When you look at the two companies Xero Accounting and GoDaddy hosting companies are very similar. They both provide cloud-based solutions, for a subscription fee and have small businesses as their major clients. They are both in a very good position to provide accounting software for their customers.
One of the Xero Directors sold an accounting software program to GoDaddy in 2012 and at the time TechCrunch reported that Accounting software is a logical service for them to provide to their small business clients. What does it mean for the future though?
Wiise, which is owned by the deep pockets of KPMG and will operate under a strategic partnership with Microsoft and the Commonwealth Bank, will combine cloud accounting, job costing, workflow scheduling and inventory management, payroll, sales and marketing and customer relationship management into one system.
Pricing hasn’t been confirmed, but it’s understood Wiise will operate a tiered model, costing businesses between $60 and $200 a month.
The software will integrate with all major Australian banks, but added functionality will be given to CBA customers, such as access to working capital and financing options.
Businesses that have outgrown their cloud accounting system
Although Wiise will target SMEs; founders KPMG, Microsoft and CBA say the software isn’t competing with MYOB, Xero or QuickBooks for customers.
Rather, the Wiise software will suit complex businesses that have outgrown traditional cloud accounting systems, because their business operates in more than one location, has a complex supply chain, various legal entities or high transaction volumes.
The Wiise software will suit complex businesses that have outgrown traditional cloud accounting systems.
Wiise will also appeal to businesses that want to use one piece of business software, rather than multiple separate systems or cloud-accounting add-ons.
That said, it’s probably a worry to MYOB, which signalled it would grow market share by pursuing bigger and more complicated businesses; acquiring the enterprise reporting system Greentree in 2016.
As a general rule, most small businesses want to spend as little time worrying about compliance as possible, which is as it should be. Simple businesses with straightforward tax and compliance requirements typically stick with simple cloud accounting systems.
So there’s value in bookkeepers that typically services larger, more complicated businesses learning more about Wiise, but probably not for bookkeepers that look after smaller, straightforward businesses.
Who’s Managing Your Business Accounts?
If you’re a business owner trying to decide on an accounting system, speak with your bookkeeper or tax agent to determine the best option for your business.
If you’re looking for a reliable bookkeeper or tax agent to manage your business accounts, visit the National Bookkeeping website to find someone professional, able to work in your office, or remotely, to suit the needs of your business.
Unfortunately, we’re not given free access to accounting software, so we can’t pass free software access onto our students either. However, we do let you know where you can access trial or student versions while you complete our courses.
It made me wonder: Who’s driving the demand for these programs? It turns out, it’s usually someone’s bookkeeper or accountant recommending them. And this is usually because they’ve done a training course and learnt how to use one or more of the major accounting packages.
Does your bookkeeper or accountant disclose whether they’re earning a commission?
Some bookkeepers take a 15 percent cut of the monthly subscription fee because they’re a certified MYOB / Xero / QuickBooks consultant — and that’s why they recommend a particular package. I personally think that bookkeepers or BAS agents who do this should disclose that they are earning an ongoing commission — just as real estate agents need to make these declarations in their agency agreements.
Businesses don’t know any alternatives
It also happens that a lot of business owners don’t know about alternative accounting packages. Therefore they simply choose the brand name they’ve heard about the most. I discovered this with real estate agents when it comes to who they choose for their social media marketing services — most of them ask what software or which person Joe Blow uses and then assume it’s good enough for them.
Selecting an accounting package to use is often one of the first things a new business owner does. At this stage, however, they may not even be aware of what they require from an accounting package; never mind what sorts of alternatives they should be looking at. When first starting out, they’re just anxious to be able to invoice and get paid by their first client.
Three low cost alternatives to the “three brand names”
Zoho, Freshbooks and Wave are three other accounting packages that are either free or very inexpensive.
These three also include many of the same features you’ll find in the three big name accounting packages — MYOB, Xero and QuickBooks.
Zoho: Free invoicing software allows one user, invoice up to five customers; paid subscriptions from $7 U.S. per month; add extra features (expenses, subscription management, inventory management) as required. Pricing for Zoho Books, the complete accounting package, start at $9 U.S. per month for 2 users, 50 contacts, 5 automated workflows.
Freshbooks: Complete accounting software includes unlimited invoices, accept online and credit card payments, multiple devices, reports, payment reminders, notifications when clients have received, viewed, paid invoices; pricing starts at $15 U.S. per month for 5 active contacts (customers).
