How to make the very most of Xero’s features

Xero is one of the most widely used accounting platforms in the UK, and it’s not hard to see why. 

It brings invoicing, payroll, VAT, reporting, and much more into a single system that’s accessible from anywhere, on any device.

But having access to Xero’s wealth of features isn’t the same as using them well. A lot of businesses get set up on Xero, find their feet with the basics and then carry on doing things manually that Xero could handle for them automatically. They’re paying for a platform that could save them hours every week, but they use only a fraction of it.

To help you avoid making the same mistake, we’ve put together this blog which runs through Xero’s key features, what each one does, and how to get the most from them.

The features in Xero worth knowing about

Xero covers a lot of ground. Some features you’ll probably use every day. Others will depend on the nature of your business. If you sell products, for example, your business will probably find Xero’s features for inventory tracking and purchase orders useful, while if you run a service-based business, you might lean more heavily on project tracking.

What follows is a run-through of the main features Xero offers. It’s not an exhaustive list of every button and setting, but it should give you a practical overview of what’s available in Xero and where the value lies.

Online invoicing

Xero’s invoicing feature is straightforward to use, but there’s more to it than just sending a bill. You can set up repeating invoices for regular clients, so they go out automatically without you lifting a finger. Automatic payment reminders chase overdue invoices on your behalf. And because invoices are created and stored in the cloud, you can raise one from your phone, your laptop or anywhere else you happen to be working.

Accept payments

Xero integrates with a wealth of payment providers, including Stripe, GoCardless and many more, letting you add a payment link to your invoices. Your clients can pay in a couple of clicks, which means you get paid faster and spend less time chasing. Once a payment comes in, Xero automatically matches it to the relevant invoice.

Bank connections

Xero connects to your business bank account and pulls in your transactions automatically, usually daily. Most major UK banks are supported. This live feed is what makes so many of Xero’s other features work well. Without it, you’re back to importing statements or entering things manually.

Bank reconciliation

Once your bank feed is up and running, Xero gets to work matching incoming transactions to your invoices, bills and other records. With your bank rules set up properly, a lot of this happens automatically. Over time, Xero learns how to categorise your regular transactions and suggests matches for the rest. For many businesses, this is where the biggest time-saving comes from. What used to take you hours can be done in minutes. You can learn more about setting up & managing bank connections in our blog here.

Purchase orders

Xero lets you raise purchase orders and send them to your suppliers directly from the system. When the goods or services arrive, the purchase order can be matched to the bill, making it easier to track what you’ve committed to spending and keep your supplier relationships organised.

Pay bills

Logging your bills in Xero means you always know what’s coming up and when it’s due. You can schedule payments, see what’s outstanding at a glance, and make sure nothing slips through the cracks. It also feeds into your cash flow reporting, so you’re not caught short at the end of each month.

Quotes

Xero’s quotes feature allows you to create a professional-looking quotation, send it to the client, and, once it’s accepted, convert it into an invoice with a single click, with no retyping or risk of the numbers not matching up.

Claim expenses

Your team can log their expenses directly in Xero, or via the mobile app, and attach a photo of the receipt. Once approved, the expense flows straight into your accounts. It means no more paper receipts, no more chasing people for their expense claim forms, and no more manual data entry at your end.

Track projects

Xero’s projects tool lets you log time and costs against specific jobs, so you can see in real time whether a project is running on budget or heading the wrong way. It’s particularly useful if you provide services that you charge for by time, or if you need to know whether individual jobs are profitable.

Inventory management

If your business sells physical products, Xero’s inventory feature can track your stock levels, costs and sales. It’s a lighter-touch tool than a full warehouse management system, but if your business has straightforward stock management needs, it does the job well and keeps everything connected to your accounts.

Contact management

Xero stores all your customer and supplier records in one place, with a full history of invoices, bills and payments attached to each contact. It’s useful day to day, but also handy for spotting patterns. If a client consistently pays late, for example, it’ll show up in their contact history.

