10 common mistakes when setting up a Xero file

10 common mistakes when setting up a Xero file

You have made the choice to use Xero – congratulations on a great business decision. Xero is a fantastic accounting software, the interface is well designed and easy to use. However, the initial setup of a Xero file can tricky when you are new to the software. Below are 10 common mistakes we come across when setting up a file.

1. Automatic Invoice Reminders

Setting up invoice reminders is crucial to help you get paid on time. Too often do we see the invoice reminder function in Xero not being utilised. Invoice reminders let the customer know they have either missed a payment by the due date or can remind them when the invoice due date is fast approaching.

2. Immediate online payment

One of the first functions to be set up should be an online payment system so customers can pay their invoices by card or direct debit. This can help you get paid faster by connecting to payment services such as Stripe, PayPal, and Go Cardless.

3. Chart of account configuration

Although the default Xero chart is a good starting point, it is important to customise it based on your business. There will be many accounts that can be deleted or archived and several that will need to be added or renamed. It is suggested an accountant or bookkeeper help with customising the chart to ensure all the default tax codes are set up properly. This can save time and money down the track as it will assist in the business activity statement being prepared correctly.

4. Bank reconciliation report

If you are doing the bookkeeping yourself, the bank reconciliation report will be your best friend. This report compares the bank balance as per your bank statement with the balance in the Xero ledger. You should run this report when you connect the bank feed to ensure there are no discrepancies. Continue to run this report every week and contact your accountant or bookkeeper should there be any unusual variances.

5. Lock dates

Lock dates can be changed by users with advisor access. This ensures other users cannot add or edit any transactions before the lock date. This will often be locked at the end of a financial year however it's also crucial to lock the file after a conversion has been completed in Xero to guarantee the data won't be changed.

6. User permissions

Understanding the user permissions is important when you are adding staff, relatives, or other professionals to your file. Xero central has an easy-to-understand chart that compares the different user roles. For example, you may want your accounts payable officer to only see invoices only plus purchases. This ensures they can’t see bank account transactions, payroll, or financial reports.

7. Connecting Dext

An electronic filing system such as Dext is a must when using Xero. This will ensure all your receipts and other paperwork can be extracted and filed in Xero with little effort.

8. Favourite reports

Xero has reports that can be marked as favourites which allows them to automatically display as an option on the reports drop-down menu for ease of access. Some common reports regularly used include balance sheet, profit and loss, account transactions, activity statement, aged payables, and aged receivables.

9. Linking personal bank accounts

If you operate through a business structure such as a company or trust, it is important to only link bank accounts owned by that entity. It is best practice to keep personal bank accounts out of Xero. If you have paid for something on a personal card, request that your accountant or bookkeeper bring this in for you.

10. Professional Advice

To ensure all the points above are set up using best practice, use a Xero Certified Consultant like Link Advisors. Once the setup is complete they can train you on how to use Xero to its full capabilities.


Contact Link Advisors for any Xero setup, conversion, or training questions.