With the new financial year literally just around the corner, there are the usual pieces of information that we need as ‘bean counters’ at 31 March for standard balance date businesses.

This year end we are encouraging our clients to use Xero Files for uploading these important documents.

Files for Xero is another game changer with Xero and again will improve the efficiencies with preparing year end financial statements and tax returns for us at Cloud Accountants and you.

We recommend setting up a ‘Cloud Accts’ folder and start to put the necessary docs into this folder. These would include:

• Confirmation of bank and credit cards balances at 31 March
• RWT interest certificates
• ACC invoices
• Fixed asset invoices
• Legal fee invoices
• Stock takes
• Loan documents, statements
• Hire purchase documents, statements
• Home office details
• Wages details if you do not use an online system

For all you need to know check these links to the Xero blog:

http://www.xero.com/blog/2013/10/attach-files-financial-data/

http://www.xero.com/blog/2013/12/emailing-files/

http://www.xero.com/blog/2014/03/files-run/

Bad debts to be written off, review of Accounts Receivable

Before March 31, you need to review your Accounts Receivable and determine whether any of your invoices outstanding are recoverable or not.

If they are old and you have made every step to recover these, you must write them off as a bad debt expense before the end of this financial year.

For guidance there is some help from Xero here – http://help.xero.com/nz/#Q_BadDebts Of course please contact the Cloud Accountants team for guidance.

Stock takes

If you hold stock in your business, it is important to prepare a stock take on 31 March. If you do not use a stock system (that ideally links to your Xero organisation!) we can process this stock take for you in your year end financial statements.

We have a few changes coming at Cloud Accountants which we will be communicating with you soon, including an introduction to our favourite add ons to Xero that we and our clients are using and loving!

Happy New Financial Year!

1. Once you have done a log book for your vehicle usage you will then need to code your motor vehicle transactions accordingly.
2. Let’s say your vehicle split is 80% business and 20% personal which means that 80% will go to motor vehicle expenses and 20% will go to drawings
3. You can create a rule for this by going to Manage Account on your dashboard and click Bank Rules
4. Click on create rule and select Spend Money
5. In the 1^st column you will select ‘payee’ and in the 2^nd column select ‘contains’ and then in the 3^rd column type in the name of the place you want to add as a condition to this rule e.g Caltex, BP. Ensure you select ‘any’ and not all at top of bank rule screen
6. In the description enter in vehicle expenses and code to motor vehicle expenses and put 80% in the percent box
7. Next add a new line and enter vehicle expenses again but this time you will code to drawings and put 20% in the percent box.
8. Save this by clicking the save button at the bottom of the screen
9. You can keep adding to this bank rule as required so whenever these transactions are imported, Xero will do the split and code automatically for you.  All you need to do is hit ok.

For example, if a bedroom is set aside as an office for your business and the area of this room is 10% of the home, then this proportion of the expenses is a business expense. In this situation 10% of the home office expenses would be deductible for tax purposes.

1. Compile your home office expenses e.g Power, Telephone, Rates, Rent, Interest on mortgage etc.  Please note that the interest on your mortgage does not incur GST
2. Go to Expense Claims under the Accounts tab
3. Click add receipts and enter in the details of the expense you are claiming for
4. If you haven’t already got a code set up for ‘Home Office Expenses’ you can do this in the account section where it says ‘add account’ ensuring that you check the box ‘Show in Expense Claims’ at the bottom of this screen.
5. If you are claiming 20% for your home office then you will claim 20% of all home office expenses by entering in .20 in the Quantity amount and the full amount of the expense in the Unit Price
6. When finished click Save and Add another receipt until you have completed your Expense Claim
7. You can also use this expense claim option for any other business related expenses incurred that have not gone through any of your business accounts loaded in Xero e.g if they have come out of your personal account or if you have paid cash
8. Once you have completed your expense claim then select all receipts and submit them for approval
9. Next go to your ‘awaiting authorisation’ tab and review them once more and if you are happy, select all expenses and approve
10. Next scroll down to the bottom of the screen and enter in the due date and reporting date
11. Finally go to the ‘awaiting payment’ tab and enter in the applicable details e.g the amount the date you are reimbursing the funds and the code e.g funds introduced or other

