Xero is a popular small business accounting solution. This idea is further reinforced by the 200 employee limit as well as other lesser known “soft” limits on invoices, expenses and transactions. You may wonder whether or not is is a viable option for when your small business grows. With some creativity, you can avoid moving to a more expensive, enterprise resource planning system.
Accounting systems like Xero care less about the value of transactions compared to the number of them. Small businesses tend to make a plethora of small, low value transactions which can quickly add up to hundreds or even thousands of entries on Xero. The issue for Xero is that the more entries you use, the more it costs them in terms of processing power.
As a result, many small business accounting systems place limits on the number of transactions that can be used in a given period (e.g a month).
For example, Xero places a limit of 1000 sales invoices per month, a limit of 1000 purchase invoices per month and a limit of 2000 bank transactions per month (valid as of June 2018).
These are, in effect, soft limits that can be exceeded at your own risk. Due to the nature of Xero, if you exceed these limits constantly, it will slow down and will likely cause issues when attempting to interface with the system. Worse case scenario, the software simply stops working.
Do you need to plan your migration out of Xero then? Do you need to avoid it completely? Probably not. In the majority of cases, with some clever thinking, some rearranging can be all you need to stick with the popular cloud accounting option.
Here are a few tips you can take advantage of while using Xero or any cloud software:
Usually, if you’re taking advantage of a POS system or inventory management software, your vendor will likely support transaction batching. Ask your vendor, you never know if they might have it.
For example, if you run a small business that processes large invoices that contain many invoice items, you may encounter the limits of Xero. It will likely slow down to the point of timing out! Issues can become so severe that you may even struggle to generate financial statements from Xero.
Fortunately, transaction batching can be used to limit this. Instead of processing the individual invoice items, we can take the final invoice amount and use that. This can cut the number of “invoices” listed on Xero from tens of thousands to mere hundreds to thousands.
Many businesses run a variety of different systems to manage inventory, their online stores, etc.
As sales begin to pick up, naturally Xero begins to get bogged down by the number of transactions you make. Just like the previous tip — you guessed it — you’ll eventually reach the point where Xero will fail to generate business activity statements and other important documents.
Certainly, to keep efficiency, you wouldn’t consolidate transactions by hand as that wouldn’t be beneficial to your business. We can help: we’ll create a solution for your business that summarizes transactions for each day and moves it all into one daily transaction.
Once you begin consolidating transactions, not only can you keep everything automated, you’ll be free from any further slowdowns.
When businesses first use Xero, many times they choose to use it as a billing solution as well.
Instead of bogging down Xero with billing, you might consider using a billing engine such as Chargify or Chargebee. Taking the heavy lifting of billing from Xero can significantly increase the speed that it works at.
In fact, you’ll get benefits such as prorated billing, automatic cancellation handling and service provisioning with Chargify that Xero doesn’t normally provide. This means that Xero can do what it does best — bank reconciliations, the plethora of accounting statements, etc.
Not only does it provide plenty of additional benefits, many billing engine providers also offer support for migrating from Xero. Because Chargify comes with full Xero support, you won’t have to abandon it entirely.
The default integration between your trading and accounting system may suffice for now, but may need to be replaced later on.
Most popular systems come with well documented APIs (interfaces usable to connect software). As a result, it is generally possible to create a system that pulls data from your trading system automatically, put it all into a single batch and post it into your accounting system.
This would require you to turn off the default integration partially or even entirely.
There’s a huge benefit to having a customized integration. It can be modified to suit your business’s continued growth and leaves you much more control over your systems, which allows for better software solutions that work for your business.