O U T C O M E S B Y D E S I G N WORKBOOK1

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1 WORKBOOK1

2 XERO TRAINING HANDBOOK 1. BANK RECONCILIATION The biggest, and most time-saving feature of Xero is its usage of bank data feeds. This makes reconciling your bank statement an easy process without any double entry. The bank data feeds into Xero every night from Tuesday-Sunday it is important to note that this is only a copy of your bank statement and that Xero does not transact on your behalf at all. An important part of keeping your accounts up-to-date is to ensure your bank reconciliation is complete we recommend completing this on a weekly basis. To reconcile the bank, on the Dashboard select the button Reconcile on the relevant bank account as below: We have detailed below the main functions within the bank reconciliation screen: Match Xero matches bank transactions from your statement to transactions that have already been entered into Xero based on amount. The transactions that can be matched include sales invoices, bills and spend/receive money transactions. Therefore, if you have manually entered an invoice or bill and the payment is made on that bill, then Xero will try and match this transaction based upon the amount this needs to be accepted so you can change the allocation of the transaction if necessary. 2

3 If you are happy with the match that Xero has made, you can select OK and the payment will be allocated accordingly. However, if you are not happy with the Match that Xero has made and you want to allocate the payment elsewhere, you can select Find & Match in the right-hand corner. This can only be used if the invoice/bill or transaction has already been entered into Xero. The Find & Match function will be demonstrated at a later stage of this handbook. Create Xero s default setting is that it will suggest previous entries in the Create tab based upon how certain transactions have been reconciled previously. This feature can be turned off easily if you find that the suggestions are always different and therefore confusing they can be turned off at the bottom of the bank reconciliation screen by unchecking the box displayed below: The Create tab is also where bank rules will be allocated this will be demonstrated at a later stage in this workbook. The Create tab will generally be used most where money is spent on the fly and it is therefore not necessary to enter a bill into the system. When there are no previous entries suggested, the Create tab will be displayed as follows: 3

4 Only create a spend or receive money transaction if there isn't a match or suggestion, and you haven't already entered the transaction in Xero. Create a Xero spend or receive money transaction quickly by adding contact name, account and description under the Create tab. Select tracking (if you've set this up), and a tax rate. If you enter a name that does not already exist as a contact, Xero will create a new contact. When you type a name that isn't in your list of contacts, NEW appears in the To field. After you've completed all fields you can select OK and you've reconciled! This creates a spend or receive money account transaction in your bank account in Xero. By selecting Add Details in the bottom right corner, you can create a full spend/receive money transaction in Xero. This can be used if you need to split a transaction between different accounts. Don't enter invoices, bills or expense claims using the Create tab if the imported statement lines are payments on an invoice, bill or expense claim. 4

5 Transfer Xero's Transfer tab lets you enter a quick transfer between 2 Xero bank accounts during bank reconciliation. Use the Transfer tab when you've imported a statement line (or lines) showing the transfer but you haven't entered the transfer into Xero. Discuss The discuss tab can be used where there is a comment you would like to leave regarding a transaction for example you may be unsure where to allocate something, so you could record a note in the Discuss tab and hit Save, and any other person who logs into Xero will be able to see that comment. It is important to note that by leaving a note here, this won t save against the transaction when it is eventually reconciled and it doesn t notify other users that a note has been left. Find and Match As mentioned previously, the Find & Match function can be used if Xero doesn t match the statement line to an invoice/bill which could be because the customer has only made a part payment, or you have paid multiple bills in one transaction line. Payments for Multiple Invoices/Bills We have demonstrated an example below of a situation where you have paid a supplier for two separate bills in one transaction: 5

6 You will see that you have the ability to search for a bill by a name, reference or an amount in order to reduce the list of bills showing. You will also see in the above screenshot that all of the bills in the system will show up when you use the Find & Match function (all of the invoices will also show in the case of receiving a payment from a customer). It can be seen in the above example that the total amount paid was $4,500 with reference under the list of bills you can see that there are two bills for SMART Agency with the corresponding invoice numbers matching the reference. To allocate the payment to both of these bills you can simply mark the checkbox next to the invoices and as the amounts will match up you will be able to reconcile. 6

