Many businesses are looking for ways to improve their processes. One easy way to do this is to utilise existing streamlining options in Xero.
Xero provides two ways of entering expenses into the file. Many businesses use ‘Spend Money’ to enter expenses while they are reconciling their bank account from the bank feed. However, entering expenses as ‘Bills’ will provide businesses with far greater benefits, which we detail below.
Benefits of entering expenses into Xero via “Bill” versus “Spend Money”:
1. Warning for duplicates
When entering a bill, Xero will show a warning that another bill with a matching reference number already exists within the file. A spend money transaction does not have a field for the reference number on the bill, meaning duplicate payments can occur.
2. Cash flow forecasting
Entering a payment as a bill allows you to select a due date which is used by Xero to give a summary on the dashboard of when bills need to be paid and the amount to be paid. Additionally, Xero has also introduced a short term cash flow tool which shows a prediction of the bank account balance using the due date for invoices and bills. These tools can assist with cash flow planning.
3. More valuable reporting
When an expense is entered as a bill, it will be displayed on the profit & loss report on the date of the invoice number, rather than the date paid. This ensures the expense matches to the period the income is earned and provides a true representation of the performance of the business. Additionally, if your business is struggling with cash flow, entering bills allows the business to see where funds are being spent, and which suppliers are owed money at a given point in time.
4. Reconciling to supplier statements
Entering an expense as a bill enables the ability to reconcile all purchases back to the supplier statements. This is useful when a business makes multiple purchases from one supplier.
5. Having a history of bills
Information regarding the payment of bills is easy to access, if a supplier was to chase an invoice that they claim to be outstanding. Additionally, Xero can attach a copy of the bill to the transaction. This assists with meeting the ATO’s substantiation requirements for deductions and can save folders of paper around the office.
6. Paying suppliers via batch payments
A batch payment allows you to select multiple invoices to pay in one bank entry. Xero uses the bank account details from the supplier’s information to make a payment. For security, there is a setting to allow only certain users in the file to have permission to change bank account details for contacts. The batch payment creates an ABA file which can be uploaded to online internet banking platforms to make payments. This saves time with internet banking as it eliminates re-entering payments and reduces inadvertent errors such as entering incorrect bank accounts or amounts.
7. Suppliers can be notified of payments made
After a batch payment has been made, suppliers can be sent a remittance advice with a click of a button to notify them of payment.
Large quantities of invoices?
If you enter large amounts of invoices, another option to consider is utilising Hubdoc within Xero. Hubdoc makes entering bills quicker and reduces errors. With Hubdoc, you can automatically import all your financial documents and export them into data you can use. If you have a Starter, Standard or Premium Xero subscription plan, Hubdoc is included in your subscription at no additional cost.
If you need help getting more out of your Xero subscription, or to learn about more streamlining options for your business, contact your Pilot advisor on 07 3023 1300.