Xero is the leading, user-friendly accounting software for small businesses. It helps you streamline your accounting workflow which in turn frees up more time for you to focus on tasks you’re best at. In this tutorial, you’ll learn how to use Xero – one of the best accounting software tools out there.
How to Use XERO Software?
Let us now begin with this Xero accounting software tutorial for small businesses:
Xero At a Glance
Go ahead and join up with Xero here.
We’ve gone ahead and logged in to our Xero account using a demo company. With this account, you can also create a new organization. The demo account, however, allows you to play around with Xero and helps you understand all its extensive features and tools.
Before we dive into its features, we want to expand on the accounting software itself. Xero is a cloud-based accounting software for small businesses that allows you to manage your day-to-day transactions and operations such as invoicing, bank reconciliations, inventory, project management, and more.
Learning how to use Xero software will ultimately save you both time and money. What’s more, is you can connect your accountant with this easy-to-use software. They can access and monitor the account when they need to for financial reporting as well as general support.
Also, it’s important to get your accountant’s recommendations before investing in this accounting software for small businesses.
Diving Into Your Xero Business Settings
Now that you’ve got an idea of what Xero is all about, we’ll now explore and understand the business settings. We want to make sure that our business information is accurate. For that, you need to click on your demo account or your regular account and then select ‘Settings’.
Under ‘General’, select ‘Organization details’. The first option that you see is creating invoices within Xero and sending those automatically to your clients. Hence, you need to click ‘On’ under that option.
Below that, you need to fill out your basic information and contact details. Apart from that, you can choose what you want to include in your invoice such as ‘line of business’, ‘postal address, etc. That’s entirely up to your discretion.
Navigating back to ‘Organization settings’, here we’ll explore other options in this accounting software tutorial for small businesses. For example, under ‘Users’ you can add, modify, or remove users working in your organization. This is where you can give access to your accountant as well.
We’re not going to share too much about ‘Currencies’ and ‘Connected Apps’ in this accounting software tutorial for small businesses. But you can browse around a few apps (including payment gateways like PayPal and Stripe) that you can possibly connect with Xero.
The ‘Features’ section is quite tedious and you can cover this in your own time.
Connecting Business Bank Accounts
Head back to your Xero dashboard to connect your business bank accounts that will automatically import your transactions. You may reconcile those items later. For example, if you purchased office supplies, then that transaction will be automatically imported to Xero.
By clicking ‘Reconcile’, you can ensure that you’ve selected ‘office supplies’ under the drop-down (more on that later). You can thus manage and balance your account with complete ease. To connect your bank accounts, head over to ‘Accounting’.
Then, click on ‘Bank accounts’. As you can see, we have an ASB bank account connected with Xero and have yet to reconcile 27 items or transactions. Also, we have had no transactions imported from our business savings account which is connected with Xero.
Now, click on ‘Add Bank Accounts’, find your bank, and follow the simple step-by-step process to add your account. Remember, it may take up to 10 days before you start seeing transactions carried out through your bank account on Xero.
Understanding the Xero Dashboard
You want to utilize all the extensive tools and features within Xero to make the most out of this accounting software for small businesses.
On your Xero dashboard, you can see an overview of what’s happening within your business:
- Business Bank Account – items to be reconciled
- Total cash in and out in the last six months
- Accounts watchlist – a snapshot of accounts important to you. To add more accounts under your watchlist, click on ‘Accounting’ and then ‘Chart of accounts’. Select an account, check the box ‘Show on Dashboard Watchlist’, and then hit ‘Save’.
- Invoices owed to you – click on ‘New sales invoice’ to create a new invoice
- Bills – A snapshot of bills you need to pay. Click on ‘New bill’ to create a new bill on Xero
You can also navigate down to ‘Edit dashboard’ and hide any of these figures or snapshots if you like. For example, you can hide the ‘Business Savings Account’ because there are no transactions happening through this account. You can also move any of these elements to a different place based on your personal preferences and hit save changes.
Also, by clicking the ‘+’ sign on the top-right, you can quickly create new elements such as bill, contact, invoice, quote, purchase order, and more. You will most likely deal with invoices and bills that you can create from your Xero dashboard as explained before.
How to Reconcile Items
Click on ‘Reconcile Items’ on your Xero dashboard. In this Xero tutorial for beginners, we have already connected our bank accounts. Now, all we need to do is click ‘OK’ next to the information shown in the color green.
