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So, you decided to go ahead and use Xero bookkeeping software for your business.  Good decision in our opinion ☺

Xero is a great software and really easy to use compared to many other bookkeeping softwares.  However, it is still an accounting system and it is important to have set it up correctly, you need to understand what accounting practices to follow and how to get the best out of the system.

Unfortunately, we have seen a lot of businesses where, through their enthusiasm, have gone ahead without really knowing fully or understanding everything they needed to know and it’s then taken a lot more time and effort to unravel or re-do some of the work which has been done on it.  So, we don’t want you to make those mistakes, hence our 7 steps to helping you getting started.

Plan your implementation and decide who is doing what

  • Decide when you plan to implement the change to Xero software.  Ideally, you want to have this in place for the start of a new financial year.  It can be done mid-year but you will be making things a bit harder for yourself.
  • Start preparing ahead of the changeover date so that your Xero is up and running and ready to go as much as possible
  • Decide what support you are going to get with this.  Are you doing it yourself?  Are you going to get a Xero Certified Adviser to help you?   In my opinion, it’s worth paying the one off cost of some set up support to get this right and they will do this much quickly and more effectively than someone who doesn’t know the system or isn’t a bookkeeper or accountant.  You also have them to call upon if you have any questions or issues once you are up and running.
  • Think about, when you have the software up and running, who is going to be doing your bookkeeping each month.   One of the great things about Xero is that you can have staff doing particular elements only e.g. raising sales invoices.  So you may want particular people to have different levels of access.  Your bookkeeper and accountant will also need access for their respective roles.
  • If you are moving from another software, can you utilise the transfer services provided by someone like ‘Movemybooks’.  At the time of writing this blog, they provide free data transfer from Sage and Quickbooks.

Think about what you want from your software

Here are some questions to ask yourself;

a) What functions in my business do I want to operate through Xero?

  • Bookkeeping
  • VAT
  • Debt control
  • Payroll
  • Supplier payments
  • Quotations
  • Purchase orders
  • Budgets
  • Stock management
  • Other

b) What reports and information do I need to get out of the system?  So for example, if I want do job costing then the software needs to be set up in this way.  What information would I want to see on a profit & loss report affects how you structure the chart of accounts.

c) Are there any existing systems you have which you want to interface with Xero or Xero add on companies that you want to explore which would help you streamline your business?

Get the set up done carefully and properly

We’ve already given the opinion that getting a Xero Certified Adviser to do the set up is the best way to go.  However, if you are doing it yourself, then definitely create the time and space to do this and get your bookkeeper or accountant to check it.  There are lots of Xero videos and guidance you can draw upon and work through.

In particular, do take care with the following areas as these are where most of the problems we see occur;

  • The financial settings
  • Conversion balances
  • Stock balances
  • Bank feed

Conversion balances

We’re drawing particular attention to the conversion balances as this is where you are bringing in the closing balances from your business from the last financial year which are the starting point for the accounts in your new financial year on Xero.

As long as you have finished your accounts on the system you are transferring from then you can take these closing balances and enter them in as conversion balances.  Send your previous years accounts off to your accountant and then when they provide you with a year end journal then you can enter this into Xero or get someone to help you with this.

As part of entering the conversion balances process, be aware that you will need to enter all the outstanding debtors and creditors which were outstanding on closing your old system so that these are in the system ready for payments and receipts to be matched to.

If you are transferring from another software, you will see that the standard nominal codes in Xero are different and so there is a matching process to be gone through if you wish to adopt the Xero codes.  So take the time before you enter anything to go through the trial balance from your old accounts and match the codes or create new ones in Xero.

Get trained

Xero provide lots of online training resources which are great and would thoroughly recommend.

Do consider though what is the best way for you to learn and how much time you have.

There is lots to be said for attending a Xero training course or workshop where you can ask questions and be taught the most effective ways to do things in Xero without having to find it all out yourself.

Unfortunately we do see situations where mistakes are made because the person doing the bookkeeping isn’t quite sure what they are doing and this then has to be rectified at a later date and, worse than that, is giving a misleading financial picture of your business in the meantime.

Make sure you get the most out of your system

Like any system, we can often get it up and running to do the critical things but then don’t use it to its full extent so it’s worth keeping evaluating whether there are other things you can use it for, more information you can get out of it and other systems you can link it with in your business.

Quality control

If you have a bookkeeper and accountant in place supporting you, then in effect they will ensure that you are using your Xero correctly for accounting purposes.

If you don’t have one or both of these in place and are doing your own bookkeeping, then we would recommend that you at least get a bookkeeper to do a quarterly review for you (preferably prior to VAT return submissions) and have an accountant in place to do your year end accounts.  Some bookkeepers also offer a service where for a small monthly retainer you can call or email them for support or help.


We hope this blog has helped to give you some practical steps to follow to help you have a smooth and positive transition to Xero bookkeeping and the benefits it will bring you and your business.  We look forward to hearing your comments.

At the Bookkeeping Department, we are Xero certified advisers who provide Xero workshops, 1 to 1 training and Xero set up support and are more than happy to help you in anyway we can.  You can contact us via email at or via our website

To book your place on our next Xero training course, take a look here.