How To Use Xero Software

Xero is a complicated accounting system. Especially for those unfamiliar with accounting, the names of the accounting statements alone can be confusing.

What is an income statement? What is the difference between a regular expense and an investment into a capital asset?

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Key Takeaways

  • Sign up for your Xero account at Xero.com.
  • Add your company’s details by going to “Organisation Settings” under “Settings”.
  • Write out a list of income and expense categories that your company has.
  • Set up your chart of accounts by referencing that list of income and expense categories.
  • Connect your Xero account with your corporate bank account if you’re using a bank with a Xero bank feed integration. Large Singaporean banks like DBS and OCBC have bank feeds with Xero.
  • Have your employees details on hand.
  • Set up your payroll by going to “Payroll Overview” under “Payroll”.
  • Play around with your Xero account!

Janice Johnson

Written by Janice. Janice is an accountant at WLP Group and 4 years of experience with using Xero to help SMEs in Singapore with bookkeeping. She loves teaching and learning new technologies in finance. She’ll be one of the instructors that help you learn Xero!

Go to your settings and register your organisation

Let’s start with the basics — this is mentioned in every how to use Xero software tutorial. Under “Settings”, click on “Organisation Settings”. You will be asked to input your:

  • Name
  • Company Name
  • Email Address
  • Legal Company Registration Number (e.g. Singapore companies should have received an entity number from ACRA)
  • Description Of Company
  • Physical Address

It is important to fill up all of these details accurately. This is because Xero uses this information when creating reports and invoices. For example, your company physical address may be placed at the top or bottom of invoices. Many accountants that are new to Xero often make the mistake of writing a fake physical address, only to have it be sent to clients who write back confused.

Also, you will have to set up your financial year details by going to “Advanced Settings” under “Settings”. By default, Xero sets your financial year to start from 31 December. If you are preparing accounting statements for the business owner or business manager to look over, it is crucial to have the correct fiscal year be listed on reports. This is even more so when sending reports to the government when filing taxes.

Set up your chart of accounts and income and expenses categories

Chart of accounts are income and expense categories. Let’s use a web agency as an example. The company’s income categories might be “Web Design Services” and “Consultation Services”. Their expense categories might be “R&D”. 

It is important to think of every possible income or expense that your company makes. You’ll need this for your chart of accounts. Equity categories are also important but most small companies only have one owner and it’s usually an “Owners Equity” category in the chart of accounts. It is also important to not be too specific. For example, an expense category titled “R&D For Shutters & Blinds” may be too specific for a small furniture company. A broad “R&D” category would be suitable.

By default, Xero provides a default own chart of accounts that works well for most businesses. However, they are often too generic and not specific to your business. It’s unlikely that Xero’s default chart of accounts will have your business’s income categories. To change your chart of accounts, head over to “Chart Of Accounts” under “Accounting”. It’s also easy to remove categories that you don’t need and only keep categories applicable to your business.

Connect Xero with your bank account

Unfortunately, this option is not available for all banks. For example, Xero has partnered with DBS in Singapore. However, they have yet to partner with UOB.

By integrating your Xero account with your corporate bank account, all transactions will automatically be added to Xero. As a bookkeeper, this will save tremendous time. You can also connect Xero with your PayPal or Stripe account (used by eCommerce companies) through Xero add-ons.

For more information, sign up for our Xero online course!

Set up payroll with Xero

This is probably one of the most confusing aspects of our how to use Xero software tutorial. Xero Payroll is extremely useful because payroll can be done automatically and all information is consolidated in one place. Aside from monitoring cash flows paid out to staff, you will be able to schedule payments by going to “Payroll Overview” under “Payroll”. 

One drawback from Xero Payroll is that you are unable to write specific instructions such as giving bonuses to employees who have met monthly quotas. But you can always add this as an expense category in your “Transactions” page and make the transfer to the employee manually.

Set up invoicing with Xero

Invoicing is probably the most commonly used feature in Xero. Every service business needs to create and send invoices. Go to “Invoicing” under “Accounts”. Xero will ask for details such as what products you are selling. You’ll also have a field to enter any additional details and the client’s email address (If you need the invoice to be sent out by Xero).

Once an invoice has been sent out and paid, Xero will automatically note it as an income cashflow record in your transaction The only thing left to do is to categorise the income entry.

Create a customer list with Xero

One problem that you may have noticed from creating an invoice is having to manually add a customer. Adding a customer’s details such as name and address repeatedly is tiring. Therefore, you can create a customer list by going to “List” under “Contacts”. 

For more information on how to use Xero software, sign up for our Xero software training programs now!

Quick FAQs

Can I access Xero On my tablet or mobile phone?

Yes, you can. It is a fully cloud-based system. You can access it anytime from anywhere. Be it from an Internet enabled phone, tablet or computer. Multiple users can work on it simultaneously.

Do I need an accountant to use Xero?

Learning how to use Xero is not as difficult as you might assume. You don’t need an accountant to teach and hand hold you through everything. However, as simple and user-friendly the software is to use, it is recommended you have an accountant by your side. This will keep your finances straight and keep you well-informed.

Can I export and move data out of Xero?

It is difficult to import your chart of accounts, invoices, accounts, bills or journals into Xero in bulk using third-party applications. However, you can use Xero authorised migration tools to import, export and delete your transactions.

What are the basic steps on how to use Xero software?

Here are a few basic steps on how to get you started using Xero:

  • Set up your organization details
  • Set up your financial settings
  • Add your company’s branding
  • Set up your chart of accounts
  • Set up your bank account feed
  • Set up payroll
  • Add payment services
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