applications

As Xero is in the cloud, it can easily be connected to and exchange information with other cloud applications. There are lots of cloud applications that can work with Xero such as inventory management applications, CRM applications, banking applications.  Xero has the ability to push data out to these applications or pull data in from them.
Several years ago I had a client who did a lot of work online.  The nature of the work was that he had a lot of small transactions for which he got paid very small amounts of money – usually cents. This money was paid through PayPal.  He was able to set up his accounting package to connect to PayPal and this high volume of small accounting transactions were pulled in, immediately on login, into his accounting application.  This really streamlined his online operation and made it a whole lot more efficient for him.  So the ability to talk to other could applications can be very useful.

5.     Your accountant can help you remotely

Xero makes it easy for your accountant to access your data remotely.  Let’s say my client is using Xero, and they are having a problem. He or she can ring me up, we can go onto a Skype call or use some sort of other conferencing type call.  We can share our screen, so they can be looking at my screen or I can be looking and his/hers screen, whichever we want.  Using these tools we can resolve the question fairly quickly.   This could save a trip out to the clients’ premises for me which then makes the service less costly for the client if all they need is five or ten minutes of my time.

6.     Safe data back-up

Xero is always backed up.  The software provider will have the application and data stored in a number of different data servers, so if anything happens to one data centre, they have a backup  and can be accessed from another  data centre.  You won’t be aware of this happening. You won’t have the need to take backups or store them off site.  With Xero you also have the option of downloading data, just to be sure, to be sure, but in fact, that is not not needed.  They have it backed up better than you would probably do yourself.

7.     Functionality

Xero is a mature product  and at this stage, it has a lot of very useful functionality.  It offers reccurring invoices, multi-currency processing and automated bank reconciliations among other features.

A big advantage of Xero is that it has some very basic “intelligence” built in to the software. For example if a payment goes through your bank that might be for Three or Vodafone, you can set up a rule that this is a telephone bill, and that is normally a subject of VAT of 23%.  Every time that comes through, Xero will let you know it thinks that’s a telephone bill with VAT at 23% and you can accept or reject/edit the suggestion.  You don’t have to do any more with it.  You set up the rule initially, and once Xero recognizes that it’s a payment for Three or for Vodafone, it will code it properly.  It makes the process of coding at month end accounting simpler, easier and faster.

What are disadvantages of Xero?

1.     Slow with high number of transactions

There are some disadvantages to Xero.  You are using an online piece of software and if you have a lot of transactions and/or a slow connection, you may be waiting for a while until the screens re-build.  So if you have a lot of transactions, Xero might not be for you.

Book-keepers who come into a company once per week or month to bulk enter the transactions often find it doesn’t suit the way they work.

2.     Lack of support in Ireland

The Irish Banks don’t support the online accounting packages very well right now.  Elsewhere around the world, banks are providing feeds to Xero, so the bank statement can be pushed straight into Xero and then when you log into Xero, the application will tell you that you have these transactions waiting to be posted, and will use its intelligence to suggest to you what it thinks the posts should be.

There is a  workaround to overcome the lack of a feed – exporting the transactions from the bank and importing them to Xero but its more cumbersome.  Having said that, I use the workaround and I have dramatically reduced the amount of time I spend on monthly accounts.

3.     Cost

Xero costs more than a traditional desktop accounting software.  If you use something like QuickBooks online, you may have bought that for maybe €180-€200 for the licence, and you may get three to four years out of that before you decide to upgrade. So it could cost you €50 a year.

Xero typically costs around €25 a month, so you would be spending maybe about €300 a year on your software, which is a little bit more than you might be used to be spending.

How do you decide if Xero is right for you?

First of all you should look at the number of transactions that you have. If you have a low number of transactions – a low number of sales invoices and a low number of purchase invoices, then I would say Xero would be well worth looking at. If you have a high number of transactions, it might slow the process of entering these transactions down when you try and enter them all into the system.

