Good morning

We’ll be posting throughout the day from the Viaduct Events Centre in Auckland New Zealand.

Check back at 9.00am NZST for live coverage from the Xerocon keynote #xerocon.

9.37am CEO Rod Drury keynote

“This is about real people, things that they play with everyday. We make things a whole lot easier.” 

9.50am Introducing some of the Xero board members

Sam Knowles, Phil Norman and Craig Winkler

10.00am

Big investment in the last year into accountant side features as it makes sense in the Cloud. Client and accountant software should be seamlessly connected. The client pays-not the advisor.

Xero is moving from being a software vendor to being a partner.

Many practices have out of date hardware which is not helping them to to move to the Modern Practice model.

Partners need a ‘common desktop’ so all of their document and file management works together. Many do-it-yourself solutions require more time in the long run.

10.10am Practice management

Announcement of the new practice management offer with the acqusition of Workflow max. Free practice management for partners who add 20 clients – that caused a ripple of excitement. I think I heard a ‘woo hoo’ or three.

10.23am Andrew Tokeley takes the stage to talk about the Xero Roadmap

You can call him ‘Tokes’.

“Even my 83 year old grandmother calls me Tokes so don’t feel weird.”

Report packs give complete control, new features such as notes can be drag and dropped to make life a lot easier.

You can now take Word or Excel tables and drop them into report fields. Lots of claps from the floor.

10:44am What’s in store for 2012 – report packs

Custom report fields e.g. banker, overdraft size, solicitor.

Automating schedule for Current Accounts and Loans.

Report code updates.

Purchase orders, quotes, stock lite and setup and conversion tools.

“We are not doing a full stock management system.” 

10.49am Next up, it’s Craig Walker 

30,000 + downloads Xero Touch from app store.

Craig tells us “what he got up to over the Christmas break.” … Address verification.

Data shows businesses dealing with the same businesses across the ecosystem.

Developing the Xero-to-Xero user features. Online invoices create online statements and help businesses get paid faster.

Users also get remittance advice (big cheer).

11:05 am Sara Goepel

Sara Goepel

The new Xero business community will be coming out on the 13 February. Businesses can help each other and work together.

Online training and a training dashboard for partner edition. Online training modules mean that businesses can keep track of their requirements.

You should see bank feeds in Xero personal in the next two to four months.

11.32am 

Back from the break. Getting ready to hear Hon Craig Foss speak.

“It is fantastic to be in room full of accountants. It’s not often you say that.”

Lots of concerns about the global economy around the world. It is a great time to be doing business in New Zealand. We are a trading nation and the world wants the stuff that Xero is making.

We need people with clever ideas and big visions.

We need exporters and investors who can see a new, innovative, start-up company and make it grow.

The huge investment in fibre adds lots of new opportunities for New Zealand businesses.

12.10pm Trevor Schoenmaekers, Hansens Accountants

GST is the biggest nightmare for his practice.

Trying to send things to India to save costs didn’t work and client’s didn’t like it. Trying to do reporting was taking too long and there was no time to spend with clients.

Switched to Xero in June 2010.

“Their (Xero’s) support to me was something I had never, ever, ever experienced before. One push of the button turned off $30,000 worth of fees to MYOB”.

Show of hands for the Rob Nixon group people in the room? A few here.

Major culture change was required as accountants in the business became more responsible for their clients. Increased transparency was hard for some to change habits. The business models have changed inside the practice.

Hired a marketing person fulltime to use new tools such as Twitter and Facebook to connect with customers. Staff turnover has basically stopped by creating fun and focusing everyone on clearly defined targets. Clients are encouraged to pay bills on time with prizes such as weekends away.

Trevor & Rod

12.40pm David Jessep, DJCA

David invested heavily in his business and then the Christchurch earthquake hit. He was in a bar called the Twisted Hop having a beer at the time. The whole building was demolished.

Up in running after three days with some cheap laptops and products such as Google Docs and Smart Payroll.

“The Cloud enables two businesses that are passionate about different things to connect and work together.”

“We’ve made lots of mistakes but we learned lots. It was hard in 2011 but we still doubled in size.”

1.00pm Lunchtime. (I’ll plug-in and be back soon for the afternoon workstreams).

In the meantime, you might get some food tweets on Twitter #xerocon.

1.56pm Hamish Edwards - Profiting as a connected practice

“Who went to university four years to learn how to do tax returns?”

A lot of accountants have  a lot to offer business because they run their own business.

Labour is expensive and junior accountants are getting paid more.

Love the bookkeeper. “If you annoy one of your client’s staff they will go with their staff not you.”

2.19pm  The Single Ledger

The same accounting system used by the accounting and the client.

The same accounting system is used for all clients.

2.35 pm Live Demos

Spotlight workpapers + Xero + WorkflowMax

Annual financial statements can be built anywhere. Very fast and easy to do.

Richard Francis launches a new innovation on stage with his wife Julie, Spotlight Workpapers.

March 20 is the target release date. Data is imported live from Xero into the workpaper.

The one-stop shop workpaper approach enables queries to be captured and shared online, in real-time.