Wave: Forever free invoicing and accounting software includes unlimited estimates and invoices, generate reports, scan receipts, bank feeds (accounting package), and more; accept credit card and online payments for a fee (1.75 percent for ever 30 cents AUD); payroll $36 AUD per month.
Consider your business needs first
We recommend either Wave or Zoho for small but growing businesses, looking for a cheap or free accounting solution. Wave, in particular, provides a fairly robust accounting package that’s entirely free, and remains so if you don’t intend to take credit card or online payments (lots of businesses do, but many more don’t). In fact, they even have their own smartphone apps to capture receipts and create invoices while you’re at a clients!
If you anticipate you might want to add other productivity apps, like a CRM, inventory management, IT helpdesk, recruitment tools, or collaborate in a team project, Zoho is a good place to start, as these features can be turned on and off as required.
Of course, these accounting packages are rarely used or recommended by accountants or bookkeepers, who prefer to work with Xero, MYOB or QuickBooks because they provide the functionality needed to complete and lodge activity statements. If you’ll be working with a bookkeeper or accountant, it’s best to stick with one of the brand name three.
If you need training in MYOB, Xero and QuickBooks, our online training courses will show you how to set up and use various aspects of the software. More importantly, they will take you through detailed case studies where you can enter all the transactions performed by various different business types eg. professional services, trades and even the sale of inventory products. Visit our website for more information or to enrol.
The key to cutting down discrepancies is consistency
IF YOU RUN A SHOP or business that holds stock, you should be in the habit of checking your inventory regularly. A lot of retail stores only check their inventory every quarter; others every year. This is usually because a stocktake is a big job.
The case for a monthly stocktake
The inventory feature in Xero was a functionality that was missing for many years — but then Xero caught up.
Running an inventory report in Xero is pretty easy. The hard work sets in when you have to count your inventory to account for any discrepancies. There are usually always differences between what Xero says you should have in stock, and what you actually have on hand. The more frequently you run them, the fewer discrepancies you’ll find.
Like anything in the bookkeeping process, the more frequently you do something — be it reconciling your account or chasing up late payers — the easier and quicker it is. Where a quarterly or yearly stocktake could take half a day or more, a monthly one may only take you a couple of hours.
Understand trends in your business
A monthly stocktake is a good way to get to know your business, and understand its certain trends and idiosyncrasies. In particular, it helps you with ordering and making related business decisions.
If you only have a very basic knowledge of Xero, cloud accounting or bookkeeping, and you’re looking to gain a better understanding of basic bookkeeping terminology, get our free Basic Bookkeeping Guide.
FOR BUSINESSES WORKING on large projects spanning weeks or even months, keeping track of time, cash flow and profitability is imperative. This is even more so for businesses that work on fixed-rate contracts or tenders.
Such fixed-rate projects are common in the building and construction industry, but also the creative, engineering, and IT industries.
Many of these businesses manage a project’s workflow across a number of different documents (spreadsheets, their CRM, accounting software) — and many don’t manage it properly at all.
As a consequence, projects often come in over budget. A number of cloud-based project management and workflow apps aim to change that, however.
Bookkeeping Incumbent, MYOB Versus Cloud Innovator, Xero
MYOB HAS LONG BEEN the preferred accounting software of choice for accountants, but a lot of small business owners have now come to prefer Xero. It’s easier to use, and they can access it anywhere — their desktop PC, tablet or smartphone.
Meanwhile, the rise of cloud-based accounting software, which was pioneered by Xero, has made it a lot easier for bookkeepers to base themselves from home.
Throw in other technological innovations — cloud storage, bank feeds — and a remote Xero bookkeeper has become the more appealing choice for businesses, too.
I’VE BEEN IN BUSINESS since my early twenties but it wasn’t until my late twenties that I had any clue about how larger companies use and pay for software. I was going through the process of selling a water filter business that I’d been operating in Sydney’s Dee Why when I had the pleasure of meeting the owner of Fountainhead Water Company, Mark Darling.
Fountainhead used a specialised accounting system for the bottled water business which did everything from receipts for each delivery to capturing bottle deposits, tracking rental coolers and more — and Mark was paying hundreds of dollars per month for this software. It was a far cry from purchasing the MYOB software for a couple hundred dollars and NEVER upgrading (no payroll at the time).
Since then, however, a number of cloud-based accounting applications have entered the market — QuickBooks Online (now distributed by their US-based parent company Intuit), Reckon One, Saasu, Zoho, and so on.