Think about your  broadband.  Is it fast enough?  If it can handle something like Netflix, then it’s ok and can handle Xero comfortably.  If you speed is 1MB/s or less then maybe no.

If you are already using some cloud apps, like a CRM app or an inventory app or maybe something like Expensify for managing expenses, Xero can integrate with those cloud apps, and can make transferring data from one to the other a lot more streamlined.  If you are using any of these applications, I would strongly consider looking at Xero.

You would have to be comfortable with .csv files.  In Ireland at the moment the banks don’t provide the banks feeds for us, so what you have to do is use the workaround mentioned above where you go into your bank account and export you bank statement into a .csv file, which excel can work with. Then you have to tidy up that file, to make sure that the columns are in the right order and that it is ready to be imported into Xero.  So if you are not comfortable doing that process manually, you should probably shy away from Xero

If you do your own books, you will find that Xero will give you a lot of insight into what is going on in your business.  Xero will help you to really understand your accounts.  Completing the tasks of entering your costs and your invoices, knowing where they go, and being able to run the reports and drill down, will all make a whole lot of difference to how well you understand your accounts.

There are some businesses where Xero would be a good fit because of the type and number of transactions that they have.  For example, I am aware of furniture retailers that use Xero and they don’t have a till system or a point of sales system, all they have is an iPad. They can walk around the shop, they might have a small number of high value transactions per day and they can easily process those with an ipad and Xero. They can be with a customer, enter the sales invoice there and then, print it off on a wireless printer, give the sales invoice to the customer, and that transaction is already in their accounts.

Alternative applications

Xero is not the only online accounting package.

There is also Kashflow – a product that initially came out around the same time as Xero, but hasn’t grown as fast as they chose to grow organically rather than by investing loads of money into marketing as Xero did.  I think it is a bit simpler and a bit more user friendly, but it hasn’t developed functionality to the same extent that Xero has.

A newer product is Quickbooks online.  You may be familiar with QuickBooks – one of the bestselling desktop accounting packages in the last number of years. I heard recently that QuickBooks has made a decision to move online totally and that they will no longer be updating the desktop versions. At the moment I feel that QuickBooks and Xero will be the two main competitors of the online accounting packages. They will probably fight it out. I think they will probably end up having similar functionality.

SAGE have also introduced an online accounting package. The initial feedback was very poor, I know it has gradually been improved but I think they are a bit behind Xero and QuickBooks online.

Some of these online packages are a little behind, and don’t have as many integrations yet. Whether Xero will stay as the main player in the future, I am not sure. But right now, it is definitely the main player and should be considered if you are thinking of an online package.

We have worked with all the main SME accounting packages.  We also have significant experience helping select and implement software for larger businesses.  If you are thinking of going with Xero, or another cloud accounting package, feel free to contact me at jim@accountsplus.ie.

Working with VAT on Kashflow

I have had a couple of questions recently about how Kashflow handles VAT. Users do not seem to fully understand the use of the “submit VAT” button. So here is a brief overview of what needs to be done to have accurate VAT reporting.

When you first submit a VAT report, it is important that you make sure that your submission agrees with the relevant VAT management report in Kashflow. If your VAT submission for Jan Feb 10 says VAT on sales 5000, VAT on purchases 3000 then these numbers should agree to the relevant figures on the VAT Management Report for the same period. If they don’t agree, you need to understand why. Either the VAT submission is wrong or Kashflow is wrong. I recommend that you check the Kashflow report, making any amendments necessary, and make a submission that ties back to Kashflow.

Once you have the submission made you run the VAT management report which agrees with the submission and hit “Submit VAT” button. This does not actually submit anything. It effectively tells Kashflow that all the transactions on the report have been reported to the VAT authorities.

When you run the VAT Management report for the following period, it will pick up all transactions for that period but it will also pick up any transactions in earlier periods that have not been reported (submitted) to the VAT authorities. For example, if in late April, a Purchase invoice dated February comes in with VAT of € 1000, we cannot add it to the Jan Feb return which was already submitted. Kashflow knows that it was not submitted because it was not on the report which you marked submitted. Therefore, it will be brought forward and added to the Mar Apr report. When you download the detail for the report you will see a transaction in there with a February date.