2.56pm Gavin George

WorkflowMax and now Xero’s newest employee as WorkflowMax country manager for New Zealand demos value-based billing and looking at improving job throughput and practice efficiencies.

WorkflowMax demo

3.10pm Hamish Edwards back into it

It’s not about time. What is the average fee per client?

Taking questions from the floor

3.30pm

Guy Pearson from Interactive Accounting presenting his journey to the Modern Practice. Aiming to go global with his practice enabled with Cloud tools such as Mailchimp, WuFu, Google, LodgeIT and Eventbrite.

Guy Pearson's Ecosystem of providers

4.30pm

A few questions from the floor from some of today’s speakers.

Speakers take questions from the floor to finish of the day session

We’re wrapping up now for a bit so we can all go and get beautiful for the gala dinner and awards ceremony at 7,30pm tonight at the Viaduct Events Centre in Auckland. Keep an eye on our Twitter feed at #xerocon for winners of the New Zealand Xero Partner Awards for 2012. Thanks for all your comments and pictures. Great to see everyone had such a fun and informative day.

So much was packed into one day, and we haven’t even had our awards dinner yet – photos to follow of the dance floor action. 430 cups of coffee (from Aurum Coffee including help from Kevin from Customer Care) was like fuel on the fire.

Highlights of the day:

New Zealand Minister of Small Business and Statistics Maurice Williamson, gave an open insight into the direction our government is taking with cloud technology and initiatives such as the Single Business Number.

Our Modern Practice providers gave a world-first view of their solutions working seamlessly together to bring game-changing productivity gains to the accounting practice.

CEO of the New Zealand Institute of Chartered Accountants (NZICA) Terry McLaughlin showed how they are leading the drive to help members adjust to the industry changes as accountants move to higher value relationships with clients.

Justin Hygate entertained with a lively presentation of the Companies Office web services initiatives and the future of linking to these through solutions like Xero.

Our rapid-fire session saw senior members of the product team unveil what’s planned for the year ahead. We got some cracking applause from partners who had their top requests and even some items from their dream list show up. And yes, budgets may have been on there…

But the real fist pumps came at the end when CTO, Craig Walker showed the power of our mobile vision, with expense claims on the run and attaching a photo of the receipt straight from your smart phone.

Craig also fired everyone up with a demo on address verification work we’re doing with NZ Post that automatically populates addresses into contacts in Xero and includes geo data (or maps for you non-geeks) to make it easy to find new clients when you’re out and about.

We also had hilarious interludes during the day from MC Mark Wright who kept the room entertained with a selection of his favorite quotes and sometimes fictitious introductions of presenters.

There are no words to describe how proud we were to have so many accountants come and tell us this was “the best conference ever”.

More conference photos on the Xero Facebook page.

The GST rise is clearly the big ‘cost’ for SMEs. You will need to be very careful about how you price your products and services, or you may find you are wearing the GST rise on your top line (revenue). If you do not get your pricing right here, all the other lower income tax benefits will be eroded.The difference in the top individual tax rate of 33c and the new company rate of 28c will provide tax advantages for small businesses, which are trading as a company. And for those that wish to re-invest after-tax profits back into their business, they will have more to invest.  So if you have a growing business, set up as a company and you will save yourself 5c tax on your profits.

If you are carrying forward tax losses you will need to think about the effect on you and the timing – comes in from 1 April 2011 for those with a 31 march balance date. While slightly more technical, you will also need to consider your imputation credit account. There are some transition rules, but check with your accountant what is the best strategy for you. You will need to think about how much provisional tax you pay and I suggest you ask your accountant to complete a tax forecast for you, so you can assess your options.

The proposed changes to LAQCs (Loss Attributing Qualifying Companies) and the removal of depreciation on property with a useful life of more than 50 years, removes the easy tax advantages the residential property investment market has enjoyed. This means the pre-tax cashflow and amortised future capital gain, balanced against inflation, will have to stack up. Residential investment properties become less attractive. For small businesses that rent, there is an argument that the changes will hike rents up. Rents are usually based on value, and if anything, these tax changes make property less valuable because there will be less demand. It may be that rents do not move.

So all up a lot of tax reform here. The Prime Minister John Key and Finance Minister Bill English have been very bold.  There are winners and losers and small businesses can fit into both camps. But generally for growing small businesses, this is good news.

Well, the news is all good, Xero will be taking care of all the heavy lifting for you while you get on with more important things. This is a great example of the power of online software – you get to enjoy all the benefits of regular updates and new features without having to install any updates or pay anything extra. And from what you tell us this is important …

“Friends warned us that the software gets outdated and upgrades are expensive, plus they’re a real hassle to install. With Xero we get all the upgrades automatically for free.” – Penny Towns, Inspire Photography

So sit back, relax and look out for posts over the next few months explaining what we’ll be doing and how we’ll make the increase in GST a wee bit less painful.

We’ll also be posting more on The Budget…

Another thread is ensuring we get the accounting requirements for schools right. We don’t want to see Charts of Accounts with 600+ items, but instead implement an easy to use Chart and ensure our Tracking features allow the right reports to be easily obtained.

