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How to Convert to Xero

Xero Meeting

How to Convert to Xero – follow our 10-step plan to get it right

Converting your accounts to Xero from another system is an exciting time for your business and you want to get it right. After converting numerous clients to Xero I have found a logical order that works well and want to share this 10-step plan with you.

If you follow these steps, then before you know it you will be enjoying the benefits of Xero.

STEP 1 – COMMIT

“The journey of a thousand miles begins with one step”
Lao Tzu

When you embark on your journey with Xero the very first step is to decide when you are going to convert and commit to it. The ideal time to switch to Xero is at your business year-end, but it doesn’t have to be done then. If you are half way through your financial year and totally fed up with your current system, then I would recommend that you take the leap of faith and switch now. Otherwise you will spend a further 6 months pulling your hair out, wishing that things were better.

STEP 2 – PLAN

Get your team together, sit down and chat through what your plans are. Make sure that everybody is committed to the move to Xero and understands the reasons why. Decide who is going to be your Xero Champion – this person will be the driving force for your project.

You can download our planning document template here.
Grab a coffee and take a couple of hours out of your day to agree your timescales and who will do what.

STEP 3 – GATHER INFORMATION

You want to make sure that you have all the required information available for setting up your Xero account. You can download a form to complete with what is required here.

For your Xero subscription you will need to decide if you will be using Xero for Payroll as well as Accounts and if you will need the Foreign Currency upgrade.

STEP 4 – YOUR XERO SUBSCRIPTION

At this stage, things start to get exciting. You can go ahead and sign up to Xero. If you are not planning to use Xero for Payroll you can take advantage of the 30-day free trial, which you will find here.

Once you have your Xero account you will be guided through the setup process where you can complete the following:

• Basic Information
• Upload your company logo
• Contact Details
• Financial Details
• Xero Users
• Xero Start Date

I recommend that you skip the option to amend your sales invoice layouts (see step 6) and accept the default Chart of Accounts which you can then review in Step 5.
You can also accept the message reminding you that you have no bank accounts set up (see Step 7).

STEP 5 – REVIEW YOUR CHART OF ACCOUNTS *

When you set up Xero there is a default Chart of Accounts available. I recommend that you use the Xero Chart of Accounts unless you have a Chart of Accounts that you are ready familiar with and you want to keep.

The chart of accounts can be reviewed in Xero here:

Settings
Chart of Accounts

You can Add new accounts or Edit existing accounts as required.

*What is a Chart of Accounts?
Your Chart of Accounts is simply a list of the names of the accounts that the business will use for recording its financial transactions. Each account has a unique numeric Code and a Name.

STEP 6 – YOUR SALES INVOICE LAYOUT

If you issue sales invoices in your business you will want to spend some time experimenting with the layout until you find something you are happy with.

Where to find the Xero invoice settings in Xero:

Settings
General Settings
Invoice Settings

To help you create your sales invoice layouts you can also check out the Xero tutorial video here.

The first 6 steps can be done in advance of your start date. Once you arrive at your start date you can then move on to the remaining 4 steps.

STEP 7 – LINK YOUR BANK ACCOUNT TO XERO

Xero bank feeds are amazing as they let you automatically import account transactions into Xero from your bank.
You want to do this fairly soon after your start date in Xero.

This is done in Xero by going to:

Accounts
Bank Accounts
Add Bank Account
You then search for your bank and follow the instructions.

You can view a Xero tutorial video here.

STEP 8 – IMPORT YOUR OUTSTANDING SALES INVOICES *

You will need to prepare a list of all your unpaid sales invoices as at your conversion date. If your Xero start date is 1st April, then your conversion date will be 31st March.

These invoices can either be entered in Xero or I recommend using the option to Import them to save time.

Importing your sales invoices is done in Xero here:
Accounts
Sales
Import

You can then download a template, complete, save, select using ‘Browse’ and then Import.

*Why do we enter outstanding sales invoices?
When your outstanding sales invoices are paid, the receipts will appear in Xero and we will then be able to match the receipts against the unpaid invoices.

STEP 9 – IMPORT YOUR OUTSTANDING PURCHASE INVOICES

You will need to prepare a list of all your outstanding purchase invoices as at your conversion date.

These invoices can either be entered in Xero or I recommend using the option to Import them to save time.

Importing your purchase invoices is done in Xero here:
Accounts
Purchases
Import

You can then download a template, complete, save, select using ‘Browse’ and then Import.

*Why do we enter outstanding purchase invoices?
When you pay your outstanding purchases invoices, the payments will appear in Xero and we will then be able to match the payments against the unpaid invoices.

STEP 10 – INPUT YOUR CONVERSION BALANCES

At your conversion date you need to enter your opening balances from your previous accounting system. If you start using Xero on the 1st of April, you will enter the balances as at the 31st of March. You may need to get your conversion balances from your accountant, and this could be after your year-end accounts have been completed. However you will already have opening balances for the following accounts:

Bank Accounts – as per your bank statements
Accounts Receivable – as per the list prepared in Step 8
Accounts Payable – as per the list prepared in Step 9

You can go ahead and enter these balances, and the remaining balances can then be completed at a later date once they are available.

Bank Accounts – enter the bank statement balances for each bank as at your conversion date. If you have funds in your account, the amount will go in the Debit column; if your account is overdrawn the amount will go in the Credit column.

Accounts Receivable – enter the total of your outstanding sales invoices as an amount in the Debit Column

Accounts Payable – enter the total of your outstanding purchase invoices as an amount in the Credit Column

You input your conversion balances in Xero here:

Settings
General Settings
Conversion Balances

Once you have completed your conversion, it’s time to dive in, and really start enjoying using the software.

Happy Xero-ing!!