Not sure whether a small business accounting app like Xero is big enough for your business (or your client's)? With a little lateral thinking you can avoid moving to an expensive ERP.
Every app has its limitations and Xero is no exception. There is the publicised limit of 200 employees and lesser known soft limits on invoices, bills and transactions. These numbers are more important to selecting accounting software than the actual revenue of the business.
Take a real estate agent on $1 million a year. She could make that target with just 10 sales a month. To hit the same target, an online retailer could crank over 2,000 sales a month of low-value items, such as stamps or cards.
Small business accounting software cares less about the size of the deals than the number of them. This is because the database behind the software needs much more processing power to cope with 2,000 sales a month than it does for 10.
Accordingly, accounting software vendors place limits on the number of transactions they can handle.
Xero provides the following guidelines, as of November 2016 (they are likely to change).
- Up to 1,000 sales invoices per month
- Up to 1,000 purchase bills per month
- Up to 2,000 bank statement lines per month (across all bank accounts)
These are not hard limits and they are not part of your licence agreement; the software will work just fine if you exceed them occasionally. But if you significantly exceed them on a regular basis the software will take longer to load each page. In extreme cases, parts of the program will just stop working.
Does this mean that you have to plan your migration out of Xero? Or avoid using it for a business that plans on healthy growth? Not necessarily.
In many cases, creative thinking and rearranging your systems’ architecture are all that’s needed to stick with your cloud accounting system of choice.
Here are a few tips that we often suggest to consider when evaluating a performance-compromised cloud ecosystem.
Tip #1. Can you batch?
If your transactions are coming from a point of sale or an inventory software, ask the vendor if it can batch the transactions.
Marianne, an online retailer of imported foods, was unable to run the general ledger report to send to her accountant. Xero would think forever and then time out. She tried on different machines and at various times of day.
Eventually, we had to run it on a quarterly basis and ask the accountant to add everything together. Then we looked at her data in Vend, her point-of-sale app.
Vend was sending an average of 70 invoices a month for two outlets and a handful of wholesale customers. The number of invoices clearly wasn’t the source of the performance issue.
Then we realised that each invoice carried on average a hundred items. In this financial year, she was averaging 7,000 invoice lines per month!
We changed Vend from posting a line per product to a line per income account. The monthly average is now down to under 600 invoice lines per month. And Xero is back to being fast and efficient.
Many other systems can batch transactions. Cin7 can batch POS transactions on a daily basis and send wholesale orders individually. Neto eCommerce also has a variety of batching options.
Aren’t we missing out on important information?
Not usually. In most cases, order fulfilment is done in the ecommerce system and individual orders are not needed in Xero.
In fact, it is much easier to handle reconciliation in Xero when a single daily transaction comes in and matches the merchant account settlement for online cash clients.
Tip #2. Can you consolidate?
John, a wholesaler of lifestyle goods, is using Magento for eCommerce, Unleashed for inventory and Xero in his import business.
John and his bookkeeper were excited to use Xero for the first three years until John’s online sales started to pick up. A multitude of small transactions coming into Xero through Unleashed every day began to slow the system.
Alarmingly, the BAS report stopped working entirely. You guessed it; Xero would think forever and then time out.
Xero Support offered to process the BAS report and send it on to the bookkeeper – for a while. Eventually, Xero advised John that he would have to find another solution.
The option of disconnecting Magento and handling online sales manually seemed daunting. There had to be a better way.
Finally, we decided to consolidate the data within Xero. A quick chat to Xero confirmed that if we removed the multitude of transactions every day and replaced them with a summarised transaction, the performance issue would disappear.
A couple of weeks later the Xero Consolidator was up and running. A wicked nightly process goes into Xero every night, identifies all the web orders, removes them and enters a single order with lines totalled by income account.
John’s bookkeeper is happy because reconciliation is now much easier. All the online sales that were cash transactions and paid in bulk through the merchant settlement were consolidated. And the BAS report was back to running instantaneously.
Tip #3. Use a billing engine
If you are using Xero to bill for a subscription-based business it might be time to graduate to a purpose-built billing engine such as Chargify. Let it handle the heavy lifting of billing and leave Xero to handle just the accounting.
Chargify and the like also give you the added benefits of automated pro-rata billing, handling cancellations and even service provisioning based on paid/non-paid subscriptions.
It will leave Xero to do what it does best – bank reconciliation, GST accounting, payables and payroll.
Billing engine providers are usually very helpful in moving you across from your accounting app to their billing systems.
Helen, a business owner with an online directory for health providers, decided to build her own billing engine. This engine managed users’ access to the directory and recorded the invoices in Xero.
As the number of invoices began to cripple Xero, we redesigned her integration and instructed her developers to post totals to Xero instead. This simple solution only works for cash clients. It gets more interesting when you need to track debtors.
Tip #4. Build your own connector
Sometimes it’s worth replacing the out-of-the-box integration between your trading system and your accounting system. If both systems have good APIs (or software connectors), it is usually possible for a custom-built process to retrieve information from the trading system, batch it in an interim database and then push it to the accounting system.
In this case, you would turn off the relevant parts of the built-in integration or turn it off altogether.
The API economy rewards software vendors for opening up their applications so they can connect to other programs. It makes it easier than ever for business owners to structure the flow of data between software solutions in the way that best works for them.