We’ve had a number of discussions with people about their requirements and what they’d like to see in a school accounting solution. And as we move into design and development, we thought it would be useful to create a LinkedIn Group to engage with those that are interested in school accounting.

Feel free to join our  Accounting for Schools group and let us know directly what you’d like to see in Xero for Schools.

Here’s what we’ve learnt:

• Farmers don’t do accounting – they manage their farms.
• As a general rule, farmers don’t keep an electronic record of stock. They just know how many stock units they have. You ask them and they will tell you. They don’t need a computer.
• At end-of-year the closing stock calculations are prepared by an accountant.
• There are two stock valuation methods available for tax purposes, National Standard Cost or Herd Scheme. Both are reasonably technical. The necessary calculations and valuations are done on a spread sheet with the help of an accountant.
• Farmers don’t do monthly stock takes.
• Some farmers receive a bi-monthly cash basis management report from their accountant, but this is not widespread.
• The accountant generally takes care of the GST requirements for the farm.
• Accounting is generally on a cash basis and farmers rarely create invoices. Most accounts receivable invoices are buyer created.
• Most monthly bills are on account at PPG Wrightson, Farmlands or RD1.
• Farms have term debt against the land asset and this is reasonably large.
• Banks offer an improved lending capacity and lower interest rates if the farmer produces monthly accounts that demonstrate good financial awareness and management. Farmers are now taking monthly accounts more seriously, especially those buying a farm.
• The banks also require a budget and most farms now prepare these. Best practice is to prepare an annual budget, but to make quarterly forecasts and then compare actual to the budget and forecast.
• The key performance metric for a farm is the “Economic Farm Surplus”.  This is used by farmers and farm consultants as a basis for improving the financial performance of the farm.
• Having broadband is reasonably common in the farming sector, especially among dairy farms.

What can Xero do?

• Include quantities at the transaction level and a stock reconciliation which ages stock correctly so as to help the accountant prepare the end-of-year stock calculations and journals.
• Provide for cashflow budgeting and the ability to have multiple budgets to allow for the annual budget and the quarterly updated forecast.
• Provide the Economic Farm Surplus Report as a standard report that can be customised in Xero.
• Provide the end-of-year accounts formats for farms, including the correct notes to the accounts.
• For key purchasers in the supply chain, make it possible for their buyer created invoice to automatically appear in Xero.
• Arrange for daily data feeds from the on account trade merchants.

We’re still gathering information, so if you do have any requests please let us know. As you can see there’s lots to do and we’ll be working on it over time, releasing features as we go. A top priority is to enable the quantity capture and data feeds as early as possible, so the accountant can use Xero for monthly reporting, GST and data capture for end-of-year.

The other stream of work we are doing with Federated Farmers is look at how various software suppliers can work together to improve rural productivity. For anyone who wants to join that discussion we’ve set up a LinkedIn group.

To make sure you’re on track here’s a check list you may want to follow:

1.  Complete a Bank Reconciliation for each of your bank accounts. You will know if you have any unreconciled items because the Reconcile Now button will be visible on the Dashboard.

2.  Make sure you have all your Accounts Payable up-to-date. These should be coming in either by mail, email or as a Xero to Xero transaction, so check they’re correct and entered into Xero via Accounts Payable.

3.  Finish off your end-of-month billing. If you have any outstanding jobs that need to be billed, complete the invoices and send them off.

4.  If you hold stock, complete a stock-take and let your accountant know what the value of your stock was at year-end.

5.  Finish your March expense claim for any business expenses paid personally. If you are using Xero Personal, categorise  these as “Business Expenses” so you can submit them to your Xero Business edition and they’ll automatically appear.6.  Complete your March payroll and enter the payroll tax due for March but payable in April, as an Accounts Payable Invoice. If you use one of the payroll packages that integrate with Xero, then you only need to make sure you have finished the final March payrun.

7. Have at the ready any other other documents such as investment statements, RWT certificates for interest, dividend statements, details of any new hire purchase arrangements or new loans and loan summaries from the banks. Scan these and email to your accountant. 

8.  Run an eye over your Profit and Loss. Go to Reports, select the Profit and Loss, select Compare Periods, Change the Date to March 2010 and change the Compare With to Previous 11 Periods. Look at each line and just make sure everything looks reasonable. Sometimes ‘strange’ items will jump out at you which you can drill into the detail to fix.

If you’re not sure of any of the above there’s more detail about year-end here in the Help Centre.

Now, you’re ready to get in touch with your accountant and let them know you have Xero up-to-date and ready for their review. Your accountant will let you know if there is any other information they need from you.

For the accountant

I suggest you have a look at the Reconciliation Report. This is a great start for your work papers and includes a Trial Balance, Aged Receivables and Aged Payables Report, Bank Reconciliation(s), GST Reconciliation, Fixed Asset Reconciliation and a General Ledger Exceptions Report that looks for anomalies across the entire GL. You can export this entire report to Excel and use it to supplement your own work papers package. You can also use the report for a quick sanity check of the data before you start the job and see if any other key information is missing. Just the  thing to minimise the dreaded “pick-up and put-down”.

