How to use Xero as a tradie: a simple guide

Xero is online accounting software that started in Wellington and is now used by small businesses all over the world. In New Zealand it’s the default choice for many accountants, and every major job management app connects to it.

If your books are currently a spreadsheet, a shoebox of receipts and a panic every GST period, Xero is worth getting set up properly.

What Xero does for a trade business

• Bank feeds: your business bank transactions come into Xero automatically every day. You just match them to invoices and bills, which Xero often suggests for you.
• Invoicing: send invoices with an online “Pay now” option, and set automatic reminders for overdue ones.
• Bills and receipts: snap a photo of a receipt or forward a supplier bill, and it’s recorded against your accounts.
• GST: Xero works out your GST and, in New Zealand, lets you file your GST return to IRD from inside Xero.
• Payroll: if you have staff, Xero Payroll handles pay runs, PAYE, KiwiSaver deductions and payday filing to IRD.
• Reports: see profit and loss, who owes you money and how your cash flow looks.
• Your accountant: you can invite your accountant or bookkeeper in, so there’s no sending files back and forth.

The setup that saves the most time

1. Connect your bank feeds first

This is the heart of Xero. Connect your business bank accounts and cards so transactions flow in daily. Then make a habit of reconciling a few times a week. It takes minutes when you keep on top of it and hours when you don’t.

2. Connect your job management app

This is the big one for tradies. If you use Tradify, Fergus or ServiceM8, connect it to Xero. Invoices you create on site go straight into Xero, and when the customer pays, it matches up. You stop typing the same invoice twice.

3. Set up bank rules

If the same thing comes through every week, like fuel, phone or software subscriptions, create a bank rule so Xero codes it automatically.

4. Capture receipts as you go

Use Xero’s mobile app or its receipt capture tools (Hubdoc) to photograph receipts at the counter, then bin the paper. Many trade suppliers can also email invoices straight into Xero.

5. Turn on invoice reminders and online payments

Set Xero to remind customers automatically when an invoice is overdue, and add an online card payment option. You’ll spend far less time chasing money.

Tips from the trades

• Keep business and personal spending separate. Use a dedicated business account and card. It makes reconciling simple.
• Put GST aside as you go. A separate savings account for GST (and provisional tax) avoids nasty surprises.
• Code materials to jobs in your job app, not Xero. Your job app is better at job costing. Let Xero handle the overall books.
• Ask your accountant to set up your chart of accounts. Ten minutes of their time at the start saves a messy year-end.

Do I still need an accountant?

Probably, yes, especially for year-end accounts, income tax and advice. But with Xero kept up to date, your accountant spends less time tidying your books, which usually means a smaller bill.

Pricing

Xero has several monthly plans, from a basic plan for sole traders to plans with more invoices, multiple currencies and payroll. Check Xero’s NZ pricing page for current plans, and ask your accountant, since many can get you a discount.

Readysite isn’t affiliated with Xero. Features and pricing change, so check Xero’s website for the latest.