Table of Contents

Foreword xv


Introduction 1


About This Book 2


Foolish Assumptions 3


Icons Used in This Book 4


Beyond the Book 4


Where to Go from Here 5


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 15


Understanding Your Team’s Needs 16


Integrating Xero into Your Strategic Planning 20


Generating accurate, complete and timely data entry 20


Introducing Management Reporting and the analysis capabilities of Xero 20


Taking Advantage of Support Options 21


Using Xero in a Training Environment 22


Chapter 2: Getting Organised: Setting Up Xero from Scratch 23


Preparing for Set-Up 24


Checking your browser and system requirements 24


Collecting your business data 26


Signing Up for Xero 27


Getting started 28


Organisation Settings 32


Financial Settings 34


Understanding Bookkeeping Basics 35


Working out how account types affect your reports 36


Creating a chart of accounts that works for you 38


Developing your own chart of accounts 39


Setting Up Your Chart of Accounts 41


Using Xero’s default Chart of Accounts 42


Customising your chart of accounts 42


Putting Your Accounts into Practice 46


Checking your conversion balances 46


Adding comparative balances 49


Entering historical invoices, bills and credit notes 50


Adding Ways to Get Paid 51


Setting up bank accounts 51


Including credit cards 53


Online payment options 53


Tax Rates 55


Chapter 3: Converting to Xero from Another System 59


Preparing to Import Data from a Non-Accounting Program 60


Converting paper-based records 60


Working with spreadsheets 60


Getting Ready to Convert from an Accounting Program 61


Getting ready to convert 63


Converting exported CSV files into Excel 65


Preparing data for import 68


Mapping tax rates 70


Importing Data into Xero 70


Chart of accounts 71


Contacts 73


Inventory items 74


Sales 76


Purchases 77


Bank transactions 79


Manual journals 81


Fixed assets 82


Unpresented payments or uncleared funds 83


Turning Off Your Old System 84


Accessing historical data 84


Moving to the new system 84


Confirming the switchover date 85


Chapter 4: Fine-tuning Your Set-Up 87


Tools of the Trade: Understanding the Dashboard 88


Xero balance versus bank balance 88


Account Watchlist 90


Invoices owed to you 91


Bills you need to pay 91


Dealing with expense claims 92


Setting Up Users 92


Understanding user access levels 92


Inviting other users to access Xero 93


Taking Advantage of Live Bank Feeds 96


Activating live bank feeds 97


Organising bank accounts on your dashboard 100


Managing bank feeds 101


Manually Importing Statements 102


Bank Rules 102


Setting up bank rules 103


Managing bank rules 106


Using File Storage and the Xero Inbox 107


Part 2: Daily Activities 111


Chapter 5: Managing Your Contacts 113


Setting Up Customers 114


Setting Up Suppliers 122


Connecting Your Email Account to Your Contacts 122


Tweaking Your Contacts after Set-Up 123


Finding your contacts 123


Managing your contacts 125


Grouping your contacts 125


Merging your contacts 126


Unpicking accidentally merged contacts 126


Archiving your outdated contacts 127


Setting Up Employees 127


Utilising Smart Lists CRM functionality 130


Chapter 6: Managing Your Sales 133


Navigating the Sales Dashboard 134


Money Coming In 136


Customers Owing the Most — list 137


Customers Owing the Most — pie chart 137


Mastering Basic Invoice Functions 137


Creating a new sales invoice 138


Saving, approving and cancelling invoices 142


Sending an invoice to a customer 143


Mastering More Advanced Invoice Functions 148


Designing clear invoices for a positive cash flow 148


Working with repeating invoices 157


Invoicing contact groups 158


Managing credit notes 159


Creating a new quote 160


Recording Payments 161


Receipting against sales invoices 162


Sending receipts 162


Recording income for a simple cash business 163


Making use of batch payments 164


Removing allocated payments 166


Taking Advantage of Email Templates 167


Defining your user email addresses 168


Creating a new email template 169


