1

Contents
Section 1 - Get started 3

Section 2 - Chart of accounts 7

Section 3 - Contacts 10

Section 4 - Accounts receivables and Accounts payables 12

Section 5 - Conversion Balances 15

Section 6 - Products and services (Inventory) 19

Section 7 - Sales Ledger 20

Section 8 - Purchase Ledger 23

Section 9 - Tracking 25

Section 10 - Bank receipts & payments 26

Section 11 - Customer and supplier payments 29

Section 12 - Bank reconciliation 32

Section 13 - Useful reports 35

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Section 1 - Get Started

Xero is a cloud-based accounting platform available to accountants,
bookkeepers and small businesses. It allows small business owners to connect
to their bank, their advisors and other software they use in their business, all
from one platform.

Xero doesn’t require users to carry out any updates (for example, to update to a
new version). Updates and improvements to Xero happen automatically.

In this guide, we’ll show you how to get started with Xero, and how to complete
transactions and activities for a small business.

To help you we’ve included links to articles throughout this course. You can
also click on the question mark in the top banner when you’re logged into Xero,
or search any Xero topic and access help 24/7 via our online help centre, Xero
Central.

This case study is about Xero Leisure, a gym and fitness studio, privately owned
by Gemma Bridges. She is registered as a sole trader and is VAT registered.
Gemma previously kept the business accounts manually but has made the
decision to use Xero from the 1st January 2025
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Activity 1.1 - Access your free Xero trial

If you don’t have a Xero Login, access your free Xero trial. Click on the link here
and complete the details on the webpage. You are then asked to confirm your
email to start using Xero. Once you confirm your email, create a password when
prompted and click Activate your account.

Follow these steps to create a new organisation:

1. Enter Xero Leisure and your name as the business name
2. Select Health and Fitness Centres as the Industry type
3. Select United Kingdom for the country
4. Select No employees and deselect the option for calculating GST as the
business is not registered
5. Tick the reCPTCHA box
6. Click Start Trial

If you already have a Xero login, follow the steps below:

1. Log into Xero and click on the arrow in the organisation name on the
navigation bar
2. Select Add a new organisation
3. Enter the organisation name Xero Leisure and your name
4. Enter Health and Fitness Centres as the industry type
5. Check United Kingdom is displayed for the country
6. Select No employees and deselect the option for calculating GST as the
business is not registered
7. Tick the reCPTCHA box
8. Click Start Trial

ORGANISATION DETAILS

The first step is to enter further organisation details, where you are able to enter
key information such as the address and contact details.

To access the Organisation details:

1. Head to the organisation name on the left of your screen

2. Click on the drop down menu and select Settings
3. Select Organisation details

Learn about organisation details on Xero by clicking here

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Activity 1.2 - Enter the organisation details

ENTER THE FOLLOWING ORGANISATION DETAILS

The remaining information can be left blank for now as you’re working with a fictitious business

Display and Legal/Trading name: Xero Leisure + Your name

Organisation type Sole Trader

Registered address: 100 Avebury Blvd

Milton Keynes
MK9 1FH

Physical address As above

Dont forget to Save

FINANCIAL SETTINGS

Activity 1.3 - Enter the financial details

The next step is to enter the financial year end and VAT information.

1. Go to the Accounting menu

2. Select Advanced
3. Choose Financial Settings

Learn more about setting up your financial details on Xero

by clicking here

ENTER THE FOLLOWING FINANCIAL SETTINGS

Accounting period end: 31 March

VAT scheme: Accrual

VAT period: Quarterly

VAT number: 987654321

Dont forget to Save

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USER ROLES

It is important to set the correct level of access for different users. The main
user role is Business and Accounting with Advisor access, but there are many
other options including Projects, Expenses, and Payroll.

