Is Xero the right software for my charity?
This blog is inspired by a chat with a charity FD who was assessing whether Xero would be the right software for her charity. I put a post on Linkedin asking for other feedback and as a result this is a non-exhaustive list of some of the features to help you to decide. If you want to talk through the options with our team, feel free to get in touch.
How many dimensions or tags do you need?
Xero has account codes plus two tracking categories available. So if you want to report the account codes (stationery expense, donation income etc) divided between Department and Funder then Xero will work.
If you need three tracking categories for Department, Funder and Region then Xero may not be the best choice.
You can read a bit more about using Tracking for Restricted Funding here.
Reporting to funders
This comes back to the first point about how you use the Tracking Categories. If you use one of them to track “Funder” then this can work well for charity needs, allowing you to track and report on Restricted funds. It’s something we have in place for most of our charity clients and it’s useful throughout the year, not just at year end.
How easy is it to get reports out?
Honestly, it’s easy. You can get basic profit and Loss reports, balance sheet reports, aged debtors and creditors and others really easily. With a few clicks you can customise the reports and change the title “Profit and loss” to “SOFA” so that it sounds a bit more charity friendly. If it’s helpful, you can group account codes, for example, for staff costs (salaries, pension, national insurance) to display as one line called “employment costs”. And you can filter reports by your tracking categories.
Can the budget be put in and reports given against budget?
Yes.
If you want to put report against individual department budgets you’ll need to load in individual department budgets. The same applies for regional or funder budgets or any other division that you want to report against. If you want to report against a budget you need to load it in. There’s a straightforward Excel template you can use to create the budget and import it.
Can I see month by month actuals against forecast, with the remainder of the year forecast added on?
There is a default report for the current financial year showing month by month actuals year-to-date and month by month budget year-to-go. Otherwise you can create a bespoke report in Xero or consider bolting on a reporting / forecasting tool such as Spotlight or Fathom (or others).
Can I easily allocate staff time across different departments and projects?
This one depends on your definition of easy. We do this for a few clients and have an Excel template set up that takes the payroll file and splits it based on fixed amounts or %s as appropriate and then pops out a journal in Excel that we can upload into Xero. We find it easy once it’s set up so if you are reasonably comfy with Excel then yes you can do this.
Do you need a fixed assets register?
If you do, then Xero could tick your boxes. You can set up different asset types with different default depreciation rates. The defaults can be overridden for individual assets if needed.
When you add a bill which is coded to an asset code, Xero automatically creates a draft asset in the register for you with a nice link back to the original bill.
Integrations with other apps
This depends on your tastes.
Xero will integrate with loads of other apps so you can build a system that does what you need it to.
You can integrate CRMs, document management systems, PO apps, expenses apps, reporting tools, direct debit collection apps, payment apps, all sorts.
I like that Xero can be customised and scaled to suit each organisation. Some people don’t like it because it means having multiple companies involved and they prefer to go to one supplier for the whole package, so this depends on your tastes.
Complex approvals
If you have multi layered approvals for purchase orders or supplier bills, then Xero itself won’t take care of this. In Xero user roles are quite simple and the options to restrict access are limited, so if someone can approve bills then they can approve all bills, you can’t restrict it to a certain value or department.
But of course, there are apps that integrate and that will give you the bolted on power to create more complex workflows. Approval Max is one, you can build approval workflows based on coding and/ or value. So, if you are open to integrating other apps then Xero would still work for you.
Does it align with the bank account?
The bank feeds are a strength of Xero. Most major banks have a feed into Xero. For charities, at the time of writing, CAF bank and Unity Trust don’t. You can upload an Excel bank statement and Xero will ‘remember’ the format so at least you don’t have to map it every time you upload.
VAT
Charities often have to restrict VAT recovery. VAT is MTD compliant, and you can upload the manually calculated irrecoverable VAT as an adjustment from a spreadsheet calculation.
Hopefully that answers some of your questions. If you have others, please feel free to get in touch and we’d be happy to talk through the options with you.
0330 1330 774