Setting up your Xero reports properly is essential for success.
Xero is a powerful tool for small business owners and like most software or systems we tend to use the 5% that we learn to get started and miss out on the benefits of all the bells and whistles. The reporting function in Xero has been improved in recent times and yet most users aren’t getting the benefit from those changes.
Here are my five top tips to getting the best from your Xero reports.
Identify all your different services.
Consider each different service you provide as a different revenue stream. For example, if your business does websites, social media, SEO, blog writing each of these is a different revenue stream.
Identify specific costs for each revenue stream.
There will be costs that are specific to a particular revenue stream that are easy to identify, but then there will be other costs which may be more difficult. For example, paying for website hosting is specific to website services, but there’s also the time involved by your team or contractors in delivering the service.
Separate out expense items that have multiple costs within them to get more visibility on the costs.
The more detailed your reports, the more you will see where your profit is being eroded and costs that may be unnecessary that could be eliminated or reduced. For example, advertising where you may have the costs of the ads (think FB, Google Adwords), the costs of having the ads managed, the cost of flyers and promotional items.
Configure the profit and loss statement to break down expenses into different categories.
Expenses (other than those relating directly to revenue streams noted in point 2) can also be broken down into different categories that will make your understanding of where you’re spending money clearer. For example, consider grouping costs under headings like, sales and marketing, finance costs, occupancy costs, vehicle costs, and so on.
Put deadlines on data entry and production of reports at end of the month
Discuss with your bookkeeper the timing of their data entry and end of month reconciliations and make sure they are done in a timely manner. Agree a date when they will be completed so that you can regularly get your accounting reports as soon as you can after the end of the previous month. The sooner you get them, the sooner you can take action to correct issues, decide to change direction, or focus on what needs to be done to change the figures in the following month.
By putting in place these 5 tips you’ll have better reports that will provide you with useful information you can use to manage your business and achieve your goals.
You will be able to identify where your revenue is coming from and which revenue streams are making you the most money. In addition, you will be able to keep a closer eye on the costs and ensure that you’re not wasting money unnecessarily.
As you look at your new detailed reports, you will start to see trends and feel more in control of the numbers. The numbers won’t seem so scary and you’ll look forward to checking out how you’ve gone each month.