Xero Setup/Migration Checklist

Xero Setup/Migration Checklist

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Following are some guidelines if you are setting up Xero for the first time, or migrating from another system to Xero.

Versions of Xero

There are different versions of Xero, some of which are only available through Xero Partners such as ourselves. We have come across businesses who are simply on the wrong version – they may have been set up initially as a start up, and not upgraded as their business has grown. The most common is not having access to Invoicing, Foreign Currency, Expenses, or Payroll when you could really benefit from it.

The opposite can also apply. If you are a sole trader, not GST registered and don’t need to keep record of who owes you what, or what you owe your suppliers, there may be a lower cost version of Xero that will suit you. Ask us about this.

Getting Information Off Your Current System

There is some information you will probably want to transfer from your existing system – most commonly this is the General Ledger Codes, Bills, Invoices, Contacts and Suppliers. Although templates are available to upload directly, requirements vary so decisions may need to be made on exactly what’s required.

GL Account Balances

Ideally all GL account balances would be loaded as at the conversion date so the accounts on Xero will be correct from the start. However, that requires the balances to be checked and accurate for loading and we have found it is often difficult to get this information. Sometimes it is not until financial reports are prepared well after the year end that it can be sorted.

Changing to Xero can be a good time to review General Ledger codes. Check if any old codes need to be deleted, codes combined together, new codes set up and so on. It’s a good time to review how you are recording your data and if it giving you the information you need to make good decisions in your business. An example is clearing up what’s above the Gross Profit line, and what’s below as overheads.

Many accountants now use Xero and may use the Xero account code mapping feature. This means that although your General Ledger codes might be different from any other business, mapping codes can be set up so that when your accountant gets the data they don’t have to re-arrange it to their own set-up. Saves time and your money.

Accounts Payable and Receivable

You will need accurate Accounts Receivable and Accounts Payable records as of the date of conversion. Its’ very common for AR and AP to be out of date with old transactions that need to be either cleared, or corrected – this can be quite a process but is important to do before starting fresh in Xero.

Some businesses also find it impractical to bring in all open invoices or bills due to the sheer volume. You could then make a decision to cash code some of these, after being very clear about how records are going to be kept in the transition period.

Otherwise, Accounts Receivable must match all invoices owing that will be loaded (even if they are loaded as a bulk combined “invoice”), and Accounts Payable must match all bills owing to be loaded. Templates are available in Xero to upload outstanding invoices and bills and invoices.

Bank Accounts

At a minimum you must have accurate balances for all Bank Accounts to be loaded into Xero. There should be a bank feed set up for every bank account, overdraft or credit card that is included in the company accounts. Each Bank has a different method for setting up bank feeds and it can take up to 10 working days to get them going, so it pays to set up Bank Accounts and request bank feed as soon as possible.

The bank accounts need to be set up in Xero first, and then the form downloaded / signed / uploaded back into Xero. Some banks allow bank feeds to be set up from within Internet Banking. This is a bit of a changing feast at the moment, and there are situations where you might fill in the form within Xero, and then find out that the bank actually required you to set up the bank feed directly through your internet banking.

There are some situations where it’s not clear whether a bank account should be brought into Xero or not and the answer could be Yes, or No. Our approach around this is firstly that we strongly encourage separate bank accounts for personal v. business and that each account is used for what it was intended for. Secondly, if an account is being used for both personal and business expenses then we look at the volumes of each and whether it’s going to be quicker to reconcile a whole lot of personal stuff, or bring in transactions manually.

Based on how quick the bank feeds get activated there is usually a gap in the data which has to be manually imported. This is simple in Xero.

Suppliers and Batch Payments

You may want to import suppliers directly into Xero so you can use the batch payment function to pay your bills. This is real time saver as it means not just being able to import a file quickly to your bank to pay your supplier bills, but also when it comes to reconciling you won’t be clicking through Xero trying to match off each bills that was paid individually – it just comes as one transaction.

Some banks have batch payments through normal internet banking (ASB and ANZ at least), while others require you to set up a Business Banking login. The advantage of having the Business Banking login is that you can then assign other users with particular authority – so one person can only load batches, while you have authority to check and approve. In our experience it is very worthwhile getting this set up.

Contacts

It’s very easy to import contacts into Xero. But take the time to clean up your data first – we have yet to receive a file of contacts that is ready for direct import into Xero. Often it’s a case of deleting out old data you don’t want, updating old data, and also most commonly putting the data into the correct columns for import. You may think you can clean this up later but importing faulty data can risk messing up other software you have working alongside Xero.

Integrations

If you are using other software alongside Xero you will need to consider where you are going to keep which data. This will depend on who is accessing which system, and what they need the information for.

Contacts

Here’s an example – a service business is using Xero for accounting, WorkflowMax for job management and Hubspot for CRM. They are all integrated for contacts, and the format of “Contacts” is different in each system.

You might decide to have billing contacts only in Xero, Job Contacts in WorkflowMax, and lead contacts in Hubspot. These are sometimes the same, but sometimes not. So there is also a decision is around where you put the information for each contact, and whether or not you want if flowing from one system to another.

