10 Tips for Improving Your Cash Flow with Xero - dummies

10 Tips for Improving Your Cash Flow with Xero

By Heather Smith, Rod Drury

Cash is critical for the survival of a business and Xero can be used to help track it. Cash needs to be flowing into the business, so the business has money to pay for general expenses like rent, wages and stock. Here are ten top tips to ensure you are utilising Xero effectively for cash to flow into the business bank accounts.

Reconcile bank accounts regularly

To ensure Xero dashboards and reports are correct and up to date, make a habit of reconciling bank accounts often. With timely information, you can be confident that reports of outstanding invoices are correct and in a position to communicate with customers promptly. The alternative is waiting to check the receipts of all money coming into the business before you start chasing the customer for payment.

Keep tabs on expected cash flowing into the business

On the Xero home dashboard is the Invoices owed to You dashboard, which summarises the current accounts receivable information and includes a graph. You can quickly click through to ascertain the value of outstanding invoices, current and draft invoices, and drill down to see the detail on the Sales dashboard. Once on the Sales dashboard you can click on the box in the Expected Date column and add notes and update the expected date of the invoice.

Customise Xero invoices

Xero invoices should be customised to include your bank details and payment terms. This makes it easy for customers to pay you. Your payment gateway details can also be added to the invoice via the invoice branding theme. Print a copy of your invoice and visually check that it’s easy for customers to establish how they should pay the business.

Send out Xero invoices promptly

Invoices can be emailed from the Xero Sales area (or any mobile device), saving you the cost of a stamp and the time of slotting the invoice into the usual accounts payable process; often a few days if you had used the post box.

When sending an invoice via Xero you have the option to send it as a PDF via the Xero network, and as an online link. A client can download the PDF, cut down a tree, print it off, and file it — boo! Or they can save the PDF on their computer, ensuring they have a regular back-up system in place.

If they’re an ultra-cool Xero user like you, they can minimise data entry by connecting with your Xero system and receipting the invoice directly into their accounts as a Draft Bill. The client can click on a hyperlink, automatically generated in the invoice you sent them, and view the invoice online. When they click on the link the green tick against the invoice on your Sales dashboard darkens so you know they’ve seen it. Delicious, hey?

Engage with mobile technology

Install the Xero app on your iPhone and embrace the cloud by invoicing while you’re on the road. The quicker the invoice is issued, the quicker it’s paid and the quicker cash is receipted by the bank.

Send Xero statements at the end of the month

With just a few clicks via the Xero Sales dashboard, activity and outstanding statements summarising customer invoices can easily be sent to customers that have outstanding balances.

Review your Aged Receivables report

The Aged Receivables report can be found on Xero’s Reports dashboard and lists all receivables by client and by month. You can click on data to uncover further details about the invoice and the customer.

Review the Cash Position report

Within Xero’s Executive Summary report, you can access a Cash Position report. The first block of information in this report is a simple overview of the cash situation of the business: Cash received, Cash spent, Cash Surplus (deficit) and Closing Bank Balance.

Positive variances are highlighted green and negative variances are highlighted red. This is a high-level overview of the business’s cash position, and it can trigger you to delve deeper into detail if necessary.

The Cash Position report also helps you understand the detail behind the business’s net cash movement. By keeping informed of the cash movement of your business, you’re in a better position to make proactive decisions, such as delaying spending if cash flow is slow.

Also keep an eye on the Total Cash In and Out bar chart on the home dashboard, which highlights the last six months cash movements.

Embrace the collaborative nature of the cloud

Give a virtual team member or consultant access to your Xero file and they can chase outstanding bills and update customer records remotely.

Invest in an add-on solution to collect debt

Don’t let customers treat you like a bank. Invest in one of Xero’s debt tracking add-on solutions like Debtor Daddy, Satago, Chaser or Late Fee Manager. These offer a variety of features, including courtesy reminders before an invoice is due, automatic email reminders following up late payments, and the ability to send text messages, apply late fees, service fees or interest to invoices.