Xero® For Dummies® 4th Edition published by Wiley Publishing Australia Pty Ltd 42 McDougall Street Milton, Qld 4064 www.dummies.com Copyright © 2019 Wiley Publishing Australia Pty Ltd The moral rights of the author have been asserted All rights reserved No part of this book, including interior design, cover design and icons, may be reproduced or transmitted in any form, by any means (electronic, photocopying, recording or otherwise) without the prior written permission of the Publisher Requests to the Publisher for permission should be addressed to the Legal Services section of John Wiley & Sons Australia, Ltd, Level 2, 155 Cremorne Street, Richmond, Vic 3151, or email auspermissions@wiley.com Cover image: © Xero Limited and affiliates, 2019 Xero® and the Xero logo are registered trademarks of Xero Limited LIMIT OF LIABILITY/DISCLAIMER OF WARRANTY: THE PUBLISHER AND THE AUTHOR MAKE NO REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE ACCURACY OR COMPLETENESS OF THE CONTENTS OF THIS WORK AND SPECIFICALLY DISCLAIM ALL WARRANTIES, INCLUDING WITHOUT LIMITATION, WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE NO WARRANTY MAY BE CREATED OR EXTENDED BY SALES OR PROMOTIONAL MATERIALS THE ADVICE AND STRATEGIES CONTAINED HEREIN MAY NOT BE SUITABLE FOR EVERY SITUATION THIS WORK IS SOLD WITH THE UNDERSTANDING THAT THE PUBLISHER IS NOT ENGAGED IN RENDERING LEGAL, ACCOUNTING, OR OTHER PROFESSIONAL SERVICES IF PROFESSIONAL ASSISTANCE IS REQUIRED, THE SERVICES OF A COMPETENT PROFESSIONAL PERSON SHOULD BE SOUGHT NEITHER THE PUBLISHER NOR THE AUTHOR SHALL BE LIABLE FOR DAMAGES ARISING HEREFROM THE FACT THAT AN ORGANISATION OR WEBSITE IS REFERRED TO IN THIS WORK AS A CITATION AND/OR A POTENTIAL SOURCE OF FURTHER INFORMATION DOES NOT MEAN THAT THE AUTHOR OR THE PUBLISHER ENDORSES THE INFORMATION THE ORGANISATION OR WEBSITE MAY PROVIDE OR RECOMMENDATIONS IT MAY MAKE FURTHER, READERS SHOULD BE AWARE THAT INTERNET WEBSITES LISTED IN THIS WORK MAY HAVE CHANGED OR DISAPPEARED BETWEEN WHEN THIS WORK WAS WRITTEN AND WHEN IT IS READ Trademarks: Wiley, the Wiley logo, For Dummies, the Dummies Man logo, A Reference for the Rest of Us!, The Dummies Way, Making Everything Easier, dummies.com and related trade dress are trademarks or registered trademarks of John Wiley & Sons, Inc and/or its affiliates in the United States and other countries, and may not be used without written permission Xero® and the Xero logo are registered trademarks of Xero Limited All other trademarks are the property of their respective owners Wiley Publishing Australia Pty Ltd is not associated with any product or vendor mentioned in this book Xero For Dummies® To view this book's Cheat Sheet, simply go to www.dummies.com and search for “Xero For Dummies Cheat Sheet” in the Search box Table of Contents Cover Foreword Introduction About This Book Foolish Assumptions Icons Used in This Book Beyond the Book Where to Go from Here Part 1: Getting Started with Xero Chapter 1: Getting to Know Xero Understanding the Advantages of Xero Exploring Xero’s Different Editions Homepage: Checking Out the Dashboard Understanding Your Team’s Needs Integrating Xero into Your Strategic Planning Taking Advantage of Support Options Using Xero in a Training Environment Chapter 2: Getting Organised: Setting Up Xero from Scratch Preparing for Set-Up Signing Up for Xero Understanding Bookkeeping Basics Setting Up Your Chart of Accounts Putting Your Accounts into Practice Adding Ways to Get Paid Tax Rates Chapter 3: Converting to Xero from Another System Preparing to Import Data from a Non-Accounting Program Getting Ready to Convert from an Accounting Program Importing Data into Xero Turning Off Your Old System Chapter 4: Fine-tuning Your Set-Up Tools of the Trade: Understanding the Dashboard Setting Up Users Taking Advantage of Live Bank Feeds Manually Importing Statements Bank Rules Using File Storage and the Xero Inbox Part 2: Daily Activities Chapter 5: Managing Your Contacts Setting Up Customers Setting Up Suppliers Connecting Your Email Account to Your Contacts Tweaking Your Contacts after Set-Up Setting Up Employees Utilising Smart Lists CRM functionality Chapter 6: Managing Your Sales Navigating the Sales Dashboard Mastering Basic Invoice Functions Mastering More Advanced Invoice Functions Recording Payments Taking Advantage of Email Templates Following Up on Outstanding Debtors Chapter 7: Managing Your Payables Navigating the Purchases Dashboard Managing Your Supplier Bills Making Payments Mastering Other Payment Considerations Entering Expense