As a certified Xero advisor, Glint Accountants often comes across Xero files set up by our new clients which contain a large number of common bookkeeping mistakes. Whilst we understand that start-up business owners would like to keep their expenses low, it is sometimes as a case of ‘pound foolish, penny wise’ as our fees to fix up the errors (ie. ‘rescue job’) is often more than the our initial set-up and training fees. We highly recommend seeking the assistance and training of a Xero certified advisor if you are new to using Xero.
8 Signs Your Xero File has Mistakes
Here are 8 signs that you have made bookkeeping mistakes in Xero.
- Bank balance in Xero does not match with your bank statement.
- There are transactions listed as ‘user’ instead of ‘bank feed’ in the Xero bank transactions.
- Payables don’t match what you think you actually owe as some bills that have been paid are still showing up as being unpaid.
- Receivables don’t match what you think you are owed as some sales invoices are shown as paid but you know your customers have not paid, or vice versa.
- There are balances in clearing accounts or suspense accounts and you have no idea what they are.
- GST payable/receivable does not match with the figures in the Business Activity Statement.
- PAYG withholding payable does not match with the figures in the Business Activity Statement.
- There are huge amounts recorded as ‘General Expenses’.
Top 3 Xero Set-Up Errors
Here are 3 common Xero set-up mistakes.
Error No. 1: Not customising the standard Chart of Accounts in Xero to suit your needs.
This is one reason why ‘General Expenses’ are high as business owners use this code to avoid creating a new code in the Chart of Accounts.)
Error No. 2: Not keeping a copy of receipts or using all the tools available in Xero and HubDoc to manage expense receipts.
Error No. 3: Not arranging for bank feeds for every single business bank account.
Yes, you do have to connect bank feeds for every single account and that includes Paypal, TransferWise, credit card account and loan accounts.
Top 3 Reconciling Errors in Xero
Here are 3 common bookkeeping mistakes in Xero.
Error No. 1: Using ‘Unreconcile’ when you’ve made a error.
When correcting a reconciled bank transaction, selecting ‘unreconcile’ doesn’t reverse the error. The coded transaction sits in the bank account as an unreconciled item. This can cause doubled up transactions in your final bank reconciliation. Always select ‘Remove and Redo’ to clear the reconciled line and the transaction.
Error No. 2: Creating a new spend money transaction instead of matching a payment in the bank feed to the Bill.
This will result in the expense being recorded twice while the Bill sits in Accounts Payables as an unpaid invoice. Click ‘Match’ instead of ‘Create’ and then match the bill to the payment.
Error No. 3: Making transfers between two bank accounts twice.
When recording a transfer between two bank accounts, business owners tend to code it as a transfer in both accounts, which results in unreconciled transactions in both, ie. there is a doubling up or duplicate transaction.
If this is not corrected, Xero will have the wrong bank balance. To avoid this issue, record the transfer in one bank account. Then go to the second bank account reconciliation screen and match the Xero created transfer transaction.
Need help fixing Xero bookkeeping mistakes?
Don’t feel embarassed about contacting us for assistance. We see this day in, day out. We are more than happy to help!
If you prefer to have someone handle the bookkeeping tasks for you, ask us about our monthly bookkeeping packages. We take of everything, so that you are free to focus on growing your business!
Drive your Business Growth!
Being virtual CFOs and accountants, we can do much more than bookkeeping. Once your Xero file has been tidied up and you have timely data that is reliable and relevant, we can help with the following:
- Monthly summary of key financial information and performance
- Comparison between budgets vs actuals
- Regular forecasts
- Key performance indicators,
- Business strategy
Ask us about our virtual CFO services which will help you where your business is currently at, focus on what you are currently doing and plan ahead to get to where you would like your business to be.
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How to Streamline Bank Reconciliation with Hubdoc & Xero
Disclaimer: This blog post has been simplified to cover the common Xero bookkeeping and set-up mistakes. This should not be construed as advice from Glint Accountants. Therefore, we encourage readers of this blog post to contact Glint Accountants for assistance with their Xero file.
Prefer to speak to someone about your Xero file? Contact us at Glint Accountants to make an appointment to go through your Xero file today. We can easily do this via email, phone, Zoom, etc.