Xero Tips
I keep all of my receipts in a box, and write everything in a book, so why Xero?

Xero is all about creating efficiency savings and an integrated environment. You can create and email quotes. You can turn them into sales invoices, email them to your customers, and they can pay you instantly online by linking eWay (using a payment gateway). You can have all of your expenses dealt with automatically by linking Receiptbank, all you have to do is pay them. You can process payroll for your staff, and they have online access to payslips and time-off requests. You can record any expense claims and easily capture business mileage by linking Tripcatcher. All of this from Xero. Reports and VAT returns are all created automatically from the data already there, and the VAT return can be filed straight from Xero. Coupled with Xero being a cloud solution, you can keep up to date with everything, anytime, anywhere, using any device. And you will become paperless as a result!

Xero sounds good for dealing with my sales and costs, but what about dealing with the bank receipts and payments?

An automatic feed can be set up with your bank, so all of your bank transactions are automatically pulled into Xero. You have a bank reconciliation screen that has the bank transactions down the left and Xero data down the right. Xero is smart, so if you have received a payment into your bank from your customer ABC Ltd (shown on the left), then it will automatically search for a sales invoice to ABC Ltd on the right – when they match up correctly, just press the OK button. It’s as easy as that!

We've had a pay increase. I need each persons pay rate to be changed, but when I change the Template it won’t save it. How is this done?

You need to set new rates on each employee’s employment tab, which will automatically update the pay template and future payruns/payslips.  Go to payroll > employees > select employee > employment tab > ‘set new salary and wages’.  There will be a screen pop up where you can enter the details of the new salary/rate, and the date that it is to be effective from.  This will update the pay template in time for the next pay run, so you won’t have to manually overwrite each pay.

With Xero, will I know which of my customers owe me money?

Because Xero have created all of your sales invoices, and bank feeds have matched all of your bank receipts, Xero will always show an up to date list of customers and the amounts they owe you. By linking up Chaser, you can automatically send email reminders to your customers when the invoice is due for payment, even a few days before to remind them, and afterwards if overdue – as soon as your customer pays you through eWay, reminders stop. Chaser is highly customisable, you set up the template reminders and set the time you want to send them. Credit control made easier!

I only have a few bits of income and expenses, so why should I use Xero?

You can use a simple book or spreadsheet, but it really doesn’t give you a full picture of everything, and your bank transactions are separate. Better business decisions are made by knowing all of your numbers – that’s not just the amount in the bank, but the levels of profit over time. Xero provides all of this, on the one dashboard, in a simple and clear way, with real-time results. And because it’s a cloud solution, you can keep up to date with everything, anytime, anywhere, using any device, and have no paperwork around you!

How do I get it so my customers can pay my online invoices in Xero?

To enable your customers to pay your online invoices you need to add a payment service to Xero. This is very easy to do, and a number of payment services are available in the UK, including PayPal, Eway, Stripe and Gocardless. There is a cost involved with these services, either through transaction fees taken as a percentage of your sale, or the setup and ongoing costs of a merchant account. The advantages of getting paid quickly and opening up new payment options for your customers will far outweigh these costs. You’ll also be pleased to know that the payments and fees are taken care of in Xero automatically, meaning no fiddly adjustments for fees, and your accounts will be immediately up to date without having to wait for the money to come into your bank account.

I know what I've got in the bank, so why is it important that I know the profit all the time?

Lots of different things affect the balance in the bank, mainly the values of amounts paid into the account compared to what’s been paid out of the account, at any given point in time, which can vary considerably.  Profit is a measure of the sales that you’ve created and the costs that you’ve incurred, irrelevant of the date you received money and paid money.  A good indication of business performance is its profit levels over time, and how variable they are, as this drives the flow of cash in and out of the bank.  Strategic business decisions can only successfully be made on knowledge of the flow of profit levels.

Can I claim for clothing I wear for work through my business?

Any clothing of a protective or promotional nature can be claimed against taxable profits, for example overalls, hard hat, gloves, steel capped boots and donkey jacket as protective. Promotional items can include clothing specifically carrying the business logo, name or brand. If a business involves the wearing of a uniform, this too is fully tax allowable. HMRC would challenge claiming for ‘normal’ clothing such as shoes, shirts and trousers on the basis that they can also be worn in a person’s private life away from work.

My phone contract is not in the limited company's name so surely I can't include it in my accounts?

You can include the business portion of personal phone contracts – that is usually an estimated proportion of the contract cost e.g. 50% business 50% personal. As soon as you can look to set up a commercial phone contract and that way all employees are allowed one mobile each without a benefit in kind charge and all the contract cost is allowable, even if the phone calls made are private.

HMRC have sent me a letter saying that I owe them some tax/VAT/PAYE. I'm sure that I've already paid this. What should I do?

HMRC print off letters several days (sometimes weeks) before sending them out, and because a letter is only ever a snapshot at a given time, it’s never live up to date information.  If you’re sure that this has been paid, firstly check Xero and your online banking, and then give us a call, and we’ll log in to your account if possible (or if that’s not technically possible we’ll give them a call with details of your payment).  It’s important to take steps to check this out as soon as possible, to avoid any potential interest or surcharges being added.

What are simplified expenses?