Claims Understanding Xero Expenses Functionality Chapter 8: Reconciling Your Bank Accounts Preparing to Reconcile Automagically Reconciling Accounts Tweaking Transactions to Reconcile Taking Advantage of Cash Coding Viewing Bank Statements Viewing Account Transactions Using the Spend Money and Receive Money Options Fixing Errors What Happens in Life Happens in Xero Part 3: Making the Routine, Routine Chapter 9: Generating Reports Understanding the Reports Available in Xero Customising Reports Understanding Xero’s Different Reporting Options Exporting Reports Accessing Management Reports Chapter 10: Mastering Your Weekly and Monthly Tasks Confirming Accounts are Complete Reconciling Bank Accounts, Credit Card and Online Payment Gateway Accounts Reconciling Your Clearing Accounts Reconciling Your Consumer Tax Control Account Reviewing Your Business Information Reporting to Your Tax Authority Taking Advantage of Xero’s Budget Functions Setting a Period Lock Date Chapter 11: End of Financial Year Reporting Getting Ready for the End of the Financial Year Preparing Accounts for Your Tax Accountant Helping with Tax Accountant Tasks Special Considerations Part 4: Getting the Most Out of Xero Chapter 12: Monitoring Your Business Identifying Key Metrics Generating Useful Information Understanding Xero’s Tracking Options Maintaining Budget Control: Budget Manager Exploring Xero Projects Chapter 13: Managing Your Inventory Items Understanding Inventory Items Setting Up a Xero Inventory Item Managing Inventory Items Adjusting Inventory Balances Accessing Cloud-Based App Solutions Chapter 14: Working with Fixed Assets Recognising Fixed Assets Accessing Fixed Asset Reports Chapter 15: Working with Multi-Currency Transactions Setting Up Multi-Currency in Xero Processing Multi-Currency Transactions in Xero Conversion Balances and Multi-Currency Bank Accounts Viewing Reports in Foreign Currency Chapter 16: Exploring the Xero Marketplace Working with Xero to Xero Networks Understanding the Benefits and Risks of Cloud App Solutions Making Use of Online Cloud Integration Specialists Getting a Feel for Available Solutions Looking at Custom Integration Part 5: The Part of Tens Chapter 17: Ten (Plus One!) Tips for Long-Term Success with Xero Embrace the Cloud Make Use of Networking Technology Export Data to Create Graphs Set up Bank Feeds and Reconcile Regularly Use the Batch Payments Feature Keep Bank Accounts for Business Use Embrace Change Use Tracking to Sharpen Reporting Take Advantage of Repeating Bills and Invoices Collaborate with Your Xero Advisory Team Effectively Tap into Online Storage Features Chapter 18: Ten Common Mistakes Made in Xero and How to Avoid Them Not Making Use of Expert Help Not Understanding Terminology Differences Messing Up Bank Reconciliation Autosuggestions Using a Communal User Account Not Deleting Old User Accounts Thinking Your Xero Emails Are Stored Not Realising the Subscriber Owns and Controls the Data Trying to Make Xero Do What Your Old System Did Watching Your Bank Feeds Refresh Paying Full Price If You’re a NFP Index About the Author Connect with Dummies End User License Agreement Foreword I remember how excited we were when we were approached to support Xero For Dummies We thought we’d made it as a software company — and now here we are with the 4th edition! To be honest, we found it humorous to see an ‘old world’ book about accounting in the cloud — a book on something that changes every week! — but it’s turned out to be a valuable way for accountants, bookkeepers and business owners to discover how best to use Xero and to understand what we’ve been trying to to make life better for those in business Business can be fun For most small-business owners, it’s certainly all-consuming In our previous roles we liked building businesses; we didn’t like the drudgery of administrative jobs and working late into the night to meet a looming tax return deadline As we talked to other business owners it became clear that we weren’t alone — for most, doing the books was the number one pain of running a small business It’s great to hear that the number of business owners is growing, but also that they’re capturing a better lifestyle, free to work anywhere at any time It’s also been great to see a thriving community of accountants, bookkeepers and add-on partners all working together to make life easier for small business owners Many bookkeepers are creating their own new businesses, helping others, in turn, grow As the nature of work changes, smallbusiness ownership is becoming