Welcome to the Fit Small Business Xero training course!
In this lesson, we’re going to cover how to set up organization and financial settings
in Xero.
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!
The information that is required to set up the organization and financial settings section
affects just about everything that you do in Xero.
In the organization section, you will provide basic information such as the address, telephone
number and email address of your business.
This information will appear on customer invoices, credit notes and purchase orders that you create.
In the financial settings section you will include information like your fiscal year,
business entity (S Corp, Sole prop etc;) and sales tax.
For more information, we have included a link below this video to our business entity guide.
The information that you provide in this section is used on all financial reports, tax returns
and other financial documents.
Next, we will discuss all of the information that you need to gather in order to set up
your business in Xero.
In order to make the most of your time, it’s important that you have access to key documents
and other information that you will need in order to set your company up in Xero.
While it’s not required that you set up everything all at once, we recommend that
you provide as much info as possible.
This will prevent you from having to fix something later on, which will save you some time.
Here is a list of some of the key documents and questions that you will need to answer
as you walk through the Xero setup guide.
The business name, address,
email address, website,
any social media links that you'd like to include, company logo,
your Tax ID Number, business entity (sole prop, LLC etc;),
your accounting method (cash or accrual), bank statements,
credit card statements, your chart of accounts list*,
account balances*, the numbering sequence for customer invoices*
and copies or a list of all outstanding checks that you've written, outstanding deposits,
opened customer invoices, and unpaid bills.
* From this list, the items that are required if you are an existing business, include everything on this list.
However, if you are not an existing business but a brand new start up then you probably won't have a chart of accounts
list or anything else below that account balances, etc.
So no need to worry about having those items if you're just starting your business.
Some questions that you will need to answer:
-What is your fiscal year?
-What industry does your business fall into?
-What payment terms do you want to offer your customers?
For example: Net 30 days or Net 60 days.
-Do you need to create estimates/bids/quotes for your customers?
-What payment terms do you have with suppliers?
For example: Net 30 days or Net 60 days.
-Do you need to create purchase orders?
-Do you need to track income and expenses by location or department?
-What date do you want to start using Xero to track your day to day business?
- and do you charge customers sales tax?
When you first log into Xero, you reach your dashboard.
The dashboard gives you a snapshot of important financial information, such as invoices owed
to you, bills that you need to pay and bank balances.
When setting up Xero, you will spend most of your time in Settings.
To navigate to the organization and financial settings, go to General Settings.
Within the Organization screen, you can edit both the Organization Settings and the Financial Settings
Let’s start with the Organization Settings.
In Organization Settings, you will enter basic company info that will appear on customer
invoices and quotes as well as financial reports.
You can pick and choose what information you want to appear on your customer invoices by
selecting the “On” option right here.
We will use a fictitious company, Acme Web Pro Plus, a digital marketing business to
demonstrate some of the concepts in this lesson. Starting with our basic information, in the first field we have
Display name - This is the company name that you will see in Xero when you log in.
Legal/Trading name - If your company name (DBA) is different from your legal name, then
be sure to enter your legal name in this field.
The company name that you enter in this field will appear by default on financial reports
and all outgoing invoices, quotes and other documents.
Logo - If you have a company logo, this is where you would upload it.
This logo will appear with your profile in the Xero Business Community.
This is a community of other Xero users that you can connect with to get answers to questions
as well as learn great tips on how to use Xero.
In addition, this logo will appear on all outgoing invoices, quotes and other documents.
What is your line of business - You can enter a brief description of what your business does in this field
Based on previous descriptions entered, Xero will make suggestions.
However, if you cannot find something that best describes what you do, you can enter
your own unique description.
Organization type - Select the legal structure of your business.
The options that you have to choose from are:
Corporation, Exempt Organization, Partnership, Private Foundation, S Corp, and Sole Proprietor.
This information will be used to complete tax returns and other financial documents.
EIN - Your employer identification number belongs in this field.
If you don’t have an EIN, you can enter your social security number instead.
This info will be used on tax returns and other financial documents.
We have included a link below this video to find out if you need an EIN.
Organization description - You can enter a brief description about what your company
does here.
This information will appear in the Xero Business Directory.
Let’s complete the contact details section now.
Postal (mailing) address - In this field, enter the address where you would like to
receive customer payments and other important business correspondence.
This address is also used for check remittances.
Right below that we have our Physical address - If your mailing address and physical address are the same then you can just select the box.
But if they are not, then you want to go ahead and enter the physical address where your business is located in the fields
Telephone - Enter the telephone number where customers can reach you. This information will also appear on any invoices, quotes, and other documents that you create and send to your customers.
Email - Enter your business email address where customers can email you.
Website - If you have a website, enter that information in this field.
Otherwise, you can leave it blank.
Add contact field - (click link) As you can see, you can enter any additional ways you
would like to be contacted either via phone, fax or social media channels.
We are all done with the organization settings.
You can come back and make any changes to this information whenever you need to.
Now let’s talk about financial settings.
Financial Settings includes information that
will affect your financial reports. So let's go back to our General Settings section. Right below Organization Settings we've got our Financial Settings option.
It’s important to set this information up (before you begin entering transactions) so
that your financial reports are accurate and your sales tax is tracked and reported correctly.
If you need assistance with completing this info, contact your accountant or you can click
the link below to check out the Xero Directory which includes a list of accountants and bookkeepers
who are certified Xero experts.
Let's begin with the Financial Year End - Indicate the last day of your fiscal year.
Most businesses use a calendar year, (December 31) which is the default in Xero.
However, if your fiscal year runs July 1 through June 30 then you would select June 30 as your
financial year end.
Sales Tax - The information in this section will be used to track and report sales tax
that you collect from your customers.
Starting with the Tax Basis - Select which method (cash or accrual) you are required to use to report sales tax.
If your state requires you to use the cash method, then you will report sales tax based
on when you receive payment from your customer; however, if your state requires that you use
the accrual method, then you will report sales tax based on when the sale is made.
Be sure to check with your accountant if you are not sure which method to select.
The next field is the Tax ID Number - This is the same as your EIN that we entered in the Organization Settings section.
Tax ID Display Name - Enter the legal name associated with your tax ID Number.
Tax Period - Indicate how often you are required to report sales taxes to your state.
This generally depends on how much sales tax you collect.
Most businesses must file on a monthly, quarterly or annual basis.
Tax Defaults - In this section, we need to indicate what the default tax settings are
for sales and purchases.
There are 4 options to choose from: Based on last sale, Tax inclusive, Tax exclusive, or No tax
Based on last sale - when you elect this option, the invoice will follow the format that your last invoice took. Either tax inclusive, tax exclusive, or no tax.
Tax Inclusive - This option will include tax for each taxable item on sales, invoices, and credit notes that you create for customers.
Tax exclusive - This option will show tax separately on sales invoices and credit notes
(or purchase orders) that you create.
For example, if you invoice a customer for products that cost $100 and you charge 8%
sales tax, there will be a separate line on the invoice to show the sales tax calculation
of $8.00 ($100.00 times .08).
No tax - Select this option if you are not required to charge your customers sales tax.
That wraps up the lesson on how to set up organization and financial settings 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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