Last night, I had the privilege of joining the Xero team at Santa Monica New Tech, a group of entrepreneurs who get together to network and showcase new technology. I spoke a bit about what makes Xero a great fit for U.S. startups looking for an accounting software solution. Here’s what I had to say:
Xero is designed for non-accountants
One of the first things people notice about Xero is the clean, intuitive user interface. For instance, Xero dispenses with traditional accounting terminology, referring to Accounts Receivable and Accounts Payable simply as "Invoices owed to you” and “Bills you need to pay.” This might seem like a small thing, but it embodies Xero's user-centric approach to design.
The dashboard is the first thing you see when you log in and it provides an easy-to-understand snapshot of the business. From the dashboard, there are links prompting the user to create and send invoices, as well as to categorize expenses. The workflows are carefully thought out and seek to minimize effort and time on the part of the user.
Xero is so easy to use, I've trained many clients to do their own bookkeeping. We'll set them up and point them in the right direction, then check in on them from time to time, making any necessary corrections. This is a great option for startups that don't yet have the financial resources to dedicate to hiring a bookkeeper.
Because of the way the reconciliation process is designed, it’s very difficult for a client of ours to mess up something in a way we can’t easily fix. Anyone who has used QuickBooks knows what a disaster it can be if one of the users starts mucking around in a closed accounting period and accidentally deletes or changes the amount of a reconciled transaction. Not a big deal if that happens in Xero.
It's all about the daily reconciliation
To stay current on the changes to Xero (because Xero is constantly improving), I personally do my firm’s books in Xero. Normally, this would be a huge waste of time for me as a founder of a fast-growing startup. Not with Xero.
Every day, I log in and reconcile the transactions that downloaded from my bank for the previous day. It takes less than 10 minutes. And then I’m done. Because Xero reconciles individual transactions to the bank feed, there is no need for a monthly reconciliation.
Those hours spent doing a painful monthly reconciliation to the bank statement? They’re gone for good. As long as my statement balance displayed in Xero matches my balance in online banking, I can rest assured knowing that my books are accurate to the penny.
Xero is built for global businesses
Amazingly, the U.S. version of QuickBooks Online does not support multiple currencies. If you’ve ever had to manually convert a bunch of transactions into your home currency, you know what a pain that can be. The technology community is a global one, so shouldn’t your accounting software be able to handle Euros in addition to U.S. Dollars?
The Premium edition of Xero supports over 160 currencies. You can invoice, get paid, and reconcile bank accounts in all of them. Xero also calculates your currency exchange gains/losses in real time, meaning you can see at a glance the effect of exchange rates on your cash flow and profits. You can use this information to make tactical financial moves, such as waiting to pay an invoice until an exchange rate improves. The information is all there, right on the invoice in Xero, so it's easy to do.
Developers love the open API
One of our clients wanted to see more detailed sales information on his income statement. His website ran on a custom billing platform, so there was no available sync tool for getting that information into Xero. Rather than design a time-consuming manual process for entering this data, we worked together to design a script that runs on his website to push his daily sales totals into Xero, broken down by revenue stream.
It's a win-win for our client and the bookkeeper. Our client gets more relevant, up-to-date information on his financial statements. And the bookkeeper doesn't have to do tedious, manual data entry.
These are just a few of the ways Xero is a great fit for startups. Anything I missed? Let me know in the comments!
For more information, check out Xero's "Accounting for startups" Small Business Guide. If you're interested in getting help setting up Xero, using it, or bookkeeping in general, take a look at my firm, Cloudsourced Accounting. You can read more about the Xero API at the Xero Developer Center.