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After a working lifetime struggling with small business accounting, I settled on Xero.

I’m no accountant and none of this comes naturally to me yet compared with the other accounting applications I’ve used over the years, Xero is dead simple.

Simple, not foolproof. I constantly make errors and there are at least three Xero things I struggle with.

Xero for Dummies


That’s where Heather Smith’s Xero for Dummies comes in. It’s a hefty paperback book with advice, tips and essential information on using the software.


Smith wrote the book in Dummies’ style. Her chirpiness and repetition might be irritating if this was a reading book. It isn’t, Xero for Dummies is a manual, primer and resource for people who don’t live and breath accounting or cloud software. The writing is just right for the job in hand.

It works best if you dip in and out learning how to do certain tasks and how things that aren’t immediately apparent work. My favourite sections are those that tell you how to make better use of the software. I learnt two useful lessons this morning.

A printed book for dummies?

It feels anachronistic using a printed book to navigate a cloud application, in truth print is precisely the best tool for this.

Xero is a cloud application. Cloud software tends to throw users in at the deep end. There’s often support, but it’s usually hidden from sight while you’re working. The only realistic way of achieving the same effect as having printed pages open while checking some aspect of the software would be to have a second computer. Paying NZ$40 for a book is far cheaper.

Xero accounting software

Small business accounting software works well online. Being able to jump on and enter data, check numbers and create reports from anywhere is a huge time saver.

Modern accounting applications are easy to use. Small business owners like me may not know if a transaction is a credit or a debit, but we do know if we’re spending money or getting money.

Double entry book-keeping may excite professionals, but most small companies just need to know their cash position, whether they are trading profitably, send invoices and fill in tax forms. Being able to enter data without stressing over accounting terms and concepts is essential.

Every small business accounting software brand does a good job of dealing with the paperwork for GST returns and filing annual tax information for the Inland Revenue Department.

That’s the good stuff. Now the bad stuff.

Accounting software subscription

Online accounting firms sell their software as a subscription. Companies generally offer a basic option as a lure to new business. Quickly customers learn the cheapest option doesn’t cope with enough transactions for a meaningful business or they run up against other restrictions.

Warning. You won’t pay that entry-level subscription for long. Expect to move up to a more advanced product quickly.

There’s often a similar trap further up the product range.

Many small businesses sell to overseas customers. I may send one or two invoices to overseas clients each month. Small business accounting software companies usually charge users extra to handle multiple currencies.

In the case of Xero, a standard medium subscription is NZ$49 monthly. Being able to send invoices to Australian clients in Australian dollars costs an extra $15 a month. That works out at NZ$10 per international invoice over a year.

Xero makes it hard to work around the restriction by clearly labelling amounts on invoices created by the medium subscription product in NZ$.

Xero has managed my business accounts for a year. There are negatives, but I’m happy with the online accounting application.

While the price is higher than other accounting tools, it is money well spent. It meets my needs.

On the plus side, Xero slashed the time spent handling paperwork. I now hardly touch any physical paper – part of my paperless journalist goal.

Xero saves time

I’m not a natural accountant. Book-keeping is my least favourite part of running a business, so speeding up book-keeping is a big step forward. Time is money. I estimate the extra cost compared to other accounting tools is a tiny fraction of the money value of the time I save using the application.

Xero looks wonderful. It has a clear, easy to comprehend user interface and all the tools are close to hand where and when you want them. It also produces crisp reports and other output. This interface is one reason the application is more efficient than rival accounting tools.

Before Xero it took me a day and a half every two months to prepare my GST return and two or three days at the end of the year to prepare my income tax return. Monthly invoicing would take a couple of hours.

With Xero the GST return now takes two hours. The longest part of the job is keying in cash receipts. If I could scan these paper documents into my computer, OCR them and send them to Xero I’d halve the time.

GST was hard going because I’d make small errors and need to fix them before completing the return and sending it to the Inland Revenue Department. I still make errors, but they are easier to trace and fix with Xero. This means there’s less teeth gnashing and sense of helplessness.

My invoices take minutes, not hours to prepare. I briefly had one client on automatic invoicing which mean no work whatsoever. I can go directly from adding items to sending off emailed invoices to clients without leaving the application.

So far I’ve only been through one end of year. It was still painful but less stressful than in past years – mainly because Xero is easier to understand and use than desktop accounting packages like MYOB or Quickbooks. It has a slick, uncluttered interface and a seamless connection to my bank accounts. Sure other applications now do this, but Xero is better integrated.

Well balanced feature set

Another great feature is the software is nicely balanced for non-accountants. Many accounting packages come with esoteric features that accountants love, but leave the rest of us befuddled. I can just about understand everything that goes on with Xero. If I ever run into problems – and that happens less than with Quickbooks or MYOB – support is fast and professional.

One feature that sets Xero apart from other accounting applications is the automatic bank feeds. While rival applications offer something similar, Xero’s integration with the banks is both seamless and effortless. I’ve never seen anything as impressive here in New Zealand. If Xero could reverse this integration, so you could pay Inland Revenue direct from the application, it would be a killer advantage.

So what’s not good?

I’m not comfortable with security. Keeping financial data in the cloud and not on a secured home computer carries a risk. I’d like more reassurance that my data is safe. The company says its application is safe, but I’m operating on trust instead of knowing for certain strangers can’t fool around with my accounts.

The price is at the high-end of the range – Xero works out at NZ$600 a year which is more than MYOB or Quickbooks. As I’ve said the time saved more than makes up for this. However, most of my business involves billing Australian clients. Xero invoices are hardwired to state amounts in New Zealand dollars – at the time of writing the difference between the two is close to 30%.

There is an add-on multicurrency option but that’s another NZ$180 a year. The higher price takes Xero into the luxury product range – a high price just to write A$ on invoices instead of NZ$. There’s extra functionality, but the bit I need is the A$ on the invoice – not the rest of the functionality.

This last point aside, Xero remains the best accounting tool I’ve found to date. Over the years I’ve used plenty including Quicken Cashbook, Quickbooks, MYOB and Accpac Simply Accounting. None comes close.