30 Days With Xero

Yes, we have finally done it!  After approximately 2 years of to-ing and fro-ing, we have moved our business accounting system to a fully Cloud based service.  In this instance, we have chosen to go with Xero Accounting after evaluating a few online options.  Ben Kepes has already done a review of Xero on this site, but I thought I would add this post about our real world experiences with going online.

Many of you who follow my personal and business blogs may be aware that we have successfully moved most of our day to day business software onto the Cloud.  For example, we use BaseCamp for project management, and Lighthouse for bug tracking.  We also have ‘hybrid’ cloud systems such as our SugarCRM system and Warehouse version control, which are web based, but hosted on our own servers.  The last remaining day to day business apps that were still installable were our internal accounting/invoicing system, and our payroll system.  (Note: We also still use local Word/Excel for now, but moving those onto the cloud as we speak – another post will detail our experiences on that front).

I originally wanted to go to Cloud accounting some 2 years ago, but back then, the available offerings were fairly primitive, expensive and lacklustre in terms of functionality.  In the past 6 months though, the market has become very crowded with a plethora of excellent systems, and so I spent a good 2 months signing up for trial accounts and testing them.  Remember that I have spent over 18 years assisting our clients to
choose and implement business accounting systems so I have had a lot of
experience at this.  This time it would be my turn to be on the ‘other
side of the fence’.

Our Selection Criteria

Any accountant will tell your that accounting is accounting.  There are not many variations on the old Debit and Credit double entry book keeping methods, but the execution of those methods can be implemented in wildly differing ways.  It is difficult to do an ‘apples to apples’ comparison of accounting systems, as there are many variables such as the number of features or modules (i.e. inventory control and job costing) or the number of fields in a customer form etc.

In the end, I went for a more subjective criteria when choosing the eventual system that we would use.  I chose on how well designed the interface was, and how easy it made it for me or my staff to perform our day to day tasks such as entering invoices and payments etc.  I also wanted to see just how responsive the support staff were, and how readily they listened to customer feedback and suggestions.

First Looks

I must say that Xero came up trumps on these criteria.  I immediately took to their interface, and found myself able to do most tasks with very little training.  Of course, there is the different nomenclature that you have to get used to.  Xero uses the terms ‘Account Payable’ and ‘Account Receivable’ as opposed to ‘Debtors’ and ‘Creditors’.  Not hard to get used to, just requires a minor shift in your thinking.  They also use a centralised ‘Contacts’ database instead of separate ‘Customers’ and ‘Suppliers’ – and they allow you to enter in a payables and a receivables invoice against the same contact.  At first, I found this a little strange, but after converting our data across, I realised just how many of our customers were ALSO our suppliers.  In a small city such as where I am, it is actually more common than I thought to do business both ways with your clients and vendors.  Welcome to the new economy!

I also like the way that we can get to certain options multiple ways.  For instance, whilst viewing a customer invoice on the screen, you have a button which allows you to immediately copy, duplicate, credit or delete that invoice.  Nice touch!  Wish all other accounting software developers would note this.  I also like the ability to set up repeating invoices.  With so many businesses turning to subscription based services and support contracts, this is an invaluable feature to have.

Xero, like most other offerings, allows you to use the system free of charge for 30 days.  Enough time for us to create a company database and upload our real life data on there to see how it would fit our needs.

Importing Data

There is a nice easy import wizard to get you started.  The early stages, such as creating the company and setting up your operational parameters were quite straightforward.  You are also offered the choice of using the default Xero chart of accounts, or importing our own.  We chose to import our own chart that is quite customised for our needs.  No real problems here.

The only gripe I have with this wizard process, is that it was not made entirely clear to use whether we could skip the last two phases, i.e. the importing of our General Ledger carried forward balances and the importing of our outstanding debtor & creditor invoices until a later time.  In our case, we wanted to go live with Xero as of 1st July, our new financial year calendar, but as of the middle of July, we still had not finalised our closing balances for our General Ledger as we were still waiting for our accountant to get back to us with some final journals.  As a result, we held off on finalising the creation of our Xero company until nearly the end of July.

To be fair, Xero lets you stop the creation wizard at any point and come back at a later date to finish off – very nice.  What I also really liked, is that once we entered in all the GL opening balances, the system checked the Trade Creditors and Trade Debtors figures, and would not let us continue until we had entered outstanding customer and supplier invoices that balanced back to these GL control accounts.  Very nice touch to ensure that everything was ship shape from the outset!

Upon later investigation, it appears that you can actually defer these last two steps until after you have finished the creation wizard, but I wish this was made clearer to us when we were actually running the wizard.

At any time, you can import in a list of your customers and suppliers into Xero.  This is done via CSV files (although XML would be a nice option).  Importing was very easy, and the system is smart enough to recognise duplicates and just update them rather than creating two records.

Bank Reconciliation

Anybody who knows me, knows that I would rather face root canal surgery with no anaesthetic rather than do bank reconciliations.  Xero however, actually makes bank reconciliations fun!  There is an almost ‘game’ like quality to the whole process, and I am actually disappointed when it is all done.  The big bonus here is that Xero supports direct bank feeds from most major banks.  No waiting for weekly or monthly statements to come – you can just do a quick ‘tick and flick’ reconciliation every morning to keep things in check and maintain real time figures.

If your bank or credit card company does not support live feeds, you can simlpy download your transactional data as a Quicken or a CSV file to import into Xero.  Once again, the system is smart enough to detect duplicated transactions, so you need never worry about doubling up transactions if you specify the wrong date range when exporting from your bank.

