As part of Office Shed’s administrative support services, we suggest Xero as the top accounting software package for trades and services business owners. Why? Because Xero does everything you need it to do and does it very well. Xero is user friendly, cloud based so you can access it whenever and wherever you need to, it gives you terrific management reporting functionality, integrates seamlessly with other apps and it’s super easy to collaborate with other users.
Whether you are looking to set your small business up in Xero, are a newish user or have been using Xero for a while now, we have some valuable tips to help you optimise Xero’s benefit to your trades and services business.
- Make sure your chart of accounts suits your business needs – Should you have more than 1 revenue account? You may want to opt for commercial and residential revenue accounts for example. Or do you need to split your cost of sales so that you have sub-contractors and materials separated? This is especially important for any Tradies that need to submit a TPAR to the ATO each year.
- Connect all your bank feeds – By connecting the bank feeds and not relying on importing your data, you can track payments from customers daily in your Xero account. Your books can be kept reconciled and you’ll always know how your business is tracking.
- Get rid of personal accounts – Only use business accounts! Either get a business credit card, or only use your business debit card. If you stop using cash all your payments are tracked in Xero via your automatic bank feeds, and you needn’t worry about keeping cash receipts.
- Open a bank account to keep your GST, super and PAYG accruals in – Don’t get caught out at BAS time. Have your bookkeeper send you a weekly report, then transfer the correct amount over so there’s no nasty surprises at the end of the quarter.
- Connect Xero to a payment gateway – There are some great options available in the app marketplace like Stripe, Go Cardless and Pinch. All integrate seamlessly with Xero and will help you collect money off your customers with the click of a button. They allow you to send your customer invoices with a “Pay now” facility, making it easier for your customers to make invoice payments, so you get your cash in faster.
- Connect to Hubdoc or Receipt Bank – Simply download the mobile app and use it to take photos of any receipts or invoices. These are stored in the cloud and synced with your Xero account. Reducing data entry time and now you have no need to keep a paper receipt! You can also email supplier invoices from your email to the app, so you’ll never have to print anything again.
- Check your Subbies ABN’s! Just because you’re being invoiced for GST doesn’t mean they’re registered, so make sure that you are recording this correctly. You can check if an ABN is GST registered here – https://abr.business.gov.au/. If they aren’t, don’t pay the GST. The ATO tracks subbies that are charging GST and will question you if you claim GST incorrectly on your TPAR. No one wants to be audited!
- Get professional advice before setting up apprentices’ payroll in Xero – Set reminders to update the pay rates each year. You must make sure you pay apprentices’ correctly, just adding $1 to their hourly rate may not necessary mean you’re paying them above their award. Each award has specific allowances, rates and rules.
- Stay focused on your debtors – Set up Auto reminders in Xero or connect with a debtor management app like Chaser to cut down Debtor days. No one likes chasing money so put in a robust process to reduce it. The faster you can collect your cash the healthier your business is.
- Keep Xero accurate up to date – Xero updates every 12 hours, it syncs with your bank accounts and manages your business finances. What use is Xero if none of your receipts, invoices or payments aren’t reconciled regularly? Your information needs to be up to date if your management reporting is going to be. When you have a decision to make that will impact your business finances you want to be assessing up to date financial data in real time. You’ll also want to be prepared for when you need to see your bank manager, broker or talk to the ATO. If you leave it, the work builds up, it gets harder and when you have lots of reconciling to do you increase the risk of making costly and time-consuming errors. Finally, the better shape your Xero is in when you need to see your accountant, the less they are going to cost you!
Bonus tip – Get an experienced bookkeeper to help you manage your Xero and keep on top your reconciliations!
Xero is Office Shed’s preferred accounting software and we are a Xero Silver Champion partner. Office Shed are a registered BAS Agent providing bookkeeping, payroll, call answering and general admin service to Tradies. We are tradie admin support specialists, so if you’re a tradie who needs support with your Xero and daily admin we can help you! We can do your bank reconciliation as part of our tradie admin support packages or help you with all your bookkeeping within one of our bookkeeping packages. Give us a call today to find out how we can help you with your Xero.