7 Payments for Multiple Invoices/Bills In some cases, the amount you have paid for a bill or an amount a customer has paid you may be a part-payment. This is also easily reconciled in Xero using the Split function shown below: Once you have hit Split, you will be able to allocate the part payment of the bill. This will leave the remaining balance in your outstanding debtors or creditors listings. Another thing to note regarding the Find & Match screen is that you can select any of the headings of the bill listing (Date, Name, Reference etc) and this will sort the list of bills by that selection this helps when there are a large number of bills. Bank Rules Bank rules in Xero is a great function if used correctly as it speeds up the reconciliation process for transactions which occur regularly. For example, you may have monthly direct debits or you may pay for petrol at a Caltex service station 4 times a month. By using bank rules, you will not need to allocate these transactions you will only need to hit OK. It is important to ensure that the following instructions are followed exactly to make the bank rules work effectively. 7

8 Step One: Step Two: Once you press Create Rule, Xero will prefill the information on the next screen based upon the detail of the bank statement. This is demonstrated below at 1. I It is necessary to adjust these details to make the process as streamlined as possible - in this example, we do not need the Description to equal Eft as this description could be anything, it is the Payee which is important. You can therefore select the X on the right-hand side next to the description line: We can also amend the Payee as in some circumstances, the payee may change. For example, it may be Cooper St Bakery one week and Cooper Street Bakery the next week we still want the rule to work if the payee changes. You can therefore adjust the dropdown box where it says Equals to say Contains. You can also remove the words St Bakery so that if there is any transaction and the Payee contains the word Cooper, the bank rule will be applied: Step Three: At point 2, you need to select who the contact will be. The contact should either by the Payee or if you select the dropdown box, you can add in your own contact depending on the details entered into Xero. 8

9 You can also see in the above screenshot that you can allocate a fixed portion to a certain account this is not used in too many scenarios however this is an option. Step Four: At the next point, you can determine how you would like transaction to be allocated which is demonstrated in the following screenshot: You will also see a Percentage column you can therefore portion expenses by % also. This may be used where you claim a portion of your electricity for Home Office and the remainder is private. Step Five: The default dropdown box for setting the reference is that The reference will be set by me during reconciliation. As we don t want to be entering anything during the bank reconciliation process, you can select the dropdown box as below and change this option to be from the Reference. The bank rule can also be run on just one bank account, or all bank accounts which could be handy when there are multiple credit cards. You can also give the rule a title. 9

10 Step Six Hit Save and the rule is set up! You can go back to the bank reconciliation screen and the rule will appear as shown below: As always, you can elect to not apply the rule and change the contact if necessary however if you are happy with the rule you can hit OK and continue with the bank reconciliation. In order to view and edit your bank rules, you can do this from the dashboard: 10

11 2. SALES INVOICE Sales invoices in Xero can be accessed by a number of avenues either via the login dashboard, or what is called the Sales Dashboard. The display on the front dashboard provides you a quick snapshot of what is owing to the business by customers, and you have the ability to create a new sales invoice: Alternatively, to obtain more information regarding your invoices you can access the Sales Dashboard by: 1.Clicking on Accounts along the top of the Xero page 2.Selecting Sales This will take you to the screen below: From here, you can create new invoices, send statements to your customers, review your outstanding listing and search for either paid or unpaid invoices. You also have some data in here around your customers such as which customer owes the most and what portion of this is overdue, and when funds are expected to come into the business based on the due date on the invoice. To create a new invoice, simply click + New. 11