This is a significant change that will require most external bookkeepers to become registered. If you use a bookkeeper for BAS services and they don’t become registered there could be consequences for you. For instance you would not be covered by new legislation which provides safe harbour protection from penalties in the event your bookkeeper does not take reasonable care when lodging your return.

We suggest you find out if your bookkeeper is registered or if they are intending to do this. To help with the transition, those who have been providing BAS services up until 1 March have six months in which to register with the new national Tax Practitioners Board (TPB). Bookeepers can download the registration form from the TPB website.

Your bookkeeper will need to register as a BAS agent if they do any of the following for you: 

• Installing computer accounting software and determining default GST and other codes tailored to the client.
• Deciding on the GST coding of tax invoices and transferring data onto a computer program for clients.  (Simple data entry is not a BAS Agent Service).
• Reconciling BAS provision data entry to get the figures to be included on a client’s activity statement. (This does not include normal bookkeeping duties nor reconciliation processes.)
• Filling in the activity statement on behalf of an entity or instructing the entity which figures to include.
• Assessing the withholding obligations for the employees’ of the business. This includes the preparation of payment summaries.

There are a number of organisations that can help external bookkeepers comply with the new legislation. One of these is the Institute of Certified Bookkeepers (ICB). At Xero we suggest external bookeepers contact the ICB to find out how they might be affected.

ICB is an association of bookkeepers that’s all about bookkeepers. It provides resources, information, support and guidance to employed and contract bookkeepers, including how to be the best and most competent professional bookkeeper.

Recognising the extensive role played by software in the provision of bookkeeping services, ICB is now working with Xero so that bookkeepers are aware of Xero and how it can improve the way they do business.This is an exciting alliance with great benefit for the bookkeeping community.

The timing of this alliance is pivotal with the introduction of the Tax Practitioners Board and pending changes to the BAS service legislation on 1 March 2010.  Xero is working closely with the ICB to help Australian bookkeepers with the transition. Watch our blog and visit the ICB website  for further updates on these changes for bookkeepers small business in Australia.

Wayne Schmidt Xero Country Manager, Australia is a speaker at the up coming national ICB conferences in March. You can register here.

Melanie noticed that accountants often have a clean up job to get their clients financial transaction to a state where they can prepare final accounts. It’s time consuming and therefore expensive for accountants to clean up books that are a mess.

Using Xero’s fast coding features Melanie has come up with an approach and service for ‘rescuing’ a bad set of books.

For small businesses with poor records, lots of errors in their legacy system, or  even a crazy chart of accounts you can be rescued by quickly reprocessing your transactions. Simply gather up electronic copies of the last years bank statements, load them into Xero and quickly reprocess the years transactions using Xero’s fast coding features.

Many banks allow online statements to be downloaded for up to several years back. If your bank does that then the process is easy. Unfortunately some banks only allow a few months of transactions to be pulled. In the worst case scenario you can quickly key the old paper bank statements manually into Excel (which starts to memorize data entered above in the column – so is fairly quick), then use the Xero CSV import to load the transactions, then fast code.

[As an aside - it would be great to find a scanning package that could read paper bank statements into a file format. Anyone know of one?]

Knowing how quickly you can be rescued with Xero’s fast coding, a suggestion that we have for accountants is to recommend your small business customers check how far back their bank provides statements for, and get them in the  habit of exporting their bank statement files into a common place so that they can be reprocessed later if required. A reprocessing insurance policy!

If (in the unlikely case) your Xero accounts are a mess – the bank data that has been imported through our daily automated bank feeds can also be exported allowing the business to start again, quickly recode, and be rescued.

Its great to hear of our partners thinking of new ways to use Xero and creating valuable new services. Way to go Melanie!

A long standing frustration among accountants is the annual billing relationship they have with many of their clients. But on top of this we’re also hearing that getting paid (no matter when!) can be a bit of a challenge in tough economic times.

As an accountant you may present your bill with the final set of accounts. But if you think about it, there is no compelling reason for the customer to pay you until they get in touch next year. Monthly billing is definitely a better way to go. It’s good for your clients because they won’t be landed with a potentially large bill in one hit and they can budget for the expense. You have a more even income stream.

Making the switch to monthly or quarterly billing is easier than you think. A simple way of doing this is to list the services you’ll be providing your client, and as part of the list include the cost of Xero. You will find that by using Xero you can add GST/VAT Return Preparation and a Monthly Management Report for a very small increase in cost to you, but this will be of huge value to your clients. The aim is to turn your core services into a menu of offerings and build out the bundle that is right for each client.As part of your monthly review you can quickly process items such as fixed assets and depreciation –  which as well as providing better quality numbers, significantly reduces the amount of end-of-year processing you need to do. In effect you’re spreading your work over the period.

We already have many partners creating monthly accounting products. A few great examples are: Alexander Rosse, David Jessep & Associates and TuiBiz.

The move to online accounting is happening fast. Lots of accounting firms have seen the light and to stay competitive everyone firm needs an online strategy. There are hundreds of accounting firms on the Xero network and having assisted them to make the transition to online we’ve developed a wealth of knowledge and experience that will help and guide you and your firm to take that step.

