In short: To start on Xero: choose a plan (Ignite, Grow, Comprehensive or Ultimate in Australia), enter your organisation and financial settings, brand your invoices, set up your chart of accounts, connect bank feeds, set up payroll with Single Touch Payroll if you have staff, and connect payment apps. Invite your accountant so they can work in the same file.

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 easy for us to assist and manage your business finances.

How to set up Xero in 8 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. In Australia Xero currently offers four plans: Ignite (limited invoices and bills, suited to sole traders), Grow, Comprehensive (more payroll and multi-currency) and Ultimate. Prices rose on 1 July 2026, so check Xero's pricing page and choose the plan that fits your volume of invoices, bills and staff.

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, open your 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, found in Xero's settings menu. Here you’ll need to input details such as your financial year-end, GST basis and BAS reporting period.

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 payment terms, logo and more, open the invoice settings (Xero calls the templates "branding themes"). 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, open the chart of accounts from the Accounting menu. 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, choose to add a bank account from the Accounting menu.

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, get help from your accountant or Elephant Advisory’s Xero accountants.

Frequently asked questions

Which Xero plan should a small business choose?

Sole traders with a handful of invoices often start on Ignite. Most small businesses with regular bills or a couple of staff are better on Grow or Comprehensive. Ask your accountant before you choose, as some practices get partner pricing.

Is Xero easy to set up yourself?

The basics are, but the chart of accounts, GST settings and payroll need to be right from day one. Getting an accountant to check your set-up usually saves time at BAS and tax time.

Does Xero handle Single Touch Payroll?

Yes. Xero Payroll is STP Phase 2 compliant and reports pay details to the ATO each pay run.

Last updated: 25 October 2026.

General information only, based on the rules at the date above. It does not take into account your circumstances, so speak to your accountant before acting.