a way of working for many people around the world The move to the cloud is in full swing and is driving productivity across economies We’re seeing an exciting focus on small business as a sector that creates jobs and can deal with some of the big issues, like youth employment The move to mobile in business has been a revelation, and over the next few years we’ll see business software become even more magical as we deploy artificial intelligence (AI) into business software This book is a great way for you to learn to work in the cloud, and we’re sure that as you go through it, or dip into it to take what you need, you’ll see that doing your accounts can be easy and rewarding And hopefully your work will become just a bit more fun We love our community of customers and partners And we love to hear what we can better Thank you for learning more about Xero and what we’re doing, and feel free to send me or the team a note on Twitter at any time You can contact us via @roddrury or @xero Rod Drury Founder, Xero searches for transactions to recode, 149, 251–253 selling business, Xero file options, 327 Send Receipt window, 169 services, as inventory items, 377 Set Exchange Rate window, 407 set-up, preparing for, 24–27 Short Term Cash Forecast, 343 shortcut keys in Xero Cash Coding spreadsheet, 237 Show Base Currency Items Only check box (transactions), 231 Sign Up window, 29 signing up for Xero account, 28–31 single contact, as both customer and supplier, 121 single ledger accounting system, 322–323 Skype, using, 123 Smart Lists, creating and using as CRM system, 132–133 smart phone, accessing Xero on, 21 Social Links area (Organisation Settings dashboard), 34 social media, adding links to invoicing, 174 software, useful, 346 sorting reports, 265–266 Spend Money option, using, 242–247 Spend Money Rule wizard, 106–108 Spend Money window, 243 Split Transaction window, 232 spreadsheets, working with, 62–63 standard package, 11 standard ratios (Business Performance dashboard), 347–348 Standard user access level, 95 Standard View button (reports), 276 starter package, 11 Statement Balance, 91 Statement Details pop-up window (reconciliation), 227 Statement Import Options window, 82, 83 statements, using, 176–178 stocktakes, periodic, 380–381 Straight Line depreciation method, 388 strategic planning, 20–21 strategies, setting realistic, 332–333 stretch bars in Purchases, 183 Submitter access to Xero Expenses, 214 subscriber, ownership and control of data by, 440–441 subscription discounts, 441 subscription purchase, 31 success in meeting KPIs, rewarding, 333–335 summary notes, adding to reports, 275 supplier bills See also bills; invoices entering, 51 managing, 183–191 printing, 197 supplier credit notes, entering, 51 suppliers, setting up, 124 support options, 21–22 switchover date, confirming, 88 system requirements, 24–25 systems, converting from other, 61–88 T targets focusing on specific (example), 333 setting realistic, 332–333 tasks invoicing billable, 367–368 regularly recurring, 283–311 tax accountants contacting prior to EOFY, 315 enabling to work directly in Xero, 322–323 functions, 16–17, 18 helping, 321–326 preparing accounts for, 317–321 tax authority recording payments to, 306 reporting to, 295–306 Tax Exclusive and Inclusive options (sales invoices), 141 tax payments, reconciling for year, 316 tax rate display names, 404 tax rate settings by region, 56–57 tax rates in currency sales and purchases, 404 global, 55–59 mapping, 73 tax reporting, and asset pooling, 394–395 tax reports (bank reconciliation), 223 Taxable Payment Annual Report (TPAR), 299 team members, use of Xero by, 17–18 templates (Xero), downloading, 66–68 terminology, understanding differences in, 438–439 text files converting to CSV files, 68–71 opening in Excel, 69 Text Import Wizard window, 70 Theme option for purchase orders, 189 themed invoices, setting up, 153–157 Time Entry window, 366 Time Entry (Xero Projects), 365–366 time management systems online, 427 time tracking tools, using, 291 time zone, entering, 30 tracked inventory quantities, adjusting, 382–383 tracked inventory values, adjusting, 383–384 Tracking conversion balances, 354–357 for improved reporting, 434 Project time entries from mobile device, 368–370 using, 350–351 Tracking Category window, 352 Tracking options, 349–357 editing, deleting and applying, 352–353 setting up, 351–352 Tracking reports, reviewing, 353–354 training files, establishing, 22 training videos, 21 transaction box (reconciliation), 229 transactions finding and recoding, 249, 