HMRC have a set list of overheads that a business can incur, as a flat rate. Sole traders can elect to use these simplified expenses as a way of calculating some of their business overheads. Flat rate overheads include the cost of running a vehicle for the business, working from a private home or living at the business premises. All other business expenses must be calculated by working out the actual cost. It’s therefore essential for a business owner to log all business related mileage and record the number of hours they work from their private residence.


Tools within our finance toolkit, such as Tripcatcher and Receiptbank, assist business owners in recording and capturing actual costs and getting it automatically recorded within their Xero bookkeeping. This means nothing gets lost, and all relevant tax relief is obtained.

What is the current VAT registration limit? (as at February 2016)

The present compulsary threshold, as at February 2916, is £82,000 turnover in a given 12 month period (this limit does change each year, so keep checking this out!). Once the turnover limit has been reached, the business has 30 days to register for VAT with HMRC. Registration can also be voluntary when turnover is below £82,000 and will largely depend upon individual circumstances, such as incurring large start up costs when a business begins trading. Our advice to clients is always get in touch to discuss the various options, and to check out the most up to date threshold, therefore allowing an informed decision to be made.

I have received a letter from HMRC with an 'authorisation code' to give to my accountant. What is this?

This is the code that authorises us as your agents with HMRC. What this means is that we can talk to HMRC on your behalf and deal with your affairs. The codes replace the old 64-8 forms that we used to get you to sign. There will be a different code for each tax that we do for you (Corporation Tax, Self Assessment, PAYE etc) but once entered, we do not need to request them again. Please let us know these codes as soon as you receive them as there is a time limit on their usage.

Why is the March payroll run usually different to February each year?

If you’re a director of a limited company, the payments are usually higher in March (month 12) as that’s when the national insurance kicks in as your cumulative director’s salary for the year-to-date crosses the NI threshold.  This applies to both employee’s NI and employer’s NI, although you should see employer’s NI being reduced to nil on the P32 (the payment you make to HMRC) due to the employment allowance relief (the first £2k of employer’s NI is relieved each year).

Why do I need a business plan?

A business plan is vital if you want to grow your business and/or become more profitable. It sets out how you plan to develop your business, how you will price for your products and services, how you will market your business, it includes some targets, and allows you to consider your competitors and the evolving marketplace that you operate within. Without a plan, it’s easy to operate day-to-day without a longer term goal and vision in mind. And a business plan doesn’t need to be a massive essay, just a couple of pages is sufficient. And if things change, then just update the plan. Along with up to date financial results, this becomes a powerful tool we can use to help access finance, funding and grants.

Why do I need the services of a financial director, as I'm only a small business?

Xero provides all financial information about the business, all the factual numbers. The business plan sets out how the business owner plans to grow the business and/or become more profitable. For the latter to work, there needs to be something connecting it to the former, that can take the factual numbers and then support the business owner to realise their plans. For example you may have made steady profits over time, and have a certain amount of cash in the bank, but what does that mean in terms of developing the business? Often referred to as an FD, finance director style support will help you to connect all of the dots.

Why do I need to connect other apps to Xero?

By sitting down with you and walking through your systems, from how you find your work and complete your projects for your customers, to how you receive your money, we will recommend apps to link up with Xero, to enable every part of your business to be run using Xero at the heart. This creates the true integrated approach, that will be efficient (as you’re only doing something once) and will create a paperless environment (as all source documents, such as expense invoices, are stored against transactions).

Where do I go for business grants and support?

The grant and funding landscape is constantly changing – our mission is to ensure that we’re always well connected with everything that’s going on in terms of help for businesses.  If you need help to grow your business in any way, contact us, and we’ll point you in the correct direction.

Financial Planning
I'm happy paying my current pension, why does it need reviewing?

Very often, circumstances change, be that personal or within a pension fund, so it’s crucial that both of these are reviewed regularly to ensure that they are aligned. Also, it’s important that you know what everything really means, and how paperwork received from your pension company translates into a pension amount received in the future. Our financial adviser will sit down with you, take all of the paperwork, and translate it into clear and simple language, so you can see what it really means. We’ll then create a plan for you, that supports your goals and builds your future, and we’ll be with you every step of the way to ensure continued alignment.

How is financial planning integrated with my accounts?

Based on your financial results, there may be opportunities to pay into a pension at a particular time, to minimise any tax. By working together, we can identify these opportunities.

How much do you charge?

We offer a free review of your current circumstances, and then create an individual financial plan for you moving forward based on our knowledge of the marketplace, again this is free.  Our proposition is second to none in terms of ‘real value’, which means the returns achieved are felt in your own pocket.  There’s only a cost should you wish to pursue our advice, and we use a transparent charging model that’s highly competitive, so no hidden fees.

I have a mortgage on my home - is this currently on the best rate?

If you currently have a mortgage that’s on your lenders Standard Variable Rate, you could be saving money by re-mortgaging.  With the vote to leave the European Union, there’s some uncertainty as to what’s going to happen within the financial markets.  We’ve already seen the Bank of England reduce their base rate just two months after the result of the referendum.  Whilst this hasn’t had a direct impact on the new products lenders are currently offering, it does show that nobody really knows what could happen in the future.  Your mortgage should be included as part of your financial planning discussions, as it can have an impact on your future goals for retirement.


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