Learn how to add or edit a user and the different user roles in
Xero by clicking here

Activity 1.4 - Check your user access

To access User Roles:

1. Go to the organisation name on the left of your screen

2. Click on the drop down menu and select Settings
3. Select Users
4. Check you have Advisor access. Note: If it’s set as standard, click on
the three dots to change permissions. Change your access to Advisor
and click Update permissions
5. Click Invite a user to invite your tutor with Advisor access

THE DASHBOARD

Xero’s dashboard helps you understand your business at a glance. It has all the
key pieces of information you’ll need to run your business on a day to day basis.
Use it to drill down into a transaction or perform common tasks such as adding
a sales invoice.

The dashboard won’t have much information on it at this stage but as you
progress through this case study you’ll see information that’s been added.

Once you’ve watched the overview video of the main features of the dashboard
you can click to Hide it.

Learn about the Xero dashboard by clicking here

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Section 2 - Chart of accounts

CHART OF ACCOUNTS

There is a default chart of accounts available for every organisation that is set
up on Xero. Bank and Cash accounts are not included as default codes within
this chart of accounts – so these, and any additional accounts, will need to be
entered manually or via a csv import.

To find your Charts of accounts:

1. Go to the Accounting menu

2. Select Advanced then Chart of accounts.

Learn more about the chart of accounts in Xero by clicking here

ADD OR AMEND AN ACCOUNT CODE

Add further chart of account (COA) codes to fit the business’ needs. These can
be added using the Add Account button.

Click on the individual tabs for a list of all the Assets, Liabilities, Equity,
Expenses and Revenue accounts. If an account code is archived, you’ll find this
located in the Archive tab.

Use the Search option and search for an account in the list. You can also change
the details of existing account codes by clicking their hyperlink name in the COA
list.

Learn more about adding or editing an account in Xero

by clicking here
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Activity 2.1 - Add or amend account codes

ADD NEW, OR AMEND CODES FOR THE FOLLOWING:

Account Type Code Name Tax

Revenue 200 Sales: Memberships 20% (VAT on Income)

Revenue 201 Sales: Personal training 20% (VAT on Income)

Revenue 202 Sales: Fitness classes 20% (VAT on Income)

Revenue 203 Sales: Clothing 20% (VAT on Income)

Direct Costs 300 Purchases: Goods for resale 20% (VAT on Expenses)

Direct Costs 301 Purchases: Other 20% (VAT on Expenses)

Overheads 408 Specialist cleaning materials 20% (VAT on Expenses)

*Fields not shown in the table above can be left blank. For the purposes of this exercise you are
not required to enter a description.

ADD A BANK ACCOUNT

This option will allow you to add the bank and cash accounts to the chart of
accounts.

Xero works best with bank feeds. Bank feeds automatically import transactions
from your bank or financial institution directly into your Xero organisation,
eliminating the need to import transactions manually. Once you’ve connected a
bank feed, statement lines appear in your bank account in Xero ready for you to
reconcile each day.

Enter the account name and Xero will try and find your bank whilst you are
typing the name in. If it doesn’t find it you’ll be able to enter the details
manually.

To add a bank account:

1. Go to your Chart of accounts

2. Select Add Bank Account
9
Enter the name of the bank or financial institution and Xero will try and find it
whilst you are typing the name in. Click Add without bank feed, then click
Continue to enter the details in Activity 2.2

Learn more about setting up your bank account on Xero by

by clicking here

Activity 2.2 - Add a bank account

ADD THE FOLLOWING BANK DETAILS

YOUR BANK The Big Bank

ACCOUNT NAME Bank Current Account

ACCOUNT NUMBER 01-23-04 12345678

ACCOUNT TYPE Other

CODE 100

You can also add bank accounts by heading to ‘Accounting’

then ‘Bank Accounts’.

PETTY CASH, CASH OR CREDIT CARD ACCOUNTS

The process for adding a petty cash or cash account is very similar to adding a
manual bank account as you did in activity 2.2. This isn’t a physical bank
account, it’s just somewhere to record purchases made with a petty cash fund.
You can also transfer money to and from different bank accounts in Xero and
record transactions using a spend money transaction.

