An Ideal Xero Setup: The 10 Steps You Must Take

Once you’ve created an account with Xero, you’ll be presented with the Xero dashboard. This dashboard provides insights into your business and can be customized depending on the way you want to use Xero.

The first and most important step for new Xero users is to watch the “Getting Started with Xero” video, which can be accessed via the top right of the Xero dashboard or via this link.

Xero is able to communicate with hundreds of different banking systems in order to provide real-time financial details. In your ideal Xero setup, you will see your bank transactions. To capture these, you’ll need to link Xero to your bank accounts. Setting up your bank accounts with Xero is simple — first-time Xero users are presented with a banking transaction prompt that looks like this:

After clicking “Securely connect to my bank,” you’ll be presented with a search tool that allows you to search for your bank. Xero provides a convenient list of popular Australian banking institutions that can speed up this process.

When you’ve selected your bank account, you’ll need to provide a name for your bank account and provide your BSB and account number. It’s possible to add multiple accounts with a single bank at this stage of the setup process.

After adding your account details, you’ll be presented with a summary of the accounts you’ve added. Xero provides the option to set up bank feeds and allow transactions to flow in automatically. You can also select whether you would like updates for this bank account to appear on your Xero dashboard

To set up automatic transaction updates, you’ll need to set up bank feeds via your online banking service. This is performed by logging in to your online banking service for the bank you’d like to connect and navigating to the relevant section for bank feeds. In most cases, your bank will require only the organization name and email address you used to sign up to Xero. Note that it typically takes one business day for bank feeds requests to be processed.

In order to ensure that your ideal Xero setup will work correctly, it’s important to ensure that you’ve set up your organization details correctly.

If you operate a limited company, you’ll need to add your registration details and registered office address to Xero. To set up your organization details, you’ll need to click the name of your organization in the top left of the Xero dashboard, then click the “Settings” option.

The settings page will provide you with a range of options, such as the ability to add or remove additional users, manage the currencies your business uses, alter the settings for a variety of features, and change organization details.

Clicking “Organization Settings” will present you with a page that allows you to alter your business name, logo, ABN, contact details, physical address, and contact details. When you’re satisfied with the accuracy of your organization details, click the “Save” button at the bottom of the page.

Setting up your bank feeds in your ideal Xero setup will allow you to categorize transactions. These categorizations allow you to quickly select a category for each transaction that occurs in your accounts, matching them to your books in Xero.

Once you’ve added your bank feeds, you can reconcile accounts by clicking the “Accounting” option in the dashboard header and selecting “Bank Accounts.” A “Reconciliation tab allows you to quickly reconcile any outstanding transactions

Reconciling on a daily or weekly basis ensures that your accounts are as accurate as possible. Keeping track of reconciliation also means tracking invoices — you can track outstanding invoices by adding a new invoice via the “Invoices owed to you” feature on the Xero dashboard.

Similarly, outstanding bills and payments can be tracked via the “Bills to pay” feature on the Xero dashboard.

The ideal Xero setup offers extremely powerful invoicing features that speed up the remittance process and get you paid faster. Before you start invoicing clients, you’ll need to set up invoicing correctly. You can get started with Xero invoicing via the “Business” tab on the Xero dashboard header and selecting “Invoices.”

When setting up a new invoice with Xero, you’ll be presented with a streamlined interface that allows you to quickly add the receiving party, reference number, invoice number, issue date, due date, and currency.

To issue an invoice, you’ll need to select an existing contact or, if you don’t yet have any contacts, create a new contact. Click the “To” field to add a new contact, which will bring up a contact form.

One of the most powerful advantages offered by Xero invoicing is the ability to add online payment options to invoices. By clicking the “Set up online payments” button, you’ll be presented with a field that allows you to add either credit card or direct debit payment options to your invoices.

