As a small business owner, managing your finances effectively and efficiently will have an enormous impact on all areas of your business. With the right accounting software, you can streamline your financial processes and gain valuable insights into your business's financial health.
At Elephant Advisory, our accounting software of choice is Xero. Among many reasons, we use the software because of how it allows us to collaborate with clients and its relatively low-learning curve when getting started. As we encourage our clients to use Xero when working with us, we wanted to create a comprehensive beginner's guide to help small business owners get set up with the software.
In this article, we’ll outline Xero’s key features for business owners and walk you through 8 key steps to get started on the platform.
The main features of Xero’s accounting software
Invoicing and Billing: Like many other software platforms, Xero makes it easy to send invoices to your clients and track payments, making it easy to manage your accounts receivable. Xero also allows you to enter bills from your vendors, helping you keep track of your accounts payable.
Bank Reconciliation: Xero offers automated bank reconciliation, which makes it easy to match your bank transactions with the transactions you've entered in Xero, such as invoices and bills. This will be an enormous time saver when running your small business and will help ensure the accuracy of your financial records.
Expense Tracking: Through the software, you can track your expenses easily by either entering them manually or importing them from your bank transactions. You can categorise your expenses using your customised chart of accounts, helping you analyse your spending and make informed financial decisions.
Financial Reporting: Xero provides a wide range of financial reports, such as profit and loss statements, balance sheets, and cash flow statements, which give you insights into your business's financial health.
Cash Flow Management: The software provides tools to help you manage your cash flow effectively. You can easily track your income and expenses, view cash flow projections, and set up automated bank feeds to reconcile your bank transactions.
Payroll Management: Xero offers payroll management features that allow you to set up and manage payroll for your employees. This includes registering for Single Touch Payroll, calculating wages, managing leave requests, and generating payslips.
Integrations: Xero integrates with over a thousand third-party applications, such as payment gateways, e-commerce platforms, CRM systems, and more. This allows you to streamline your business processes and eliminate manual data entry by automating tasks across different software systems.
Collaboration: One of the features we love the most, Xero offers collaboration features that allow you to work with your accountants in real-time. This means you can easily share access to your financial data, collaborate on transactions, and communicate within the software, making it for us to assist and manage your business finances.
How to Use Xero in 12 Easy Steps
1. Sign up for Xero
If you haven’t done so already, you’ll need to sign up to get started. This can be done through Xero’s website, where you’ll need to choose a plan and enter some of your business and financial details. Xero offers different subscription plans with varying capabilities, so choose the one that best fits your business's needs and budget.
2. Set up the details of your small business
Once you've signed up, you'll need to set up your organisation details in Xero.
To do this, go to Organisation Settings to input or update your business’s contact details such as email, business name, organisation type and description and more. Ensure that you have an Australian Business Number (ABN) and a registered office address as this information needs to be displayed on any invoices you issue.
3. Set up your financial settings
Now it’s time to set up your financial settings, which you can find through Settings > Advanced Settings > Financial Settings. Here you’ll need to input details such as your currency, financial year-end, and tax rates.
You can also set up default accounts for sales and expenses, as well as configure your tax settings.
4. Add your business’s branding
Customising your invoices and other financial documents with your business's branding is an important step to establish your brand identity.
To set up your invoices with your terms of payment, contract, logo and more, go to Settings > Invoice Settings. Here, you can also customise invoice templates and set up email templates with your branding.
5. Set up your chart of accounts
Your chart of accounts is a key component of your financials in Xero. It's essential to set up your chart of accounts accurately to track your income, expenses, and other financial transactions.
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. Xero provides a default chart of accounts, but you can customise it to suit your business's needs. You can also import your existing chart of accounts from a CSV file.
If you are unsure about this step, you can reach out to one of our accountants about getting your chart of accounts set up correctly.
6. Set up your bank account feed
The next step in getting started with Xero is to set up your bank account feeds. This allows for one of the best features of Xero where you can automatically import transactions from your bank accounts, credit cards, PayPal accounts and more.
Xero makes the process of bank reconciliation incredibly easy for small business owners, saving time, ensuring accuracy and enabling insightful reporting. To complete this step, you can find ‘Add Bank Account’ in the accounting tab.
7. Set up payroll and register for STP
If you need to manage payroll, Xero offers payroll features that make it easy to set up and manage your payroll processes. You can set up payroll items, enter employee details, set up pay rates, and even manage leave requests and timesheets. Xero also integrates with various payroll providers so you can tailor payroll management to your business.
In Australia, if you have employees, you need to comply with Single Touch Payroll (STP) requirements, which you can easily register for within the Xero software.
Once registered, Xero will automatically submit your payroll information to the Australian Taxation Office (ATO) on your behalf.
8. Add payment services & connect apps
The last step we recommend our clients do when setting up is linking active payment services to their Xero account, including services like PayPal, Stripe, and GoCardless.
There are also over 1000 integration options with third-party apps on Xero for you to consider. Using these integrations, you’ll be able to streamline repetitive processes and save yourself some time in areas where your business needs it the most. Xero offers apps with a wide range of functionalities from cash flow forecasting, to document management, and many more.
To finish your set up with Xero, we recommend you research these integration options to find the ones that will be most beneficial to your business.
And lastly, if you’re getting set up on Xero for the first time, we recommend you seek assistance from your accountant or a member of Elephant Advisory’s accounting team.