Payroll

Xero Payroll brings your payroll runs into the same system as your accounts, which cuts out a lot of manual work. It can handle your RTI submissions to HMRC, calculate tax and National Insurance, manage pension contributions and cover statutory payments like sick pay and maternity pay. Payslips go straight to employees by email.

Employees can also download the Xero Me app on their phone to access payslips, timesheets, leave & approvals.  

Because everything sits in the same system, there are no payroll journals to enter manually. It posts to your accounts automatically.

If you’d like a more detailed look at how Xero Payroll works day to day, we’ve covered it in this blog.

VAT returns

Xero calculates VAT on every transaction automatically, based on the tax rates you’ve set up. When it’s time to file, you can submit your VAT return directly to HMRC from within Xero via Making Tax Digital, with no downloading, uploading or separate filing process. It reduces the risk of errors and takes a lot of the stress out of your quarterly reporting deadlines.

Reporting

Xero’s reporting suite covers all the essentials, including profit and loss, balance sheet, cash flow, aged debtors and creditors, and more. You can customise your reports to show only the data you need, and schedule them to run automatically if you want them to land in your inbox each week or month. However, the key point to remember here is that the quality of your reports depends on the quality of the data behind them. If you’ve set Xero up correctly and kept it up to date, your reports will be useful. If not, they can give you a misleading picture.

Manage fixed assets

Xero can track your fixed assets, such as equipment, vehicles, machinery and so on, and automatically calculate depreciation. It keeps your balance sheet accurate without you having to post manual journals. It’s one of those features that can quietly save you and your accountant a fair amount of time at year-end.

Multi-currency accounting

If your business trades internationally, Xero can handle invoicing and payments in multiple currencies, with exchange rates updated automatically. It’s worth noting that multi-currency is available only on Xero’s higher-tier (Comprehensive or Ultimate) plans rather than its entry-level subscriptions, so it’s worth checking your plan if this is something you need.

Integrate apps

Xero connects with over 1,000 third-party apps via the Xero App Store, everything from Tripcatcher for capturing receipts and Shopify for ecommerce, to industry-specific tools for construction, manufacturing, hospitality and beyond. The right integrations can automate data entry, remove duplication between systems and give you a much clearer view of your business. That said, more apps don’t always mean better. It’s worth getting expert advice on which integrations will add value to your specific Xero setup, rather than connecting things for the sake of it.

Xero Accounting app

Finally, Xero’s mobile app is worth a mention, because it’s more capable than you might expect. It allows you to raise invoices, reconcile transactions, check your cash flow and capture receipts while you’re out and about. It’s not a stripped-down version of the desktop platform. It’s a genuinely useful tool for keeping on top of things when you’re away from your desk.

Getting the most from Xero, and why it helps to have an expert in your corner

Xero is designed to be accessible, and in many ways it is. 

The interface is clean, the logic is reasonably intuitive, and it provides plenty of helpful content if you get stuck. If you’re reasonably confident with technology, getting started isn’t particularly daunting.

But user-friendly doesn’t mean self-configuring. The features we’ve talked about in this blog only deliver real value when they’re set up correctly for your business. That means the right chart of accounts from the start, bank rules that accurately reflect how your business operates, payroll configured properly before your first pay run, and VAT settings that match your scheme. 

Get any of those wrong and the knock-on effects can be significant. It can lead to inaccurate reports, compliance problems or hours spent unpicking mistakes that could have been avoided.

That’s why working with a Xero specialist can make a real difference to your experience with the software. It helps ensure your foundations are solid from day one and you have the knowledge to use Xero confidently. 

We've been helping businesses to get set up and get the most from Xero since 2014. As Xero Gold Partners, we've helped hundreds of clients across the UK, from straightforward sole traders to more complex businesses with payroll, stock and multi-currency needs, to get up and running with Xero.

So, whether you’re new to Xero, switching from another system, or have been using it for a while but suspect you’re not getting full value from it, we can help you get everything configured correctly and make sure you’re making the most of what you’re paying for.

Get in touch to learn more about our Xero training and support.

Happy Xero-ing folks!