It is important then that when making a vat return the return should agree with the VAT Management report for the same period and that you hit the “Submit VAT” button to let the system know that all transactions on that report have been submitted.

If you have any questions on this, or any other aspect of Kashflow, feel free to give me a call or email me on jim (at) accountsplus (dot) ie.

Kashflow Update – Video Interview with Kashflow CEO

Kashflow users will find this video interesting. On July 5 last, Dennis Howlett, who writes a blog on accounting issues at www.accmanpro.com, interviewed the Kashflow CEO Duane Jackson. The video of this short interview is below and lasts just under 5 minutes.

In the video, Duane talks about the progress the company has made, what’s happening about the design (which he readily admits isn’t the best in the business) and an indication of where the company is going.

One thing he did reveal: KashFlow is working on a version that will make fast data input a reality for book-keepers.

He also said that longer term, he doesn’t want the company to be stuck as a single product business but expects to expand the range of solutions in the next year.

Recent Changes to Kashflow

Our online Accounting Software, Kashflow, is constantly being improved.

Sometimes the improvements are obvious like the recent changes to the entry screens for sales and purchase invoices. Other times the changes are in the background and you may not realise that there’s a new option that might be useful for you.

Kashflow publish the changelog here – http://www.kashflow.co.uk/changelog.asp. You can also sign up to receive notifications of changes via email, rss feeds or twitter.

For today, I have copied the change notices from the Kashflow changelog for some of the most recent changes.

Recent Changes

Improvements to Customer and Supplier pages 2nd August, 2010

General Look and Feel Improvements 2nd August, 2010

Defaulting Purchases to Paid 2nd August, 2010

Custom Fields for Customers 2nd August, 2010

Email Templates for Statements 2nd August, 2010

Lesser Known Kashflow Features

As I work with clients who are using Kashflow, I realise that there are several features in Kashflow that clients often don’t know about. I am going to highlight some of these in posts over the next period. Some of them may be useful to you.

Repeat Invoicing.

If you have a customer where you have an agreement to invoice regularly over a period, you can set up a repeat invoice. For example, I have a client where I provide a monthly management accounting service. I have a repeat invoice set up that is created monthly. The system sends me a reminder to let me know that it has created the invoice and I just hit the email button to send the invoice out.

To set up a repeat invoice, go into Sales, then into repeat billing – one of the four buttons above the list of sales invoices.

Projects

Kashflow has a projects feature that allows you to assign sales invoices and costs to projects. Some businesses are project based and this allows them to track profitability by project. Even if you are not project based you could use this for departments or you could use it to track costs by vehicle or by individual.

I have a client who produces tv programmes and uses this feature to track costs by programme. I have another client who carries out consultancy projects for clients and uses the feature to track outlay costs (eg. travel) by project for reinvoicing.

Bulk Payments.

Typically, most businesses will receive a payment for each invoice they issue or they will make a payment for each bill (receipt) that they receive. However, some businesses might have a number or smaller invoices or bills (receipts) that are paid together. In this case, instead of going into each invoice and adding a payment, you can use the Kashflow Bulk Payment options. On the Sales or Purchases tab, choose the Bulk Payment button on top of the page. This lets you mark multiple invoices as being paid with one payment.

That’s enough for today. Over the next while I will highlight some other features that you may not know about. If you have any questions, be sure to let me know by emailing me at jim (at) accountsplus (dot) ie.

Are you slack about IT security

Yesterday www.boards.ie was hacked and the passwords of the users may be compromised. If users use the same username and passwords on multiple sites, then the hackers may now have access to those other sites. Could they have access to online banking passwords? Possibly.

A couple of months ago I was reading a blog, and the follow-on animated exchange, about the importance of security in accounting software. While I agree with the importance of security, I felt at the time, that the dev elopers had little understanding of how careless users actually are when it comes to security, passwords and backups.

