Before You Set Up Xero: 10 Things to Get Clear On First

While starting a new Xero subscription is quick and the setup wizard is simple to follow, it’s essential to understand that the decisions you're asked to make early on can have long-term consequences. Before you dive in, make sure you’re clear on what information you'll need and where you stand on a few key setup choices.

Here’s what I recommend all new business owners consider before jumping into Xero for the first time:

1. Your Business Structure

Are you a sole trader, company, partnership, or trust?

Have you registered the right ABN or ACN for this entity?

If you’re switching from sole trader to company, you’ll need a new ABN and a new Xero file and some careful transition planning.

Your Tax Agent Accountant is the best person to speak with to work out which business structure is right for you.

Hold off on setting up your Xero file until your structure is confirmed and your entity is registered. Xero assigns a different set of default accounts depending on whether you choose sole trader, partnership of company so it’s easier to get it right from the beginning.

2. Your GST Status

Are you registered for GST? If not, should you be? 

When will you be likely to hit the threshold and how will you manage the switchover in Xero if you do it later.

What’s your BAS reporting cycle - monthly, quarterly?

What is your BAS accounting basis - cash or accrual?

3. Your Start Date in Xero

Are you setting up Xero from the very start of trade for this business?

Or are you migrating from another system?

If switching systems, what’s your cutover date, and are you bringing in opening balances only or full transaction history and how?

If migration from another system to Xero then what tax returns and BAS returns are going to be produced out of old systems and what returns will be the first to be produced from this one.

4. Your Bank Accounts & Payment Tools

Which bank accounts, credit cards, and payment providers (e.g. Stripe, PayPal) will you use?

Does Xero support bank feeds for these banks? Here’s their current supported bank feed list.

Do you want to accept online payments on invoices?

5. Your Payroll Situation

Do you have staff or plan to hire soon?

If you’re a company director, will you be paying yourself wages that will be subject to PAYG and Single Touch Payroll?

What’s your pay frequency, and which award or pay rates apply?

Will you use Xero Payroll or another tool?

6. Receipt & Bill Management

How will you manage your supplier bills and receipts? Options include:

- Hubdoc (free with most Xero plans)

- Email to Bills

- Manual upload

- 3rd-party tools like Dext

7. Invoicing Preferences

Do you need to send quotes, or just invoices?

What are your standard payment terms?

Do you need branding themes or logos added to invoices?

8. Chart of Accounts & Tracking

Will the default chart of accounts work for your needs, or do you want to track different types of revenue?

If you're registered for GST, the chart of accounts should be customised by a BAS or Tax Agent to ensure each account has the correct type and GST treatment.

Do you want to track income/expenses by project, job, or location?

9. Who Will Be Doing the Bookkeeping?

Will you be doing it yourself or with help?

Do you need training, support, or mentoring to manage it confidently?

Will you engage a BAS agent to review or lodge BAS?

If a BAS agent will be doing your ongoing bookkeeping or BAS lodgements, we highly recommend they also handle your initial Xero setup, so it’s configured in a way that supports accurate reporting from the start

10. Any Software Integrations

Are you using job management, POS, e-commerce, or inventory software?

Do you want these to integrate with Xero?

Who will be responsible for connecting and maintaining the integrations?

Final Thoughts

Getting your Xero setup right from the start makes everything smoother, from reconciling your accounts to preparing BAS. Taking a bit of time now to make clear decisions will save you hours of cleanup later.

If you’re not sure about any of the steps above, or just want to know it’s been done properly, I offer personalised support for small business owners who need help setting up Xero. I’ll guide you through the process, configure your file to suit your business, and make sure you understand how to use it confidently moving forward.

Get in touch if you'd like to get started or talk through whether Xero is the right fit for you.