Can Xero really replace your accounting practice software?

Xero is great for bookkeepers. But does it work for accounting practices? We take some time out to think about that a little more, now that we’ve been using it for a while.

It’s one thing to make great software for small-medium enterprises, and Xero do just that. As an SME ourselves, we love the efficiencies Xero brings to our internal bookkeeping procedures.

It’s another thing altogether for an accounting firm to use Xero ledgers to replace a practice level general ledger system. We’re trying to do just that. Does it work?

Hopefully over the coming weeks and months we’ll approach this very question from a variety of angles. This time around though, I want to consider it from a data entry perspective.

In Xeroland, you can run your practice from the beach and every client is a tech-savvy twenty-something with perfectly reconciled books. We hope to visit there someday…

There is a Xero utopia where the client is getting most of their data in automatically using bank feeds, and collaborating with their accountant to make sure that the result is accurate and meaningful. The accountant then uses that same ledger to prepare statutory reports at the end of the financial year. If every client can do that, you’ve got it made. That’s the dream.

We have a number of clients where the ‘dream’ is already working brilliantly. There is a real sense in which Xero is fundamentally changing the landscape for accounting firms.

There is one thing we’d like to see though that would make Xero even better – because as we all know, there’s another kind of client. Their particular style will be many and varied, but there is one trait that consistently defines them. They don’t use software to keep their records. This can be a problem for Xero.

If your client doesn’t use software and you can’t get a CSV from the bank, there’s no easy way to get data into Xero. Even if the client could get CSVs, some banks don’t provide a year’s worth of transactions in CSV form anyway, and if you’re depending on the client to get them for you, may lose your window of opportunity. This may even be a problem where a client is committed to using Xero. Perhaps they are a new client and have only just made the switch, but you still need to prepare financials for the period prior to Xero. Or maybe they use Xero for their main trading entity but have a few side projects that you also need to prepare accounts for.

The bottom line is that we accountants sometimes still find ourselves in any number of situations where we have to do some old school manual data entry. We don’t like it, we would love to never have to do it again. And Xero is certainly a big part of our ticket out of there. But sometimes for a variety of reasons it still happens.

Xero is, at its core, an SME accounting product. That’s what makes it so easy to use, and we love that. But that also means that you input transactions individually, one at a time. You write a cheque, prepare an invoice, and so on. Xero makes this process easier by using feeds, and then pre-coding and reconciling much of your data for you. There is also a general journal area for advisers. But none of this is conducive to rapid-fire data entry.

We can’t seem to find a button to import this into Xero.

Our old software, for example, has an area called ‘Bank Statements’ where you enter transactions from statements, line by line. All the major applications have something along these lines. Unless there’s another way of doing it, we’d like to humbly request that Xero add something similar.

It’s important to note that this isn’t a request to change Xero’s MO. Fundamentally, the Xero formula is the future of data entry and we’re committed to it. Our request would be something along the lines of a back door for advisers only, for those times where there simply isn’t any other alternative. The client experience of Xero would not be any different, but Xero would have an area for accountants where effectively, you would create your own CSV by only entering basic data line by line

Our current workaround is based on this same idea. We create our own CSVs in Excel and enter transactions line by line. We then import the CSV into Xero. It’s ugly, but it ends up being a lot quicker than entering individual transactions using Xero’s functionality. Where you have a lot of transactions that don’t go through a bank account, such as items from a personal credit card, you can create a dummy bank account in Xero and import the CSV to it. Because it ends up balancing to zero, it doesn’t show on any of your reports. It would be so much better though if this functionality could be available in Xero.

We get that Xero is a management accounting tool for SMEs, and that means it’s geared towards helping businesses do their bookkeeping. But we’re accountants, using it as a practice level general ledger product. And as far as we can tell, we’re a core part of Xero’s strategy for market penetration. Can Xero really replace your accounting practice software? From a data entry perspective, the answer is still ‘yes’. But there will be times when you’re really not going to like it.

We’re relatively new to Xero so if anyone has any ideas they’d like to share, we’d love to hear from you. How do you get a year’s worth of transactions into a ledger quickly when you don’t have anything to import from?

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The bookkeeper’s perspective

This time around we fire six questions at our internal bookkeeper.

Sometimes new things come into focus with a change of perspective, which is why from time to time we’re asking some of our team members to offer their reflection on the Xero journey. If you’re considering whether Xero can work for your accounting firm, you’re almost definitely going to want to find out how it copes with your practice accounting.

Just another day at the office for Lauren.

Lauren Degnan wears a lot of hats at Dewings. She’s the kind of person you can pretty much throw anything at – we often do – and you know that it will get done well. She manages all of those regular practice management things that need to be done in order for us to function, she remembers when things are due and frankly, she helps to make people like me look more capable than I really am. We don’t want to say she’s perfect – just that we’re yet to to find any kind of fault. In short, every firm should have a Lauren.

One of Lauren’s responsibilities is management of our internal bookkeeping. She makes sure that all the data is in so that our practice reporting and planning can get done. Lauren also prepares our budgets. So naturally the transition to Xero affects her directly – we now run our practice accounts through Xero and this means that Lauren has to get all the information in there.

Our first ‘Six Questions’ post looked at things from the product champion’s perspective. We directed those same six questions to Lauren, and here’s her response. Hopefully there’s some encouragement here for anyone considering the impact that Xero will have on their internal accounting processes.