12 The invoices fields are as follows: To: This is the Customer if it is existing, as you start typing the customer will appear. If it is a new contact, it will be created upon the completion of this invoice. Date: Date of the invoice. Due Date: Due date of the invoice it is possible to set default due dates for invoice either in the Contact set up, or the Invoice Settings. Invoice #: This is the invoice number this will be automatically generated in Xero. This can be customised in the Invoice Settings. Reference: This field does not have to be filled out however you could put a Job number, Quote number or any other relevant detail if necessary Branding: This does not need to be changed this will be your invoice template Item: This will only be entered if you have inventory items, or have the same services for each customer Description: This is the description the client will see regarding the works completed Qty: Must always be a Quantity entered if you do not invoice on an hourly rate, you can put this as 1 and the total will go into the next field Unit Price: The rate or selling price of the product/services Discount: Can enter a % if you are giving a customer a discount Account: This will be your income account in Xero may be Sales, Fee Income, Consulting Fees etc Tax Rate: This is the GST this will be automatically calculated depending on the account OR the set-up of the contact this field can be adjusted if necessary Region: This will only appear if you are using Tracking Categories in Xero Amount: This will calculate based on the Qty & Unit Price Once all of the invoice information has been entered, you can click Save, Approve or Cancel. Saving the invoice will only save it as a Draft Invoice may be necessary if you want to come back later and edit the invoice. This will not push it through to Awaiting Payment status. 12

13 There is a little dropdown arrow next to Save, and you can choose to Submit the Invoice for Approval. This is a good function if you have different members of your team doing different functions in terms of Accounts Receivable. From here, you can , Print PDF, Attach a File or Edit/Copy/Void the invoice. When you go back to the Sales Dashboard, you can simply click on Awaiting Payment and this will bring up a list of all of your invoices that are waiting to be paid: - Invoices can be marked as Sent when you them to a customer, or when you Print PDF you have the option to mark the invoice as Sent 13

14 Credit Notes Credit notes will most commonly be used when you have an invoice that a customer is not going to pay, and it therefore becomes a Bad Debt in the businesses accounts. They can also be used when you need to reduce the invoice total at the request of a customer and when you need to issue a cash refund. To allocate a credit note against an existing unpaid invoice, please follow these steps: 1. Go to Accounts > Sales 2. Select Awaiting Payment 3. Click into the relevant invoice from the list of invoices 4. In the right-hand corner, select Invoice Options 5. Select Add Credit Note 6.The Credit Note in the next screen will automatically be pre-populated with the data of the invoice 7. If the amount of the credit note is correct, you can simply hit Approve 8. If you need to adjust the amount of the credit note you are giving the customer, you can make these adjustments in the Qty/Unit Price fields 14

15 To issue a cash refund if a customer has already paid the invoice, you can follow these steps: 1. Go to Accounts > Sales 2. Click on the little dropdown arrow next to + New 3. Select Credit Note 4. Fill in the details of the credit note this can also be provided to the customer 5. Click Approve 6. From the next screen, you can or Print PDF if necessary When you make the cash refund through your bank account, you will then be able to Match the refund against this Credit Note in the bank reconciliation screen. Quotes From the Sales Dashboard, quotes can also be created and sent to customers, and turned into invoices once accepted. To create a new quote: 1. Go to Accounts > Sales 2. Click on the little dropdown arrow next to + New 3. Select Quote This looks much like an invoice however you have the ability to add a Title & Summary to your quote, and enter Terms of the Quote. 15

16 When you hit Send, this will automatically bring up the screen. From here you can directly to your customer and they will receive a link in their from here they can Accept, Decline or Ask a Question. When the customer selects any of those options you will receive an notification. If you would prefer to print the Quote and provide it to the customer, you can select Save. You can then go back into the Draft Quote and select Options in the right-hand corner this will allow you to mark the Quote as Sent. You can also manually accept or decline the quote by doing the above after you have marked the Quote as Sent. Once the quote has been accepted, you can Create Invoice which will copy the data into an invoice for you: 16

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18 3. BILLS In Xero, Bills are much like Sales Invoices. Bills are referred to as the invoices you receive from Suppliers. Much like Sales Invoices, these can be accessed from the Xero Dashboard or via a separate Purchases Dashboard: 1.Go to Accounts > Purchases You will notice that the Purchases dashboard is very similar to the Sales dashboard, and all of the functionality is the same the ability to search, see paid bills, see which bills are overdue etc. To create a new bill, click + New. 18

