Xero Silver ChampionA large number of our clients are using Xero to maintain their accounts records and as a Xero Silver Champion partner we are well placed to help them get started and use it to its best advantage for their business.

So if you are already using Xero or are thinking about using it what are our top five tips for getting started.

Do I need accounts software?

Don't take out a subscription until you have a significant number of transactions to record.  Once you start paying the subscription it can be a significant cost for a newly set up business that has little or no income.

Which subscription is right for my business?

Starter is ideal for a new business with less than 20 bank transactions per month.  You can record up to 5 sales and 5 purchase invoices per month.  You can record VAT transactions and submit a VAT return.  This subscription costs £10/month + VAT.

Standard will allow you to record an unlimited number of bank transactions, sales and purchase invoices.  You will be able to use Cash Coding to quickly reconcile identical bank transactions with one click.  You can produce and submit VAT returns.  This subscription costs £22/month + VAT.

Premium is exactly the same as Standard but has the facility to have foreign currency transactions.  Ideal if you trade overseas and make and receive payments in other currencies.  This subscription costs £27.50/month + VAT.  

Know your year end date

Your accounting year, and therefore your accounting record, will generally run for 12 months finishing at the end of your financial year.  If you are a sole trader this is likely to be 31st March.  If you start in September your year end will be March so you will only have 6 months of accounts in the first year but 12 months subsequently.  If you are a limited company and your accounts have to be made up to 30th June but you don't start trading until December your first set of accounts will be from December to June but after that you will have 12 months of accounts. 

You can shorten or lengthen your accounting year but it is best to know what you are aiming for as your year end date when you first set up Xero.

Ideally you will start recording transactions in Xero from the first day of your new financial year if you are changing from another software.  If you start the year on one software and then change to another it can become very complicated especially if you are VAT registered too!

Plan your account codes

The Chart of Accounts is a list of all the account codes in Xero which you record your income and expenses against.  You should familiarise yourself with them so you know which codes are used for income and which for expenses, assets, liabilities, etc.  Plan what codes you want to have for your business and adapt the available codes or make new ones which work for you. 

The reason you are recording transactions is to produce meaningful reports both for yourself and for your accountant so that they can prepare your tax return or your statutory accounts.  The reports that you will want will show you how your business is doing and therefore you must be consistent at recording the transactions otherwise your accounts are meaningless.  In simple terms, if you sell chocolate you will have a sales code for chocolate and because you buy it in you will have a cost code for chocolate.  When you produce your Income and Expenditure (Profit & Loss) report this will show you - hopefully - that you have more chocolate sales than the cost of purchasing them to sell.

The other reason for planning and recording your income and expenses consistently is you can easily see and compare income and costs.  How does your insurance cost this year compare with last year for example.

Set up bank feeds 

Xero will receive bank transactions directly from your bank on a daily basis and it makes life so much easier.  This enables you to keep up to date with recording your income and payments regularly rather than leaving it for several weeks and it becoming a chore. It will help with debt chasing too!

If you have a choice choose a bank which has direct feeds into Xero.  NatWest, Barclays, HSBC, Santander and Royal Bank of Scotland are just some of the banks which have a direct feed although you will have to pay for HSBC and Barclays (the others are free).  Lloyds does not yet have a direct feed yet but you can set up a feed with a third party called Yodlee.  You may need to refresh the feed manually using the multi factor authentication you use for online banking.

Alternatively you can import transactions which you have downloaded from your bank.  This is fairly straightforward but you need to be sure you don't duplicate transactions.

Xero Training & Support

I hope these few tips will help you plan ahead and get Xero set up correctly from the start.  If you find you need some help either at the start or if you feel a bit overwhelmed some time later we provide one to one bespoke training so that you can understand more about Xero and get back on track. 

We can help you move from one software to another too.

Give us a call on 01722 341820.