Deleting customised templates 170


Connecting with contacts via social media 170


Following Up on Outstanding Debtors 171


Setting up invoice reminders 172


Making use of statements 173


Chapter 7: Managing Your Payables 175


Navigating the Purchases Dashboard 176


Managing Your Supplier Bills 179


Creating a new bill 179


Approving and cancelling bills 182


Generating a purchase order 184


Making Payments 186


Recording an individual payment 187


Recording batch payments 188


Removing allocated payments 191


Mastering Other Payment Considerations 191


Printing bills 192


Working with Repeating Bills 192


Scheduling payments 193


Stylising your check 194


Sending remittance advice 196


Managing credit notes 197


Entering Expense Claims 198


Adding a new expense claim 200


Making mobile expense claims 201


Submitting a claim for approval 203


Reviewing and authorising the claim 204


Paying the claim 205


Chapter 8: Reconciling Your Bank Accounts 207


Preparing to Reconcile 208


Automagically Reconciling Accounts 210


Understanding the hierarchy for matching 210


Accepting transactions Xero has matched correctly 211


Tweaking Transactions to Reconcile 214


Matching misfit transactions 215


Create 219


Transfer 220


Discuss 221


Reviewing other possible matches 221


Taking Advantage of Cash Coding 222


Getting familiar with Cash Coding 222


Understanding bulk coding 224


Viewing Bank Statements 225


Viewing Account Transactions 226


Using the Spend Money and Receive Money Options 227


Direct payment 228


Prepayment 228


Overpayment 229


Underpayment 229


Processing prepayments and overpayments 230


Searching for a transaction 230


Fixing Errors 231


Resolving the difference between Xero balances and bank balances 231


Undertaking detailed searches to find and recode transactions 235


Unreconciling a bank transaction 237


Removing and undoing a bank transaction 237


What Happens in Life Happens in Xero 238


Part 3: Making the Routine, Routine 241


Chapter 9: Generating Reports 243


Understanding the Reports Available in Xero 244


Accessing Xero’s business reports 244


Selecting your favourite reports 248


Sorting and filtering 249


Customising Reports 250


Customising report layouts 250


Adding reporting ‘bling’: Summaries and footnotes 258


Changing views 259


Understanding Xero’s Different Reporting Options 260


Draft 260


Published 260


Connecting reports 262


Archived 263


Exporting Reports 263


Accessing Management Reports 264


Chapter 10: Mastering Your Weekly and Monthly Tasks 265


Confirming Accounts are Complete 266


Reconciling Bank Accounts, Credit Card and Online Payment Gateway Accounts 267


Reconciling Your Clearing Accounts 268


Reconciling Your Consumer Tax Control Account 270


Reviewing Your Business Information 272


General Ledger Exceptions report 273


Invoicing 273


Aged Receivables 274


Aged Payables 276


Reporting to Your Tax Authority 277


Australian reporting 278


New Zealand reporting 281


US reporting 284


UK reporting 286


Recording payments to your tax authority 288


Taking Advantage of Xero’s Budget Functions 289


Creating a budget 290


Reviewing and editing your budget 292


Setting a Period Lock Date 293


Chapter 11: End of Financial Year Reporting 295


Getting Ready for the End of the Financial Year 296


Finding out where you’re at 296


Being prepared early 297


Reconciling tax payments for the year 298


Processing a bad debt 298


Preparing Accounts for Your Tax Accountant 299


Helping with Tax Accountant Tasks 303


Enabling your tax accountant to work directly in Xero 304


Exporting general ledger transactions 305


Entering manual journals 306


Special Considerations 308


Publishing end-of-year reports 308


Locking down accounts 308


Part 4: Getting the Most Out of Xero 311


Chapter 12: Monitoring Your Business 313


Identifying Key Metrics 314


Using Xero to set realistic targets and strategies 314


Setting KPIs and rewarding success 315


Reviewing your business strategy 317


Generating Useful Information 317


Taking advantage of management reports 318