19 The options in a bill are the same as the options in a Sales Invoice Approving the bill will push through to awaiting to be paid. File Attachments One great feature in Xero, is the ability to attach files to bills. This is a great document storage initiative and allows you to scan in any bills or upload via , rather than keeping paper copies in files. Files can be attached by: Purchase Orders You can also do purchase orders in Xero, which can be turned into bills once accepted. These can be created by: 1. Go to Accounts > Purchases 2. Click on the little dropdown arrow next to + New 19

20 3. Select Purchase Order Once a purchase order has been approved, you will then have the option to Send via , Print and Mark as Billed this will copy the details of the Purchase Order into a bill. 20

21 4. PAYROLL Payroll in Xero is simple once the set-up is correct. I will run through some of the most important things that must be complete for your payroll to be a breeze. Firstly I will run through Payroll Settings and the importance of these, then setting up Employees & their pay templates and then running a Pay Run. Initial Payroll Setup Set up pay calendars Pay calendars dictate how often your employees are paid. For example, if your week is a Tuesday Monday and you pay on the following Tuesday, pay calendars is where you set this up. You can pay weekly, fortnightly, monthly or quarterly. 1. On the Settings menu, click Payroll Settings. 2. Click the Calendars tab. 3. Click Add Pay Calendar. 4. Select how often you want to pay your employees from the Pay Period list. 5. Type in the name of the pay period in the Name box. 6. Click the calendar and select a Start Date. 7. Click the calendar and select a First Payment Date. 8. Check when the first pay period ends and the upcoming payment dates. This information is below the dates you just selected. 9. If needed, make changes to the dates. 10. Click Add. 21

22 Set up Superannuation In Xero, Superannuation Fund details must be entered into the Payroll Settings before they can be allocated to an employee. It is imperative that you add the superannuation fund in here before you complete the set-up of an employee. 1. On the Settings menu, click Payroll Settings. 2. Click the Superannuation tab. 3. Click Add Superannuation Fund. 4. From Type, select Regulated Superannuation Fund. 5. From Name, start typing the fund name or USI and select the required fund from the list that appears. You will need to contact Payroll Support if the fund you are looking for does not appear. 6. Enter the employer number, if you have one. (If not, just leave the box blank.) 7. Click Save to complete. Now you are ready to start adding Employee Details and processing Payroll in Xero. Adding Employees When you are first setting up payroll in Xero, or when new people start, you need to add employees before you can enter their other details. 1. On the Payroll menu, click Employees. 2. Click Add Employee. 3. Enter the basic information about the employee. 4. Click Save. The new employee appears in the list of current employees. You will then need to enter the remaining employee details you will see that new tabs have appeared which need to be worked through from left to right. 22

23 - The first tab is Employment. This is where you enter their start date, their payroll calendar, their holiday group (for public holidays), their ordinary earnings rate and their superannuation fund. You will see when adding their superannuation fund that only the funds that have been entered into Payroll Settings will be available to choose from. - The next tab is the Taxes. This is basically where you copy the information from the employees TFN Declaration. In the past, you had to manually mail this form into the ATO however now it can be filed directly through Xero by selecting File Now. 23

24 - The next tab is Leave. This is where employees leave applications are entered. When an employee takes a personal leave day, or goes on annual leave, the application must be entered into here first so that it picks up the hours correctly when you run the payroll. When you enter the leave application, the hours will be automatically calculated for you. - The next tab is Bank Accounts. Here you can enter the employee s bank account details. If the employee would like to be paid into a few different accounts, you can also enter these details in this tab. - The Payslips tab is where you can see a history of this particular employee s payslips. - The next and most important tab is the Pay Template. If this is set up properly, then running your payroll each period is very simple. I have provided a step-by-step example below: James is employed for 38 hours per week and receives a salary of $40,000. He has $10 deducted each week from his pay for union fees. He also contributes an extra $50 per week into superannuation on top of the statutory rate. 1. Select + Add Earnings Line 2. From the drop down box under Earnings Rate, select Ordinary Hours (you will see that you can also add allowances and overtime here). 3. Under Calculation Type, select Annual Salary (if the employee is employed on an hourly rate rather than a salary, you would choose Enter Rate). 4. Hit OK 5. In the hours per week box, type in In the Annual Salary box, type in $40,000 24

