I am sitting writing this at Auckland airport waiting for my flight back to Sydney, feeling pretty zonked after a few full on days, but also very excited about all the great new features that will be released in Xero over the coming weeks and months.  A few of my favourites:

Opening API access to the General Ledger (GL)

Even typing that I am starting to feel like a geek!  But in plain English this means that any external program (examples below) will be able to post transactions directly to the General Ledger.  This will make interfacing from Paycycle, from Unleashed or from any of the many other apps that integrate with Xero even better.  This will be available just over a week from now - the benefit is in the next few new features.

External Reporting tools

Xero already has a great range of built in reports, but sometimes users want a range of other reports.  Because developers can now read data direct from the GL they can develop reporting tools.  This has already started, with Spotlight due for release in around a month.  Without doubt there will soon be many more options.  I will be looking at Spotlight in detail during Feb and blogging my review.

Prepayments / overpayments

You know that pesky problem when a customer pays you too much - sometimes by just a few cents or dollars, sometimes a lots more.  From an accounting sense it is quite hard to deal with - the next release of Xero will have an automated solution for this, rather than the manual work around that is required now.

Budgeting

We spend a lot of time with clients preparing budgets and management reports.  Xero will be introducing mutliple budgets (or budgets and forecasts) within the next few months, including the ability to "round trip" the budget to that invaluable budgeting tool Excel.

Benchmarking & Cashflow forecasting

No dates on these 2 yet, but on the development roadmap.  I have treated them together as they are both such great tools for helping business owners / managers improve the performance of their business.

Lots more coming, lots of enhancements to the many apps that integrate with Xero, but I hear my flight being called - more blogging on this soon.

There is a great small business event taking place all day tomorrow (July 2nd) in Ashfield (NSW for those of you in far flung parts) - the Inner West Small Business Expo.  There are a lots of interesting speakers, dozens of exhibitors, and - the reason I am blogging about it - Viridity will be there telling small businesss owners why Xero is such a great solution for them.  If you want to come along you can still get in, although you do need to pre-register - click here

If you do make it, come along to Viridity's stand and take a look at Xero!

If you want to see more of Xero right now, here is a neat video

One of the great features of Xero is its reporting functions.  Yes you can do a profit and loss, and a balance sheet, and an aged receivables, and loads more reports "out of the box".  Yes you can run reports against budget, or compared to last year, or you can run reports analysed into "tracking codes", which you can set up any way that makes sense in your business.  Yes you can set these reports so they make sense to you, but at the same time "map" them so they reduce the cost of preparing your tax return to next to nothing (because all the data just feeds straight into the reports your tax accountant needs).

But all of this feels a bit ho hum (even if other packages are still struggling to get some of this in place).  What I really love about Xero is that my clients can run these reports from anywhere, on any machine (PC, Mac, Iphone, etc).  And I can run them at the same time.  We can have these reports on screen at the same time, and we can TALK about them.  I can do what accountants are supposed to do - I can provide management advice to my clients, based on the actual performance of their business.  And I can do all of this knowing I am reporting off current and accurate data. 

At last I have a tool that can allow me to really add value to my clients businesses.  Yes I know this is all possible with desktop solutions, but the reality is that it doesn't happen.  Because the data is out of date, or it's wrong, or the time (cost) for the advisor to access that data is too high.

So that's why I love Xero.  Not for what it saves, but for what it adds - the opportunity for me to help you realise the growth potential of your business.  Yes, I am excited by this, I hope you are too.

Does it ever seem like the only reason you keep accounts is because the ATO make you?  How about using your accounting information so YOU can see how your business is performing?  It’s really not that difficult to do, and like anything else it gets easier with practice – so let’s start with a few basics.

There are a whole range of reports you can run from your accounting software that will give you important information relating to the performance of you business (and this post assumes you know which reports you want to run, but if you don't we can provide help with that).  Once you have run your reports how do you interpret that information?  How do you know if the figures in the report are "good" or "bad"?

Well there are basically 3 ways to measure an accounting report: you can measure it against a previous period, you can compare it to a budget, or you can measure it against other similar businesses.  Let’s take a look at these 3 options in a bit more detail.

Compare to Another Period.  This is the easiest way to measure your results – you just run the report (for instance a P&L) and select to compare this period to earlier ones (last month, or the same month last year). 

Review the report to see if your results getting better or worse?  Often putting the summary figures into a graph will help as a graph will reveal any trends really clearly.

And identifying the areas that are not trending the way you would like will tell you where to focus your attention to try to improve performance.

But a prior period report isn’t always enough.  What if last year you had an exceptional “one-off” year, and this year you’re still doing well, just not quite as well.  Is the downward trend “bad”?  Or what if your business (or the market you are operating in) is changing?  Then making year on year comparisons is harder.  One of the answers then might be to use a budget.

Compare to Budget.  To do this you will need to sit down and work out a budget – this doesn’t need to be very sophisticated, it is really just a financial plan (but if you’ve not prepared one before it can be pretty daunting).  With June 30^th fast approaching we will be adding a “how to create a budget” post to this blog within the next few weeks, or if you need help on this more urgently please contact Viridity).

Armed with your budget you can report your figures with the budget as the comparison.  You can investigate any differences (or variances as they are sometimes called) – and more importantly you can decide what to do in response.  If you make a habit of doing this every month you will be in far greater control of your business than if you wait for your accountant to tell you your profit figure at the end of the year.

Even a budget may not be a complete answer – maybe you are being unrealistic in setting the budget targets, maybe you could be doing much better.

Comparison to Other (similar) businesses – or “Benchmarking”.  Comparing your business to others can be a great way to measure how you are performing, as you now do get an “objective” yardstick. 

There are companies that sell this information, and it is relatively inexpensive, but if your business is too small to justify the expense there is a free alternative.  The ATO recently released performance benchmarks for 50 different types of business, and you can use this information to measure how your business is performing.  From the many thousands of tax returns lodged with the ATO they are able to assess the “normal” ranges of ratios to sales of cost of goods sold, labour and rent and other expenses.  You can use this data to compare to your business.  You can access the ATO data here. 

One further tool that this post doesn’t cover is using “ratios” to help with interpreting the figures.  So when you have run your report, against whatever comparative you are using, how do you might still need some additional help to spot what is good and what is not.  That is where ratios come in.  But that is also a topic for another post.

If you would like assistance implementing or interpreting your reporting please contact Viridity.