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How to start an accounting practice on Xero

Who is this post for?

This post is for accountants and bookkeepers who want some information about options for

"The technology and services available around Xero for starting a cloud based practice, or migrating to a cloud based practice"

It focuses on the Xero HQ app bundle called "Xero Activate".

Where is your practice?

In Practice Already?

If you are already in practice, you are either in the cloud or on the way to the cloud.

The choice no longer exists. 

Either go online or go retire. 

Starting A Practice?

If you are looking at starting an accounting practice, then cloud is the only way.

There has NEVER been an easier time as far as start up costs of technology goes. 

Let's take a look at what needs to happen for you to go cloud with Xero HQ apps.

What are Xero HQ apps?

Xero announced "HQ apps" at Xerocon on 13th September 2017.

Here is the blog from Xero.

In a nutshell, Xero HQ aims to be the "centre of the universe" for a Xero partner where you can manage all your clients, tasks etc from one spot. 

You can elect which Xero HQ apps you want to have included in your overall cloud solution.

The apps that you can choose from are listed in the blog and on the website.

Here is the landing page for HQ apps.

As you will notice, there are a few apps to choose from.

There are also three bundles to chose from.

Let's look at bundle 1 which is called "Activate".

What is the Activate Bundle?

Here is the xero.com landing page.

In our opinion, this bundle is aimed at small solo start-ups and small sole practitioners. 

If you have more than one partner and have a handful of staff working multiple jobs, then this bundle will probably not be sufficient.

Xero lists out the four apps in the "Activate" bundle as:

  1. Xero core
  2. Xero expenses
  3. Xero projects
  4. Xero tax (Australia and New Zealand)

Read the landing page for more.

However, you will notice that there is not a lot of detail provided.

So here are some details from Entry Counts for you to consider:

  1. Xero core - This is the software your customers use, as well as the ledger and cashbook editions that your practice also uses. The cool thing here is that you run your "compliance financial statements" from the exact same Xero organisation. There is no need to export data out into another financial statement solution. Xero has that covered. No extra running expense is needed, just your time.
  2. Xero expenses - Xero gives all Xero Partners a "Practice Edition" which is basically a free Xero organisation for you to run your practice. You can quote, invoice, get paid, manage expenses, payroll, everything.
  3. Xero projects (NEW) - This was just released at Xerocon and is also inside your FREE edition. It allows you to manage "jobs" in Xero, except it's called "Projects". You can add timesheets and expenses to your projects. It is like a little practice management solution for you to use.
  4. Xero tax - This is only available in Australia and New Zealand. You can lodge all your tax returns from here. You import the trial balance from Xero core into Xero tax. 

What does Activate cost you per month?

Given the above, you end up with these solutions and these costs:

  1. Financial statements - run these directly from Xero. So you only pay for the Xero subscriptions you hold for your client, not the ones that your clients pay for.
  2. Job manager - use "Xero projects" to manage your jobs. No cost.
  3. Tax returns - use Xero tax to complete all tax returns. No cost to Bronze Partners and above.

So you have some basics covered with very minimal running costs.

You will probably just pay for some Xero subscriptions.

What else is needed?

You need a few more solutions to do this properly.

Whilst Activate contains the Xero essentials from the HQ app selection, you still need some essentials:

  1. Email
  2. Calendar
  3. Document storage or document management
  4. Text and formula solutions (MS Word / Excel)

You can't run a practice without those solutions. Here are the usual providers in that category:

  1. G Suite / Google Apps
  2. Office 365

They will provide you with documents, sheets, slides and other solutions for when you need a blank canvas.

You need hardware.

You would need to invest in a computer and a phone.

Maybe a car? 

You can use cafe's and public wifi spots for meetings?

You can use Uber for meetings or teleconference solutions (Skype, Hangouts or Zoom)?

You can find your way around that yourself.

Our suggested basic cloud solution = Xero activate + G Suite / Office 365 + devices

That is your starting point. 

You can get underway with those bare essentials.


What is the set-up process and cost?

We come into it here.

  1. Xero core - You need to set up your financial statements. These are called "Xero report templates" and we are the leading consultant to solve this problem for you. Check out our webpage and we have a Youtube channel which shows some of the work we do. This is a cash outflow. You can always do it yourself. Just keep in mind, we are a fixed cost with a much much greater chance of success. 
  2. Xero expenses - This is already set up, you just need to get trained or train yourself. No cash outflow.
  3. Xero projects - Same as expenses. No cash outflow.
  4. Xero tax - Xero has an internal team who can help with basic set-up of client information but not historical tax return data. No cash outflow. You will have a labour cost of setting up prior tax return financial data.
  5. G Suite / Office 365 - This depends if you want to pay someone or not. Possible cash outflow.
  6. Devices - Maybe you need a new laptop and phone. I hire my Mac from Apple Finance. It is super powerful and costs me $450 per quarter, over 2 years. Then I return it and get a new one every 2 years. 

So really, the only definite cash outflow here is us and new devices.

Most of our services fall into the range of $2,000 for small practices to $3,000 for much larger firms with higher staff numbers. Or you do it yourself...

The value in us is, we are known as a "significant time-saver" for running reports in Xero.

Check out our customer page.

Do you want to grow your practice?

If you are a start up then you probably want to grow.

Then I would look at the Xero HQ app called "Boma".

Boma was announced at Xerocon as a Xero HQ app and it looks awesome.

It integrates with:

  1. Xero HQ email list
  2. Facebook
  3. Twitter
  4. Linkedin
  5. Instagram
  6. You can insert YouTube links

So in a time of digital marketing, it is, in our opinion, an absolute no-brainer for anyone serious about growth using online strategies.

What other apps can you add into your practice?

What we have above are the bare essentials.

Adding more is simple.

Go back to the landing page and take a look at the other options.

There are:

  1. Reporting apps - These will help with the consolidation of entities and forecasting. You can elect to use G sheets or MS Excel before you need to use these.
  2. Document management apps - These help managing documents as opposed to just storing them.
  3. Corporate affairs apps - This helps with company lodgements and document / deed / constitution creation.
  4. Expense management apps - This helps with your clients managing their payables without paper.

These can all be added at some point. 

You don't have to do it now.

Reporting

Corporate Affairs

Document Management

Expense Management

Summary

So Xero has delivered.

In spades.

Accountants and bookkeepers have awesome tools at their disposal, at a fraction of the upfront investment needed for server based solutions.

They also have the choice of DIY or paying consultants like us.

Our services have usually fallen between $2,000 and $3,000 per practice. 

If you want us to help, email donnie@entrycounts.com.

Cheers,

Donnie Buchanan

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