If you operate a till and deal with cash you’ll need to record income and
expenditure with your cash account. Set up a bank account in the same way, and
you can then record spend or receive money transactions and transfer money
between accounts.

Xero also connects to major credit card accounts, but if your credit card
company is not listed in the search, you can add it manually. This means
statement lines won’t be imported automatically but it’s relatively quick to
import a statement as you’ll see in a later chapter.
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Section 3 - Contacts
Businesses will sell their goods and services to a variety of different customers.
In order to keep a record of all of the transactions involving each customer, a
separate account will be created for each. Together all of these accounts will
form the Sales Ledger.

All sales made to that customer, credit notes issued, payments received and
any discounts allowed will be posted to the relevant Customer (Sales Ledger)
account. This enables you to see how much money that customer owes us at
any given time.

The same process is true of purchases and the Supplier (Purchase Ledger)
accounts.

Xero does not need customers and suppliers to be split out and will add them
all as ‘Contacts’. Contacts can be imported in bulk via a csv file, added manually
or quickly created as the transaction is entered.

As the business has been trading before using Xero there are contact records
that we can add now. The quickest way to add a contact is to go to the + icon
and select Contacts.

To find the Contacts screen:

1. Head to Contacts
2. Select All contacts

To add a contact record select New contact. To create a contact record the only
mandatory information is the contact name, however we recommend entering
as much information as you can to save time during invoicing and purchasing.

In this case study you’ll add their name, address and payment due dates. For
customers you’ll also add any discounts, if applicable, and credit limits. These
can be found in the Sales defaults section of Contacts.

Learn more about Contacts in Xero by clicking here

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Activity 3.1 - Enter customer details

ENTER THE FOLLOWING CUSTOMER DETAILS

Customer name Address Trading terms Credit limit

Katie Moran 1 High Street 30 days after £300

Newtown invoice date
Bucks
NT1 4LY

Alex Hill 1 Low Street 30 days after £250

Oldtown invoice date
Bucks
OT24 8RT

Rachel Foster 1 Bridge Street 30 days after £300

Hightown invoice date
Bucks
HT09 5WQ

Activity 3.2 - Enter supplier details

ENTER THE FOLLOWING SUPPLIER DETAILS

Supplier name Address Trading terms

Cleaning Supply Co 101 Borough St 30 days after bill date

Newport Pagnell
Bucks
NP80 4FG

Sportswear Co 8 Drayton Fields 30 days after bill date

Eastham
Norfolk
EA32 1PL

Weights R Us Unit 7 30 days after bill date

Western Trading Estate
West Hampton
S Yorks
EA32 1PL
12

Section 4 - Accounts receivables and Accounts

payables (debtors and creditors)
If a business buys and sells on credit, they are likely to have balances outstanding
if they move to a new software package.

These contacts had outstanding bills or invoices dated before 1st Jan 2025, when
Xero Leisure converted to Xero, known as the conversion date. It is important
to add these bills and invoices to ensure the reports are correct. There will be a
check performed when you add the opening balances later to make sure that the
outstanding bills and invoices total the correct amount.

If the contact has already been created then as you type the name, their contact
name will appear, or you can create a new contact at this point if needed.
Once you are happy the details you’ve entered are correct, they will need to be
approved to add them to the ledgers.

The quickest way to raise bills and invoices in Xero is by using the + icon in
the top right of the screen and clicking the transaction you’d like to create.
Alternatively, you can import them in bulk using a csv file.

Learn more about invoices and bills on Xero Central

• Create an invoice
• Create a bill
13

Activity 4.1 - Enter opening receivables balances

Enter the following opening receivables at close of business 31st December

2024. Remember the conversation date is 1 January 2025.

ENTER THE FOLLOWING INVOICES

Note, these balances include VAT - you may need to change the VAT status to VAT inclusive. As
the invoices are dated before the conversion date Xero won’t include the VAT or sales account
in the reports.