Last in the series
This is the final part in my series in which I look at the pain associated with old desktop software in accounting practices and how Xero can be the client engagement platform. You can find out more about how Xero is designed for accountants here.

Recently the New Zealand Institute of Chartered Accountants and Tax Management New Zealand released a discussion document Simplifying the Taxation of Small Business in New Zealand. The recommendations and issues this covers are very interesting, and the stance is quite different to the status quo. And I must say as a Chartered Accountant I think they’ve done a good job of simplifying things.

The document suggests small businesses suffer under a weight of compliance requirements, which is virtually the same requirement for big business. Inevitably the cost of compliance is not only too high but an unreasonable burden for small businesses.

Having helped lots of people who have owner managed businesses I know this to be true and I‘m hugely supportive of any initiative that makes compliance less onerous.

It seems the document’s purpose is to be a “constructive think piece to raise awareness and promote thought and discussion on some fresh approaches to tackling the ever wearisome tax compliance burden for small business.”

It further states:

“The purpose of this paper is to help determine whether there is a mood with both policy makers and small business owners to tackle tax compliance costs: because we believe our proposals could help cut income tax costs for small businesses by approximately a quarter to a third.”

Two very interesting suggestions 

1.  For micro-businesses (with earning under $60,000 with no employees), a flat 15% tax is paid on turnover including ACC levies. The business is not required to make careful deductions for expenses, which are generally 50% of the revenue.

2.  For a small business (turnover less than $1.2 million and registered for GST) the suggestion is treat all business structure types (Companies, Partnerships and Trusts) as if they were sole traders, removing dividends and salaries to owners and removing the requirement to keep an imputation credit account. Income tax is paid with GST and there is no requirement to pay provisional tax.  (Yippeeee!!)

This does not mean a small business will pay less tax, in fact the proposals suggest about the same tax would still be paid. What it does mean, is that it would make it much simpler to calculate income tax for small businesses. This would help the accounting community to move to the business coach type model we have always wanted, as opposed to being tax calculators and minimisers.

The potential impact on the NZ small business community is massive. Some 90% of all businesses in NZ employ fewer than five people and 60% of all NZ businesses are owner operators employing nobody else. 

The writers have asked for feedback and have included a number of specific questions at the back of the document. For those of you inclined I strongly suggest you take a look.

This week I’d like to talk about the No Risk Solution.

We all want to help small businesses. The global financial crisis (which we’re not quite out of yet)  means all business owners are having to pay more attention to their finances. Many of the smaller operators are struggling and need much greater visibility of  their cashflow if they are to survive. Banks are demanding quality, accurate financial information and a hastily prepared spreadsheet is simply not good enough anymore.

Anything that saves you time and money and provides greater real-time visibility of cashflow is a tool that business owners and their accountants could really do with in tough financial times. Here’s what we’ve found happens in such an environment:

• Almost all businesses need a greater focus on cashflow.
• For banks to roll over credit facilities, many will demand monthly management accounts.

Where does Xero come In?

• Xero helps businesses to have accurate, timely and up-to-date financial information.
• Xero makes it easy for businesses and their accountants to collborate cost effectively. It also aides in the preparation of professional, accurate monthly management reports.
• Xero has unlimited users and access, so the business owner and accountant use the same financial system and general ledger data for the different jobs they need to do. No more double handling of data.

As an accountant I always wanted to give my clients a no risk option when it came to accounting software. I have certainly had my fair share of clients who’ve told me their existing software sucks. So I don’t want to recommend any software where a risk exists. For instance I don’t want them to pay a large amount of money upfront for a piece of software that will soon be out of date, and which lives on just one computer and allows just one user.

Xero has a monthly subscription fee and is a better option for many small businesses for two reasons. Firstly if they decide it’s not for them, they can stop the subscription at anytime. Worst case scenario is they may have paid for a month or two. Secondly a monthly payment fits better with the cashflow cycle of most small businesses, which generally do not have cash reserves and cannot afford expensive hire purchase agreements. Also, the free trial means they can try before they buy, which just makes good sense.

An online accounting system like Xero can be implemented quickly, and easily. There’s no large, outlay upfront so where’s the risk? And Xero gives a real-time, better view of cashflow which is essential to both the accountant and the business owner.

Hamish Edwards is a Chartered Accountant and the co-founder of Xero. You can view the introduction to this series here. More information on what Xero offers accountants can be found here.

With an online accounting system where information can be transparent and readily available, you need different levels of access for the various users. Most desktop accounting software packages have single user access as standard. Principally because they were designed for just the one PC.

Unlimited users are a key benefit of an online software platform. It means that small businesses can collaborate with their accountants, employees, business partners or spouses with the one set of data and at the same time. This calls for a robust model that gives the right level of access to the right users.

