Xero accounting software how to use

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Xero terms of use

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Xero is an online accounting software designed for small businesses. If you’re new to Xero, then this guide to getting started should help you quickly get up and running.

Here are 13 steps to get you started using Xero to get a better handle on your finances.

1.Watch the ‘Xero Dashboard’ video

The first step to learning how Xero works is to watch the ‘Xero Dashboard’ video, which can be found in the top left corner of your Xero dashboard. 

2. Set up your organisation details

If you have a limited company, ensure that you have a registration number and registered office address. This information needs to be displayed on any invoices you issue.

Go to Settings > Organisation Settings to input or update your business’s contact details, including:

  • Display name

  • Legal / Trading name

  • Email

  • Registration Number

  • Organisation Description

  • Physical address

  • Registered address

  • Organisation type

  • Phone and fax numbers

  • Logo

  • Website

3. Set up your financial settings

Go to Settings > Advanced settings > Financial Settings to enter your company details:

  • Financial year end: this will ensure you to have the right year-end for your reports

  • Sales Tax / VAT Details: VAT scheme (flat, cash or accrual rate), VAT number and VAT period

4. Add your company’s branding

Next, you can set up your invoices with terms of payment, contract, and logo. To set up various branding schemes, go to Settings > Invoice Settings

Nailing down your terms of payment can help you to improve your cash flow. Having shorter payment terms can help you to get paid earlier.

5. Set up your chart of accounts

If you are switching from another accounting software, then you can import your chart of accounts into Xero, or modify the default chart of accounts.

If you have an accountant, you can seek their help with this decision. However, if you are your own bookkeeper then we recommend using Xero’s default chart of accounts. You can add, customise, or delete these accounts to match the needs of your business.

To make changes to your accounts, go to Accounting > Chart of Accounts. For more information on customising your chart of accounts, click here.

6. Set up your bank account feed

The next step is to set up your bank account feeds, including credit card and PayPal accounts, if you have them. This video shows you how to do that:

7. Reconcile often

Xero makes bank reconciliation easier than ever. Just a few minutes a week spent approving pre-matched items ensures your data is up to date. As Xero is connected to your bank, transactions are pulled through automatically. Xero remembers the last time you categorised a transaction, so you can simply click ‘OK’ if you want it to go to the same category.

You should reconcile weekly, if not daily, to ensure that your accounts are as accurate as possible.

Regularly updated invoices give you a clearer picture of cash flow. With a clear picture of your cash comes the ability to make better business decisions and avoid falling behind on outstanding payments.

Another benefit of regular reconciliation is that you’ll be able to use Xero add-on apps much more easily, as your data will be up-to-date.

Watch this video to find out more about Xero bank reconciliation:

8. Set up payroll

Xero Payroll can help you to monitor your staff costs. This function allows you to keep payroll costs in one place rather than having to pull in information from a separate system.

The payroll overview is a comprehensive guide to take you through each step of the setup.

If you are transferring payroll from another system in the middle of the financial year – don’t forget to add the opening balances.

This can be found at Payroll > Payroll Overview

how to use xero

9. Add payment services

You also need to link to any active payment services to your Xero account. These may include services like PayPal, Stripe, or GoCardless. With a larger variety of payment options, it is easier for customers to pay you.

This help video shows you how to set up a payment service that will allow you to create a ‘Pay Now’ button on your invoices:

To do this, go to Settings > Invoice Settings > Payment Services

10. Set up payment reminders

Getting paid quickly is crucial to any business. Setting up payment reminders and organising your credit control systems can help you to get paid faster.

Go to Settings > Invoice Settings > Invoice Reminders

Only set up payment reminders when you get into the habit of reconciling receipts daily. Chasing payment from customers that have already paid can tarnish your reputation. You can come back to this step once daily reconciliation is part of your routine.

11. Add users

You can add users at Settings > Users. Add your accountant, bookkeeper, and other necessary stakeholders. This video can show you the roles that can be assigned to your users:

You can find more information on users here:

12. Learn basic reports

It’s important to learn how basic Xero reports work. Initially, when you’ve input some data, look at your Balance Sheet, Profit And Loss, Aged Receivables, and Aged Payables.

Go to Accounting > Reports to see the options available to you.

13. Connect apps

Using Xero’s wide range of apps and add ons is a great way to streamline repetitive processes and save yourself some time.

Xero offers apps with a wide range of functionalities from cash flow forecasting, to document management, and many more. The Xero app marketplace is the best way to explore your options.

Finally, if you work with one, ask your accountant to check your set up. They may need to add year-end conversion balances and can ensure that your year-to-date figures are as expected.

Free Download! The Ultimate Guide to Cash Flow Forecasting

Get our top tips on how to forecast your cash to make better decisions for your business.

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Float is one of the highest-rated Xero apps available on the marketplace. It is an award-winning cash flow forecasting tool that creates accurate and visual reports for you, and your business. Float pulls through the bills and invoices from your accounting software, using them to populate your forecast on a rolling-basis. Float’s integration with Xero means no more manual data entry, and an always up-to-date and accurate forecast.

To learn more about how to use Float sign up for a free trial today.

Harriet Stevenson

Conversion Marketing Manager at Float

For a business to run smoothly, its owners must be aware of its financial position at any given time. This can help the business managers to make sound financial decisions, which is key for business growth. The business managers should have access to transactions that detail how cash flows in and out of the business. The business managers also need to stay aware of how the business spends on different areas. Being aware of any pending bills from suppliers is also key for the smooth running of a business. 

