Are you setting up Xero yourself? Follow these simple 8 steps to xero set up and start using xero immediately. Lets start with first part of xero training.
Xero Training – Series 1 – How to do Xero set up first time
First thing first, I am assuming that you have already subscribed to xero. If not, you can get free Xero trial here. Once you purchase xero, first step is xero set up.
Xero is very easy in use and set up is easier compared to other popular cloud accounting softwares.
There are two ways for xero set up.
- If you are already using other accounting software, read guide here – conversion to xero.
- If you have not use any software before, you can set up Xero with following step.
Step 1: Set up organisation in xero:
- Open Your organisation.
- Go to Setting < General setting < Organisation setting.
- Organisation setting is very easy. You need to enter following :
- Line of business ( Business nature).
- Legal structure of organisation ( Proprietorship, company, llc etc)
- Business registration number
- Contact details
That’s it. It is easy, isn’t it?
Step 2: Financial settings:
Financial setting is very important while you are setting the Xero first time.
For it, go to general settings < financial settings.
- If you have not set up currency before, go to general settings < Features < Currency. Here, you can add currency as per your business needs. You should have … plan of xero for multiple currency use.
- Choose your year end date as per tax laws of your country.
- Enter sales tax number, tax id number, tax period and accounting method in 3rd step.
- You can set up tax defaults. By setting it up, you can choose whether sales will be inclusive, exclusive or without tax.
- Xero gives you lock date features so that no data can be changed before lock dates. Lock dates can be set up for users having Adviser role and users other than non adviser role. This is very important feature when your tax consultant or CPA or CA is working on tax matters.
- Last step is choose and select time zone.
- Take a look once and hit save to do further settings.
Step 3: Invoice settings:
Use following steps to do invoice settings in Xero:
- Go to General settings < Features < Invoice settings.
- First option, you can see various options such as branding of invoices, general settings, payment method, invoice reminders.
- By using branding option, you can create standard or custom look for your invoice.
- I recommend use standard theme and do necessary changes as per your business needs. Custom docs themes are useful when you have good experience of Microsoft word.
- You can customize standard theme by clicking options < Edit ( On right side).
- Here, you can change page size, margin, enter contact details, enter terms and conditions of your business and choose payment services.Once you are done, hit save.
- You can set up payment services in Xero by hitting payment services < Add payment service. All you need to do is enter select payment service and enter necessary details required by your payment service providers. You can manage theme and add different payment service for different invoice themes.
- Default settings option helps you to set up due dates for invoices and bills, numbering and prefix, option to show total outstanding amount while customer is seeing the bill.
- To set up invoice reminders, select the option and set up reminders for overdue as per your business needs. For small businesses, when cash is king, this feature is recommended and must be used.
You can learn best way to use Xero invoices by my other post.-Creating and sending invoices through xero.
Step 4: Chart of Account setting in Xero:
There are three ways to set up chart of accounts in xero:
Use xero’s Default chart of account:
Xero gives you default chart of account. There are four categories in chart of account:
Components of chart of accounts:
There are 5 components in account at chart of account.
- Name and description
- Tax rate
- Year to Date balance.
Create New account in xero:
- Go to settings < General settings < Organisation < Chart of accounts.
- Click add account.
- Select account type
- Unique number of account
- Name of account
- Short description of account
- Select applicable tax rate
- Tick on Show on dashboard wishlist you want to see this account on dashboard.
- Tick on Show in expense claims if you want this account used when claiming expense by employees.
- Tick – enable payments to this account if you want payments received to this account. Generally contra account and cash are such account.
- Once you are satisfied, click save and yes, you have created new account in xero successfully. 🙂
- You can edit this account anytime by clicking on account name.
- You can add bank account with similar method if you want to enter bank data manually.
How to enter bank account in xero and setup automatic bank feed:
- Go to chart of account < Add bank account.
- First, write your bank account name at find your bank screen. Your bank name will be displayed. Select your bank with correct region.
- Enter Account name you want to displayed in xero, account code(Unique code for chart of account purpose) and account number.
- Next step is set up automatic bank feed. For it, you need to enter your net banking login id and password and agree with terms and conditions. Click next and your bank feed importation will be started. You get confirmation notification from Xero once your bank data will be imported.
Step 5- Import a chart of account:
If you want to import your own chart of account, it is also possible with Xero. Follow steps below to import chart of accounts in Xero.
- Download example file ( Xero chart of accounts template) given on box at right side.
- Open the file. You can see sample accounts here. You can use these accounts and enter balance or you can delete all the accounts and prepare new chart of accounts by entering account one by one in same format. There are four mandatory fields in chart of accounts template : Code, name, type and tax code. Get advise of your accountant before preparing chart of accounts.
- Save the file in csv format.
