Xero is accounting software that let’s you automate day-to-day bookkeeping tasks, so you have more time to focus on things that matter to you. With Xero you can important bank transactions and send invoice reminders, pay your staff with Xero Payroll and drive profitability with Xero Projects. 

Yes, Xero is a fully cloud-based system. You can access it from an internet enabled phone, tablet or desktop/laptop computer and multiple users can work on it simultaneously.

Yes. With payment services like Stripe or GoCardless, customers can pay you directly. Include a ‘pay now’ button in your invoice to get paid even faster.

No you need an internet connection.

To get started click accounting and select bank accounts. 

Click add bank account and search for your bank. If Xero can’t find your bank it means there are no bank feeds available.

Click add it anyway and complete the set-up.

The following screen varies depending on your bank, but one option that may come up will allow you to click login and connect accounts. Xero will then send you to the bank’s websites. 

Once your bank account is in Xero you can start using it in transactions.  

Bank feeds can take up to 10 business days to connect.

Reconciling your bank account is an important part of running your business. 

During the bank reconciliation, you categorise your bank transactions by coding them into relevant accounts. In the background, Xero will update your financial reports.

Xero makes it really easy by allowing you to set up your bank feeds and importing the data directly into Xero. Your bank statement lines will feed in every day.

To access the bank reconciliation screen, click the link to reconcile your items from the dashboard. 

On the left-hand side, you’ll find the individual bank statement lines that have come in through the bank feeds. 

There are 4 ways to match these with your transactions in Xero. The options are match, create, transfer or discuss. 

Match is used when you need to match the statement line to an existing invoice or bill in the system.

Create is used when there is no existing invoice or bill in the system so you are required to code the transaction yourself.

Transfer is used when you transfer money from one of your bank accounts to another.

Discuss is used when you’d like to leave a message regarding the transaction for another Xero user to see. 

Let’s look at an example, 

The first transaction relates to money received as it appears in the received column. We can see that Xero has found the corresponding invoice in the system that it thinks matches the payment.

Xero uses the amount, date and payee of the payment as a basis for the match. It will do this for both invoices and bills. 

You now need to confirm that the match Xero has made is correct by clicking the ok button. In doing so the relevant invoice gets marked as paid in the background and your financial reports will update. 

For more examples, you can check out this video.

Start by navigating to the sales overview, to do this click business and select sales overview. 

If you have a lot of invoices you can click Import to bulk upload them. There are 3 steps in the process, first, you need to download Xero’s invoices template file as it contains the correct headings that Xero needs. Then export your invoices from your old system as a comma-separated list and then copy and paste your invoices from the exported file into the template, ensuring all headings match up. Finally, select the file you want to import. 

If you’ve already created contacts in Xero ensure the contact name in the file is exactly the same otherwise Xero will create duplicate contacts. 

The columns with an Asterix are mandatory if you want to be able to approve invoices after the import. 

Here is a list of mandatory columns:

• Contact name
• Invoice number
• Invoice date
• Due date
• Description
• Quantity 
• Unit amount
• Account code
• Tax type

When you copy dates across use the format dd/mm/yy

Enter a clear description so you can easily reconcile the transactions in Xero when the payments come through. 

Make sure the tax type name is exactly as it appears in Xero 

There’s no need to include the total or tax amount as Xero will automatically calculate these. 

Code the item to the relevant sales account. 

When you’ve completed this save the file as a CSV. 

Then return to Xero and click browse to find the relevant file. 

Decide if you want to update contacts with the imported address details, this will override any existing contacts that you’ve already set up.

Then choose how you want Xero to handle the tax amount, tax inclusive or exclusive.

Then click import, review any messages and click complete import. 

Xero uploads any new invoices into the draft tab.

The final step is to approve them in bulk. Select them all and click approve. Xero then marks these as approved and moves them to awaiting payment.

From the dashboard click contacts and select all contacts. You’ll see a list here of your contacts and what they owe you. 

Click add a contact, you’ll see you can add in the contact name, this can be the business or a person.

 If you identify businesses using a code then select add account number. 

You can then go ahead and enter the name and email address of the primary contact. 

Xero will automatically select the primary person whenever you send an email to this contact.

You can add more than one.

Once you’ve filled in all the contact information you’ll then get to the financial details. If you know in advance the sales settings for most of the businesses invoices then you can input that data. (All defaults can be overridden on individual transactions). 

It will then ask you to enter the following details: 

• Tax
• Business registration number (if the contact has a specific number you want to show on documents)
• Sales discount (if applicable to this contact)
• Currency
• Batch payments (use this if you’re going to bundle multiple bills into one payment, you can enter their account information). 
• Invoice settings (you can override the default invoice settings for each contact if necessary)/
• Xero network key (if the contact uses Xero ask for their network key as it will allow you to send sales invoices or bills from your Xero organisation directly into theirs). 

If you have a lot of contacts you want to upload then click the import button and follow the instructions. 

From April 2024, Making Tax Digital for ITSA will apply to unincorporated businesses and landlords with a total business or property income above £10,000 per year.

What are the requirements of MTD for ITSA?

Under MTD for ITSA, businesses and landlords will be required to submit quarterly updates to HMRC providing a summary of information of income and expenditure for the quarter. After the fourth quarter, an End Of Period Statement will need to be made for each income source. A final declaration will also need to be made including other sources of taxable income such as savings and investment income. 

Businesses need to use compatible, HMRC recognised MTD software to keep digital records and file VAT returns. HMRC will be rolling out its MTD for ITSA pilot programme next year and so we will be providing more information over the coming months to get you prepared for Making Tax Digital for Income Tax Self Assessment.