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Small business processes

Posted 9 years ago in Advisors by Rod Drury
Posted by Rod Drury

I wrote a series of articles that appeared on Public Address recently which included one on small businesses changing their processes.

I’ve updated it slightly and reposted here. One of things that has become obvious after a couple years in this space is that the online world is asking small businesses to change their process. As we make traction with accountants we are also finding that they are rethiking their process and engagement model with their customers as the online model changes the way they can engage.When we set out to do Xero a couple of years ago, it came out of the frustration I had as a small business owner that the way to do small business bookkeeping was inefficient and frustrating.

The software was dated, it took ages to get up and running, it was hard to use, hard to get data out and my accountant had to keep on applying band-aids to what was fundamentally poor data.

Instead of trying to replicate what old accounting systems did, but be online, we started with a blank sheet of paper and looked at what small businesses actually did everyday. That became the foundation of Xero and over the past year or so, we’ve raced ahead building the accounting features small businesses need but with a  ‘what do you actually do’ approach.

That sounds kind of technical and we just put our heads down and worked hard, but now with thousands of customers we can look back and see what we have actually achieved.

Rather than just building software, we are finding we are asking small business owners to change their businesses processes.

It seems obvious now looking back; but small businesses don’t really have a standard set of processes. The way that traditional accounting systems work hasn’t changed for many years. The last big technology change was Windows based accounting software in the late ’90s, but that was just the same old DOS based models with colour and a mouse.

Those old processes assumed that you did your bookkeeping activities in batch, often only at the end of a reporting period. This forces bookkeeping to be a grind you dread doing, but more importantly it means the business owner cannot have a daily view of where they are at – so important in these more challenging days.

Where did these processes come from? Did a staff member who is no longer there pass them down? Have your processes ever been reviewed? Were email and the internet around when those processes were designed? Do you still fax things? Do you still have big paper files?

One of the apparent insights we had was that most small business owners log onto their online banking system in the morning to see who has paid them. We then noticed they didn’t process those bank transactions into their accounting system at that time, creating the need for catch up processing later.

We were able to connect Xero to all the major trading banks so that you can go into your accounting system each morning and your bank transactions are already there, ready to be processed. Some are already classified for you as the software learns about your business.

A better business process is therefore for business owners to jump into Xero each morning to check receipts and also quickly process their cash transactions. This has numerous benefits:

  • It eliminates the dreaded catch-up time
  • The small business owner knows exactly where they are each day
  • The business owner can better manage their cash allowing them to maximise their working capital and enhance their survivability

This is just one example where changing a business process will improve business. We’ve come up with a set of common practices, organized around when you do them to help small businesses relook at their processes. Different industries will do slightly different things but this collection of processes should be a useful start to help you get going.

Here is a link to some of our business guides:

For example: do simple daily tasks so that inputting of data never becomes your core work activity:

  • Check your bank accounts to see what transactions were processed overnight
  • Enter those transactions into your accounting system
  • Open your mail and enter any cheques received and any invoices you need to pay
  • Check your debtors and call any customers with outstanding balances
  • Completed any jobs? Invoice straight away and send out
  • Record any incidental expenses

Then there are weekly activities – mainly around invoicing and basic tracking reports:

  • Bank account reconciliation, if you’re not doing it daily make it at least weekly so you always know where you are and can avoid the dreaded catch up.
  • Plan your bill payments (Accounts Payables) – set up the amounts and dates you want to pay on your Awaiting Payment payable invoices.
  • Send out your invoices (Accounts Receivables) – check your draft and Awaiting Payment tabs for any unsent invoices.
  • Phone any customers who have exceeded your terms of trade
  • Keep on top of expense claims
  • Payroll – make sure you do this on time
  • Review your top customers and consider calling ones you haven’t spoken too recently for new opportunities

And monthly – take the temperature of your business:

  • Statement Run – send out statements to all customers with balances outstanding
  • Pay your bills
  • Clean out your wallet and expense claim any personal business expenditure
  • Take any necessary drawings
  • Process and clean up any movements in fixed assets
  • Complete your management reports and send them to your bank manager

GST/VAT time – do the compliance work (Your accountant may help you with these):

  • Check all expenses and transactions have been entered
  • Look for any abnormal transactions
  • Review the tax return
  • Enter the tax transactions that you’ll either pay or receive
  • Lock your accounts for the end of the tax period.

This is just our take on the changes we’ve seen in small business processes in the past year after talking to and hearing from a diverse group of varied customers and accountants. We’ll continue to update these guides. Please feel free to let us know how you think small business could run better and what should be best practice for small businesses.


March 22, 2009 at 2.07 am

Excellent blog !!Link to business guide is really packeted with lot of new informations and I am sure this will help many new and growing bussiness peoples to grow high.

Tony R
March 29, 2013 at 9.48 pm

Hi I think the small business proces software packages are great, but all seem to have the same missing element. I have yet to find one which has the following document stream. Quote, Acknowledgement, Packing slip Invoice. For some reason the invoice is not included. Having run my own business now for 14 months and worked with excel etc, I have carried out lots of research with the same result. When you question it the software providers say none has ever asked for it before, which I find laughable. Does your package have this logic stream?

Tony R
March 29, 2013 at 9.49 pm

Sorry mistake. I meant for some reason the ACKNOWLEDGEMENT stage is not included.

Rod Drury Xero
March 30, 2013 at 9.42 am

Hi Tony, this year we are focussing on what we call the ‘Order to Cash workflows’. Up until now we’ve been working on core accounting. There was a lot to do.

The next phase is those key workflows which include functionality for Purchase Orders, Quotes and Simple Stock and Jobs. We may add other documents later depending on feedback.

Our analysis to date backs up what you’re saying.

We’re still work hard on building these features but I think you’ll be pleasantly surprised.


Graeme Leo
March 31, 2013 at 9.56 am

This is the most succinct and practical monthly must do list of accounting tasks for a small business manager I have seen.

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