Xero has found a match with our contacts and information for each transaction. You can go ahead and hit ‘OK’ for each item. You may also see items that have no match within Xero. This means that this is a new contact or transaction. Under ‘More details’, you can view the statement details.
For this new client, you have to enter the name of the client, the right account (a sales account, for example), description, region, and GST information. If you want to add additional details, click ‘Add details’. Click ‘OK’ when your done. This is going to reconcile that item.
If needed, talk to your accountant about the reconciliation process. For example, they may help you select the right account for each item during the reconciliation process. Depending on the volume of transactions, you can reconcile the items monthly or weekly.
Studying the Other Business Options Within Xero
In this Xero accounting software tutorial, we will also cover the other important business options.
For example, under ‘Business’ you can manage areas related to your customers:
- Short-term cash flow
- Business snapshot
- Sales overview
In addition to that, you can also manage areas related to your suppliers:
- Bills to pay
- Purchase order
- Purchase overview
Some of these options are too advanced to cover in this beginner’s tutorial on how to use Xero for small businesses. But we will have a look at invoices and bills that you’re going to use on a day-to-day basis.
Click on ‘Invoices’ under ‘Business’ and this is where you can go ahead and create an invoice. You can also:
- Add a new credit note
- Send statements
- Import and export invoices
For each invoice, you can see:
- The number of the invoice
- Date and due date
To create an invoice, simply click on ‘New Invoice’ and then ‘New Invoice’ again. Now, you can enter all your information regarding the invoice which can then be sent directly to your customer. Remember to click ‘Save’ once you’ve created it.
Under ‘Business’, find ‘Bills to pay’ and click on it. The interface is pretty much the same as the invoices. Click ‘New Bill’, enter the required information, and then hit ‘Approve’.
Inspecting the Xero Accounting Options
Under the ‘Accounting’ tab on the menu, you can see all your reports within Xero. Moreover, you can access the reports that you’re often visiting under the starred reports.
If you click on ‘Reports’, this will allow you to see financial, sales, tax, purchases, accounting, inventory, payroll, and all the allocated reports under each category. By selecting the star icon on the left of each report, you can add that to the starred reports collection.
To view any report, simply click on it. You can see the date on this balance sheet, change the comparison period if you like, and then see all the updated information. Apart from that, you have the option to edit the layout of your report.
However, for this beginner’s tutorial on Xero accounting software for small businesses, we’ll leave it as it is and select ‘done’. You can export this document as a PDF file, excel sheet, or Google sheet.
Touring the Payroll Options Within Xero
Under ‘Payroll’ we have:
- Pay employees
- Taxes & filing
Take the time to go through each of these elements as this is pretty straightforward. For example, under ‘Overview’, you can see ‘Pay Runs’, ‘Leave to Approve’, and then the dates on the right containing important information.
If you have employees in your small business, there are other features within Xero that you must know. Under ‘Employees’, you can manage all your employees and contractors within Xero. By clicking ‘Add Employee’ or ‘Add Contractor’ you can add any individual here.
Project Options Within Xero
Under the ‘Project’ tab is where you can create and allocate projects. This is an easy-to-use job tracking tool that helps you move towards more efficiency and profitability.
This is pretty self-explanatory. This is where you can access all your contacts. If you click on ‘Customers’, that’s going to take you to the list of customers within Xero. Here, you can also add your customers and follow the same process for your suppliers.
By clicking the ‘+’ sign again, you’ll find ‘Contact’ in the drop-down.
What makes Xero the leading accounting software for small businesses is the apps that they provide. These apps further enhance your online accounting and streamline your day-to-day accounting tasks.
The Xero app complements your Xero account making things a lot easier when you can just work and manage your accounting tasks from your phone.
We’re not going into pricing details in this Xero accounting software tutorial as they may vary depending on the country you are in.
Choose a plan that works best for your small business:
- Starter: $27.50 per month (all in NZD)
- Standard: $60 per month
- Premium: $75 per month
Xero Tutorial for Beginners
Looking for a more visual guide. This video tutorial will help you to get started with Xero and leverage Xero to manage your day-to-day accounting and financial tasks in your business. You can also get a 30-day free trial! Enjoy the video!