- Go to Settings < General settings < Reports < Chart of accounts.Click import button. Select xero for import system. enter conversion date if you are importing balances, browse the file you prepared in csv format , select the file and click import.
- Once you imported the file, Xero gives you option to review chart of accounts. Review the chart of accounts and confirm.
Step 6- Set up account balances:
If you have not entered your account balances before, you can add it later. Follow the steps below to set up account balances in Xero:
- Conversion balances should be as on date of conversion. Date of conversion may be first date of current tax filling period or from the past date if you want to do back date accounting. Ex. Mr. Joe has business in Australia and he has purchased Xero on 21 August, 2016. In this case, the suitable date of conversion is 1st July, 2016 – First date of current tax period for Joe as per Australian accounting.
- If you are using any other accounting system before and now migrating to Xero, enter the date when you have balanced accounts and stopped using past system.
- Once you choose conversion date, you need to enter closing balance at last date of previous year. ( Balances at 1 day before conversion date- For Joe, it is 30 June, 2016).You can get this balance from trial balance.
- Go to settings < organisation < Conversion balances.
- Now, enter conversion balances one by one. This is the game of debits and credits. Enter debit balances on debit side and credit balances on credit side. If there is negative balance, enter it on opposite side in Xero.
- Please remember that the sum of debits and sum of credits should be equal. If it does not end as equal, you can do adjustments later.
- There are some special accounts which need more attention and care while entering conversion balances. For bank account, you are required to enter balance as per your bank statement. Receivable should be total of all outstanding invoices. Payable should be total of all outstanding bills.
The setting of xero is easy but every business is different so we recommend consult your accountant while setting Xero. You can get our accounting service and save 50% for first 10 hours. Contact here to start.
Step 7-Set up tax rate in xero:
Tax compliance is important for business. Now, you need to set up tax rate ( Sales tax rate) if you are covered under sales tax / GST. Follow steps below to set up tax rate in Xero:
- Xero gives you tax rate and name of tax as per your country’s tax requirement. Ex. South African companies show vat on invoices and New Zealand businesses show GST on invoices. It is different as per country’s tax laws. Do not worry Xero will handle this for you.
- Go to Settings < General settings < Tax rates.
- Here, you can see default tax rates. You can edit them and you can add new tax rate.
- To add new tax rate in Xero, click on Add New Tax Rate.
- Name the tax rate
- Add component of taxes. Ex. HST has two component – GST and PST. Any one of the component can be compound rate.Compound rate will be applied to taxed subtotal. Please note that it is not mandatory to use compound rate. You can set component without selecting compound.
- You can add component as per your tax laws. Maximum number of components which can be added are six.
- Please note that Xero gives you option to choose tax rate while creating bills or invoices via column tax rate.
- Invoices and credit notes in Xero will display tax rate with components.
- You can edit tax rate any time in Xero. Click on the name of the tax rate. Here, you can edit tax rate name, component name and rate or delete component.
- If you want to delete tax rate, tick at tax rate and click delete. Please note that you can not edit or delete few tax rates which have lock before their name.
- Xero calculates tax automatically and provides you helpful tax reports for GST/ Sales tax / Vat filling. You can see tax amount with regards to different tax rate and different components in reporting section.
Step 8- Set up users in xero:
Xero is cloud accounting system so different users can access Xero from different places same time. However, you can enhance or limit access of users as per your business requirements. Here is the sample user list in Xero:
- Owner / Partners of business / Director of companies / CFO of company.
- CPA and his staff
- Limited access to employee of company as per need.
- Xero support ( Access for limited time to solve any query).
You can set up users in Xero by taking following steps:
- Go to settings < General settings < Users.
- Here, you can see list of users with role, last login details with number of login in current week.
- You can add new users by clicking on invite users.
- Enter basic details with Email address. You can select user role as per need of user.
- There are four user role in xero: Read only user can only see invoices and reports, user with invoice can prepare and approve invoices, you can give access to only sales or only purchases, standard user can do bank reconciliation ( With cash coding or without cash coding), see all reports or no reports, create invoices, change settings. This role is suitable for bookkeeper and accountant. Adviser has higher permission with publishing reports and lock dates. You can also give any access to only payroll.
- Click continue and send invite with message.
- The user needs to accept the invitation to start working under Xero.
- You can edit access of users anytime. For it, go to users and click on the user’s name. Here, you can see here user role. You can change role and edit the Xero access for specific user.
- Please note that there is no limit to add users in Xero. Xero does not charge any extra money to add users. So add or remove user as per your business needs. Important thing is that you should not share login details to avoid data loss, fraud and for audit trails.
- You can delete user anytime if he stops working with your organisation. For it, click on name of user and click delete.
I hope this post helps you in xero set up. If you have any question, feel free to ask in comment box.