Xero For Dummies

Heather Smith FCA, FCCA, FICB, is obsessed with how effective automation and integration can unlock and produce timely, clean data, to generate information for fast, informed analysis and decision making. She sits at the intersection of accounting, education and content creation; running a virtual management accounting practice, producing the Accounting Apps newsletter, and hosting the Cloud Stories podcast. Connect with HeatherSmithAU on your favourite platforms.

Introduction 1

Part 1: Getting Started with Xero 7

Chapter 1: Getting to Know Xero 9

Chapter 2: Getting Organised: Setting Up Xero from Scratch 25

Chapter 3: Converting to Xero from Another System 63

Chapter 4: Fine-tuning Your Set-Up 91

Part 2: Daily Activities 115

Chapter 5: Managing Your Contacts 117

Chapter 6: Managing Your Sales 137

Chapter 7: Managing Your Payables 183

Chapter 8: Reconciling Your Bank Accounts 221

Part 3: Making the Routine, Routine 257

Chapter 9: Generating Reports 259

Chapter 10: Mastering Your Weekly and Monthly Tasks 279

Chapter 11: End of Financial Year Reporting 315

Part 4: Getting the Most Out of Xero 331

Chapter 12: Monitoring Your Business 333

Chapter 13: Managing Your Inventory Items 379

Chapter 14: Working with Fixed Assets 393

Chapter 15: Working with Multi-Currency Transactions 409

Chapter 16: Exploring the Xero Marketplace 423

Part 5: The Part of Tens 439

Chapter 17: Ten (Plus One!) Tips for Long-Term Success with Xero 441

Chapter 18: Ten Common Mistakes Made in Xero and How to Avoid Them 447

Index 453

Introduction 1

About This Book 2

Foolish Assumptions 3

Icons Used in This Book 4

Where to Go from Here 4

Part 1: Getting Started with Xero 7

Chapter 1: Getting to Know Xero 9

Understanding the Advantages of Xero 10

Exploring Xero’s Different Editions 13

Homepage: Checking Out the Dashboard 16

Understanding Your Team’s Needs 17

Integrating Xero into Your Strategic Planning 21

Generating accurate, complete and timely data entry 21

Introducing Management Reporting and the analysis capabilities of Xero 22

Taking Advantage of Support Options 22

Using Xero in a Training Environment 23

Chapter 2: Getting Organised: Setting Up Xerofrom Scratch 25

Preparing for Set-Up 26

Checking your browser and system requirements 26

Collecting your business data 28

Signing Up for Xero 29

Getting started 30

Organisation Settings 34

Financial Settings 36

Understanding Bookkeeping Basics 38

Working out how account types affect your reports 39

Creating a chart of accounts that works for you 42

Developing your own chart of accounts 43

Setting Up Your Chart of Accounts 45

Using Xero’s default Chart of Accounts 45

Customising your chart of accounts 46

Putting Your Accounts into Practice 50

Checking your conversion balances 50

Adding comparative balances 52

Entering historical invoices, bills and credit notes 54

Adding Ways to Get Paid 55

Setting up bank accounts 55

Including credit cards 57

Online payment options 57

Tax Rates 58

Chapter 3: Converting to Xero from Another System 63

Preparing to Import Data from a Non-Accounting Program 64

Converting paper-based records 64

Working with spreadsheets 65

Getting Ready to Convert from an Accounting Program 65

Getting ready to convert 67

Converting exported CSV files into Excel 70

Preparing data for import 73

Mapping tax rates 75

Importing Data into Xero 75

Chart of accounts 76

Contacts 78

Inventory items 79

Sales 81

Purchases 82

Bank transactions 84

Manual journals 86

Fixed assets 87

Unpresented payments or uncleared funds 88

Turning Off Your Old System 89

Accessing historical data 89

Moving to the new system 89

Confirming the switchover date 90

Chapter 4: Fine-tuning Your Set-Up 91

Tools of the Trade: Understanding the Dashboard 92

Xero balance versus bank balance 93

Total Cash In and Out 94

Account Watchlist 94

Invoices Owed to You 95

Bills You Need to Pay 96

Dealing with expense claims 96

Setting Up Users 96

Understanding user access levels 96

Inviting other users to access Xero 98

Taking Advantage of Live Bank Feeds 102

Activating live bank feeds 102

Organising bank accounts on your dashboard 105

Managing bank feeds 106

Manually Importing Statements 107

Bank Rules 107

Setting up bank rules 108

Managing bank rules 111

Using File Storage and the Xero Inbox 112

Part 2: Daily Activities 115

Chapter 5: Managing Your Contacts 117

Setting Up Customers 118

Setting Up Suppliers 126

Connecting Your Contacts to Workspace or Office 365 126

Sync Xero contacts with Google contacts and Microsoft Outlook 126

Connecting your email account to your contacts 127

Tweaking Your Contacts after Set-Up 128

Finding your contacts 128

Managing your contacts 129

Grouping your contacts 130

Merging your contacts 130

