How to Automate Common Accounting Tasks with Xero

Managing your finances efficiently is critical for any business, but it can be time-consuming and often overwhelming. This is where cloud accounting software like Xero comes in, allowing you to streamline many of your day-to-day accounting tasks.

However, if you are new to Xero’s features you may be missing out on some of its most powerful tools, namely the ability to automate several day-to-day accounting tasks.

In this guide, we’ll walk through how to automate essential accounting tasks using Xero, giving you insight into some of the most useful features we use for our clients as specialist Xero accountants.

1.     Automating Invoicing and Payment Reminders

If you work with clients on a retainer or provide regular services, setting up recurring invoices in Xero can be a great time-saving tool.

What’s more, chasing up clients for invoices can be uncomfortable and time-consuming. Xero’s handy payment reminder automation allows reminders to be sent at specific intervals. For example, you can set a reminder for a reminder to be sent three days before the due date or a week after the invoice is overdue if unpaid.

How to Automate in Xero:

Create a Recurring Invoice Template

To create a recurring invoice in Xero, follow these steps:

• Navigate to the Business menu and select Invoices.
• Open the Repeating tab and click New Repeating Invoice.
• Fill in the required information in the fields for the recurring transaction including what time period you want the invoice to repeat on.

Payment Reminders:

You can enable or disable reminders for an individual invoice directly while viewing it:

• Navigate to the Business menu and select Invoices.
• Locate and open the invoice for which you want to set reminders.
• If you are using the new invoicing format, click the Menu icon. For those using the classic invoicing layout, select Invoice Options.
• From there, choose either Turn invoice reminders on or Turn invoice reminders off based on your preference.

2.     Bank Feeds and Transaction Matching

By linking your business bank account with Xero, you can automatically pull through all transactions, both income and expenses, into the system. This eliminates the need for manual data entry, reducing the risk of errors.

Once this is set up, we recommend switching on Automatic Bank Reconciliation: this is where Xero uses machine learning to match your bank transactions to the corresponding invoices, bills, or expense claims. This means that with a single click, you can confirm the automated reconciliation matches, saving time and ensuring your accounts are always up to date.

How to Automate in Xero:

Real-Time Bank Feeds:

·        In Xero, go to the “Accounting” tab and select “Bank accounts.”

·        Click on “Add bank account” and search for your bank in the list.

·        You’ll then be prompted to log in securely to your online banking platform, allowing Xero to establish a direct connection and import your transactions automatically.

Automatic Bank Reconciliation:

·        Once your bank transactions are fed into Xero, head to “Reconcile” in the “Accounting” section.

·        Xero will suggest matches for each transaction by looking for corresponding invoices, bills, or expenses. If it finds a match, you simply click “OK” to reconcile.

·        Over time, Xero’s machine learning improves, making transaction matching faster and more accurate.

3.      Automating Expense Management

Tracking and managing expenses can be tedious, especially when receipts pile up. Xero helps simplify this by automating the process.

Xero integrates with third-party apps like Hubdoc and Receipt Bank (Dext) to allow you to scan receipts or email them directly into the system. The software will automatically extract the relevant data (such as date, amount, and supplier) and match it to the correct expense category in Xero via a nominal code.

Over time, Xero’s machine learning capabilities will learn to recognise your regular expenses and automatically categorise them. For example, if you regularly purchase office supplies from the same vendor, Xero will begin automatically categorising those expenses as “Office Supplies,” saving you the hassle of doing it manually.

How to Automate in Xero:

Receipt Scanning with Hubdoc:

• First, link Hubdoc to your Xero account by clicking on your organisation name in the top left of the Xero dashboard  and going to “Hubdoc” under the “Apps” section.
• Go through the steps to connect Hubdoc from Xero.
• On the Hubdoc dashboard, click the Settings icon.
• Navigate to the Integrations tab, then click Connect next to Xero. It may take a minute or so to establish the connection.
• Choose the Xero organisation you want to link with Hubdoc. If the organisation is greyed out, it means it's already connected, and you'll need to disconnect it before selecting it again.
• Click Allow access to complete the process.
• Once connected, you can snap photos of receipts, upload them via the Hubdoc mobile app, or email them to your Hubdoc account.

