Comparative Analysis of Xero and Myob Accounting Software

The provided content discusses the features of Myob and Xero, two accounting software packages. Both software provide facilities for customer relationship management, budgeting and forecasting, payroll management, and inventory control. Xero has an edge over Myob in invoicing and tracking purchase orders. The bakery business is recommended to adopt Xero software as it enables professional invoices to be made quickly, accurately, and with customized features. This can help the bakery maintain competitive prices by keeping costs under control.

ACCOUNTING
INFORMATION SYSTEM

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Executive Summary
Manual accounting takes time. There are more chances of errors being committed as
calculations have to be made manually. With the help of computerized accounting, large
amount of accounting entries can be made with speed and accuracy. An analysis has been
done and report has been made regarding how a bakery business is considering moving from
manual to computerized accounting. For the business, accounting software like Myob and
Zero have been considered and it has been suggested that the business adopt Xero. This
accounting software can make profit and loss statement and balance sheet. Bank
reconciliation statement can be made with the help of the software. Budgeting and forecasting
can also be done along with order tracking and expense claims. Due to these multiple features
the software Xero has been recommended in the report.

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Table of Contents
Introduction................................................................................................................................4
1 a) Business activities of a bakery............................................................................................4
2 b) Processes which are indispensable for bakery....................................................................5
2c) Outcomes required from processes.....................................................................................6
3a) Software features that should be considered........................................................................7
4a) Visit the websites accounting software package vendors....................................................9
4b) Category of software suitable for bakery.............................................................................9
5 a) Comparison of features of Myob and Xero.........................................................................9
5c) Most suitable software package for bakery........................................................................10
Conclusion................................................................................................................................12
References................................................................................................................................13
Table of Figures:
Figure 1 : Processes essential for a bakery.................................................................................6
Figure 2 : Accounting process....................................................................................................8
Figure 3 : Features of Xero......................................................................................................11

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Introduction
B. Bakery is engaged in selling bread and confectionary items. The business has so far relied
on manual accounting. It is considering buying an accounting software. The following report
discusses what are the accounting software choices available to the business. It is advised that
the business adopts accounting software Xero. This would also result in better inventory
control and costs would be brought down.

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1 a) Business activities of a bakery
A bakery business involves making and selling items like cakes, donuts, muffins, desserts,
biscuits and breads along with other confectionary items like toffees and chocolates (Dawn,
2017). A bakery business can be started from home or a rented place. A kitchen is needed to
make bakery products. The kitchen should contain an oven, mixers and grinders, central
table, pans and other utensils. There is a need for a Chef to make the bakery products. The
ingredients like flour, dry fruits, eggs, milk and creams along with chocolates are needed.
At the time of starting a bakery it has to be decided how much would be the capital of the
business, what are the products that would be sold, who would be the customers of the
business and how many people would be employed in the bakery (Nerdwallet, 2017).
There are different types of bakery businesses. One is the counter service where the
customers come to the bakery and collect bakery products from the counter (Bplans, 2017).
They do not stay in the bakery premises for long. In this case the bakery would not need
much space. Another type of bakery is where the customers can sit on the seats which are
there in the bakery. In this case the bakery has to invest more in furniture. More space is
needed. Another type of bakery is online where orders are booked on the internet and
delivery is made at the residence of the customers by the baker (Bplans, 2017). This helps to
save the capital costs for the bakery owners.
The location of the bakery is very important. It should be located where people live. The
surroundings of the bakery should be clean and spacious. If well to do people live in the area,
it would be easier to market the products. The bakery has to decide what sort of products to
make. There is need for some market research . The bakery should be able to capitalize on the
festival season like Christmas and New Year when the sales should be more. The bakery can
supply cakes on weddings and birthdays of customers. The baker need to have good
marketing skills in order to beat the competition as there would be more bakers in the area
(Eliott, Thiele and Waller, 2014).
The baker should know a number of recipes and should be able to come up with new recipes
from time to time (Chron, 2017). The bakery owner should know how to source raw
materials. Further accounting has to be done regarding the purchases and sales along with
different expenses.

