Welcome to the Fit Small Business Xero training course!
In this lesson, we’re going to cover how to set up account balances in Xero if you
are converting from an accounting software program other than QuickBooks.
For those of you who are QuickBooks converts, head over to our course on How to Convert
from QuickBooks to Xero.
Click here to access this lesson.
In addition, if you are brand new to accounting software then you will only have bank and
credit card accounts that need to be set up.
You can head over to how to set up bank and credit card accounts lesson for more information.
Click here to access this lesson.
To follow along with me, log into your Xero account now, or click the link below this
video for a free 30-day trial of Xero.
You can also click this link to access our full Xero course and other helpful resources.
Let’s get started!
In a previous lesson, we showed you how to import your chart of accounts.
In that lesson you had the option to include your account balances.
However, we did not recommend
doing this just yet (unless you’re an experienced bookkeeper.)
In this lesson, we’ll explain how to add account balances in full detail, so even a
beginner can make sure they’re doing it correctly.
As we discussed in the chart of accounts lesson, the accounts are the heart of the system.
If the amounts posted to the accounts are not correct, then the financial statements
will be inaccurate.
Click here to access this lesson.
Please note, if you are not sure how to obtain your account balances, contact your CPA or a Xero
expert who can assist you.
You can invite users to access your Xero account in just a few minutes.
Click here to access this lesson.
In this lesson, we will discuss the information that you need to have handy so that you can
enter account balances for unpaid invoices, known as accounts receivable, and unpaid bills, known as
accounts payable. And any other accounts that have balances in your existing accounting system.
Before you can set up account balances, you will need to establish your conversion date
and you need to have a few documents handy.
We will discuss what the conversion date is first, and then talk about the documents that
you need to have available.
Your conversion date is the day that you will
start keeping track of all transactions, such as invoices and bills, in Xero.
In general, this date should be the first day of a month
for example, January 1st.
If for some reason you are not setting up Xero at the beginning of the year, then use
the first day of the month that you start tracking your daily transactions in Xero.
Please note, you can also use a past date as your conversion date.
So for example, if it’s May,
you could still use January 1st, provided you’re able to enter all transactions that
have taken place since January 1st.
In the Organization and Financial Settings lesson, we
provided you with a checklist of documents that you need to have handy to set up Xero.
Next, we will discuss 6 documents from that checklist that you will need in order to set
up account balances.
The first document is the Trial Balance Report.
The Trial Balance report shows the current
and year-to-date balance for each account on your
chart of accounts list as of a specific point in time
for example, December 31st.
Every accounting program should have this report available.
Second, Unpaid Invoices.
In order to set up the accounts receivable
balance in Xero, you need to have copies of all customer invoices that have not been paid
as of your conversion date.
Later on, you will enter each invoice into Xero and confirm the invoice total matches
your accounts receivable balance as it appears on your trial balance report.
The third document is Unpaid Bills.
To establish the correct accounts payable
balance in Xero, you need to have copies of all unpaid bills as of your conversion date.
Later in this lesson, you will enter each bill into Xero and confirm that the total
of all bills entered matches your accounts payable balance as it appears on your trial
balance report.
Bank and Credit Card Statements are the 4th document. In order for you to properly reconcile your
bank and credit card accounts, you will need to enter the balance of all bank accounts
and credit card accounts as of your conversion date.
This information will come directly from the monthly statement that you receive from your
bank or credit card company.
Be sure to use the statement that is closest to your conversion date.
We will not enter any bank/credit card transactions in this lesson.
However, be sure to check out our How to Set Up Bank and Credit Card accounts lesson to learn
how to import these transactions into Xero.
Click here to access this lesson.
Please note that most bank and credit card statements will have a beginning and an ending balance.
The balance that you should enter depends on the date of the bank statement.
I want you to use the following guide to help you to determine which balance you should use.
If your bank or credit card statement is dated prior to your conversion date, then you will use
the ending balance on the bank or credit card statement as the account balance in Xero.
If your bank or credit card statement is dated after your conversion date,
then you will use the beginning balance on the bank and credit card statement as
the account balance in Xero.
For example, let’s assume that Acme Web Pros
Plus, a fictitious company, has chosen January 2017 as their conversion date
Acme will enter balances from their December 31, 2016 bank and credit card statements.
Since the statement date (December 31) is prior to the conversion date (January 2017),
Acme will use the ending balance that appears on their December bank and credit card statements.
The fifth item is Tracked Inventory Balances.
If you have products that you track quantity
and cost for, known as tracked inventory, then you will need to set up the existing quantity
and cost as of your conversion date.
Before you can set these balances up, you must set up the products in Xero first.
Once you have done that, then you are ready to enter opening balances
for tracked inventory items.
Click the link below for step by step instructions to properly set up inventory balances.
The last piece of information that you will need, has to do with Sales Tax Balances.
If you track sales tax in your current system
using more than one account, you will have to add up the total of all sales tax accounts
and enter that one number into Xero.
Xero only uses one account to track sales tax.
In the How to Set up Sales Tax lesson, we cover how to set up, track and pay sales tax.
Click here to access this lesson.
Now let’s walk through how to enter your account balances into Xero.
Go ahead and click on settings (General Settings), and right below financial settings is conversion balances.
Let's go ahead and start with our conversion date.
In this screen, you will select the month and the year of your conversion date.
After you complete this step, the date that appears here will be the date that you need to run
your Trial Balance report in your old system. So for example if we say like January 2017
next step.
Don’t forget to Save your work.
Step 3 - Enter Account Balances Within this screen, you will enter the account
balances for all accounts that you currently have a balance for in your existing system.
The default accounts that are shown here accounts receivable, and
accounts payable.
You can actually just click either of the fields and enter the account balance.
When you enter a balance in the accounts payable or accounts receivable columns, Xero will take you to
another screen to enter each invoice or bill that matches up with that total.
We'll take a look at that in a little bit here.
The show all accounts will actually show all of the other accounts on your chart of accounts list.
So any of the accounts listed here you can actually click in a field and enter a balance if you need to.
When you click add a new line, this blank field opens up and then you can select add new account
to add the account to the list and then enter a balance for that account.
Adjustments: this field will show the difference between the debits and credits.
Since debits and credits should be equal once you are done, this amount will eventually be zero.
If it is not, check out the link below for tips on entering account balances.
And Lock balances: once you have entered all of your account balances, we recommend that
you lock the balances as soon as possible so that no further changes can be made.
This will help to ensure that your financial statements remain accurate.
Please note, if you are not able to enter all of your account balances at once, you can come
back at anytime to enter them.
Just be sure to save your work before you leave here.
We also recommend that you enter all account balances before you start entering transactions into Xero.
As I mentioned previously
When you enter a conversion balance for accounts receivable or accounts payable
Xero will take you to another screen where you can enter each invoice or bill.
Once the total amount of the invoices or bill matches the balance that was entered here
it will be considered a match. So for example, if we type $1000 in this accounts payable field here and we
click save, we're going to be taken to a screen where we can enter the bills.
Whether it's one bill or multiple bills that add up to this thousand dollar account balance that was entered.
And so once you do that, Xero will consider that a match. And then that conversion balance
will be considered complete.
That wraps up the lesson on how to set up account balances in Xero.
To access our full Xero course or any of the other lessons in this series, click this link.
You can also find a link below this video for a free 30 day trial of Xero.
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