Delving deeper into the Executive Summary report 320


Assessing your performance 325


Evaluating your position 325


Unpicking the details 326


Customising the Management Report 326


Unravelling the Business Performance dashboard 329


Understanding Xero’s Tracking Options 331


Using Tracking 332


Working out what your business should track 332


Setting up Tracking 333


Editing, deleting and applying Tracking options 334


Reviewing Tracking reports 335


Tracking conversion balances 336


Maintaining Budget Control: Budget Manager 339


Chapter 13: Managing Your Inventory Items 341


Understanding Inventory Items 342


Periodic and perpetual inventory 342


Defining inventory accounts 343


Setting Up a Xero Inventory Item 344


Creating inventory items 344


Importing and exporting item details and importing opening balances 346


Managing Inventory Items 347


Making use of inventory items reports 347


Searching for and reviewing inventory items 348


Editing and deleting inventory items 348


Adjusting Inventory Balances 350


Periodic stocktakes 350


Adjusting untracked inventory values 351


Adjusting tracked inventory quantities 352


Adjusting tracked inventory values 353


Accessing Add-On Solutions 354


Chapter 14: Working with Fixed Assets 355


Recognising Fixed Assets 355


Entering a fixed asset into the register 356


Dealing with depreciation 362


Selling or removing a fixed asset from the register 364


Accessing Fixed Asset Reports 367


Chapter 15: Working with Multi-Currency Transactions 369


Setting Up Multi-Currency in Xero 370


Upgrading your Xero plan 370


Adding currencies to Xero 370


Processing Multi-Currency Transactions in Xero 372


Understanding tax rates 372


Working with foreign currency exchange rates 373


Creating a foreign currency invoice 373


Purchasing in a foreign currency 378


Conversion Balances and Multi-Currency Bank Accounts 379


Viewing Reports in Foreign Currency 380


Chapter 16: Xero Online Network 383


Working with Xero to Xero Networks 384


Understanding the Benefits and Risks of Add-On Solutions 385


Ascertaining implementation costs 385


Working out if the solution is right for you 386


Looking at longevity 386


Checking response times 387


Understanding intellectual property security 387


Making Use of Online Cloud Integration Specialists 387


Getting a Feel for Available Solutions 388


Connectors 388


CRMs 389


Debtor tracking 390


e-commerce 390


Bills and expenses 391


Inventory 391


Job tracking 392


Payments 392


Documents 392


Payroll 393


Point of sale 393


Financial services 394


Time tracking 394


Reporting 394


Looking at Custom Integration 395


Part 5: The Part of Tens 397


Chapter 17: Ten (Plus One!) Tips for Long-Term Success with Xero 399


Embrace the Cloud 400


Make Use of Networking Technology 400


Export Data to Create Graphs 400


Set up Bank Feeds and Reconcile Regularly 401


Use the Batch Payments Feature 401


Keep Bank Accounts for Business Use 401


Embrace Change 402


Use Tracking to Sharpen Reporting 402


Take Advantage of Repeating Bills and Invoices 403


Collaborate with Your Xero Advisory Team 403


Effectively Tap into Online Storage Features 403


Chapter 18: Ten Common Mistakes Made in Xero and How to Avoid Them 405


Not Making Use of Expert Help 405


Not Understanding Terminology Differences 406


Messing Up Bank Reconciliation Autosuggestions 407


Using a Communal User Account 407


Not Deleting Old User Accounts 407


Thinking Your Xero Emails Are Stored 408


Not Realising the Subscriber Owns and Controls the Data 408


Trying to Make Xero Do What Your Old System Did 409


Watching Your Bank Feeds Refresh 409


Paying Full Price If You’re a NFP 409


Index 411

About the Author

Heather Smith is an accounting consultant who specialises in management report development, data detox, and cloud suitability scoping services. Heather remotely assists global businesses advising on process automation and maximising integrated data opportunities. A business and tech writer, Heather hosts the popular Cloud Stories podcast. She is an advisory board member for many dynamic businesses.