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It would be needed to register the business of bakery. The kind of business entity to be
formed is to be decided. The business formed could be sole proprietorship, partnership or a
company (Chron, 2017).
2 b) Processes which are indispensable for bakery
A bakery cannot be run without people. The bakery would have to recruit people with diverse
qualifications (Nel, 2012). A bakery would need a Chef who would make different bakery
products. Chef is a person with specialized knowledge. The number of good Chefs is limited.
The bakery would have to give an advertisement for hiring a Chef or the owner of the bakery
would have certain contacts with people who would recommend a Chef or a baker. The
bakery would enquire where the candidate has worked before and what kind of products like
cakes, bread and biscuits the individual has been making in the past. Some assistants to the
baker would also need to be recruited in certain cases.
Similarly sales staff who would be working at the counter would also need to be recruited
(Eliott, Thiele and Waller, 2014). Such a person would have to be honest as the individual
would be taking payments from the customers. The person would have to be trained
regarding how to complete the billing process. There would be need for certain internal
controls in this regard. An accountant would also need to be hired a proper record of all sales
and expenses has to be made.
Another activity which the bakery cannot do without is procurement of raw materials which
are needed for making bakery products (Dawn, 2017). Things could be bought from retail
outlets or directly from farmers or also online.
Proper inventory management is needed. The production at the bakery should not stop
because there are no sufficient raw materials in stock. Only quality raw materials should be
procured. If the raw materials are not good, the end products would not be good and this
would harm the reputation of the bakery. The sales would then go down. A large bakery
would have a specialized purchase officer who would look after the procurement of materials.

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Figure 1 : Processes essential for a bakery
The above diagram shows the processes that are essential for a bakery.
2c) Outcomes required from processes
If a bakery follows a proper recruitment process, it would be able to hire a good Chef which
can do wonders for a bakery (Nel, 2012). Such an individual would know the art of
developing new recipes. Customers get bored with eating same food. The Chef would know
the art of baking. The individual would know how to operate the oven well, the time that
should be taken to keep the bread in the oven. The cakes and biscuits would look good and
smell well. They would have more shelf life. The Chef would follow quality control. New
shapes would be given to cakes and pastries. Customers would be attracted by looking at the
cakes in the shelf. In the end it is the product that matters especially if the customer takes it
away to its home.
The bakery would do well if the sales staff is good and knows about the positives of different
products of the bakery. If the sales people have good communication skills, they would know
more about the art of customer relationship management (Buttle and Maklan, 2015). There
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would be repeat customers of the bakery who would be attracted by the good service of the
sales staff who would promptly serve their orders in a good mood without getting irritated by
the work load due to more customers. If the bakery is small and growing there is need for
good service. If proper cleaning of bakery is done regularly, good people would come to it.
If there is proper accounting, no money would be wasted. The management would be able to
know what are the expenses and take steps to control them. There would be good
management information system (Gray, 2014). Management would know the current stock of
various items in the inventory and take steps to replenish depleting stocks. If the raw
materials procured are of good quality, the end products would also taste and smell good.
3a) Software features that should be considered
Any business would like to know the result of the business operations at the end of the
financial year. The result might be profit or loss. Nowadays accounting software have
become very advanced. The bakery business would like the accounting software to make the
profit and loss statement at the end of the year. This statement should show opening stock of
raw materials, purchases, expenses like rent, electricity, transport, telephone, wages and
salaries. It should show closing stock, sales and other items like profit or loss from sale of
any fixed asset (Mattison et al., 2015).
The accounting software in present times show profit and loss statements instantly as voucher
entries are made daily. In manual accounting journal entries are made. They are then posted
in ledger accounts. These ledger accounts are balanced and these balances are then used to
make trial balance. From this trial balance final accounts profit and loss account and balance
sheet are made (Curtis and Averis, 2014). In the case of accounting software voucher entries
are to be made and ledger accounts are automatically made and trial balance is also made
instantly automatically. The bakery would like the accounting software to provide this
facility. The accounting process is shown below:
Journal
Entries
Ledger
Accounts
Trial
Balance