Integrating codes with other apps

General Ledger Codes and Tracking Codes should also be considered alongside any other apps you might be using in your business. For example if you are using WorkflowMax you might set up tracking in Xero to enable WorkflowMax to send through data that way directly. Some apps may not integrate with tracking so you may need to consider how the information coming through to Xero can be dealt with using General Ledger codes only.

If a lot of information is coming from another app like Shopify / Paypal / Stripe etc you may also need to make decisions about what level of detail on the transactions you need in Xero. It might be that detail is kept in another system and you decide to just cash code everything in Xero. There are also bridging apps to consider if you have large volumes to deal with.

Underutilised Xero Features

Many Xero users do not make the best use of the software. For whatever reason, they get set up and then don’t explore new features as they are released, or even the standard features that have been around for years and years.

Converting to Xero is an opportunity to reduce the amount of paper in your business, become less reliant on hard copies, reduce filing and make it easier for information to be accessed by those who need it. It can be a challenge to your current systems to make the best of what’s available in Xero, but it’s worth just doing it – right from the start. So either take the time to explore the features yourself, or spend time with an expert to make sure you get all the benefits of Xero.

Tracking

Tracking is a feature that is often underutilised. Tracking allows you to categorise your transactions into different areas. For example you might have 3 offices so expenses can be Tracked to whichever office incurred it. You can then report overall, as well as reporting on each Office individually. The Tracking Feature has it’s limits and it’s important not to use it in a way it was not designed for as this may result in system errors.

Custom Reports

With Xero custom reports, you can re-order the codes on your reports to make profit margins, and other important business financial data easier to see. Invest in exploring the custom reports – you can save as many custom reports as you like – it is now a strong feature of Xero after a big upgrade a couple of years ago.

Payment Portals

You may have noticed Xero now makes it very easy to set up a Payment Portal through Stripe. We strongly recommend you consider this during set up. It means that when your customers receive their invoice from you, there will be a “Pay Now” button where they can pay directly on the spot. If you send regular invoices, it is now possible to invite your customers to activate an AutoPay option so that once they’ve put in their credit card details, all their bills from you will then be paid automatically on the due date. This is a game changer for many Xero users and can reduce the time it takes for you to be paid, but up to 10 days.

Fixed Assets

Fixed Assets is another feature of Xero we recommend to use. Traditionally this has been done by accountants through their own systems but Xero offers pretty good functionality for it. We support having your Fixed Assets recorded in Xero. There is a nice feature that if you code anything to a GL code that is classified as a Fixed Asset (eg. Computer Hardware, Office Furniture, Vehicles etc), Xero will automatically create a draft fixed asset for you to review and confirm.

Some other features to explore:

  • Xero Expenses – easily control expense claims from an app ($5 a month per user – first user free)
  • Email bills in to Xero with your own unique Email – Xero reads some of the information automatically and enters it into Xero for you (included)
  • Automatic invoice reminders – remind your clients of overdue invoices, tailor your messages
  • Smart Lists – see who your most valuable clients are and group them to easily send emails to
  • Invoice Templates – set up multiple invoice templates with different Trading Names or to meet specific supplier requirements
  • Connect Xero directly to major NZ suppliers so their bills come through will all details automatically – fuel cards, building supplies, hospitality suppliers etc.
  • Products and Services – this is a simple inventory system which can also be used as a way to record items for entering onto your invoices that you don’t want to retype again and again

Xero Owned Addons

Xero Payroll

Xero Payroll is very cost effective and in my view can work very well for smaller businesses with less complex payroll needs. However, we have seen so many incorrect Xero Payroll set ups which have proven difficult and expensive to unpick. We now strongly recommend to get advice from the start to ensure your set up is correct and that you are comfortable to deal with payroll without direct person to person call centre support.

Xero Projects

This is a nice little project management add-on that will work well for smaller businesses with perhaps up to 5 employees who need to log their time and expenses against individual jobs. It’s very simple and easy to test out yourself. If your needs are more complex, or you’re not sure if Projects will do what you need, ask an expert – it could save you a lot of time and frustration.

Hubdoc

Hubdoc is a recently acquired Xero addon which has two fold features to reduce errors and speed up processing. It’s cheap – $2 a month.

The first feature is that Hubdoc can bring in copies of invoices from your suppliers and banks who have online logins. E.g. Spark / Sky / Fuel / Energy / Building supplies. Basically if you can log in to a supplier portal, then you can set up Hubdoc to bring in invoices automatically as soon as they are created. The advantage is that you or our bookkeeper doesn’t have to fish around to find documents, and download them. They are all in one place, and nicely filed into folders. Xero is working hard to add suppliers on – at the moment it’s still a bit limited but can be very useful.

The second feature is that you can upload, email in, photo – send, etc copies of bills and receipts directly to Hubdoc, and Hubdoc will read the information and do the data entry automatically, so you don’t have to. You can also arrange to have Hubdoc send the bills it has read for you, straight into Xero. It’s all about saving time and effort when you have lots of supplier bills to process.


Living Business are business software specialists working daily with Xero across a wide range of industries. If you would like to get setup in Xero or need Xero training, please get in touch with us.