  1. What do you love about Xero/WFM so far? Once all the setting up is done, everything is more automated which will make doing my jobs much quicker and will also allow me to keep on top of everything.
  2. Is there anything you hate? I don’t hate it, but the timesheets are a bit harder and more time consuming to use for someone who does lots of small tasks during the day.
  3. Can you see it making a difference to the way you work? It will make my job quicker and easier because all the facets of our accounts are now in the one package which means less reconciling between information from different software and sources. As mentioned before, I will also be able to keep on top of things more, rather than having a busy start to each month, my workload will now be more evenly spread over the month.
  4. If you could only make one enhancement request what would it be and why? I’m not sure that it’s really an enhancement, but speeding up the rate that the screen refreshes each time. When I’m working quickly through things, the pause that I get while the screen refreshes can be a bit annoying.
  5. Is there a moment on the journey so far that stands out for you? Probably the point when I had everything finally set up for the accounts and started using it on a day to day basis. My workload is so much more even now because instead of having to code hundreds of transactions at the start of each month, I now code the entries daily as they come in through the bank feeds. Has taken the pressure off the start of the month for me..
  6. Overall, if you had to choose, old system or new system? Once all the setting up is complete, new system.

Xero room to move

Have you ever felt like you knew someone, only to discover that maybe you’d been misreading the signals? When we started this blog, we conceived the name as a little play on words, and thought it would also give Xero some free publicity. It turns out Xero thought otherwise. We’ve now got a new URL, thanks to the Xero legal team!

One of the things about this blog that I hope will resonate with firms nervous about undertaking a journey to the cloud is how uncool we are. As a firm, we have our share of issues to tackle like any other normal accounting practice. We’re not part of the new wave glitterati. Social media is still something we’re relatively new to. We’ve never blogged before. And we’re not caught up in the Xero hype. If there’s any encouragement to be taken from that, I like to think it’s that if we can do it, anyone can!

Perhaps it was that wide-eyed naiveté that got us into trouble recently. When we first decided to move everything over to Xero, we were looking for some real testimonials from firms that had been through the same thing. It’s very difficult to find anything beyond the nauseating gushiness of the Xero fanboy and fangirl clique. So being all giddy on the prospect of our impending transformation, we came up with the idea of blogging about the journey – as it was happening. Not only would this provide a more realistic resource for firms that might consider doing the same as us, but as I’ve said before, there’s a certain catharsis in writing about your experiences – especially when things aren’t going as well as you’d like! Plus, we thought, “Xero are all about the new paradigm of vendor/customer interaction and collaboration! Surely they’re going to eat this stuff up!”

And at first they did. Not having much experience at this, we figured Twitter was the best way to get the word out, so after doing some research online and reading a couple of books, we started writing and then tweeting our posts. The Xero team were soon retweeting us and directing traffic to our blog. It was all rather intoxicating. Heady times!

Does my bum look big in this?

It’s been said a few times before in this blog, but just to be totally clear, let me repeat – we love Xero! But we also intend for this story to be as honest as possible. We don’t buy into the cult of Xero, so we’re going to call it when we think the emperor is wearing a little less than he should be! And I have to say, no one here was prepared for what came next.

After developing a little following of our own, I was contacted by Xero and advised that we were no longer permitted to use the URL ‘approachingxero.com’. It turns out that Xero’s Terms and Conditions for partners precludes the use of the ‘Xero’ name in a URL. The explanation given was that Xero protects its brand very aggressively and that using the Xero name in a URL makes it difficult for visitors to determine whether this is an official Xero communique or not. Let me say here that I accept that this is entirely our fault – had we read the T&Cs initially, we may have avoided this from the beginning.

I guess we interpreted our posts being retweeted by the Xero team, right up to the very top, as being an endorsement of what we were doing – retweeted URL included. Perhaps sites like http://www.xerousers.com/ or Twitter handles like @thexerohero led us to believe that there was some grace extended to partners using and affirming Xero.

We were wrong!

It was suggested that perhaps we change the URL (and the blog name) to ‘Approaching Cloud’. Really? Not exactly catchy! Did the Xero peeps really believe that Approaching Xero was a single entendre?

And anyway, changing the URL would break all of our links. So we decided that perhaps we should find out whether they were serious or not. After asking what the implications for leaving the blog as is would be though, we were advised in no uncertain terms that the path to resolution would be swift and litigious.

OK, we were bluffing. So how do you play this game again anyway?

Ouch Xero! We thought we were friends! In the words of Kenny Rogers though, you gotta know when to hold ’em, and know when to fold ’em. And being risk averse accountants, we’re not much for gambling. So from here on this blog will use the URL https://approachingx.com/.

We know that some will defend this action on the grounds that Xero is just trying to protect its brand. Do you mean the same way that possibly the most carefully managed and protective brand in the world allows sites like http://www.appleinsider.com/ and http://www.macrumors.com/ to continue? Or how about the way another marketing behemoth chose to take a collaborative approach and embrace a Facebook page that had already been set up in their name? Isn’t the 21st century ethos for client relationship management more about the spirit of the law than the letter of it?

We always thought Xero was in this same league and looking to disrupt the status quo. But like I said at the beginning, we’re new to all of this. So maybe it’s us who don’t really get the new paradigm?

Don’t worry though – we still love you Xero. You just need to lighten up a little. And we hope we can still be part of the family. Think of us as that awkward Uncle who always says what he thinks. Sure, he’s a bit of a crackpot. But sometimes he might be just the person you should listen to.