Unpicking accidentally merged contacts 131

Archiving your outdated contacts 132

Setting Up Employees 132

Utilising Smart Lists CRM Functionality 134

Chapter 6: Managing Your Sales 137

Navigating the Sales Dashboard 138

Money Coming In 141

Customers Owing the Most — list 141

Customers Owing the Most — pie chart 141

Mastering Basic Invoice Functions 141

Creating a new sales invoice 142

Accessing additional functionality in New invoice style 146

Saving, approving and cancelling invoices 147

Sending an invoice to a customer 149

Mastering More Advanced Invoice Functions 153

Designing clear invoices for a positive cash flow 154

Working with repeating invoices 162

Invoicing contact groups 164

Managing credit notes 165

Creating a new quote 167

Recording Payments 169

Receipting against sales invoices 169

Sending receipts 170

Recording income for a simple cash business 170

Making use of batch payments 172

Removing allocated payments 174

Taking Advantage of Email Templates 174

Defining your user email addresses 175

Creating a new email template 176

Deleting customised templates 178

Connecting with contacts via social media 178

Following Up on Outstanding Debtors 179

Setting up invoice reminders 180

Making use of statements 181

Chapter 7: Managing Your Payables 183

Navigating the Purchases Dashboard 184

Managing Your Supplier Bills 187

Creating a new bill 187

Approving and cancelling bills 191

Generating a purchase order 193

Making Payments 196

Recording an individual payment 196

Recording batch payments 198

Removing allocated payments 201

Mastering Other Payment Considerations 202

Printing bills 202

Working with Repeating Bills 202

Scheduling payments 204

Stylising your check 205

Sending remittance advice 207

Managing credit notes 208

Taking advantage of Hubdoc 209

Entering Expense Claims 209

Understanding Xero Expenses functionality 210

Defining Expense Settings 212

Adding a new expense claim 213

Making mobile expense claims 215

Submitting a claim for approval 217

Reviewing and authorising the claim 217

Paying the claim 218

Adding a new mileage claim 219

Chapter 8: Reconciling Your Bank Accounts 221

Preparing to Reconcile 222

Automagically Reconciling Accounts 224

Understanding the hierarchy for matching 225

Accepting transactions Xero has matched correctly 225

Tweaking Transactions to Reconcile 229

Matching misfit transactions 229

Create 234

Transfer 235

Discuss 235

Reviewing other possible matches 236

Taking Advantage of Cash Coding 236

Getting familiar with Cash Coding 237

Understanding bulk coding 238

Viewing Bank Statements 240

Viewing Account Transactions 241

Using the Spend Money and Receive Money Options 242

Direct payment 243

Prepayment 244

Overpayment 244

Underpayment 244

Processing prepayments and overpayments 245

Searching for a transaction 245

Fixing Errors 246

Resolving the difference between Xero balances and bank balances 247

Undertaking detailed searches to find and recode transactions 249

Unreconciling a bank transaction 253

Removing and undoing a bank transaction 254

What Happens in Life Happens in Xero 254

Part 3: Making the Routine, Routine 257

Chapter 9: Generating Reports 259

Understanding the Reports Available in Xero 259

Accessing Xero’s business reports 260

Selecting your favourite reports 265

Sorting and filtering 266

Customising Reports 267

Customising report layouts 267

Adding reporting ‘bling’: Text Blocks and Footnotes 272

Changing views 274

Understanding Xero’s Different Reporting Options 274

Draft 274

Published 275

Archived 276

Exporting Reports 276

Accessing Management Reports 277

Chapter 10: Mastering Your Weekly and Monthly Tasks 279

Confirming Accounts are Complete 280

Reconciling Bank Accounts, Credit Card and Online Payment Gateway Accounts 281

Checking Off the Transactions in Your Clearing Accounts 283

Reconciling Your Consumer Tax Control Account 284

Reviewing Your Business Information 287

General Ledger Exceptions report 287

Invoicing 287

Aged Receivables 288

Aged Payables 290

Reporting to Your Tax Authority 291

Australian reporting 292

Canadian reporting 296

New Zealand reporting 298

Singapore reporting 301

South Africa reporting 302

US reporting 303

UK reporting 306

Recording payments to your tax authority 309

Taking Advantage of Xero’s Budget Functions 310

Creating a budget 311

Reviewing and editing your budget 313

Setting a Period Lock Date 314

Chapter 11: End of Financial Year Reporting 315

Getting Ready for the End of the Financial Year 316

Finding out where you’re at 316

Being prepared early 317

Reconciling tax payments for the year 318

Processing a bad debt 318

Preparing Accounts for Your Tax Accountant 319

Helping with Tax Accountant Tasks 324