1. Go to Manage Account on your dashboard and click Bank Rules
2. Go into existing bank rule that you want to add a condition to e.g Entertainment Rules
3. Enter in any new places you want to add under the Spend Money rule
4. In the 1^st column you will select ‘payee’ and in the 2^nd column select ‘contains’ and then in the 3^rd column type in the name of the place you want to add as a condition to this rule
5. Save this by clicking the save button at the bottom of the screen

With bank rules you define the conditions for each rule to match with your imported statement lines. After you import a bank statement and go to reconcile your account, your rules run. Check out the link below for a video that covers Bank Rules.

1. Go to Manage Account on your dashboard and click Bank Rules
2. Click on create rule and select Spend Money
3. In the 1^st column you will select ‘payee’ and in the 2^nd column select ‘contains’ and then in the 3^rd column type in the name of the place you want to add as a condition to this rule e.g Prego, Starbucks. Ensure you select ‘any’ and not ‘all’ at top of bank rule screen
4. In the description enter in client meeting and code to entertainment -deductible and put 50% in the percent box
5. Next add a new line and client meeting again but this time you will code to entertainment non-deductible and put 50% in the percent box.
6. Save this by clicking the save button at the bottom of the screen
7. You can keep adding to this bank rule as required so whenever these transactions are imported, Xero will do the split and code automatically for you.  All you need to do is hit ok.

But it is not fully deductible and needs to be split 50/50 between ‘entertainment’ and ‘entertainment non-deductible.’ By setting up an entertainment rule, this makes reconciling these transactions easy and fast.

1. Click ‘add details’ on the right of the screen next to the transaction you are wanting to reconcile
2. On the first line under Description type in what it was e.g Client Meeting
3. Under Quantity enter in .50 as we are splitting this transactions 50/50
4. Leave unit price as original full amount
5. Code the Account to ‘Entertainment’
6. Enter in the same details on the second line but this time you will code the Account to  Entertainment – Non deductible
7. Save transaction and then hit reconcile at bottom of the screen.

I’ve been using Xero for over 4 years now and I’ve learnt some great tips and tricks along the way that I’m looking forward to sharing with you over the coming months.   I’m confident these will help you use Xero more effectively and efficiently plus save you time as well!

Bank Rules

These are fantastic when set up correctly in Xero and they make reconciling some transactions so much easier and faster!  I’m going to use Entertainment transactions as my example as entertainment needs to be split 50% to entertainment and 50% to non-deductible entertainment.

How to add a Bank Rule around entertainment

1. Go to Manage Account on your dashboard and click Bank Rules

2. Click on create rule and select Spend Money

3. In the 1st column you will select ‘payee’ and in the 2nd column select ‘contains’ and then in the 3rd column type in the name of the place you want to add as a condition to this rule e.g. Prego, Salta Cafe.  Ensure you select ‘any’ and not ‘all’ at top of bank rule screen.

4. In the description enter in ‘Client meeting’ and code to entertainment -deductible and put 50% in the percentage box

5. Next add a new line and ‘Client meeting’ again but this time you will code to entertainment Non-deductible and put 50% in the percentage box.

6. Save this by clicking the save button at the bottom of the screen and name your rule ‘Entertainment’.

7. You can keep adding conditions to this bank rule as required. Whenever transactions are imported into Xero that match your bank rule, Xero will do the split and code automatically for you. All you need to do is hit ok.

Check out the Xero help centre for more information on Bank Rules.

But any accounting engine is only as good as the information that is going into it.

With bank feed transactions being reconciled on a regular basis, accounts receivable and payable being processed and reconciled, GST returns/Payroll being checked and paid throughout the year, Xero (with some add-ons) certainly makes accounting simple and more intuitive.

There are some tricks and better habits to get into however.

And these will make the end of year preparation of financial statements that much more efficient. This is a positive for everybody, our clients and us their accountants!

Emma Laing, our head internal Xero consultant, has been working closely with some of our clients for a period of time now, and has some very good tips around using Xero which are specific to the way we do things at Cloud Accountants.

She will be highlighting some of these tips in a series over the next few months.

A warm welcome to Emma, our guest blogger!