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Figure 2 : Accounting process
The bakery has many big buyers. It would like to keep track of the amount that these buyers
owe to the bakery at any point of time. This helps in customer relationship management
(Buttle and Maklan, 2015). The accounting software should provide this facility. In this way
all debtors would be known. The bakery would thus make efforts to collect payments from
them. This would mean better cash position for the company as it would have more funds.
These funds could be used to buy more raw materials and pay for other expenses incurred.
Inventory is an important aspect for the bakery. It procures raw materials for production.
There should be enough raw materials in the stores to support production. The accounting
software should create separate accounts for each material in the inventory. The balance of a
material if it falls below a certain minimum amount the bakery can order the same keeping
the lead time in mind. As an item of inventory is being used up, the entry is made in the
software by the accountant and instant balance of the account should be shown by the
software.
The accounting software must make accurate calculations with speed. The accounting
software should be easy to operate and should not be complicated. The accounting software
should calculate the balance sheet automatically to show the financial position of the bakery
at any time. All the current and fixed assets and liabilities should be shown in the balance
sheet (Deegan, 2012). The accounting software should also make cash flow statement and do
ratio analysis also calculating various ratios. The cash flow statement would show inflow and
outflow of cash. The bakery would be able to keep track of the movement of cash which is
the most important element of the business. A firm which can control cash would not suffer
misappropriation of cash. It would be able to make use of the available cash in an efficient
manner.
4a) Visit the websites accounting software package vendors
In this activity, I visited the websites of different vendors of accounting software packages of
Australia like SAP, MYOB and Xerox.
Profit And Loss
Account
Balance
Sheet

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4b) Category of software suitable for bakery
Bakery should adopt medium end accounting software. It has sufficient amount of sales. Low
end software should not be adopted as they do not have enough features although they are
simple to understand. In this case spreadsheets might have to be added to the low end
software to make it useful. High end software are adopted by big companies which have
several layers of management and large number of employees (Fitrix, 2017). In this case
accounting work is complex and more advanced and specialized software is required. More
controls are needed by the company.
The bakery is comparatively smaller in size than a big firm. If too complex software is taken,
the accountant and employees of the company would get confused and daunted. Higher end
software has features like multicurrency transactions can be recorded. Accounting data from
multiple locations is consolidated. Such features are not of much use to Bakery at present so
there is no need to buy expensive software which is not completely used. It is better to opt for
medium end which is sophisticated to a certain degree.
5 a) Comparison of features of Myob and Xero
The users of accounting software can do lot of things with the accounting software Myob and
Xero. The Myob software can do lot of things like prepare general ledger. This would contain
different accounts relating to expenses, income, assets and liabilities. The personal accounts
of customers of the company are also calculated. In Myob bank reconciliation statement is
also automatically made. This statement shows the reasons why there is a difference in the
cash balance as per the cash book of the company and the bank statement. There was a time
when this statement was made manually by the accountants of companies but now this
statement is calculated by the accounting software as few entries are made in the accounting
software. This facility is also there in Xero.
Myob helps the companies in creating invoices of customers. Different details of the
customers are fed into the computer in the given proforma or design. The amount owed by
the customer is automatically calculated. If any particular invoice is needed from the past, it
can be obtained after a few clicks. The records of customer invoices has been already made in
the computer. They can be referred to any time. This helps in customer relationship
management. Xero provides facility for customized invoices that can be made by the
company. The other option for the company is to add its logo to the design made by Xero

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(Etaxlocal, 2017). This helps the company to create an identity among the customers through
invoices.
Myob provides facility for inventory control. The balance of any material in the inventory
can be found instantly. Both the quantity and the value of a material in the inventory are
shown instantly.
Myob provides the facility for budgeting and forecasting in the software. Production budgets
can be made where cost of production is estimated. The material, labour and overheads
estimates are put in the computer and projections for the future are made by the software.
Balance sheet and profit and loss statement are made by both Myob and Xero as accounting
data is fed into the computer (GetApp, 2017). Myob also provides for sales tax management.
When invoices are made sales tax is also computed and included. The total amount of sales
tax is also shown by the software. Xero also helps in payroll accounting. The amount of
salary that the company has to pay to each employee is calculated by the computer. The data
regarding hundreds of workers is kept in the software. The amount owing to any worker can
be instantly found with the use of the software.
5c) Most suitable software package for bakery
The bakery business should adopt Xero software which enables professional invoices to be
made. In the formation of invoices the software helps avoid repetitive data entry with
different tools in the software. Invoices are created quickly with this software (Xero, 2017).
This means more work gets done in less time. As less data is to be fed while making invoices,
there are less chances of an error taking place. Xero also provides the facility of customized
invoices. The software provides the facility to convert purchase orders from customers to
invoices with speed. The bakery business has difficulty in selling products at competitive
prices. If it can keep the costs under control, it can charge better price.

