Common Errors In Xero Bookkeeping

I have been helping a business owner this week who uses Xero for their bookkeeping, but has had a multitude of different people help with the data entry into the package, and left it in a terrible mess ...

So, for my blog post this week, I thought it might be useful to go through some common problems I have found and give a few pointers to prevent your Xero based bookkeeping ending up in a mess too.

- My first tip is don't leave it too long before checking if Xero is working correctly. I have just gone through a whole year of transactions, July 2020 to June 2021, and the longer you leave a mess the harder it is to tidy.

- Double check the bank feeds. Just because the bank is importing transactions into Xero, it doesn't mean they are correct. With the accounts I was looking at the first day I checked, the first of July, had 8 transactions in Xero, but only 4 on the bank statement. Everything was in twice.

The Xero user had not noticed and had confirmed and entered transactions against all 8 entries so everything was in twice. This is such a simple problem to check for and rectify and something I bang on about a lot in my blog! This is my most recent post about checking your bank balance in Xero.

- If you have multiple ways of receiving or making payments such as Stripe, GoCardless, Square or Paypal, each one is likely to have their own special bank account, termed a 'control account', and when you receive money through the service into your main bank account then that is a transfer to the relevant control account and should not be added as a bank receipt or payment through the create option on the bank screen. This, in effect, doubles your sales and while it might look good in your profit and loss it means needlessly paying more tax as it will overstate your profits.

- Control accounts (as mentioned in point 3 above) and cash accounts should be checked regularly. If the balance on them is just getting bigger and bigger then you are probably doing something wrong!

- If a bill has been entered in Xero, when you see the payment in the bank account then match the payment to the bill already in Xero, do no create a new transaction! This is such a common mistake I see time and time again.

- When you use Find & Match on the bank statement and you can see a list of loads of invoices or bills on the system dated a long time in the past, but you know you pay your bills promptly or you aren't owed any money, you are probably doing something wrong!

If you are using Xero for your bookkeeping and you are not sure if you are using it correctly and would like a health check and perhaps to learn some pointers on how to use it better then why not arrange a handholding session with me?

"Like I did for this client, I can help you get everything sorted, or just tidy it all up for you!"

I'll let you know where you are going wrong, and help you use the software correctly going forward. Don't wait until your tax return is due or it's time to submit your limited company accounts as getting on top of your Xero (or even my other specialism, Sage50) bookkeeping now means you can know your business numbers and make important financial decisions before the end of the tax year and even reduce your tax bill.

I will step off my soapbox now and hope that a few of these pointers help you improve your bookkeeping.

If anything I've written here resonates with you, call me on 01604 420057 and let's see how we can help you.