Finance Tech

How to Manage Xero: A Guide For Digital Businesses

A man sitting at a desk counting money.
Written by MicroStartups

Xero has changed the accounting and bookkeeping landscape for many digital businesses. From ecommerce brands to content marketing agencies, Xero allows business owners to take charge and manage finances themselves.

And though Xero is a fantastic way to help you manage your finances — it’s not a completely automated, 100 % foolproof solution either. Like many things, you get what you put in. Spend time learning about Xero and all its features in order to build a business that can weather any digital storm.

Branding and finances: do they mix?

Financial management doesn’t often feature in branding guidelines, but businesses are run on money, and the business of managing money will have a big impact on your brand.

  1. Xero will play a central part in your client and customer brand. The way that you ask for money from your clients says a lot about you as a brand. Xero makes this process a lot more professional and streamlined, no matter how big or small you are.
  2. Spend time personalizing Xero’s universal invoice templates to reflect your branding. Small details like logos and copy make a big difference. Create different templates for different scenarios.
  3. Worried about client experience? Keep invoicing apart from client management and create a separate accounting persona; this can be a handy way to manage tricky conversations.
  4. Be ambitious about your financial processes. Clients should be excited to pay you! (Or at least find it easy).

Xero at the center of client services

Good client relationships are key for digital businesses looking for sustainable business growth. Choosing the ideal client is half the battle, but how do you then hold onto these clients and build a fruitful partnership?

  1. Xero can help you deliver a better service for clients with professional invoices, consistent financial data, and friendly emails.
  2. Don’t get so caught up in client work and delivery that you forget to sort out the really important stuff — invoices. Use Xero daft invoices and automatic approvals to help prompt you to invoice for the work you’re doing.
  3. You can easily create custom invoices with fields that break down your work into projects, departments, hours, and teams. This will help build confidence in your brand and business.
  4. Client proposals can be integrated with Xero with apps like Quoteroller — a great way to make sure that you convert clients quickly and get them into your sales and financial pipeline fast.
  5. Billing time? If you use apps for tracking time (like MinuteDock), you can easily integrate billable client hours into your invoicing system.

Get paid on time with Xero

Cash flow can be a huge headache for digital businesses. With money coming in from all over the world at different times of the month, use Xero’s features and functions in order to ensure that you get paid on time. Xero invoices make life easier for both you and clients — get to grips with Xero invoicing to grow your business.

  1. Don’t leave invoicing to chance — get everyone involved for improved accuracy. It’s a good idea to have financial meetings with client managers who get involved in invoicing as well as reporting. In digital, it’s important to keep project  deadlines in mind; many businesses will be collecting part-payment upon project completion — Xero invoicing will help you manage this.
  2. In Xero, you can easily set up and vary payment terms, so take advantage of this feature and set payment deadlines that make sense for your business. Try to time it so that client payments come in mid-month as well as the end of the month to aid cash flow.
  3. Use Xero’s automated invoice chase functions — you can turn invoice chasers off and on for specific organizations and invoices, and you can edit the templates using placeholders to make them as friendly as possible. It’s up to you how you want to manage chasing, but it’s good to be clear and firm. You can use a chaser app like to help take invoice chasing to the next level.
  4. GoCardless will help you collect money on a regular basis — use it to avoid bank fees for regular payments (it’s cheap and it integrates seamlessly into Xero).
  5. Download and install the Xero mobile app to help you keep track of payments on the go — essential for business owners who travel!

Tracking clients, projects, expenses….

One of Xero’s most useful features is its ability to track transactions with custom codes. Using tracking features for clients and projects means that you can easily track how much running a website, or managing a campaign will cost your business.

  1. Tracking can easily be changed — you can tweak client and project lists as your business grows.
  2. Client and project tracking means that you can take advantage of Xero’s powerful reporting functions to track profitability and decide where to invest your money and efforts next.
  3. Think about what you need to track down the line — a $10 software subscription may not seem like a lot, but these small recurring payments can quickly add up to the thousands. Tracking them accurately will help you keep an eye on expenses.

Xero & bookkeeping

Xero empowers digital businesses and entrepreneurs to manage their bookkeeping for themselves (though you will still probably need the help of an accountant). Think carefully about what makes sense for you to manage in-house, and what you are better off outsourcing — you can easily find bookkeepers well-versed in Xero.

  1. Xero allows you to define and create your own bookkeeping environment — take advantage of this and create a system that will stand the test of time. You may need a financial adviser to help you get set up.
  2. Receiptbank is a bookkeeper’s best friend! It helps you manage invoices and receipts, and its handy mobile app means that you can scan in wayward receipts on the go. Receiptbank integrates with Xero perfectly, and will help you manage tracking and reconciliation.

Accepting PayPal payments

PayPal is a great way to manage international payments and is favored by many online shoppers thanks to its ubiquitous ease. You can pull PayPal into Xero with a dedicated feed.

  1. PayPal can generate a lot of ‘noise’ in Xero  if you use it a lot— you may need a separate system for managing PayPal invoices and clients (like a company credit card).
  2. The description field in PayPal invoices doesn’t easily get transferred into Xero, so be careful — don’t put anything too crucial into that field.

Xero for ecommerce businesses

It’s worth investing in systems that talk to each other — it will make your business smarter. Probably the best thing about Xero are all the awesome integrations that help you manage your business, from logistics to timekeeping. This kind of joined-up management is especially useful for ecommerce businesses selling products online. Ecommerce businesses are data-hungry and time-poor: ripe for Xero.

  1. Hook Xero up with your store. You can pay a small extra for an app or service that connects your ecommerce environment with Xero. Save time and build a store on Shopify that will perfectly integrate with Xero, or spend time developing a custom site in Magento or WordPress. Xero integrates with all the big ecommerce environments and takes the pain out of ecommerce accounting.
  2. Ecommerce is full of useful tools and software that can help you scale, from pricing tools to inventory management and automated emails. Try to favor apps and solutions that fit within your existing ecosystem — it can be hard to change tools at a later date if you find an integration is lacking. Use free trial periods to determine whether a solution will work for you.

Xero is fantastic financial tool — but you need to get to grips with what it can do before you can get the most out of it. Embrace the mobile app and Xero’s countless  integrations to make your financial systems as smooth as possible. The biggest thing that holds companies back from a successful Xero adoption is not knowing enough about the system, and not asking the right questions. Get involved in local meetups and user groups — they can be an invaluable source of knowledge (like this magazine). What’s your favorite digital business Xero tip?

About the author


A team of writers and marketers, MicroStartups was founded to inspire the entrepreneurial and business community to give back. We believe in business growth through giving and supporting the local community.

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