Part 7 - Reports in Xero

This part follows on from Part 6 - Doing Your BAS in Xero.

You’ve learnt now to make transactions (that’s enter data) and check that the data is ok.
You’ve also learnt to do your regular weekly and monthly activities e.g. BAS, bank reconciliations.

Now, here’s the fun part.

All your hard work in entering in data and making sure that it’s correct, means that Xero can provide you with reports that are useful so that you have more information about your business and can make more informed decisions.

What kind of decisions?

Here are some decisions I’ve made from information shown in my financial system:

  • A product was selling quite often and more than another product, so I moved that product to a higher spot and more prominent spot on my website.
  • Rental ate into a large portion of my expenses so I reviewed the need for it and changed to a lower rental plan saving me $100 a month.
  • Accounting software was costing me $50 a week, I could transfer to a lower priced software and save $400 a year. This $400 could then be used for advertising which would then increase revenue.

These decisions, while small, helps my business become leaner… and I was only able to make these decisions by having financial reports.

Xero has a set of reports that you can use to regularly monitor and check on the ‘health’ of your business. Here are a list of reports that I think would be useful to businesses to look at regularly. Remember, the reports are only good as the information you enter in (transactional data).

Summary Report

  • Executive Summary - If you have an aversion to reports and only want to look at one - make it this one. The executive summary gives you a summary of your business overall. You can choose to have the summary by itself or have the summary with a ratios (you can read up about the types of ratios for business and what they mean here).
    • To access this report go to: Reports > All Reports > Executive Summary under Performance Reports.
    • Have a look at the variance (that’s the percentage signs with the up and down triangle), and for non-favourable variances (red down triangle), is there a reason for them and are they justified?
    • Here’s an example of an executive summary showing a business that isn’t in the best financial situation. See how knowing this information will help the business owner look at his income situation and question the over $20,000 drop in income from the previous month to the current month…

Essential Reports

  • Cash Summary - Use this report to see how much cash has gone in and out of your business. Monitor this and make sure you’re collecting cash when you should be. Remember, cash is the life blood of any business so monitor this so that you make sure you have enough cash to operate.
    • To access this report go to: Reports > All Reports > Cash Summary under Cash Reports.
  • Profit & Loss - This report is used to see how your business is performing. Is it making a profit? In the first few years of a business, sometimes, a business may make a loss, however, the goal is always to have a profitable business. It is possible to have good cash flow without profit, however, in the long term, without profit, you won’t have ongoing positive cash flow.
    • To access this report go to: Reports > All Reports > Profit and Loss under Performance Reports.
  • Balance Sheet - this shows you what you own (assets), how much you owe to others (liabilities) and you can calculate the base value of your business with it by calculating assets less liabilities (net assets).
    • To access this report go to: Reports > All Reports > Balance Sheet under Position Reports.

Management of Money Owing to You and to Others

  • Aged Receivables - Use this report to see money that is owing to you that hasn’t yet been collected. Then send out reminders to customers that need to pay their bills. It’s important you do this, because if you don’t do this, sometimes, customers can claim variation of contract which can sometimes lead to them not having to pay you.
    • To access this report go to: Reports > All Reports > Aged Receivables under Position Reports.
  • Aged Payables - This report shows how long you’ve left invoices unpaid. While this is better for your cash flow position (as you’re retaining cash in the business for longer), it affects relationships with suppliers. So, identify payables that need paying and/or organise more favourable payment terms.
    • To access this report go to: Reports > All Reports > Aged Payables under Position Reports.

Product Decision Reports

  • Sales by Item - This report shows you the items of inventory you have and how much each is selling. Look at quantity and also the value. A decision that could be made is to discard selling items that only breakeven and then trial items that are likely to produce higher profits.
    • To access this report go to: Reports > All Reports > Sales by Item under Performance Reports.
  • Income by Contact - Have you heard of the A, B, C customer? Customers/clients aren’t created equally. This report will show customers and the amount they have purchased from you. You can use this data in your marketing emails - for example, if a person has purchased an Apple laptop from you, perhaps send then emails about Apple computer accessories.
    • To access this report go to: Reports > All Reports > Income by Contact under Performance Reports.

Reports in More Detail to Drill Down - Mainly for Accountants

  • Account Transactions - If you want to drill down to see that transactions that you’ve entered into an account, go to this report. To correct things, you’ll need to do a journal entry. Not a report you need to monitor your business in the bigger picture, but a report that’s useful if you need to drill down and look at detail.
    • To access this report go to: Reports > All Reports > Account Transactions under Detail Reports.
  • General Ledger - Outlines the accounts in your system and all the transactions that have gone into and out of the account. Useful for accountants and the like if you’re trying to go into the system and sort out issues. General ledger effectively underpins the whole structure of your accounting system! Affectionately called GL.
    • To access this report go to: Reports > All Reports > General Ledger under Detail Reports.

Now that you have some useful reports to help you monitor your business and do even more, let’s move on to the lucky last part of this guide.

That’s Part 8 - End of Year Reports & Budgeting!

Next: How to Prepare a NZ GST Return in Xero

Sign up to post comments

Have A Question?

Get in touch!