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.
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.
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?