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Figure 3 : Features of Xero
Xero software provides simple inventory tracking that is good for single location retailers and
wholesalers. The business can keep track of various items in the stock with the help of the
software. The firm can calculate the profit margins on the products moving in and out of
inventory with the help of the software conveniently (Horngren, 2013). The business can
know which are the items moving out of the inventory with speed and what the company is
earning on these items. The items which are moving fast need to be replenished with speed
and orders are to be placed with the suppliers. The company can make purchase orders in
time with the help of the software.
The software also allows the purchase orders to be tracked, that is, what are the orders that
have been placed with the suppliers, the cost at which they have been made and when the
delivery is expected (Xero, 2017). All this information is represented in an organized way in
the software. There are other facilities in the software which can quickly import large
numbers of inventory items from a spreadsheet. In this way work of different people can be
integrated with convenience.
Another feature of the software is that one can attach files and documents to accounting
transactions so that related information is stored in one place for reference. For example in
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the case of record of purchases, the delivery note and bills from suppliers can be attached.
This acts as an internal control system. Payment would be made for only those purchase
orders for which delivery has been made. Apart from this the payroll management can be
done in a better way with this software than Myob. Similarly expense claims are also better
accounted for with this software.
Conclusion
Any company which has been doing manual accounting would think hard before buying an
accounting software. It is not just the expenses involved in adopting such software, but the
impact on business operations that is important. The accounting software Myob and Xero,
both are capable of organizing the accounting system and result in speedier accounting
process. These software are also very accurate. Both these software have common features
and perform almost similar tasks. But Xero has an edge over Myob especially in invoicing
and tracking purchase orders.

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References
Atrill, P., Mclaney, E. And Harvey, D. (2014) Accounting: an introduction. Australia:
Pearson.
Bplans (2017) How to start a bakery: the ultimate guide for bakers. Available at:
http://articles.bplans.com/the-bakers-guide-to-opening-a-successful-bakery/ (Accessed: 8
September 2017).
Buttle, F. and Maklan, S. (2015) Customer relationship management: concepts and
technologies. Australia: Taylor & Francis Ltd.
Chron (2017) How to open a bakery : step by step instructions. Available at:
http://smallbusiness.chron.com/open-bakery-stepbystep-instructions-11543.html (Accessed: 8
September 2017).
Curtis, V. And Averis, L. (2014) Bookkeeping for dummies. Australia: Wiley.
Dawn (2017) Baking ingredients & bakery products. Available at:
https://www.dawnfoods.com/products (Accessed: 8 September 2017).
Deegan, C. (2012) Australian financial accounting. 7th edn. Australia: McGraw Hill
Australia.
Eliott, G., Thiele, S. and Waller, D. (2014) Marketing. 3rd edn. Australia : Wiley.
Etaxlocal (2017) Xero Vs Myob. Available at: https://www.etaxlocal.com.au/blog/xero-vs-
myob/ (Accessed: 9 September 2017).
Fitrix (2017) Specialized ERP software geared towards your small or medium sized
electronics manufacturing business. Available at: http://www.fitrix.com/specialized-erp-
software-geared-towards-your-small-or-medium-sized-electronics-manufacturing-business/
(Accessed: 11 September 2017).
GetApp (2017) Xero Vs Myob comparison chart. Available at :
https://www.getapp.com/finance-accounting-software/a/xero/compare/myob/ (Accessed: 9
September 2017).
Gray, H., Issa, T., Pye, G., Troshani, I., Rainer, R., Prince, B. And Watson, H. (2014)
Management information systems. Australia: John Wiley & Sons Australia Ltd.

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Horngren, C. (2013) Cost accounting: a managerial emphasis. Australia: Pearson Education
Australia.
Mattison, B., Matsumura, E., Nobles, T., Best, P., Fraser, D., Tan, R. and Willet, R. (2015)
Horngren’s financial accounting. 8th edn. Australia: Pearson Australia.
Nel, P. (2012) Human resource management : in Australia and New Zealand. Australia:
Victoria Oxford Press.
Nerdwallet (2017) 6 financial tips for starting a successful bakery. Available at:
https://www.nerdwallet.com/blog/small-business/6-financial-tips-starting-successful-bakery/
(Accessed: 8 September 2017).
Xero (2017) Create purchase orders. Available at: https://www.xero.com/ (Accessed: 9
September 2017).
Xero (2017) Easy invoicing. Available at: https://www.xero.com/ (Accessed: 9 September
2017).