How to Perform Basic Bookkeeping in Xero

Bookkeeping is a crucial aspect of running any business, no matter the size or industry. It involves keeping track of financial transactions, managing cash flow, and preparing financial statements. 

Traditionally, bookkeeping was done manually using paper and pen or spreadsheets. However, with the advancement of technology, there are now various software solutions available for bookkeeping, including Xero. In this blog post, we will explore how Australian businesses can perform basic bookkeeping in Xero.

Understanding Xero

Xero is a cloud-based accounting software specifically designed for small and medium-sized businesses. It is a user-friendly platform that allows businesses to manage and track their financial transactions in real time. Xero has become increasingly popular due to its affordability, ease of use, and accessibility from anywhere with an internet connection.

Setting up Your Xero Account

To get started on Xero, you first need to sign up and create an account. Once you have completed the sign-up process, you can start setting up your account. This involves adding your business details, such as name, address, and tax information. You will also need to connect your bank accounts, credit cards, and other financial accounts to Xero. This will allow for automatic bank feeds, which save time and reduce the risk of errors.

Creating and Managing Contacts

Managing contacts in Xero is crucial, as it allows you to keep track of your customers, suppliers, and employees. To create a contact, click on the “Contacts” tab and then click “Add Contact.” You can then enter their details, such as name, email, address, and payment terms. This information will be automatically saved and can be accessed whenever needed.

Recording Sales and Invoices

Recording sales and invoices in Xero is an essential part of bookkeeping. When you make a sale, you need to record the details in the “Invoices” tab. This includes the customer’s name, items sold, quantity, price, and payment terms. If you have a recurring transaction, you can also set up automatic invoices in Xero. This saves time and reduces the risk of errors in repetitive tasks.

Managing Expenses and Bills

Tracking expenses and managing bills is another important aspect of bookkeeping. In Xero, you can easily add expenses by clicking on the “Expenses” tab and entering the details, such as the amount, date, and category. You can also attach receipts and invoices to ensure accurate record-keeping. For bills, Xero allows users to set up recurring payments, making it easier to manage regular bills such as rent, utilities, and subscriptions.

Reconciling Accounts

Reconciling accounts in Xero ensures that your records match the transactions recorded in your bank statement. This process involves matching the transactions on Xero with the transactions on your bank statement. Xero provides a bank reconciliation report, which makes the process quick and efficient.

Generating Reports

One of the significant benefits of using Xero for bookkeeping is the ability to generate detailed financial reports. These reports, such as balance sheets, income statements, and cash flow statements, provide insights into the financial health of your business. They also help with decision-making and planning for future growth.

Using an Accountant or Bookkeeper with Xero

While Xero is designed to be user-friendly, seeking professional help from an accountant or bookkeeper is always recommended. They can assist with setting up your account, managing complex transactions, and generating accurate financial reports.

Xero is an affordable, user-friendly, and efficient software solution for bookkeeping for Australian businesses. At Griffiths Advisory, we are Xero-certified specialists who can help you set up and manage your Xero account. Contact us today to see how we can assist your business in achieving accurate and organised financial records.