Having up to date data and information is so important for small businesses. It allows you to spot trends in income and expenses, allows you to see when you may encounter cashflow issues and allows you to monitor your actual vs budget figures.
Without this knowledge you are literally flying blind in every business decision you make.
Garbage in = Garbage out
But as with everything unless the data entry in Xero is good, the reporting you will get out can be complete garbage.
That's why we always suggest never use the General Expenses category.
Why?
You want to be able to see when expenses are increasing each month, quarter and year. And you want to be able to see which of these expenses are increasing (or decreasing if that is what you are focused on).
When you lump things together in General Expenses it's really difficult to see what's actually going on. It's difficult to budget and super difficult to track changes.
What should you do instead?
Split your expenses up! Insurance should all be lumped together, items you buy your team should be put in Staff Amenities (or another account you have specific for that), Uniforms should have their own seperate category, likewise Computer Software should be another category.
Xero don't limit you to the number of expense categories you can have. Obviously you don't want hundreds of these as it's too hard to then look at your figures. But you do want to be able to see the trends month on month, year on year.
If your current Chart of Accounts doesn't have the categories you need all you need to do is click Settings, then Chart of Accounts. Click add, ensure you have selected Expense as the category and you are good to go.
As always any questions or issues just let one of the Growthwise team know.
Missed out on any of our previous weekly Xero tips? Click here