Even though Xero was hailed as a breath of fresh air when it first entered the market, it is still a little more complicated to use when compared with other cloud accounting apps, like QuickBooks and Reckon One. For instance, the purchase orders feature is still hidden behind bills, when it could easily be access via a dropdown menu. But it’s not a major quibble.
Xero’s contact profile misses a beat
Although Xero allows you to assign customer numbers for your suppliers or customers in the contact profile, it doesn’t have the functionality to record customer numbers assigned by supplier or customer.
ONLINE RATINGS AND REVIEWS ARE a great way to determine whether a business is trustworthy or whether they products and services they provide will suit your needs. TripAdvisor and Yelp have transformed the hospitality and accommodation industry, for example. And Airbnb is doing similar with short-term rentals.
While recently working on a home renovation in Newcastle, I came across a carpenter who had seven employees working for him. Jimmy the Chippy in Belmont has been in business nine years, has no website or online presence — but his business is booming.
How does he do it?
The old fashioned way! He does exceptional work for his customers and clients, who hire him again and again and refer him to friends, relatives, colleagues and so on. He also made a point of networking with local builders and plumbers in the area, who contact him when they have work to do, and refer him to other builders and plumbers as well.
Use word of mouth
If you’re looking locally, and the online ratings and reviews of the businesses you’re trying to decide between aren’t helping, asking a friend, relative or work colleague if they know any of the businesses.
If no one in your social network knows the business, you can also google an online forum like Whirlpool, where members frequently provide fair and balanced opinions of businesses they’ve dealt with — and if they don’t, they’re usually called out for it.
Testimonials are helpful, too
Real estate agents, accountants and many other businesses — EzyLearn included — use testimonials rather than ratings or reviews (except on Facebook), so you shouldn’t discount these just because they’ve been vetted before going online.
At EzyLearn we provide testimonials from our students, which include their full name and location, and why they chose EzyLearn to study in the first place. We ask each student whether it is ok to publish these beforehand. We also offer a money-back guarantee and free samples of our course content, so students know they can trust they’re making the right choice.
If you’re in the financial position to buy your business premises outright, it may seem like a no-brainer to do this instead of getting a mortgage. However, there are some things you need to consider:
You’ll lose liquidity on the assets in your property, which means you won’t be able to tap into any equity in the property, unless you take out an equity loan against the property.
You’re tying all your cash to one asset class, which may limit your ability to make other investments and prevent your business from expanding. This could run counter to your reasons for making the property purchase in the first place.
You’re spreading the payments over many years, which ties you to paying down that asset for the foreseeable future.
You’re paying interest, which although it’s a tax deduction, will significantly inflate the price of the property.
Work out the best way in Excel
Using the data from your Xero accounting software package, Microsoft Excel can help you determine whether your business will be financially better off buying its premises outright or getting a mortgage.
Lots of businesses avoid buying premises for their businesses, because you’ll need to have a large capital injection right off the bat, and you may also incur land tax obligations, building insurance, and also be liable for maintenance and repairs.
Renting gives businesses, especially new ones, flexibility, as you’re only locked into a short term lease — not a multi decade mortgage. And if you decide to move or find new premises before your lease term is up, you can often minimise the costs by subletting the premises.
You’re also afforded greater freedoms and stability when you own your business’s premises — in particular, protections from rising rents — than you would have if you rented your premises. If you outgrow the space, you can always access the equity and may be able to buy adjacent premises, or rent out your existing ones while you upgrade, providing another valuable income stream.
Industrial units are a good pathway into ownership for your business. If you don’t need to be right in the heart of the city or major town centre, you can often purchase an industrial unit for under $100,000.
In Newcastle in the Hunter region of New South Wales, you can purchase an industrial unit called a Cubbyhole, which can be used as a workshop, storage unit or office space for tradespeople, small and online businesses. These come with amenities such as toilets and showers, car parking (including visitors’ and disabled) and CCTV security, among other things and are worth checking out if you want to buy and only need a smaller business space.
Cash flow reports show the money going in and out of the business, so they’re better indicators of a business’s overall financial health than a Profit and Loss statement (P&L).
A cash flow report enables you to make forecasts and budgets for your business based on previous trends — recurring expenses, average time to get paid, seasonal quiet periods, and so forth.