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4.      Automating Payroll

For businesses with employees, Xero’s payroll automation tools can be a game-changer.

You can set up Xero to automatically calculate payroll, including tax deductions, pensions, and holiday entitlements. All you need to do is review and approve the payroll before it’s processed.

What’s more, Xero is fully compliant with HMRC’s Real Time Information (RTI) system, meaning you can submit payroll information directly to HMRC without needing to manually log into the government portal. This saves time and ensures that you remain compliant with HMRC regulations at all times.

How to Automate in Xero:

Automated Payroll Runs:

·        Go to the “Payroll” tab under your organisation name in the top left of Xero

·        Select “Pay employees.” Set up each employee or subcontractor with their pay details, including salary or hourly rates, tax deductions, and pension contributions.

·        Once this is done, you can automate the payroll process by scheduling pay runs to occur weekly, bi-weekly, or monthly. Xero will calculate all relevant deductions and generate payslips automatically.

Direct HMRC Submissions:

·        After running payroll, Xero will prompt you to submit the payroll information to HMRC directly.

·        To do this, go to “Payroll” > “Pay runs,” select the relevant pay run, and click “File with HMRC.”

5.     Automating VAT Returns and Tax Filing

For VAT-registered businesses, preparing and submitting VAT returns can be another time consuming task that distracts you from running your business. Xero simplifies and automates much of this, helping you stay compliant with HMRC.

Xero’s automatic VAT calculation will track your sales and purchases, automatically calculating how much VAT you owe (or are owed) based on the transactions you’ve input. What’s more, Xero allows you to submit your VAT returns directly to HMRC in just a few clicks.

How to Automate in Xero:

Connect Xero to HMRC

1. Go to the Accounting menu and select Reports.
2. Locate and open the UK VAT Return.
3. If you see the following screens:some text
   • On the MTD screen, click Set up MTD for VAT in Xero.
   • On the How would you like to file your VAT? screen, choose Making Tax Digital (MTD) VAT, then click Continue to VAT.
4. After signing up, click Continue.
5. Select Connect to HMRC—you’ll be redirected to the HMRC website.
6. Click Continue again.
7. Enter your Government Gateway user ID and password, then click Sign in.
8. Review the HMRC authority details and click Grant authority to complete the connection.

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Beyond the Basics: Supercharging Your Automation with Zapier

If you are ready to take your automation to the next level, you can integrate Xero with a ton of third-party apps using Zapier to further streamline your financial processes.

Zapier is a powerful automation tool that connects Xero to over 6,000 other apps, allowing you to create automated workflows. With so many integrations you can ensure Xero can communicate with your other business systems seamlessly. Here’s an example of a Xero integration that can be set up via Zapier:

1.   Customer places an order on an ecommerce platform such as Shopify

2.   The Zapier link means an invoice and customer is automatically created in Xero

3.   Once the customer is created in Xero a Zapier link creates a new contact with a CRM system such as Hubspot

This is just one example, but the customisations really are endless. Automating tedious tasks copying data across your various systems is a great way to cut costs and free up employees to work more efficiently on other areas of your business.

Please note that setting up these Zapier integrations should be done by a competent IT professional.

Ready to Embrace the Automation Revolution?

Xero's automation features are a powerful way to streamline your accounting processes, save time, and reduce stress. Start by exploring the built-in automation tools and setting up reports, then consider adding some powerful integrations to supercharge your workflow.

With a little bit of setup, you can say goodbye to tedious manual tasks and focus more on growing your business.

If you need any help with maximising Xero for your business, or would just like to outsource all your bookkeeping and accounting, Linggard and Thomas can help.

We are specialist chartered accountants whose knowledge of cloud accounting tools such as Xero means we can streamline and simplify your business finances.

Get in touch today to see how we can empower your business to succeed.