Tax Prep.

As a small business owner, preparing for tax season can be daunting. From bank reconciliation to managing your documents, and reviewing your income statements, there’s lots of work that needs to be done. Luckily, Xero provides you with lots of tools and features that can help tax prep feel like a breeze. Let’s take a look at some of them.

1. Reporting

A big part of tax prep is bank reconciliation and reviewing financial data to account for all the money that went in and out of the business over the past year. With Xero’s reporting suite, you have the ability to gather all of this data in one place. There’s a handful of reports in particular that are especially useful during tax season. They are the Bank Reconciliation report, Aged Payables, Aged Receivables, and Profit & Loss.

The first report we recommend looking at is the Bank Reconciliation Summary. This report is great for checking if your bank balance, meaning all of the transactions in your business bank account, match up with the balance in Xero, which is all of your invoices and bills. If any transactions are missing or things don’t add up, this report will surface that information for you. You can then use this data to complete the bank reconciliation process and ensure all transactions are accounted for.

From there, you can move on to the Aged Payables report, which shows you any supplier that your business owes money to. It’s offered in both a summary and detailed version to view the totals across all bills, credit notes, expense claims, and overpayments that you owe, based on the age of the transaction.

On the flipside of that, the Aged Receivables report shows you any customers that owe your business money. This report is also offered in a summary and detailed format depending on how in-depth you need to go. Looking at the data in these reports together gives you an understanding of any money that’s due to come in or out of the business and any potential payments that are overdue. It’s a great starting point to tie off any loose ends before starting to finalize your financial year.

Once you’ve looked at all that, you can move on to the Profit & Loss report, which gives you a snapshot of your business performance at a specific point in time. In simple terms, it shows you whether you’re making money or not. You’ll see all of your income, expenses and get a great understanding of how healthy your business is at that point in time. If you want to get really detailed, you can even compare those numbers with prior periods and see if any trends emerge.

Using the data from those three reports sets you up nicely to begin working on your tax reports like the GST/HST and any provincial-specific ones, if applicable. The best part is that just like the reports we mentioned above, these tax reports can be generated all from within your Xero account as well!

2. Hubdoc

Along with reviewing financial data and any relevant reports, the other major part of tax prep is document management. Xero can help make this part a lot easier thanks to a tool called Hubdoc.

Hubdoc is a data capture tool that extracts key data from documents like invoices, bills, and receipts, and then creates transactions in Xero. You can send via email, using the mobile, or right from your computer and Hubdoc will do the rest. After reviewing the data it extracts, you can publish the document to Xero. This will create the invoice, bill, credit note, or spend money transaction with a copy of the document attached, which is especially handy for the odd occasion you might be audited. From there, you can log into Xero and reconcile the transactions with bank statement lines, which is simply matching the transaction from your receipt or invoice to the corresponding line in your bank statement.

This functionality also works with bank statements if you’re unable to set up a direct feed with your bank. Simply upload your PDF bank statement and Hubdoc will convert it to a CSV in seconds. You can then import that CSV into Xero and reconcile your transactions. No need to manually enter individual line items ever again!

Beyond data capture and extraction, Hubdoc will store the documents you upload so you never need to keep paper copies of bills and receipts. You can then organize the documents in Hubdoc using tags and folders, or send them to another cloud storage system your business might use, such as BILL or Dropbox. Just like with Xero, you can invite your accountant, bookkeeper, or team members into your Hubdoc organization, and decide how much access you want them to have.

To learn more about how Xero can support your small business or help with tax prep, sign up for a free 30-day trial and explore all our educational resources on Xero Central.