The 3 cash flow categories
Cash flow reports are typically broken up into three categories:
Operating activities: cash flowing in and out of the business from revenue-generating activities
Investing activities: cash flowing in and out of the business from the acquisition and sale of long-term assets
Financing activities: cash flowing in and out of the business from borrowings and changes in equity.
Items in a cash flow report
In our Cash Flow, Budgets and ROI Xero Training Course, you’ll learn how to generate a cash flow report in Xero. That report will show every transaction that’s run in and out of your business, divided among one of the three categories.
In the operating activities category, you’ll typically find things like costs associated with any training courses or seminars, advertising and marketing expenses, income or commissions from your business, subscriptions to any magazines or periodicals, etc.
Under the investing activities category, you’ll find the cost of purchasing office or warehouse space and the capitalised borrowing cost, for example.
The financing activities category will show the loan you’ve taken out to purchase your business’s office or warehouse space.
The sales spiels of many of the notable online accounting software packages like QuickBooks, Wave Accounting, Outright, Kashoo, LessAccounting, Clearbooks and even Xero, claim that this feature will save you time and effort as it imports your bank transactions. The truth is, this is not foolproof and won’t work 100 percent of the time (even if it’s just a matter of not being able to get your software and your bank to “connect” just as your mobile phone connection inexplicably doesn’t work sometimes).
Therefore, always double check your bank transaction data has been imported accurately. This said, importing your bank statement into Xero (or whatever accounting software you use) is a really important step in the bookkeeping process that a lot of business owners forget or don’t know how to do. And the technology is only going to get better!
Using the correct format
To import your bank statement into Xero, you must ensure it’s in the correct format. Xero can only work with a CSV file of your bank statement. Depending on your bank, you might be able to download your bank statement as a CSV file from your internet banking, or you will have to create one from scratch.
Creating one from scratch isn’t too difficult. If your bank doesn’t give you the option of downloading a bank statement as a CSV file, you can create one yourself in Microsoft Excel.
You can download an Excel template from Xero. It includes the recommended fields and is already set up as a CSV file, so all you need to do is add in your data.
Setting rules for recurring transactions helps speed up the reconciliation process, which depending on the type of business you operate and how often you reconcile your account, can be the most time-consuming part of the process.
Importing your bank statement and creating rules for transactions that occur each week, month fortnight, year, etc, greatly speeds up this process.
No CSV? Use bank feeds
If your business has lots of expenses every week, and your bank doesn’t let you download your bank statement in a CSV format, you may find that manually creating one in Excel each month is too time consuming.
MICROSOFT EXCEL IS THE most widely used spreadsheet application in modern computing. That said, it’s also one of the more difficult programs of the Microsoft Office Suite to learn, which is why we recently updated the content of our Excel training courses.
A lot of people do our Excel training courses to help them “skill up” to find a job, find a position better suited to them, or develop their career path. However, Excel is a fantastic tool for small business owners as well.
But whether you use Excel to create a pivot table or a database, there are a few things you should do each time you open an Excel document. Here we present you with three:
1. Vertical align: always centre
Always align the text in the cells of your Excel spreadsheet to the centre, or the top in certain circumstances. But never, ever align it to the bottom. It’s hard on the eyes and, when you’re looking at lots and lots of data in lots and lots of cells, it becomes difficult to know which row, column, etc, you’re looking in. Centre alignment, always.
2. Build error-checking into formulas
There should never be an instance where one of your workbooks is showing a #DIV/0, #N/A, #REF, #NAME?, #NUM!, or #NULL! error. This is especially true if you’re sharing these workbooks with your business partners or accountant or whomever.
Seeing an error in a financial report may cause the reader to doubt the accuracy of the entire workbook, so ensure your workbooks remain error free by using the simple IFERROR() error-checking function in Excel.
3. Print preview your work
Again, if you intend to share workbooks with other people, you should always ensure that your Excel workbooks can be printed nicely and easily, even if you don’t intend to ever print the document yourself. This is easy enough to do via File > Print Preview and adjusting the print margins before sharing (or printing) the document.
However, judging by the number of times I’ve printed an Excel document only to collect 87 sheets of paper off my printer to read the contents one 4×4 table, the function is seldom used by anyone else but me!
The difference between the two boils down to price and functions: The more functions you need, the higher the price tag. Businesses that require high-level reporting and forecasting tools, such as a “scenarios” function that lets you determine the impact different business decisions would have on your cash flow, before you actually make them, would need to stump up, at a minimum, between $50 and $80 a month for this functionality.