Enabling your tax accountant to work directly in Xero 325

Exporting general ledger transactions 325

Entering manual journals 326

Special Considerations 329

Publishing end-of-year reports 329

Locking down accounts 329

Part 4: Getting the Most Out of Xero 331

Chapter 12: Monitoring Your Business 333

Identifying Key Metrics 334

Using Xero to set realistic targets and strategies 335

Setting KPIs and rewarding success 336

Reviewing your business strategy 337

Generating Useful Information 338

Taking advantage of management reports 338

Delving deeper into the Executive Summary report 341

Assessing your performance 345

Evaluating your position 346

Unpicking the details 346

Customising the Management Report 346

Unravelling the Business Performance dashboard 348

Exploring the Analytics Plus Reports 352

The Business Snapshot report 352

Short Term Cash Flow 353

Understanding Xero’s Tracking Options 354

Using Tracking 355

Working out what your business should track 355

Setting up Tracking 356

Editing, deleting and applying Tracking options 357

Reviewing Tracking reports 358

Tracking conversion balances 359

Maintaining Budget Control: Budget Manager 361

Exploring Xero Projects 362

Defining Project Settings 364

Adding a new Project 365

Adding a Project Task 367

Adding a Project Expense 368

Recording a Time Entry 371

Raising a Deposit Invoice for a Project 373

Invoicing billable Tasks & Expenses 374

Raising a Project Invoice 375

Tracking Project time entries from your mobile device 375

Project reporting 377

Chapter 13: Managing Your Inventory Items 379

Understanding Inventory Items 380

Periodic and perpetual inventory 380

Defining inventory accounts 381

Setting Up a Xero Inventory Item 382

Creating inventory items 382

Importing and exporting item details and importing opening balances 385

Managing Inventory Items 385

Making use of inventory items reports 385

Searching for and reviewing inventory items 386

Editing and deleting inventory items 386

Adjusting Inventory Balances 388

Periodic stocktakes 388

Adjusting untracked inventory values 389

Adjusting tracked inventory quantities 390

Adjusting tracked inventory values 391

Accessing Online App Solutions 392

Chapter 14: Working with Fixed Assets 393

Recognising Fixed Assets 393

Entering a fixed asset into the register 394

Dealing with depreciation 401

Tax reporting and asset pooling 403

Selling or removing a fixed asset from the register 403

Accessing Fixed Asset Reports 406

Chapter 15: Working with Multi-Currency Transactions 409

Setting Up Multi-Currency in Xero 410

Upgrading your Xero plan 410

Adding currencies to Xero 410

Processing Multi-Currency Transactions in Xero 412

Understanding tax rates 412

Working with foreign currency exchange rates 413

Creating a foreign currency invoice 413

Purchasing in a foreign currency 418

Conversion Balances and Multi-Currency Bank Accounts 420

Viewing Reports in Foreign Currency 420

Chapter 16: Exploring the Xero Marketplace 423

Working with Xero to Xero Networks 424

Understanding the Benefits and Risks of Cloud App Solutions 425

What to look for when choosing an app 425

Ascertaining implementation costs 426

Working out if the solution is right for you 427

Looking at longevity 427

Checking response times 428

Understanding data usage and security 428

Making Use of Online Cloud Integration Specialists 428

Getting a Feel for Available Solutions 429

Connectors 430

CRMs 431

Debtor tracking 431

e-commerce 432

Bills and expenses 432

Inventory 432

Job tracking 433

Payments 434

Documents 434

Payroll 435

Point of sale 435

Financial services 436

Time tracking 436

Reporting 436

Looking at Custom Integration 437

Part 5: the Part of Tens 439

Chapter 17: Ten (Plus One!) Tips for Long-Term Success with Xero 441

Embrace the Cloud 442

Make Use of Networking Technology and Apps 442

Export and Visually Organise Data 442

Set up Bank Feeds and Reconcile Regularly 443

Use the Batch Payments Feature 443

Keep Bank Accounts for Business Use 444

Embrace Change 444

Use Tracking to Enhance Reporting Options 444

Take Advantage of Repeating Bills and Invoices 445

Collaborate with Your Xero Advisory Team 445

Effectively Tap into Online Storage Features 446

Chapter 18: Ten Common Mistakes Made in Xero and How to Avoid Them 447

Not Making Use of Expert Help 447

Not Understanding Terminology Differences 448

Messing Up Bank Reconciliation Autosuggestions 449

Using a Communal User Account 449

Not Deleting Old User Accounts 449

Thinking Your Xero Emails Are Stored 450

Not Realising the Subscriber Owns and Controls the Data 450

Trying to Make Xero Do What Your Old System Did 451

Watching Your Bank Feeds Refresh 451

Paying Full Price If You’re a NFP 451

Index 453