• Xero credit card payments are processed by Stripe, with no setup fees, monthly fees, or other hidden fees. Each successful local payment is subject to a 1.75 percent fee plus an additional 30c fee. International payments are subject to a 2.9 percent fee, plus an additional 30c. Xero credit card payments are processed on a rolling two-day schedule
• Xero direct debit payments allow businesses to collect invoice payments automatically on the day that they are due, and are subject to a 1 percent fee, as well as an additional 40c fee. This fee is capped at $4.00 per transaction

If you’re interested in accepting payments via other payment services such as PayPal, you’ll need to navigate to “Payment Gateways” via the Xero settings page, or click the link at the bottom of the online payments prompt in the previous step. This page will allow you to edit your credit card and direct debit payment options, as well as add Paypal, eWay, DPS, and Braintree payments if necessary.

Getting paid on time can be difficult. Setting up your invoices with payment reminders helps your clients remain aware of when invoices are due. To set up payment reminders, you’ll need to navigate to Settings via the Xero dashboard, and click “Invoice Settings.”

The invoice reminder settings will allow the ideal Xero setup to automatically follow up overdue invoices on your behalf. Invoice payment reminder frequency can be customized with quick links to online invoice and detail summary, links to invoice PDFs, and a return email address. When you’re satisfied with your payment reminder settings, click the “Save” button in the lower right corner.

The ideal Xero setup provides powerful customization options for your invoice branding. By navigating to the Invoice Settings feature as per the instructions in step six, you are able to click “New Branding Theme” and alter a range of invoice branding options.

This section provides businesses with the ability to change a variety of defaults and alter the amount of detail provided in invoices, as well as add additional terms and payment advice. When you’re satisfied with your invoice branding, click the “Save” button in the lower right.

Reporting is one of the most important time-saving tools provided by Xero. Xero reports make it easy to generate cash summaries, reports on equity movements, profit and loss statements, sales reports, balance sheets, and much more.

In order to take advantage of the full functionality of Xero reports, you’ll need to have already entered a reasonable amount of data, such as bank feeds, invoices, and expenses. To review the reporting options available to you via Xero, click the “Reports” option under “Accounting” on the Xero dashboard header.

The reports page will allow you to instantly generate a broad spectrum of report templates, as well as create custom reports, draft reports, publish reports, or view archived reports. The reporting functionality of Xero is greatly expanded when additional third-party Xero applications or integrations are added.

If your business employs staff members, the ideal Xero setup payroll functionality can significantly decrease payroll management time costs. Xero collects all payroll costs into a single location, streamlining the payroll process and eliminating the need for multiple separate systems.

Getting your payroll set up with Xero can be somewhat more complex than the previous steps in this guide. To get started with Xero payroll, you’ll need to navigate to the “Payroll” tab in the Xero dashboard header. Xero provides a simple video summary of the Payroll system that can be accessed via the Payroll page.

The Payroll page will run first-time Xero users through the Payroll setup process, which includes organization detail confirmation, payroll account setup, pay calendar scheduling, and employee logging.

Clicking “Add Pay Calendars” will allow you to add bank details, accounts, and pay items, as well as superannuation details. Clicking “Add” on the Payroll Calendars tab will prompt you to select a pay schedule, start date, and first payment date.

When you’re satisfied with your payroll calendars, holidays, pay items, and superannuation details, return to the Payroll page in order to set up Employee details. Clicking the “Add Employees” button will allow you to enter employee details, earning rates, tax declarations, leave details, and banking details.

After successfully adding an employee to the Xero payroll system, they will be listed under “Current Employees” within payroll. Clicking on the name of an employee will reveal details and customization option tabs that include taxes, leave, bank accounts, payslips, and basic information.

Xero provides robust accounting functionality but is greatly enhanced through third-party integration. It’s possible to connect Xero to a wide variety of apps and add-ons that can automate many different accounting processes.

The most popular Xero apps and add-ons used by our clients include
• Paypal and Stripe for payment methods
• Hubdoc for automated document entry
• Expensify for expense tracking and reimbursement
• Waddle for invoice financing
• And Chaser for automated collecting

For more details on the most powerful third-party automation tools for Xero, check out our article on Accounting Automation: Five Tools to Help.

Setting up Xero is relatively straightforward — Xero’s expansive and easy-to-follow onboarding process will ensure that you’ve added the basic information you need to get started. Once you’re ready to unlock the full potential of your ideal Xero setup, the next step is to find add-on solutions that communicate with each other, eliminating manual data entry and capturing a deeper understanding of the financial position of your business.