Free expense and budgeting apps would suit most contractors and sole traders who don’t require complex forecasting and reporting tools, but who do need to see when money is coming in and when it’s going out, and whether there are deficiencies.
The ATO’s tax and superannuation app
Looking into the best expense and budgeting apps for small business, we came across the Australian Tax Office’s app, simply called ATO. It works on Windows phones, as well as iOs and Android devices, and it’s updated regularly by the ATO, so you know this isn’t just a passing fling.
If these features sound familiar, that’s because they’re all the features you’ll find in a basic cloud accounting program, with the notable exception of invoicing. Electronic invoicing is not something the ATO is particularly concerned with because it’s not a requirement. Invoicing, of course, is a requirement, but how you do it — in person, by snail mail, email, etc — isn’t.
Cloud accounting still best and easiest
If the ATO app introduced a simple way to invoice customers, we’d say it was definitely muscling in on QuickBooks and Xero’s territory, since both programs appeal to the small business owner, QuickBooks in particular.
In absence of that, the ATO app is a great tool for contractors and small business owners to use to keep track of their expenses and deductions, and especially to calculate their tax rates (so as to properly keep money aside for tax, rather than being hit with a tax bill you have to pay off). For contractors with a very simply business model, it’s even useful for lodging your tax return.
But otherwise, cloud accounting applications are still the best and easiest way for businesses to run an efficient, compliant business. At the end of the day, for many small business owners, they’re not drawn to Xero or QuickBooks because they want to stay compliant, it’s because they want to be able to easily invoice customers and track their income — compliance is just an added bonus.
Our online Xero training courses meet all skills levels for ONE LOW COST. We will show you how to record deductions, invoice customers, run financial reports, and lodge activity statements and tax returns. Visit our website for more information about our range of online accounting, media and general business courses.
What’s a cash flow app, if not a program that tracks your expenses and income and then tells you how much money you have left in the bank? That’s what FUTRLI and Spotlight, the apps we reviewed recently would do, and then also let you do other things, like create scenarios to determine the particular outcome of a business decision.
But there are other expense apps that sole traders and contractors can use for cash flow forecasting:
Pocketbook, the Australian personal finances app recently acquired by ASX-listed ZipMoney, is free to use, although a recent deal with 1300HomeLoans means it may analyse your spending data to make commercial suggestions around your personal finances. (For the record, I have been testing it for months and hasn’t been subject to any such suggestions.)
Pocketbook lets you connect your bank account to the app so it can import your income and transaction data. Once you get some initial housekeeping — categorising your expenses and income — out of the way, you can then set up a safety spend limit based on Pocketbook’s analysis of your spending vs. income.
Pocketbook also learns from your transaction history, meaning it can predict upcoming income and bills. It’s very nifty for contractors or freelancers who have more than one income source that doesn’t always run through your accounting software — if you’re working on your TFN and ABN, for instance.
This free app, by ASIC MoneySmart, lets you connect your bank account to the app, categorise your expenses, nominate a spending limit, and create expense reminders that can be sent to as text messages ahead of their due date.
Like Pocketbook (but without the commercial overtones), TrackMySpend will also learn from previous trends in your income and expense data to predict future income and expenses. Best of all, TrackMySpend can be exported as an Excel file or connected to your accounting software. The iOS app is a bit out of date, though, so it won’t work on more recent Apple devices.
If you didn’t know it already, the Australian Tax Office has its own mobile app. It allows you to access the ATO’s online services, lodge and track your tax return (yes, right from your mobile phone), work out key tax dates and access tools and calculators.
Its most handy functions: being able to enter your expenses (including a photo of receipts and bills), track mileage, and record your income. It’s not automated, but it does propagate that info directly into your tax return, so you don’t have to do it later. It also accurately calculates your tax liabilities.
The ATO app’s best function, however, is its “business performance calculator”, which, using the data you input, will give you an indication of your business’s ability to pay its debts, as well as a comparison of its performance based on the ATO’s “small business benchmarks” data. Over time, it’ll also show whether your business has improved or declined since you last used the tool.
Understanding your business’s cash flow is critical to its ongoing financial health, and to your ability to make sound business decisions. Use one of these tools in conjunction with your accounting software to ensure your business is running on all cylinders.
Our Xero training courses, which provide training in EVERY LEVEL for ONE LOW COST, will show you how to run financial reports, including cash flow statements that you can use to create forecasts in Excel. Visit our website for more information about our online training courses.
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