Well done, you use Xero for your bookkeeping…great choice!
Not only should Xero help streamline your business, but it will provide live financial information at your fingertips and an up to date snapshot of business performance.
But have you ever heard of the saying “garbage in, garbage out”? If the data input is incorrect then the reports coming out are going to be barely usable…missing the whole point of having Xero in our eyes!
When we start working with a new client or the client completes their own bookkeeping, there are 10 very common errors that we find.
Our experts explain what they look out for when assisting customers with their monthly bookkeeping…
- The bank accounts in Xero do not balance with the bank statement (there are 3 main reasons for this…but the next reason is the most common)
- You have posted a bill/invoice then immediately marked it as paid – well you did pay it right? It seems the logical thing to do – but unfortunately it’s wrong! This posts the payment direct to the Xero bank account, but the Xero bank account is already linked to your bank that is pulling all of the payment/receipt information. What happens? It duplicates the payment and the bank does not balance
- Salary payments are posted direct to the wages/salaries codes and not the wages payable code, if you use Xero Payroll then it posts the payroll transactions already in to the system, so this often causes a doubling of costs in the profit and loss
- Director payments that have been taken are posted direct to the director remuneration code and not to the director loan account
- HMRC payments for PAYE get posted direct to employers’ national insurance
- VAT – where do we start? This could have 10+ mistakes to itself. Normally VAT is claimed on items that do not have it…insurance, rates, sometimes rent, vehicle monthly payments, subcontractors are the main culprits
- Car expenses for fuel/mot/car repairs are posted to the wrong code – the fixed asset motor vehicle cost
- The prior year yearend accounts that were submitted and filed do not look anything like the prior year data in Xero
- There are no copies of invoices/bills/receipts attached to any of the bank transactions. It makes it difficult for your Accountant to check and help you save money and tax with little or no information. Sometimes this can cost you money!
- Fixed asset purchases are not recorded correctly or posted to the right codes
- Other common issues include postings dividends (or not is usually the case), being on the wrong VAT scheme, charging VAT when you are not VAT registered
When the team here at Abbeygate Accountancy are instructed to provide the bookkeeping and monthly reporting for our clients, we always complete a Xero data health check – aiming for 9/10 result each time. That way our clients can be safe in the knowledge that the reports they are using and relying on to grow their business are correct. If you are interested in a Xero health check or monthly reporting then please email Archie at firstname.lastname@example.org – we’re only successful, if you are!