251–253 matching misfits, 229–234 searching for, 246–247 transactions correctly matched by Xero accepting, 225–228 reconciling, 228 Transfer Money rules, 109 Transfer tab (transactions), 229, 235 transferring money, 232–234 between foreign and base currency bank accounts, 409–410 TSheets time tracking tool, 291 U UK tax reporting, 304–306 uncleared funds, treating, 86 Uncoded Statement Lines reports, 285–286 underpayment option (Spend Money), 245 unpresented payments, treating, 86 Unrealised Currency Gain accounts, 406 Unrealised Currency Gains account, 408 untracked inventory values, adjusting, 381 Upload attachments to contact function, 125 uploading documents, 110 US, sales tax in, 58 US tax reporting, 302–304 useful information, generating, 335–349 user access levels, 94–95 user accounts, deleting old, 439–440 User Activity tab (Assurance dashboard), 290 user profile, adding email address to, 171–172 users, setting up, 94–99 V Value Added Tax (VAT), 55 VAT Return (UK), 304–305 videos, training, 21 voiding bills, 188–189 W weekly and monthly tasks, 283–311 Wide View button (reports), 276 X Xero account, signing up for, 28–31 Xero balance compared with bank balance, 91–92 Xero balances, resolving difference from bank balances, 247–249 Xero cash coding spreadsheet, shortcut keys in, 237 Xero Expense Claims dashboard, 213 Xero Expense Settings window, 214 Xero Expenses See also Expenses adding new claim in, 215–216 authorising claims in, 219 functionality, 212–220 paying claims in, 220 submitting claim for approval, 218–219 Xero Expenses app, 369 Xero Expenses summary dashboard, 213 Xero file options when selling business, 327 Xero global version, 307 Xero Inbox and file storage, 109–111 Xero Me app, for Payroll, 369 Xero as new system, learning to use, 444 Xero partner, 17 Xero plan, upgrading for multi-currencies, 402 Xero Projects, 358–370 Xero Projects app, 369 Xero to Xero networks, 416–417 Xero Touch dashboard, 131 mobile app, 21 Y Yodlee bank feeds, 102 re-entering passwords for, 103 refreshing, 103 Your Expenses tab (Xero Expenses), 218 About the Author Heather Smith Heather creates and delivers compelling educational and technical content about cloud app tools and solutions that resonate with the cloud accounting and bookkeeping businesses community Using her superpower of ‘explanation’, she’s educated and provided support to over million people, via her: Speaking roles, including panel participation, facilitation and presentations Instructional YouTube channel Newsletter, where she shares curated content, news and events from the cloud apps community (heathersmithsmallbusiness.com/newsletter/) Cloud Stories podcast, which explores the stories behind the people who build or use cloud apps that extend the capability of online accounting software (heathersmithsmallbusiness.com/podcast/) Mastermind community, which shares efficient automation, integration and business process workflow solutions for leveraging cloud apps (www.facebook.com/groups/XeroMasterMind/) Cloud Advisers meetups, showcasing cloud apps that extend the capability of online accounting software (heathersmithsmallbusiness.com/meetup/) Heather is also a Chartered Accountant, a fellow of the Association of Chartered Certified Accountants and a fellow of the Institute of Certified Bookkeepers (ICB), and she holds a bachelor of commerce degree This is her ninth business book In the noughties she created a global virtual consultancy firm focused on providing management report development, data detox, cloud suitability scoping services, online set-up, conversion, training, integration, consultation and ongoing support Heather loves identifying cloud efficiencies and creating meaningful business reports, so businesses can make data-driven decisions While working from home helps Heather stay close to her family and enjoy lots of walks with Charlie, her King Charles Spaniel, her office fits in her handbag and so she also travels extensively Author’s Acknowledgements Rod Drury, I am in awe of your vision and the disruption you’re creating in the accounting industry and for businesses globally It’s an honour to be able to contribute my writing skills to the Xero journey Thank you for your support — I’m ever so grateful you had the faith in me to pull this off Thanks also to my mum and dad, and all my family and friends Thank you to the small-business rock stars who educate, motivate and inspire me — I’m elated to be a part of your journey Thanks to Charlotte Duff, who helps me sound like an ordered and grammatically correct