With Xero the subscription holder determines who they invite to have access and what role the invited users have. This subsequently restricts certain usage so that there are different levels of control and access. For example the business owner may want to provide access to an employee, but may not want the employee to see how much profit is being made. We call this the Employee Role. The Employee role allows invoices to be added, saved  as drafts and submitted for approval. It doesn’t allow the importing of invoices, or for these to be approved or sent via email.  Expense claims can also be added under this role and there’s access to contacts.

You can specify whether or not each user is allowed to change their role themselves or you can invite other users to have access to the organisation. There is also a Read Only role that’s especially for external directors or bank managers to review your numbers – but they can’t make changes.Standard users have full access to everything in Xero except the ability to publish reports, access management reports or alter any data that has been locked. The Financial Adviser role is for the Accountant and provides full access to everything that is available in Xero – including the ability to use the full reporting functionality.

Some clients want you to do it all – including outsourcing the bookkeeping and accounting. Xero gives you the option to own the subscription and then invite your client to have access under any user role. For our Accounting Partners using Accountants Edition we have two special user roles: Managed Client where the user can write notes against bank statement transaction lines, and Cashbook Client where the user can code and reconcile the bank transactions.

Every transaction or entry in Xero has a history and notes section, so you know exactly who has done what and when. It also allows you to identify tasks that are educational and assist with training. This history is essentially a built-in audit trail for every transaction and you can drill right down to the double entry journal.

Unlimited user access is one of the great benefits of online accounting. But having different user levels also gives you peace of mind that the right people have the right access.

Hamish Edwards is a Chartered Accountant and the co-founder of Xero. You can view the introduction to this series here. More information on what Xero offers accountants can be found here.

One of the problems I had in practice was that desk top accounting software can be difficult to use. So when I introduced it to my clients they had a big learning curve and it certainly wasn’t an enjoyable experience. Learning the software took them lots of time and they had to spend money on external training and support.

My clients used to say that the software made them feel dumb and they made many mistakes. Clients who now use Xero tell us that it makes them feel smart. We’re also noticing that the quality of the financial information means we don’t have to fix mistakes anymore.

All accounting software enables the user to conduct business transactions and aggregate information into a report. But the design of the traditional windows-based accounting software is technical, clunky, non-intuitive and just plain hard to use. There has been a revolution in the delivery of web-based services and the basic premise is that it has to be extremely easy to use so that users require no training, and there must be cost savings associated with training resources. This sounds simple but is actually hard to do. It really does require specialist interaction designers.Xero has focused on securing the smartest and most design-led people. By having an understanding of what small businesses do every day and how they interact with software, our designers have developed an accounting system that’s easy to use. Desktop software was designed before internet banking, email and the world wide web. Xero took a fresh look at the processes, and this approach has allowed us to build an accounting system that is very easy to use and you don’t need training.

Customers and accountants alike find the user interface – the actual way the software looks – uncluttered, clearly laid out, but at the same time beautiful and even sexy. That’s right we’ve made accounting sexy!  It’s not a claim we make I might add, but it’s what customers have told us.  

Xero empowers people to feel smart, get on top of the books and arms them with vital information – with everything at their fingertips. My favourite quote from a client remains, “You had me at Dashboard”.  See, it really is that good.

Hamish Edwards is a Chartered Accountant and the co-founder of Xero. You can view the introduction to this series here.

We have all seen the dragons tear apart a budding entrepreneur because they don’t know the numbers. There’s a reason why 80% of the world’s CEOs are ex-accountants and that’s because if you are serious about your business you need to know about the numbers.

The problem is unless you are an accountant – and most people aren’t, then financial information can be very confusing and frustrating. If the client and their accountant have the numbers at their fingertips, the accountant can act as the virtual Financial Director. With knowledge of the numbers then the accountant can help the client fly past the dragons.

This becomes powerful with online tools like Xero. The information is displayed in a way that the entrepreneur can understand, and it encourages them to take a greater interest in the numbers. As the entrepreneur’s interest and understanding grows, so does the importance of timely, accurate and reliable financial information. Typically a small business owner is familiar with their bank balance, but if we help them get a better understanding of the financial side of their business, they start to love it. In fact they often can’t get enough of it.

As well having the ability to better engage the client, an online system needs to have as all the essential, more technical aspects that I an accountant understand and want to use. This includes: manual journals, GST/VAT Return, reconciliation reports, audit  trails, Management Report, Annual Report, Abbreviated Accounts and such like.

The combination of the two starts to make the accountant mission critical and changes the relationship we have with our clients –  from one of  compliance, to right hand man or woman. That’s got to be a better way to build business.

You can view the introduction to this series here.

Access to the clients’ accounting systems and the ability to collaborate in real-time, anytime, anywhere and on the mobile…

Old technology means accounting systems are installed on a PC in the office where the only people that can access important financial information is the person sitting in front of that PC. This tended to be the internal accounts person or the business owner. The inherent problem with this is that only one person can have access to the accounting system at any one time.

In the current environment, businesses are becoming more aware of the importance of their financial information, access to it and mobility. Businesses also understand the value of providing sensible access for their employees and their accountant. Instead of going it alone, they are becoming more aware of using their biggest resource: other people. They also see the value of having experts close and at hand to help when needed.