I can honestly say that the great bank reconciliation features heavily weighted on my decision to go with Xero.

Dashboards

Like all modern systems, Xero displays a ‘dashboard’ of your business key performance indicators as soon as you log in.  These include pretty charts of your bank balances, as well as your top 10 customers and suppliers etc.  I would wish for more customisation and ordering of this information, but I believe that is in the works.  Just last week, they allowed the end user to change the order of the bank accounts on the dashboard which was a huge benefit.

Far from being just a fancy gimmick, I believe that dashboards are a really handy tool for any business owner to ‘keep their eye on the ball’ and maintain vigilance about the pulse of their business.

Remote Working

Our main reason for moving all our business onto the Cloud, is that we have a philosophy of being able to run our business from anywhere in the world.  Yes, Xero is web based so it doesn’t matter what platform or operating system we use, but I was excited to see that they have an iPhone ready interface that works on the phone’s safari browser.  Now I can keep tabs on my business KPI’s from anywhere I am on the road.  I can look up customer addresses and phone numbers easily – I can even re-email an existing invoice out to a customer just using my phone.

All I need now is the ability to create invoices on the iPhone, and perhaps enter payments then I can be a happy man…

Support

Customer support is probably one of the most under valued parts of an accounting system.  With something so time critical, you need solid, reliable answers fast.  During our evaluation phase, I contacted Xero using both email and via Twitter.  At best, they got back to me within 2 hours, and at worst, within 24 hours.  Not bad at all.  This was even before I was a paying customer, so obviously, they prio
ritise
‘tyre kickers’ along with paying users.

One issue though, is that a couple of times I contacted them via both channels with the same query, and got two different answers back from two different people.  From the outset, it looks like the Twitter support team has more up to date documentation than the email support team.  Perhaps this is something that Xero needs to tighten up on, but with a product that is still in it’s infancy, and subject to major ongoing changes, a little of this is to be expected.

Their support teams did point me to their online support knowledgebase, which is an excellent source of information for new, and old, users.  It is easily searchable, and very well written, and even includes ‘out of the box’ ways to handle certain situations.  We all know that jaded users very rarely read the manuals, but this is one resource that is required reading for all.

The Grey Areas

As much as I love Xero, there are still a few things that we have discovered during day to day use that I wish could be improved on.  For instance, I find it really strange that you cannot part pay an invoice from the bank rec screen.  We routinely do large development projects for our clients, and have them pay in installments.  You can part pay direct from the customer invoice screen, but not from the bank rec.  The opposite problem is true if you have one payment received that pays multiple invoices.  This you have to do from the bank rec screen and you cannot do from the customer screen!  I am told that this is a work in progress, but I think it is something that should have been integral to the core system.  Xero support gave me the workarounds here, but this was one instance where the email and Twitter teams gave me conflicting advice on how to handle the situation.

Another thing that we got really used to in our old system was doing monthly journals to process our regular lease and insurance payments etc.  Xero however will not let you do manual journals directly to any bank or control account.  A nice safety measure, but an inconvenience.

Their inventory system is also really, really basic and is next to useless for anyone who handles more than a dozen line items.  To be honest, I found this deficiency across the board with nearly all Cloud based accounting systems we trialed.  I think they all tend to cater more for the ‘knowledge worker’ crowd who sell time rather than physical stock.

Extending Xero

As with most Web 2.0 offerings, Xero comes with an API (application programming interface) which allows savvy programmers to extend the capabilities of the core system.  Whilst limited for now, I believe that they are extending out this API in the future to allow greater functionality.

We are already utilising the API, to generate our invoices using Word 2007.  Xero doesn’t really offer much customisability over their invoice layout online, but their development team has a CodePlex beta project that allows you to automate exporting your invoicing data to Word 2007, which offer a far greater degree of customisation – one that we leapt on gleefully.

Being software developers ourselves, we wanted to see if we could integrate Xero into an existing report writing toolset that we use on other accounting systems, but upon requesting an API developers key from Xero, we were told by them that they really only issue keys to online service providers, not to installable software providers due to key security.  This is despite the fact that their Word 2007 integration project is an installable software product, and the API key is immediately visible as clear text!

Reporting

Accounting reports are only as good as the information going in, and to be honest, a lot of business owners hate reading financial reports and instead hand this task over to their accountant.  Xero reports may change all that.  I have to say that the reports generated by the system are quite beautiful.  They are easy to read, and are laid out in a very friendly fashion that should be easy to comprehend for even the most non accounting of users.

As a bonus, all reports can be saved directly to Google Docs, or as a PDF file, which suits our workflow down to a ‘T’.

Conclusion

Well, after our first month, we have no regrets with choosing to go with Xero.  I have confidence that their developers and management team are listening to their users, and the product will improve with time.  Feedback from our staff here is that the system is really easy to user, and they are enjoying using it a lot more than our previous systems.

Xero have recently announced support for foreign currencies, and they also have an Asset module that we have not implemented ourselves.  These are nice sub-modules to have, but I wish that their development efforts would be more focused on more ‘core’ needs such as better invoice payment functionality, and a much better inventory management system.  I would have thought that perhaps Job Costing or Purchasing would also be a higher priority than FX – but that is just my take on things based on the needs of my business.  Xero a very tight lipped about their development roadmap, but I am undecided as to whether this is a good or a bad thing.

I am looking forward to seeing how we progress with Xero, and certainly have no hesitation in recommending the system to our smaller clients as a viable option to some of the other installable accounting systems out there.

(Guest post by Devan Sabaratnam)