We run pubs. We’re paid by our customers both in cash and by card, and we spend money with our suppliers in cash, by card, and by bank transfer or direct debit. Xero is where the information about all these money flows ends up for checking, cross-referencing and reporting.
Our chart of accounts in Xero is fairly simple, and is very close to the chart of accounts you can see if you create a Xero login and play around with “Demo Company (UK)”.
The main points of difference are that we have accounts corresponding to our various different real bank accounts (multiple Barclays current accounts, a Handelsbanken current account and a Santander savings account), and also fake “bank” accounts for the cash on hand at each of our pubs.
We’ve added separate “Sales” and “Purchases” accounts for each department in our point of sale system (“Real Ale”, “Cider”, “Spirits”, etc.) - we use these to track our gross profit per department, and we use Xero’s “Tracking cagegories” feature when we need to split sales and purchases out per pub.
There are 136 accounts in our chart of accounts, compared with 90 in the Demo Company chart, so it’s not a huge difference.
We’ve been using Xero since December 2016. To give you some idea how much information goes through Xero, to date we have 3326 invoices (money in) and 7553 bills (money out). There are also some number of “spend money” and “receive money” transactions that are like bills and invoices except they are simpler: they have a single payment to or from a bank account and don’t make use of the Accounts Payable or Accounts Receivable accounts, i.e. split payments aren’t possible and the transaction only has one date associated with it. I don’t have an easy way of getting a count of those out of Xero (that I know about!) but I reckon there are probably about 10,000 of them: we generally use them to describe small cash purchases. (“£1 for lemons at Tesco” etc.)
When we’re paid by our customers:
- The point of sale system at the pub records what we sold and how we were paid.
- At the end of each day, after the cash is counted and the card machine totals are printed, the POS system uses the Xero API to create an “invoice” in Xero for all the sales that day, broken down by department, and payments are recorded against the invoice into the pub’s cash account and (three working days in the future) the Barclays current account, for card payments.
- A couple of times per week, money is transferred from the pub’s cash account to one of our current accounts by paying cash in at the bank.
- Usually three working days later, the money for card payments arrives in the main Barclays current account by direct credit. Information about this transaction arrives in Xero through the direct feed from Barclays, and it’s reconciled against the expected amount submitted by the POS system. Any discrepancies are investigated and corrected (they usually turn out to be typoes, although we have seen some more bizarre errors).
- At regular intervals (but probably not as often as we should!) the pub’s cash book is reconciled against Xero, the cash is counted, and any discrepancies are investigated.
When we buy stock from our suppliers:
- The delivery note is entered into the POS system.
- The POS system prints out stock labels for each item in the delivery. If you end up with labels left over, you know something’s missing!
- Once the delivery has been checked, the POS system uses the Xero API to create a draft “bill” in Xero for the delivery.
- Eventually the invoice for the delivery arrives: usually by email from the supplier, but sometimes by post and then we scan it in. We upload the invoice to Xero so it appears in the “Files Inbox”.
- When we’re doing paperwork, we match up draft bills in Xero against uploaded invoices. The file from the inbox is attached to the bill. When the invoice appears to be correct (it matches the information sent from the POS system), we hit the “Approve” button and the bill is queued for payment. If the invoice doesn’t appear to be correct, we work out why and sort out the differences with the supplier.
- Xero lets us set up a planned payment schedule for our bills. Each day we have payments planned it gives us a list of bills to pay. We generally pay by bank transfer, although we also have direct debit arrangements with some suppliers. Once we’ve paid a bill by bank transfer, we enter this into Xero so it knows the bill is paid.
- The bank transactions we’ve made arrive back in Xero through the direct feed from Barclays, along with any direct debits. We use Xero’s bank reconciliation interface to check these against the payments we intended to make, and to mark bills paid by direct debit as paid. If there are any differences it’s usually because we made a typo while entering the payment into the Barclays website, although it’s not unknown for our suppliers paid by direct debit to make mistakes too.
When we get other bills (utilities, etc.) we deal with them in a similar way, except there usually isn’t a draft bill waiting in Xero to match them up with. (Some suppliers bill us very consistently and we can set up a repeating bill in Xero to match those, just to save a bit of typing.)
If we receive a delivery and don’t receive an invoice for it, we’re left with a draft bill in Xero that we can chase up with the supplier.
If we receive an invoice but didn’t receive the corresponding delivery, we can’t find the draft bill in Xero and we can chase this up with the pub staff (who may have forgotten to enter it) or the supplier (who may have billed us incorrectly).
Every month we pay our staff. We don’t use Xero’s payroll system at the moment (because they haven’t released their UK payroll API yet, so we have no way to get figures from our online timesheet system into Xero) but the system we use ultimately sends details of all the payments we need to make as bills using the Xero API. We then have a very tedious hour or two with the Barclays website making all the separate payments!
Every quarter we use Xero to make our VAT return. This takes under 5 minutes.
Every year we make sure everything is up to date and then say to our accountant “everything is in Xero, help yourself!” — since scans of the original documents are stored in Xero alongside the transactions, he usually doesn’t have to come back and ask us many questions.
So: why do we like Xero?
It makes it very easy to stay in control. API access from our POS system to create invoices and bills means that there’s very little data entry to do. The direct feed of transactions from our banks into its reconciliation interface is very convenient, and unexpected or incorrect transactions are made very obvious. We never end up with a backlog of things to chase up at the end of the year, we can keep on top of things from day to day.
What’s not so good?
The missing UK payroll API is the main thing, really. There are features Xero has that our banks don’t support which would save us time if they worked (eg. being able to export a batch file to the bank to make all the payments we need to do for the payroll each month).
We’d like to give Xero access to more of our pub managers, but its permissions system is very basic and we think it’d be too easy for a manager at one pub to make mistakes that affect another.
Why do we have so many current accounts?
Mostly it’s a workaround for a Barclays problem. We want our pub managers to have debit cards for business spending, but we want these cards to have fairly low spending limits. Barclays sets spending limits per account, not per card, so we can’t have the cards issued against our main current account: that needs a high limit so we can pay our staff, HMRC, and our suppliers. It would be great if a Monzo business account could have configurable spending limits per card…