Bookkeeping & Xero Accounting Tutorial 2021
Welcome to episode 2 in our line of Xero tutorials.
Provided to you by Xoba – Chartered Accountants in Preston. In today’s episode, James takes you through every step you will need to follow when doing your bookkeeping on Xero.
Xero is a powerful package, in fact, we strongly believe it is BY FAR the best system for small and medium-sized businesses in the UK.
Moving to Xero can completely streamline your accounting and bookkeeping function, allowing you to see the performance of your business like never before.
There are some very important steps you need to be aware of when working on Xero and these are laid out very simply in the episode. These are:
1. Recording income (sales invoices)
2. Recording expenditure (bills)
3. Reconciling bank account(s)
4. Error checking
You may already be aware of adding invoices and bills, but where it gets tricky is the reconciling of the bank account(s) correctly. We cover every aspect of this in the tutorial. Even with the best controls and best intentions, you will find that you make errors. Bookkeeping is a large task and human error is all too easy! That’s why error checking is the ultimate way to ensure your records on Xero are spot on. It’s a very important step and is something 99% of Xero users will not be aware of. Knowing these relatively easy tricks will help you save a huge amount of time in the long run, allow you to gain accurate information from the system, and save money in the long run.
Month End Xero checks for small businesses
- Have you finished recording all transactions?
- Are all invoices on up to date? Go to “Business > Invoices” to check
- Are all bills on up to date? Go to “Business > Bills to pay” to check
- Have you reconciled the bank account(s)? Go to “Accounting > Bank accounts” to check
- Check the bank reconciliation reports for each bank account. Go to “Accounting > Bank accounts” and for each bank account, click on “Manage Account > Reconciliation Report”.
- Select the last day of the month you are checking and update the report.
- You will see the statement balance at the bottom. You need to ensure this matches the actual statement balance as per your bank statements. If it isn’t, it Is likely there are either duplicate transactions and/or missing transactions. This may be due to a bank feed error or an error when importing statements manually. It is usually best to speak to your accountant if this happens, but if you want to do this yourself you need to export the imported bank statement from Xero, compare it to the actual statement and import or delete any transactions needed to correct the statement.
- At the top you will see the “balance in Xero”. If this matches the statement balance, you have nothing to do – everything has been reconciled correctly.
- If there is a difference between the “Balance In Xero” at the top and the “Statement balance” at the bottom, then this is broken down by all the transactions shown in the middle of the report. These are categorised and “Outstanding Payments”, “Outstanding Receipts” and “Un-Reconciled Bank statement lines”. Lets take these in turn:
- Outstanding Payments: These is expenditure which has already been put on Xero to that bank account, but which has not yet been matched up to the statement on the reconciliation page. There are many ways to correct these, but it is best to start by looking at all transactions around the date of the transaction. Go back to the dashboard and click on the name of the bank to display the bank transactions. You can search by date, description, or amount to find the transaction and determine the reason for it being left unreconciled – and then correct it.
- Outstanding receipts are very similar to the above, but they are for income (or money coming into the bank account)
- Unreconciled bank statement lines are simply transactions which still need to be reconciled. Go to the dashboard and click on the blue reconcile button for that bank account to complete these.
- Check the Aged Receivables report. To do this go to “Accounting > Reports > Aged Receivables”. Make sure you run the old report, not the new “Aged Receivable Summary”. Change the date to the end of the month you are reviewing, and then update the report.
- You need to confirm these balances are correct for each customer. In particular, older balances will be more noticeable as erroneous, so check the older column in particular.
- If you do find an error, there are a couple of reasons it might be there:
- You may have duplicated an invoice. To check this, drill down into the contact by clicking on it. Once found, click on the invoice and delete it.
- You may be not yet have matched the payment up to the invoice because it was paid into an account for which there is no bank feed. This means you have to put the payment on manually. To do this, click on the amount and drill down until you get to the invoice itself. Open it and at the bottom, you should see a “Receive a payment” section to fill out.
- The payment may have been reconciled incorrectly. This usually happens if the payment gets reconciled using “Create” rather than “Match” because the invoice wasn’t on the system at the time. You need to find the payment and redo it by matching up to the invoice. Searching for the payment amount in a system wide search is very helpful here (Top right magnifying glass).
- Check the Aged Payables report – this is the exact same process as above, but for your supplier balances.
And that’s it, well done!
If you have got through these points, your bookkeeping on Xero is going to be pretty darn accurate.
There are other checks you can do (see below), but we have covered the most important ones that really make the difference.
Advanced checks – only for the confident
- Run the trial balance and confirm the balances in each account are accurate by drilling down and comparing to records.
- Run the Account transactions report for every account for the whole year to date to ensure all transactions have been coded to the correct accounts. You could also do this by downloading the General ledger to excel where everything is easier to sort.
- View the VAT return and it is accompanying audit report to ensure all VAT has been accounted for. It is helpful to download this to Excel where it can be sorted easily.
- If you track stock, run the stock reports to ensure balances are correct
- If you used the fixed assets feature on Xero, you can run reports and compare it to the actual balance of the fixed assets accounts in the Trial Balance.
Where to find help?
Xoba is on hand for all Xero Queries. We are Chartered Accountants based in the UK and we are Xero certified. We partnered with Xero as it is by far the best bookkeeping system for small businesses.
James from Xoba has helped hundreds of businesses on Xero over the last 7 years, so if you are ever stuck, give him a call on 01772 367303 and he will be happy to help.
P.s. don’t forget our full monthly checks are shown on our website which you can find in the Blog section.
You can download the checklist in a printable format
Access your FREE Month End Xero checklist for Small businesses by subscribing to our newsletter. Month-end checks are part of the error checking step and will help you to stay on top of Xero with ease.
As always, Xoba is available for any Xero queries you might have. So, if you find setting up Xero by yourself is too hard, please do get in touch with us. We’re here to help.