With installed software, providing access is difficult. Traditionally, all users would need to have the same and correct version on their computer and then files get sent around, which means as soon as data is exported, it is out of date. One of the main problems here is the risk of data being lost. It also evokes Key Person Dependency, whereby only one person can have access to the ‘master copy’ at any one time. It’s no longer acceptable to have to go back to your desk to make a phone call – that’s why we have mobile phones. So why is it still acceptable to keep installed software on our PC which in effect chains us to our desks?Xero is delivered as software on the web, which means you can access the accounting software and financial information from anywhere.  All you need is an internet connection and a computer or a mobile phone that has internet access. Furthermore, Xero allows unlimited users so you can invite as many people as you deem appropriate to access the accounting system. If the client has a question, I want them to email or call me. I also want to be able to answer the question fast, and if we can both see the accounting system at the same time, it makes it so much easier.

More and more accountants and small business owners are embracing this new, emerging technology. Soon it will be commonplace to have all your business processes operating online. US based salesforce.com has proved the online collaborative model works for customer relationship management (CRM), so why not for accounting?

But do you really know if you are as profitable as you could be? Are your customer numbers growing?  Are your customers spending more?  Are you on track to hit this month’s numbers?

If you’re using Xero for your invoicing as well as keeping your bank rec up to date – then the answers to some of these questions is only a few clicks away.   Your accountant or financial advisor can help you to identify metrics and KPIs that are most relevant to your business and then Xero can help you track them monthly, weekly or even daily if times are tough.

In today’s product release there are a couple of extra ways to track your performance, so I’d like to take the opportunity to highlight these and a few others.  Not all of these will be appropriate or useful to your business, but some will.

Using the Executive Summary report:

• Average invoice value *new* – this is a measure of whether your customers are spending more or less.  If your income is down for the month – is it because you issued fewer invoices, or because your average sale value was down?  If your average value was down – are you discounting too much or are people spending less?
• Number of invoices issued *new* –  used with average invoice value, this will help shed some light on your sales trends
• Gross & net profit margins – how profitable is your business?  Is it costing you more to make sales and run the business compared to the sales you are making?
• Return on investment (p.a.) – is your investment in the company working for you – or would your invested money perform better if it were in the bank?
• Average debtor & creditor days – how long is it taking your customers to pay compared to how long its taking you to pay your suppliers?

Using the Profit and Loss report:

• Month to date progress *new* – this compares this month’s partial figures against the same period last month.  For example, if it’s the 20^th of the month, then you can compare your month income and expenses against previous months as at the 20^th to see if you are ahead or behind
• Compare weeks *new* – compare income on a weekly basis to look for patterns.  Is all of your income being booked in the last week of each month or is it spread evenly through-out the month?
• Actuals vs budget - compare your actual income and expenses for the month and year-to-date against your budget
• Compare cost centres – using tracking you can compare income and expenses for each department, sales person, office or product-line which helps  you to identify strong and weak performers

Once you know which metrics to watch, its easier to start working on improving them. We’d also be interested to know what metrics you find useful, whether they are in Xero or not.

I loved working with small business clients. My firm, Openside, was built to provide next generation accounting services for fast growth entrepreneurs. In about 2002, I did an offsite strategy day and took a good look at my practice. I realised the practice I wanted was not what I had. My practice was 85% compliance-based, I was working huge hours, I had high write offs and often had disputes with clients over fees. I was getting tired fast. So I decided to change my business and in doing so, I looked for the tools that I needed to do the job.

Rod Drury, a technology entrepreneur, became my client and he and I discussed how great an online accounting system would be. So we resolved to build the accounting tools we had both always wanted.

This is what I didn’t like about the old model:

• Being disconnected from my clients’ accounting system.
• Doing only compliance and having arguments with my clients over fees.
• Being an agent of the government tax authority that my clients paid for.

This is what I wanted:

• My clients to see value in what I did and to build valuable relationships with them.
• To help my clients. I knew as an accountant I could help almost any small business become more successful, but in order to do that the client had to see the value.
• To provide next generation accounting services to my clients, being their virtual finance director and becoming mission critical to the growth and success of their business.
• Higher touch points with my clients, providing the ability to find opportunities to pro-actively add value.
• Bill my clients monthly with  service level agreements and bundled service offerings.

The obstacles

What I did not realise then, but I know now, is the old model of accounting software, where the customer manages their own version of their data and sends me a copy periodically, dictated how I worked.

The time it took to get a copy of my customer’s data into a location format, was time my customers weren’t happy to pay for. Any changes I made were out of sync with their business copy. This forced my firm to provide retrospective advice – sometimes after year-end. It stopped me adding value on a more regular basis, such as monthly.

The key elements of an online accounting system

• Access to the clients’ accounting systems and the ability to collaborate.
• Help my client understand the financial side of their business.
• Easy to use and keep up-to-date.
• Different user functions for: my client, their employees, the bookkeepers, my staff, and of course myself (the accounting partner).
• No risk model to my clients. I wanted to tell them, “try this”.
• Reduce IT costs to my clients’ business.

The online accounting system is not the final solution – you need to change the way you think about your clients and your practice. But it is a huge part of the solution.

