Cash Flow Management for Tradies: Using Xero to Stay in the Green

"Cash flow woes? No dramas, mate—we’ll help you keep the green in your pocket and the ATO off your back!"

Are you a tradie struggling to stay on top of your cash flow? Mate, this guide is for you.

Xero makes tracking income, managing expenses, and forecasting your finances straightforward and stress-free.

Cash flow might feel like a constant battle, but this step-by-step tutorial will help you stay in the green and in control.

Managing cash flow is one of the biggest challenges for tradies, especially when juggling invoices, bills, and unexpected expenses. Xero provides tools to help you track your income and expenses, ensuring you always know where your money is going and how to keep your business thriving. This guide will show you how to manage cash flow effectively in Xero.

Step 1: Track Invoices and Payments

1. Create and Send Invoices in Xero:

   • Navigate to Business > Invoices and click “New Invoice.”

   • Fill in your client details, job description, and amounts.

   • Set payment terms (e.g., 7 or 14 days) to ensure timely payments.

2. Monitor Overdue Payments:

   • Go to Business > Invoices and check the overdue invoices tab.

   • Send payment reminders directly from Xero to clients.

Step 2: Record Bills and Expenses

1. Enter Your Bills:

   • Navigate to Business > Bills to Pay and click “New Bill.”

   • Add supplier details, amounts, and due dates to keep track of what you owe.

2. Attach Receipts and Documents:

   • Use Xero’s mobile app to snap a photo of receipts and link them to transactions.

Step 3: Use the Cash Flow Dashboard

1. Access the Dashboard:

   • From the Xero home screen, view the Cash Flow widget to see your current position.

2. Review Your Bank Balances:

   • Ensure all transactions are reconciled to get an accurate view of available funds.

3. Check Money In vs. Money Out:

   • Compare your incoming payments to outgoing expenses to identify cash flow gaps.

Step 4: Plan Ahead with Cash Flow Forecasts

1. Enable Short-Term Cash Flow Projection:

   • Go to Business > Short-Term Cash Flow and set a forecast period (e.g., 7, 30, or 90 days).

2. Analyze Trends:

   • Use the forecast to spot upcoming cash shortages or surpluses.

3. Adjust Spending:

   • Plan large purchases or supplier payments when you expect cash surpluses.

Step 5: Automate Your Processes

1. Set Up Payment Reminders:

   • Automate invoice reminders for overdue payments through Business > Invoices > Invoice Settings.

2. Automate Bill Payments:

   • Use direct debit or recurring payment features to avoid missed bills.

Pro Tips for Tradies:

• Keep an Eye on Overheads: Regularly review expenses like fuel, materials, and subcontractor costs to ensure profitability.

• Prioritize Debt Payments: Pay off high-interest debt quickly to improve cash flow.

• Maintain a Buffer: Aim to keep a few months’ worth of operating expenses in reserve.

Conclusion

Good cash flow management can mean the difference between a thriving trade business and a financial struggle. With Xero, you’ll have the tools to track income, control expenses, and forecast your financial future.

Need help managing your cash flow? Contact Contigo Accounting today for expert bookkeeping and advisory services.

Checklist: Managing Cash Flow in Xero for Tradies

• Log in to Xero and navigate to the Business > Invoices section to create and send invoices with clear payment terms.

• Monitor overdue payments under Business > Invoices and send automated reminders to clients directly from Xero.

• Enter bills and expenses in Business > Bills to Pay to track what you owe, including due dates.

• Use the Xero mobile app to upload and attach receipts to transactions for better record-keeping.

• Check your Cash Flow Dashboard on the Xero home screen to review money in vs. money out.

• Enable Short-Term Cash Flow Projection under Business > Short-Term Cash Flow to forecast financial trends.

• Review cash flow trends to identify potential gaps and plan for upcoming expenses or purchases.

• Automate invoice reminders and bill payments through Business > Invoice Settings and recurring payment features.

• Set aside a cash reserve to cover a few months of operating expenses for unexpected situations.

• Regularly review your financial position to make adjustments and stay on track.