The beauty of modern cloud accounting systems is many of them link to your bank and allow you to download transactions. I found this hard to get used to with being from a background of using Sage 50 accounts ...
Bank feeds in Xero are a good thing, but you need to be careful!
The reason for this is that I love the bank reconciliation tools in Sage, but I have learned to embrace the Xero and Sage Business Cloud bank reconciliation features. However, there are a few things to consider.
If you enter sales invoices and purchase invoices (bills in Xero) into your system then make sure that when you see the payment or receipt on the bank feed, remember to match the payment to the invoices you have already entered on the system. Don't accidentally 'create' a new transaction unless you mean to.
"With simple regular payments, you can set up bank rules!"
This automatically matches regularly appearing payments, saying who the contact is, the VAT code and the account code. When I started using Xero, I set up loads of bank rules and learned quickly how to enter them in a flexible way, I'll do a separate post about that. If you see a regular direct debit there may be no need to set up bank rules as Xero will remember what you did last time it saw that payment.
That works great until the bank feeds changes how it uploads your data. Go and look at your statements page and see which columns the bank feed has imported the data into; if this changes the remember feature won't work and you will have a frustrating month remembering where you normally code those transactions to. It happened to me with one of my clients this week.
The biggest problems I see with new clients getting used to using bank feeds is they accidentally create duplicate contacts using the create area on Xero, or they create new transactions rather than marking invoices as paid!
You need to take care when you are reconciling items and don't be lulled into the false sense of security of a big green tick. Xero is not that clever when matching transactions; it is looking for an amount and won't look at the contact or date on a transaction. If you have a payment going out regularly be sure you match the payments to the correct invoice so your outstanding invoices don't look wrong.
"That could lead to issues further down the line!"
If you have got into a bit of a mess with your bank feeds in Xero then why not arrange a hand-holding session with me to go through and identify what is causing the problems so you can get your bookkeeping spot on going forward.
Until next time ...
ALISON MEAD
Would you like to know more?
If anything I've written in this blog post resonates with you and you'd like to discover more, it may be a great idea to give me a call on 01604 217365 and let's see how I can help you.
Alison loves bookkeeping and supporting bookkeepers. She has been helping clients to be better bookkeepers in Sage 50 for over 24 years and has been Xero Accredited in accounts and payroll for a number of years too.
She specialises in a very unique hand-holding method of training, helping bookkeepers and business owners to use their accounts software as and when they need support in setting up and producing their invoices, reports and financial information.
Alison combines her role at Silicon Bullet with her Forever Living network marketing businesses and is often to be seen at business networking meetings as she likes to keep busy.
You know what they say: if you want something done well ask a busy person!
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