In KPMG Business Advisory’s latest newsletter, KPMG talks about experiencing ‘something of a revolution’ with online accounting technology, and highlights the benefits to both KPMG and their clients.

“We find that Xero is very user-friendly and well designed for those without specialised accounting skills.”  
 
KPMG says real-time information and a range of reporting functions distinguish online packages from desktop systems available.

Every week KPMG recommends clients consider online accounting options.

$60 +GST per person

Includes:
Dashboard
Chart of Accounts
Bank Account Set up
Importing Statements
Conversion from old system
Bank Reconciliations
Questions and answers

$60 +GST per person

Includes:
Accounts Payable
Accounts Receivable
Set up Contacts
Price List Items
Invoicing basic
Repeating invoices
Sending invoices
Reporting
Payment of invoices
Questions and answers

As a way of saying thank you to our early customers, if your business is on a Xero billing plan before 1 September 2009 multi-currency will be free forever as long as you remain on that billing plan. Starting 1 September multi-currency will cost an additional monthly fee (see the multi-currency page for details). So sign up now, while it’s free!

Instant and effortless (the Xero way)
This marks a really important step forward for people who do international business. Until now, doing multi-currency has been a complex and time consuming process. You really needed to be an expert to work out your gains and losses.

If you’re a small business with foreign currency exposure Xero can now mange this for you. Xero automatically does foreign currency conversions for you in real-time, so you know how much money you’re gaining or losing on all your international transactions. No other small business solution can match the simplicity and precision that Xero gives you.

Unlike other solutions on the market, Xero does way more than simply let you raise an invoice in a over 160 currencies – Xero revalues your numbers in real-time and eliminates the major hassles of doing foreign currency accounting.

The following video shows how comprehensive, yet simple, multi-currency in Xero is…

Here are simple instructions for setting up multi-currency. For in-depth details, please read the release notes.

We’ll be making additional enhancements to multi-currency over the next few weeks, so we really look forward to your feedback.

Update to the Terms of Use
Please be aware that the Xero Terms of Use have been updated to include XE.com terms, which cover the use of the currency data feeds.

Designed to empower you with the skills you need to carry out your essential accounting processes, this course will show you how easy it can be to stay on top of your transactions daily and know exactly where your finances are at, thus enabling you to make better business decisions every day.

This course covers the following topics:

• Navigating the Dashboard
• Setting up your General Ledger
• Setting up Customer and Supplier contacts
• Enter Sales and Customer Payments
• Enter Purchases and Supplier Payments
• Other types of transactions (including how to copy, void and set up repeating transactions)
• Completing Daily Bank Reconciliations
• Prepare your GST Return

Xero courses are run from 9am – 1pm and students will get morning tea, and a certificate at the end of the course.

You can register here.

Thankfully, once shown, and set up, it can be very easy. And really satisfying once you have it under control.

I’ve noticed that there are a couple of ways that small business owners do their books. The first is the Cash Book method. Under this method you simply code what comes through your bank account. Many products are just a simple Cash Book.

Xero can operate as a Cash Book. The two main transactions are ‘Spend Money‘ and ‘Receive Money‘. Using the bank reconciliation you simply create these transactions as they come in. Our bank rec remembers how things were last coded.

But this approach does has some limitations.

• You have to keep checking on missing transactions.
• It’s hard to forecast what’s going to happen.
• Your computer system isn’t helping you as much as it can

The convention in traditional accounting is then you move up into an accrual system. This sounds scary but what it really means is adding invoicing into your processes. Even really small business can use invoicing. Accounts Receivable are invoices you send out and Accounts Payable are invoices mailed to you that you need to pay.

Under a Cash Book basis you might just have the paper copies of these invoices, act on them them, and wait until the cash hits the bank until you load them into your system.

Xero allows you to be smarter that that. You can enter in your invoices in immediately. Whenever you sell something or do a job you  create an Accounts Receivable invoice. Whenever you check your mail and open your bills you can enter your Accounts Payable invoices.

For Accounts Receivable we provide tools to allow you to stay on top of when people pay you. You can even send statements. For Accounts Payable you’ll have everything you owe (rather than have to hold it in your head) and we’ll soon be providing more tools to help you more efficiently manage those payments.

We also have repeating transactions, that allow you to template your business. Xero will automatically create invoices that occur regularly for you. The machine can start doing some of your work.

Then your daily bank Reconciliation is about matching things off, rather than inputting data. This is really important.  Your bank reconciliation becomes a check on the status of Accounts Receivable and Accounts Payable. You’ll have a much better understanding of your business. It will save you time and money.

Xero is unique in that it provides both the Cash and Accrual view of your transactions. Under the Accrual view you see where your accounts are based on what has been invoiced. The Cash view allows you to see the actual cash movements. You’ll soon learn that timing matters a lot for small business cash flow.

If you are just using Spend Money and Receive Money I urge you to check out Invoicing with Accounts Receivable and Accounts Payable. It will make your business better.

Your Xero advisor can help you take the next step up in understanding and help you move beyond the Cash Book.