I have often commented on the amount of companies with no password protection on their accounts software, or common words as passwords, or use the pc users name as password, or have the password visible on a post-it stuck up beside the screen.

Well, recent research has shown just how loose password security is.

It seems that in Dec 09, social networking services and customized widget company, Rockyou.com, suffered a data breach. The breach included millions of people’s email addresses and passwords for Rockyou.com (and in many cases passwords and login details for associated social networking sites). The hacker responsible for the attack subsequently posted the full list of passwords on the internet.

You will end up with a lot of passwords and you will need something to help you manage them. I use a piece of software to store all of my different passwords. It’s a password manager called eWallet. Another free package is keepass. And remember you need to be careful how you use these!

So now, what passwords are you using for the various software and websites you use. Are they secure enough? Do you need to change them. Go on – do it now!

The compromised password and login data was examined by US-based security company, Imperva Application Defense Center (ADC). The data provides valuable insights into the way that users select passwords and an opportunity to evaluate the true strength of these as a security mechanism. What’s good about this is the number of real-world passwords the analysts were able to examine .

There report is available here – http://www.imperva.com/ld/password_report.asp

A full analysis of the 32 million Rockyou.com passwords show the most commonly used passwords are:
1. 123456
2. 12345
3. 123456789
4. Password
5. iloveyou
6. princess
7. rockyou
8. 1234567
9. 12345678
10. abc123

Its amazing, isn’t it. And to think of all of the effort the IT developer puts in to improve security and then see users undermine all that by careless selection of passwords.

So what should you be doing? To keep your accounts safe, NASA recommends adhering to the following steps when creating a password:

1. It should contain at least eight characters.

Online Accounting – what’s that about?

Recently, I’ve been looking into on-line accounting software (also known as Cloud Accounting or SaaS Accounting.  I am interested in it for a number of reasons.

I have a number of friends who want me to act as their accountant but they are located quite far from me and it did not seem practical to have them as clients.  That’s what got me looking at it in the first place.

Secondly, having a background of improvement projects and business process reengineering, I was looking for something that would simplify or streamline the annual accounts process.

Finally, I believe that many businesses need to improve their management improvement and I was looking for practical ways to help to do that.

There are many things that I like about on-line accounting.

As the accountant, I can either setup or help set up the accounting system at the very start.  In doing so, I can let the client have the benefit of my experience from the beginning.

With all of these systems, the client can give me a log-on and if the client has a question about something, they call me, I log-on and deal with the query quickly and much more cheaply than if I had to go to the clients premises.

If the client is nervous about filing a VAT return, they can give me a call and I can quickly review the VAT before its submitted.

Similarly, I can log-on every now and again, say every quarter, and have a quick review of the clients account’s and if I see something unusual or strange I can raise and deal with it there and then.  And remember, its always much easier as an outsider to see something than it is for the person who is looking at the numbers every day or every week.

You will have better information to be bringing to your bank manager.  Right now, lack of good information is one of the things that stops banks lending.  They want to eliminate uncertainty and if you can only show last years annual accounts that’s not great.

At the year end, I will have much better and more reliable information.  This will make preparing the accounts easier but will also mean I have more time to analyse and advise compared to the more traditional approach.

Finally, when the accounts have been completed, I can post any adjustments to the accounts so that the accounts are up to date.  You would be amazed at the number of clients whose accounts have not been adjusted to agree with the last years accounts.

Finally, most online accounting have much better back up routines than your typical SME office.  So the chances of losing key data are greatly diminished.

Is online accounting for everyone?  I don’t think so.  It is definitely a good solution for independent consultants that use computers in their work anyway.  It will work for SMES where one person looks after the book-keeping/accounting.  You need to have a good broadband connection – although I am told that it does not need to be the fastest. or anyone with good computing skills.

In my research, I spoke to a number of people using the various packages.  The most common response I noticed was the increased sense of knowing what was going on in the business and of feeling in control.

If you have any comments on this article or if there are any areas you would like to address, please do let me know.

Best Wishes

Jim