How to use Xero smarter
Kylie Parker CA’s Xero tips come from real-world experience, and can slash the amount of time it takes to update, process and review an accounting file.
- Xero guru and owner of Lotus Accountants Kylie Parker CA has real-world tips and trick to suit accountants at each stage of their careers.
- For example, for junior accountants, the Create Rule function in Xero can slice hours off a cash coding task.
- Recurring year-end journals are a big time-saver at the end of the financial year, as is a General Ledger Exception report.
The transition from desktop accounting software to the cloud is more than just a change in location of your accounting files. Software companies are reworking the mechanics of accounting to make it faster and easier at all stages of the process.
Kylie Parker CA is the owner of Lotus Accountants in St Peters in Sydney’s inner west, and a bit of a Xero guru. The former Deloitte client director knows the old-school approaches to accounting, and also the benefits of committing to newer methods. Her practice uses 100% Xero tax and accounting products with its clients.
Acuity asked Parker to share her top tips for Xero, and she got back to us with advice to suit accountants at every stage of their career, from a junior making cash entries to a partner managing year-end reviews.
The productivity improvements that flow from using Parker’s pro tips can slash the amount of time it takes to update, process and review an accounting file for each client.
Xero tip for the junior accountant or bookkeeper
Bank rules before cash coding
Most accountants go straight to the Cash Coding screen because that’s what they were taught. In Xero, there’s a better way that saves a lot of time.
Go into the Reconcile screen and you will see a Create Rule option for each transaction. If you create your rules from there, you won’t have anywhere near as much coding.
Create a Spend Money rule and Xero will automatically include details in the Description and Payee fields in that transaction so you’re not re-keying the data.
From the Xero demo file, you can create a rule for a transaction by SMART Agency. The Bank Rules screen automatically adds a rule for the Description and the Payee fields. You can use the Description field to identify different types of transactions from the same payee and deal with them differently. In this example we can just delete it.
Change the modifier for the Payee field to “contains”, then select an existing or new contact below by entering the name SMART Agency.
You can then allocate a fixed value for that transaction with the correct GST rate and tracking categories if you are using them.
Now, when you visit the Cash Coding screen, the bank rules have already started to code transactions for you. And the bank rules will continuously code future transactions as they appear in the bank feed.
Another very useful tip: in Xero’s cash coding, you can apply a rule set-up for one payee to another. For example, you could have a rule for meals in a cafe and apply it to transactions with all cafes, from the Cash Coding screen.
Xero tip for the intermediate accountant
Kylie Parker CA
Find and recode
Intermediate accountants should be thinking about what’s going in the file, not just doing a bank reconciliation. Usually it’s a three-step process – running a report, finding that transactions are wrong, and fixing them.
There are two options to fix wrongly coded transactions: either recode the source transactions or add a manual journal entry. I encourage accountants to recode. That way, the contact doesn’t change, you can change the tax rate from GST to free if it’s incorrectly coded, and reallocate those transactions to the correct bank account.
Understanding how Xero’s Find and Recode tool works can save you a huge amount of time. There’s a short video on the Find and Recode screen that explains it well.
The first thing to do in Find and Recode is to select a general ledger account, for example, Subscriptions. You can add a condition or a date range for the current financial year. If there are transactions in Subscriptions that need to move to Office Expenses, Find and Recode will bring up all the transactions that match your parameters, and then it’s two clicks to allocate them to the Office Expenses account.
Xero tip for the senior accountant
Recurring year-end journals
Senior accountants spend a lot of time adding year-end journals, say for motor vehicle expenses. A lot of accountants start journals from scratch each year. But in reality, a lot of the adjustments are the same each year.
In Xero, you can set up a repeating journal for 30 June that recurs every 12 months. You can make all the adjustments and prepayments required in that repeating journal. If you’re using Asset Guru as an asset register and you need to add a journal for depreciation, for example, Journals in Xero can attach files so you can add new assets directly to the journal.
“…understanding how Xero’s Find and Recode tool works can save you a huge amount of time’
If you add a placeholder for weeks, months or years in the narration, it auto-populates with the correct date.
When the next financial year swings around, the senior accountant can open the repeating journal and just change the amounts for all those adjustments and prepayments. There’s no need to re-create the journal from scratch, and it saves a lot of time.
Xero tip for the accounting partner
General ledger exception report
When it comes to review time, a lot of partners are quite old school. They still like to get printed reports. But in my mind there is no excuse for a printout if they do this: just pull up a report on screen and click on the amounts to see the transactions directly.
Every partner should star (mark as a favourite) the General Ledger Exception report. To do this, click Reports, All Reports, Accounting, then click the star next to General Ledger. Now the General Ledger report will appear directly under the top-level menu option, Reports.
Open the report, change the date to the financial year, and click on the tab labelled General Ledger Exceptions. You can sort by account name or account code.
I go to this report when I’m reviewing, even in my own file. It shows what isn’t quite right. If you see that the bulk of transactions in an account are credits and one is a debit, then it will appear in this report. It will alert you to ask, why is that a debit? Is there something in there that should be reallocated?
You can also review sales and investigate any that are 20% or more higher or lower than the median.