Financial basics for your business

Financial literacy is important for everyone but it’s essential if you’re in business.

Most businesses fail due to lack of cash, not profits

One definition of financial literacy is “The ability to make informed judgements and decisions regarding the use and management of money”.

For business, it is understanding where your money is coming from and where it is going. It’s also knowing how to use this information to make informed decisions, resulting in better outcomes. 

So, it’s crucial you understand your cash flow and keep an eye on it every day.

Our purpose at Xero is to help make life better for people in business. So I want to highlight three tips for new business owners.

Bank reconciliation

A bank reconciliation ensures all your bank transactions are recorded and categorised in your business’ accounting system. 

If performed daily, or at least weekly, you’ll have an accurate and timely view of your cash position. It also tells you how your money is being earned and spent. 

You can quickly gauge whether you can afford to pay your bills and employees. You can also produce financial reports to see what products and services are most profitable as well as what expenses need to be reigned in.

Budgeting

Set yourself financial goals for the business and write them down. Once you understand the ins and outs of your business, you can use this as a basis to build your budget. 

You can compare your actuals with your budget to help stay on track, and also make adjustments if your circumstances changeFor example, you could shop around at different suppliers to see who has deals or offer discounts to cut down on costs.

It’s a useful tool to keep your business moving forward and help with making informed decisions. – Read more

Learn More About Xero

Getting to know the ‘cloud’ through Xero

The ‘cloud’ is most likely a common topic that comes up in conversations with other accountants, and some of you might have questions revolving around the ‘cloud’ and its capability.

Wing Siang, Managing Partner of Neutral Consulting, was unsure of the ‘cloud’ too until he got to know Xero. Neutral Consulting PLT is a consultancy company that provides accountancy, immigration and tax incentive advisory services to both local and international companies looking to set up their business in Malaysia. In a business environment that requires communication and connectivity with clients from around the world, Wing Siang recognised the importance of going paperless. He also saw the opportunity that digital technology can bring to his team. They need to be online and they need to be in the cloud. 

The ‘A-ha’ moment knowing that Xero is the one

To him, Xero is an opportunity to enable and educate his clients to access and understand financial information easily, especially within the Xero dashboard. He wants business owners to take a different perspective when it comes to accounting – it’s not a cost purely associated with compliance. Accounting can be a powerful and informative tool that businesses use to make informed business decisions. 

Besides seeing it as a valuable tool for his external stakeholders, he believes that the adoption of cloud technology can be beneficial for his team too. Based on Xero’s 2020 Singapore Accounting Industry Benchmarking report, practices that adopt the effective use of cloud technology were able to lower their costs by 240 hours per client per year. Practices are also 10% more likely to retain their staff when they embrace technology and invest in staff training. 

Since implementing Xero, Wing Siang and his team have saved at least 30% of their time previously spent on manual data entry and bank reconciliation. They now spend the extra time saved to deliver detailed analysis for their clients or turn it into an opportunity for staff to upskill themselves personally and professionally. 

“I see Xero as a breakthrough for accounting software technology and believe that they are heading towards the right direction,” says Ng Wing Siang.

Delivering greater value with cloud accounting

Despite the implementation of the movement control order (MCO) in Malaysia for approximately two months, Neutral Consulting has observed a revenue growth of 30%. This is in line with what was observed among the pacesetting firms who participated in our 2020 Singapore Accounting Industry Benchmarking report. Those who fully embrace technology were able to grow their revenue three times faster than the other firms who had not yet. Businesses are starting to see the need to move online as they face difficulties in getting the company’s latest financial information. With businesses working remotely with their accountants, it’s challenging for those who are still using desktop software and requiring physical document filing. 

Cloud accounting software is the perfect tool that enables advisors to connect and collaborate with their clients seamlessly. Being a Xero certified advisor, Neutral Consulting’s clients have been able to benefit from the switch to cloud accounting. They now have access to real-time financial data and can achieve automation in various aspects. This includes the use of Hubdoc to automatically capture data from uploaded documents and extract these information to publish into Xero as accurately coded transactions for reconciliations.  – Read more