Unit Price
Customer Invoice # Date Description Qty A/C code
Incl VAT £

Katie Moran Inv789 30/12/2024 Opening balance 1 120.00 201

Inv790 31/12/2024 Opening balance 1 48.00 203

Alex Hill Inv720 02/12/2024 Opening balance 1 84.00 201

Rachel Foster Inv705 10/12/2024 Opening balance 1 48.00 202

Inv710 15/12/2024 Opening balance 1 60.00 202

Once you’ve entered the invoices, go to the Business menu and select Sales
Overview and click Awaiting Payment. Check the amounts are correct and all
dated prior to 1st January 2025.

If you realise that you have made a mistake you can:

1. Click on the incorrect invoice to open it

2. Click on the three dots in the top right of the invoice.
3. Select Edit, make the changes and click Update
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Activity 4.2 - Enter opening payables balances

Enter the following opening payables at close of business 31st December 2024.

ENTER THE FOLLOWING BILLS

Note, these balances include VAT - you may need to change the VAT status to VAT inclusive

Unit Price
Supplier Date Ref Description Qty A/C code
Incl VAT £

Weights R 30/12/2024 987 Opening balance 1 260.00 301

Us

Sportswear 02/12/2024 621 Opening balance 1 98.00 300

Co

Cleaning 10/12/2024 484 Opening balance 1 137.00 408

Supply Co

Once you’ve entered and approved the invoices, go to the Business menu and
select Purchase overview and click Awaiting Payment. Check the amounts are
correct and all dated prior to 1st January 2025.

If you realise that you have made a mistake you can:

1. Click on the incorrect bill to open it

2. Go to Bill Options and select Edit
3. You can then correct your bill and click Update.

€
£ ¥ $
15

Section 5 - Conversion Balances

Conversion balances form the opening balances of your accounts in Xero. You
can enter your conversion balances at any time, but your reporting and bank
balances won’t be accurate until you have entered them.

Conversion balances will only need to be entered for a business that has been
trading prior to using Xero. If you’re a new business, you don’t need to add
conversion balances.

To access your conversion balances:

1. Go to the Accounting menu

2. Select Advanced
3. Under Advanced settings, choose Conversion balances

CONVERSION DATE

The conversion date is the date of your opening account balances, known in
Xero as conversion balances. It’s usually the date you start using Xero. The only
transactions you should enter in Xero dated before this date are invoices and
bills that were unpaid when you converted.

Your conversion date can be the start of the month if you are not VAT regis-
tered, the start of the financial year or the start of a new VAT period.

Activity 5.1 - Add a conversion date

Go to the Conversion Date button and enter the conversion date below. Don’t
forget to save.

CONVERSION DATE January 2025

You’ll then be led to the screen to enter the opening/conversion balances.

These balances can be entered against the appropriate chart of account.

Learn more about Conversion Balances in Xero by clicking here

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Activity 5.2 - Enter opening balances

Enter the following balances as at the 1st January 2025. If you prefer, select
‘Show all accounts’ for visibility of all the account codes available. You may
need to change an account code to exactly match the list you’ve been given.

You also may need to add a new chart of account code if the code is not
available within the Xero default list. This can be done by selecting Add a new
line and clicking into the Account box - This will give you a drop down option,
with the ability to Add a new account.

