Xero is a major cloud accounting platform that many businesses use to improve their financial management, regulatory compliance, and operational functions. But not every business uses Xero to its fullest potential – instead, they miss out on some functions and misuse others.
This how-to guide will walk you through these essential functionalities, helping you make the most out of Xero.
Reconciling transactions in Xero
One of Xero’s most valuable features is its seamless bank reconciliation, which helps ensure your business’s financial data is always up-to-date and accurate.
It works through automation. The system automatically matches your financial records with your bank accounts to complete the process in minutes. This simple fact saves you a lot of time while reducing the chance of human error.
How to use bank reconciliation:
- Make sure you’ve entered all transactions into Xero. These might include invoices, bills, credit notes, expense claims, or cash transactions. You should also check whether your bank account balance is correct and whether the statement balance in Xero matches the balance in your bank account.
- Connect your bank account. Next, you can import a bank statement. You’ll then see a bank account panel on the dashboard showing the number of bank statement lines ready to be reconciled. If you don’t see a bank account on your dashboard, go into ‘Accounting Menu’, select ‘Bank Accounts’, and follow the prompts to connect your bank account.
- Review imported transactions. For the bank account you want to reconcile, click ‘Reconcile [number] items’. This will then open a prompt that allows you to review and search through bank statements so you can, for example, reconcile statements within a certain time period.
- Reconcile transactions. Once you click ‘Reconcile [number] items’, Xero will suggest a match. Simply click ‘OK’ to reconcile the transaction. If you know a transaction has been created in Xero, but it’s not showing up as a suggested match, use the ‘Find & Match’ option.
Setting up tracking codes
Tracking codes in Xero allow you to segment your financial data into various categories, such as departments, locations, or product lines. This provides deeper insights into your business’s performance.
Here’s how to set up tracking codes:
- In the ‘Accounting Menu’, select ‘Advanced’.
- Click ‘Tracking’ categories.
- Click ‘Add Tracking Category’.
- Give a name to your tracking code.
- Enter subcodes under the ‘Category’ options. For example, if your tracking code is ‘Location,’ your subcodes might be for your different shops.
- Click ‘Save’.
- Categorise documents; you’ll notice an option to add a tracking code.
Adding sales channels in Xero
Integrating additional sales channels with Xero is key for businesses that operate across multiple platforms, like e-commerce or physical stores. It lets you automatically sync sales data, reducing manual entry and ensuring that your accounting records stay accurate.
- Log into your Xero account.
- Click on your organisation name, then ‘App Store’.
- Search for your sales platform. You should find an app dedicated to integrating it with your Xero account. Get the app.
- Connect your platform. You may need to input certain information to do this.
Final thoughts
Xero is more than a dashboard that shows you your key financial information. Today, we’ve seen exactly how you can use it to reconcile bank accounts, categorise key financial documents, and integrate sales platforms. What else might you be able to use Xero for?
Talk to us about Xero cloud accounting. We can help you get the most out of this useful piece of kit.