version of me Thanks to Senior Editor Ingrid Bond and Project Editor Chris Shorten for efficiently managing this project and being a delight to work with Also, thanks to the rest of the team at John Wiley & Sons Australia Pty Ltd Many thanks to the Xero staff and community around the world who have answered queries, called me and jumped online with me to run through processes, shared their insights with me over coffee and technically checked the book This is the 4th edition of Xero For Dummies, and my heart warms to know that so many of you have supported me from the beginning of this journey So thanks also to the following: The ORANGILICIOUS Catherine Walker, who — from the other side of the world — answers my queries with a chipper ^OG when I’m up at lonely hours tapping away at my keyboard; the awardwinning #SmokinHotBookkeepers; my Xero Heroes Gillian Rossouw, Cassandra Scott, Melanie Morris and Lisa Martin, who have been with me since the start; and my mentors and friends who’ve helped me on this journey —Jason Forbes, Tracey Newman, Chris Wheatley, Wayne and Sally Schmidt, Vicky Skipp, Clayton Oates, Steph Hinds, Steven Leaney, Matthew Prouse, Trent Innes, Sam Purcell and Hayley Brass (and her mum) Thank-you to Bridget, Tania, Sharron, Karen, Stella, Mel, Kylie, Jen and Amanda for your lasting friendship … I won’t mention I’ve known some of you over 45 years … Thanks also to my writing mentor and friend Valerie Khoo and the Australian Writers’ Centre community — who challenge and believe in my writing If you have a desire to write, a course with the AWC! Thank you to my family: Simon, Christopher and Charlotte Christopher, you’re hilarious and bring laughter and happiness into our lives — thank you for being you Charlotte, your energy and creativity light up a room — stay confident and unpredictable and thank you for being you Charlie, thanks for nuzzling my feet for endless hours, keeping me company and pestering me to take you on walks And thank you to my husband, Simon, who’s accommodated all my crazy writing hours None of this would be possible without you Thanks also go to you — for reading this book If you take a selfie with the book, share it on Twitter and tag @HeatherSmithAU — I’d love to hear from you All the best on your Xero journey Dedication This book is dedicated to my father, Michael Smith Publisher’s Acknowledgements Some of the people who helped bring this book to market include the following: Acquisitions, Editorial and Media Development Project Editor: Charlotte Duff Acquisitions Editor: Lucy Raymond Editorial Manager: Ingrid Bond Production Technical Review: Xero Limited Proofreader: Kerry Laundon Indexer: Don Jordan, Antipodes Indexing The author and publisher would like to thank the following copyright holders, organisations and individuals for their permission to reproduce copyright material in this book: Cover image: © Xero Limited and affiliates, 2019 Xero ® and the Xero logo are registered trademarks of Xero Limited Screen captures from Xero used with permission © Xero Limited and affiliates, 2019 Xero ® and the Xero logo are registered trademarks of Xero Limited Any data displayed in these images is fictitious, and any similarities with any actual data, individual, or entity is purely coincidental Microsoft Excel screenshots used with permission from Microsoft Every effort has been made to trace the ownership of copyright material Information that enables the publisher to rectify any error or omission in subsequent editions is welcome In such cases, please contact the Legal Services section of John Wiley & Sons Australia, Ltd Take Dummies with you everywhere you go! Go to our Website Like us on Facebook Follow us on Twitter Watch us on YouTube Join us on LinkedIn Pin us on Pinterest Circle us on google+ Subscribe to our newsletter Create your own Dummies book cover Shop Online WILEY END USER LICENSE AGREEMENT Go to www.wiley.com/go/eula to access Wiley’s ebook EULA ... right now, Xero For Dummies, 4th Edition, also comes with some access-anywhere goodies on the Net Check out the free Cheat Sheet by going to www.dummies.com and searching for Xero For Dummies... About This Book Xero For Dummies, 4th Edition, provides a comprehensive outline of how to use the Xero accounting cloud solution The main focus throughout the book is how you can use Xero and its... this book Xero For Dummies® To view this book's Cheat Sheet, simply go to www.dummies.com and search for Xero For Dummies Cheat Sheet” in the Search box Table of Contents Cover Foreword Introduction