What is Xero and How Does it Work?

by | Nov 26, 2020 | Xero

We’ve been working with Xero since we started Freedom in Numbers in 2017. We live and breathe it and are proud to be certified silver champion partners and professional services specialists.

Maybe you’re using different accounting software for your business. Maybe you’re still working with spreadsheets and paperwork. Either way, you might be wondering what Xero is and how exactly it works.

What is Xero?

Xero is the world’s leading cloud-based accounting software for small and medium-sized businesses. It integrates across all your business functions and can work alongside hundreds of add-on apps.

By unlocking the financial web, giving you access anywhere and anytime, it helps to streamline your business processes. This makes your business run more efficiently and helps you grow.

For us, it means we can help our clients whenever needed, safe in the knowledge that we’re being guided by the same data, in real-time.

What is cloud accounting?

You’ve probably heard the phrase “cloud-based software”. It’s becoming a hugely popular and important way to manage many business applications and operations.

Rather than installing software and storing data locally on your machine, everything runs in the cloud. Think Office 365, Amazon Web Services, Google, Dropbox and even Spotify.

The biggest advantage of cloud-based software and SaaS (Software as a Service) is that you can access the software and data you need from any device, as long as you have an internet connection.

What does this mean for accounting?

All your accounting functions – updating records, checking information, issuing invoices, and making payments – can be streamlined and done wherever you are.

You can also access live and up-to-date financial information about your business whenever you need it. This is important when it comes to making the right financial decisions.

It’s also a huge benefit as we move toward remote working and flexibility, and this has only been accelerated by the global pandemic.

Is cloud accounting secure?

Yes, even more so. Company computers, laptops and flash drives can quite easily be lost or stolen, which is always a risk. Sensitive information can fall into the wrong hands, and post-GDPR, this is even more important.

By utilising cloud-based software, you’re taking advantage of the extra levels of security on the providers’ servers. The company storing your data is responsible for backing it up and securing it. And in Xero’s case, this means encrypted data and backup servers in two or more locations.

Finally, sharing data is less of a worry -all you need with Xero is multiple user accounts with unique passwords.

should I switch to Xero, what is cloud accounting

How does Xero accounting help businesses?

Xero works based on three central concepts that help us to help our clients.

  • Bank Feeds

By connecting your business bank account with Xero, transactions flow seamlessly into the software. This reduces the chances of manual admin and data entry errors.

It also means that you can reconcile daily, giving you a more up to date picture of your business finances.

This means cash flow, forecasting and planning are all much easier.

  • Payments

For small businesses, getting paid regularly and on time is crucial. Xero can help with streamlining payment processes and providing new options for paying (bills and payroll), as well as getting paid.

Automation of payment data means greater accuracy and a reduced risk of errors.

It’s also great for e-commerce businesses and can free you from one of a business owner’s biggest pain points – chasing payments!

  • Lending

Access to capital and credit is easier when you have accurate accounting data and reports on hand.

This makes previously time-consuming processes easier and helps small businesses to grow, with better access to the financial services they need. Some lenders now even integrate with Xero to give you an accurate lending quotation!

What are the benefits of using Xero?

  • Real-time financial information

Do you have a grip on the real situation when it comes to your business finances?

By accounting for transactions in real-time, Xero is always up to date. This can be a powerful tool when it comes to making important decisions for your business.

  • Automation & efficiency

As a business owner, you’re probably used to wearing a lot of different hats. As your business grows and you get busier, the best way to save time is to streamline and automate time-consuming tasks.

This also frees you up to concentrate on what you do best. Xero has loads of automated functions that take the weight off and help you gain back that precious time.

  • Understand your business

As well as the real-time data that helps you make decisions, you can drill down into detailed reports and understand the financial side of your business.

For example, cash flow is one of the most important things Xero can help you to understand. A story from Lawrence Friell, co-founder of ProAgencies, shows how connecting Float with Xero helped them understand their business’ cash flow needs.

benefits of xero, is cloud accounting secure

Should you switch to Xero for your business?

Being able to log in whenever you want and wherever you are is a clear advantage, and if you’re looking to embrace cloud technology in your business, Xero is a great place to start.

It has a handy app for smartphones and tablet computers and it’s easy to set up and use, meaning you can be flexible with how you manage your accounts. With hundreds of app integrations available via the marketplace, it can seamlessly run alongside other tools and systems.

This includes CRM, inventory, proposals, and payments, to name but a few.

It also allows your accountant remote access to your businesses financials to provide any advice you may need.

You’ll reduce the hands-on accounting work and gain access to the information you need to make the right decisions for your business.

So, our answer is… yes!

If you’re still unsure, head over to our resources page to see a library of Xero tutorial videos we’ve created to see just how easy it is to use.

Our team is ready to talk to you about your business.
We’d love to help you get back to doing what you love! If you’d like to know how we can help, click the button to get started.