25 7. Under Deduction Type, select + Add Deduction Line 8. Under the dropdown menu, select Union Fees/Subscriptions (different items can be set up in Payroll Settings under Pay Items) 9. Under the Calculation Type select Fixed Amount 10. Hit OK 11. Type in $10 to the amount box 12. Under Superannuation Fund, select +Add Superannuation Line 13. The fund will already be selected depending on what you have added into their Employment tab 14. Contribution Type will be SGC 15. Under Calculation Type select Statutory Rate 16. Hit OK 17. Add another Superannuation line for the additional $ The Contribution Type will be Post-Tax Voluntary Contribution (Employee) 19. The Calculation Type will be Fixed Amount 20. Select OK 21. Type the amount in the box *For an employee you are only contributing the normal amount of superannuation for, you would not need to add that additional line 22. Select +Add Leave Line (Full-Time or Part-Time employees only not Casual) 23. The first leave type will be Annual Leave 24. Under Calculation Type, select Calculate Rate Based on Ordinary Earnings 25. The hours of leave accrued each year by full-time employee will be 152 (38 * 4) (this will differ if the normal week is 40 etc you just need to multiply the normal working week by 4) 25

26 26. The hours in a fortnightly pay period for full time employees will be 76 (38 * 2) (as above, this will differ depending on the normal week. The wording will also be different if employees are paid weekly or monthly etc) 27. Hit OK 28. Now you need to Add another Leave Line 29. The Leave Type will be Personal/Carer s Leave 30. Calculation Type will be Calculate Rate Based on Ordinary Earnings 31. The hours of leave accrued each year by full time employee will be 76 (38 * 2) 32. The hours in a fortnightly pay period for full time employees will also be Hit OK 34. Select Save The above will differ depending on how you pay your employees and may require some assistance. Please do not hesitate to consult your advisor at HTA Advisory or Xero s help guide which is very detailed. - The Opening Balances tab will not need to be touched - The Notes tab can be used to add notes for certain employees if necessary Your employee is now all set up and ready to go. You can make any adjustments to the pay template if necessary, for example if the employee receives a pay increase or starts receiving allowances/commissions. 26

27 Processing the Pay Run 1. On the Payroll menu, click Pay Runs. 2. Click +Add Pay Run. 3. Select a pay period from the menu. 4. Click Next. The employees that will appear here will depend upon the pay calendar they are assigned to. You can remove employees from the pay run if necessary by unticking the green tick on the right-hand side. If you need to make any changes to the employees pay, such as adjusting hours or adding overtime you can click into the employee and make the adjustments. Once you click into an employee, this will bring up a replica of their pay template. From this screen, you can add/remove anything you need to and this will not affect their pay template that has been set up in their employee file. Once you are happy with all of the employees pays, you can hit Post Pay Run. 27

28 From this screen, you can select Pay Run Options and Payslips. It is important that you understand that by posting your pay runs, your employees won t automatically be paid. You must still pay them as normal through your banking. When the wage transactions come through the bank account, it is recommended that you set up rules for these to allocate them to the Wages Payable account. 28

29 5. AUTO SUPERANNUATION We have provided this guide to you as a supplement to our Xero training. This should be consulted when you get home/in the office and start playing with Xero with your real data. You should also use the Help menu in Xero extensively which can be found: You can either search for help using keywords, or find help for this page. For example, if you are creating an invoice and need help with something, you can find help for this page and you will be directed to the invoice help menu. Of course, if Xero help is of no assistance please do not hesitate to contact your advisory here at HTA Advisory who will be happy to assist. 29

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