This means that businesses should have a platform that can help the business managers to keep track of the business expenditure and bills. This will ensure that the business is accountable for any coin that is spent. The best approach to this is the use of accounting software like Xero Accounting Software. Xero Accounting Software can make it easier for business managers to monitor the financial transactions in an organization. In this article, we will be discussing Xero Accounting Software in detail. 

Table of Contents

Understanding Xero Accounting Software

Xero Accounting Software is a Cloud-based accounting platform designed for use by small and growing enterprises. It connects businesses with their trusted advisors and gives business owners instant visibility into their financial position. Since it is a web-based platform, its users can access it with their devices from any location provided they have an active internet connection. 

Xero Accounting Software comes with robust accounting features, allowing small businesses to view their cash flows, account details, and transactions from any location. Bank transactions are imported and coded automatically. It has an online bill payment feature that helps businesses to track their spending and know their bills due and maintain a good relationship with business vendors who supply critical business materials.

Xero Accounting Software also makes it easy to manage personal expenses with mobile review and the approval of every receipt. It can also be integrated with various data sources including Bill.com, ADP, and Vend. It comes with a 30-day free trial period to allow you to test and evaluate its features. After the expiry of the trial period, you must pay to continue using Xero. 

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Understanding How to use Xero Accounting Software

In this section, we will be showing you how to use Xero Accounting Software. First, let’s discuss more about the Xero Dashboard. 

1. Understanding The Xero Accounting Software Dashboard

The dashboard is the first page that you will see once you log into your Xero account. The dashboard has a lot of data that you can see at a glance as well as a number of shortcuts. 

Xero Accounting Software DashboardImage Source: Nuts Accounting

The top part of the dashboard shows your Bank Accounts, Balances for Important Accounts, and a chart that shows the Unpaid Customer Services. 

The “Bank Accounts” section shows the Reconciliation Status of bank accounts and the Statement Balance. The “Daily Bank balances” is shown in the form of a line chart. 

“Invoices owed to you” shows information about your outstanding customer invoices categorized by invoice status and displayed on a bar chart. You can hover the mouse over the bar chart and you will see more information about it. 

The “New Sales Invoice” link provides you with a shortcut to the “New Sales Invoice” page. 

The “Total Cash In and Out” shows the Cash Flow. It is also summarized in the form of a bar chart. Whenever you hover the mouse over the chart, you will see more information about balances. 

The “Bills you need to pay” gives you information about your outstanding supplier bills per bill status and categorized by date and visualized on a bar chart. 

The “New Bill” link is a shortcut to the “New Bill” page. 

2. Understanding How to Set Up Organization Details

If you run a limited company, it’s good to have a registration number as well as the registered office address. This information should be displayed on any invoices that you give out. 

To add the contact details of your organization, open the Organization Settings page here. You will be required to provide your business information such as:

  • Display name
  • Email
  • Legal / Trading name
  • Registration Number
  • Physical address
  • Organization Description
  • Registered address
  • Phone and fax numbers
  • Organization type
  • Logo
  • Website

3. Understanding How to Configure Financial Settings

You should visit the Financial Settings Page to add the financial details of your company. You will be prompted to enter the following information:

  • Financial year end- This will give you the right year-end for your products. 
  • Sales Tax/VAT Details- The VAT scheme (cash, flat, or accrual rate), VAT number, and the VAT period. 

4. Understanding How to Set Up Direct Bank Account Feed

A direct bank feed helps you to automatically import your banking activity into Xero Accounting Software. This means that your bank and Xero will be working together to send your financial data over a secure connection to Xero. This means that you will have direct feeds. 

To know whether your bank provides direct bank feeds, visit the partner (direct) bank feeds page on Xero and click your region. You will see the list of banks that Xero has direct feeds with. 

Image Source: Float App

Click your bank and see the account types that are supported. Fill the application form. 

Note that Xero Accounting Software only allows you to have one feed per bank account. It can take up to 10 days for them to set up the direct bank feed. Note that for this to be successful, your Xero Accounting Software account MUST be set up correctly. 

5. Understanding How to Set Up Payroll

Xero Accounting Software Payroll can make it easy for you to monitor your staff costs by keeping your payroll costs in one place. You can get more information on the various steps needed to set up Xero Accounting Software Payroll on the following page. 

If you need to transfer the payroll from another system in the middle of a financial year, ensure that you add the opening balances. 

6. Understanding How to Add Payment Services

You can create a link between your Xero Accounting Software account and any active payment services. Examples of these payment services include PayPal, GoCardless, and Stripe. By providing a wide variety of payment options, it will be easy for you to receive payments from your customers. 

To set up payment services, navigate through Settings -> Invoice Settings -> Payment Services. You can then add the payment service of choice by clicking the “Add Payment Service” button. 

Image Source: Float App

7. Understanding How to Add Users

You can add users to your Xero Accounting Software account and assign them different roles like Accountant, Bookkeeper, etc. 

You can do this by visiting the “Users” page located under “Settings”. 

Image Source: Float App

Next, you can click the “Invite a user” button and fill in the user’s details. 

Image Source: Float App

Once you send the invitation, they will receive it in their email.

Understanding the Limitations of Xero Accounting Software

The following are the limitations of using Xero Accounting Software:

  • It takes some time to learn how to use Xero Accounting Software. 
  • It limits the number of transactions that you can complete in a month to 2000. 
  • Users face challenges when they need to transfer data between Xero Accounting Software and other platforms. 
  • It only allows a maximum of 10,000 contact lists. 

Conclusion

In this article, you’ve learned more about Xero Accounting Software and how to set up and use it.

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Tell us about your experience with Xero Accounting Software. Share your thoughts in the comments section below!

Written by Jane