Alternatively, choose a similar account and change the name from within the
chart of accounts.
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ENTER/ADD THE FOLLOWING CONVERSION BALANCES

Account name A/C code Debit Credit

BANK CURRENT ACCOUNT 100 23,699.00 -

SALES (MEMBERSHIPS) 200 - 64,200.00

SALES (PERSONAL TRAINING) 201 - 26,620.00

SALES (FITNESS CLASSES) 202 - 28,800.00

SALES (CLOTHING) 203 - 1,890.00

PURCHASES (GOODS FOR RESALE) 300 560.00 -

PURCHASES (OTHER) 301 24,430.00 -

ADVERTISING 400 1,780.00 -

LIGHT, POWER, HEATING 445 8,600.00 -

PRINTING & STATIONERY 461 2,200.00 -

RENT 469 14,000.00 -

SALARIES 477 44,020.00 -

ACCOUNTS RECEIVABLE 610 360.00 -

OFFICE EQUIPMENT 710 12,300.00 -

LESS ACCUMULATED DEPRECIATION

711 - 3,890.00
ON OFFICE EQUIPMENT

GYM EQUIPMENT 730 (new) 15,600.00

LESS ACCUMULATED DEPRECIATION 731 (new) 4,800.00

-
ON GYM EQUIPMENT

ACCOUNTS PAYABLE 800 - 495.00

VAT 820 - 3,700.00

LOAN 900 - 4,300.00

CAPITAL ACCOUNT 950 - 8,854.00

TOTALS 147,549.00 147,549.00

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Don’t forget to save your conversion balances.

If the opening Receivable or Payable balances do not agree with

the customer and supplier balances you entered earlier, you’ll be
prompted to check and make any changes.

To make the change, Go to the Business menu, click on the

Sales or Purchase overview, find the incorrect invoice or bill
and select Invoice/Bill Options. Click Edit, make the changes
and click Update.
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Section 6 - Products and services (Inventory)
Set up inventory items for products or services that the business provides or
receives. For instance, you can use inventory items for daily contract work or
fixed freight costs. It saves you time when you create transactions for your
products or services.

Once you’ve added your inventory items, you can select them from the
inventory list when invoicing. Xero then populates details for you, like the
description, cost / sale price, and account. If you want to manage and control
the stock quantities then use tracked inventory.

In this example we will use untracked inventory.

To add an inventory item:

1. Go to Business
2. Select Products and services
3. Select New item

Learn more about how to add inventory in Xero by clicking here

Activity 6.1 - Add products & services

CREATE THE FOLLOWING PRODUCT CODES:

Note: For those items that don’t have a cost attached, deselect the checkbox for
Purchase and just enter sales details.

Purchases Sales acc Selling price

Code Name Cost £
acc code code Excl VAT

Train0.5 1/2 hour personal 201 35.00

training
1 hour personal
Train1.0 201 50.00
training

LShortsS L Shorts - small 15.00 300 203 30.00

LShortsM L Shorts - medium 15.00 300 203 30.00

LShortsL L Shorts - large 15.00 300 203 30.00

Bronze annual
Bronze 200 350.00
membership

Silver Silver annual 200 485.00

membership
Gold annual
Gold 200 625.00
membership
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Section 7 - Sales Ledger

All sales invoices issued to customers can be reviewed in their contact record,
so you can easily see how much a customer owes you at a certain point in time.
You saw in an earlier task how to create a Sales invoice by using the + icon.
Once you have created the invoice or credit note, select Approve so it will be
added into the ledgers.

Another way to create a sales invoice:

1. Go to the Business menu

2. Select Sales Overview
3. Then select Invoice from the +New option

The Sales Overview will show you the total amount of sales invoices in their
various statuses, and give you the ability to create new transactions and
statements for customers.

You can also set up payment services to accept online payments by credit card,
debit card or direct debit straight from your Xero invoice. Let customers pay the
way they want, increase the likelihood of getting paid on time, and reduce the
time spent chasing payments.

In the next exercise you’re asked to add invoices, you’ll need to create three
new contacts as you go, you can ignore address details for the purpose of this
exercise.

To Set the invoice number to match the exercise, go to

Settings > Invoice Settings > Default Settings. Change the
Next Number to Inv807 and click Save.
21

CREATE INVOICES

Activity 7.1 - Create sales invoices

CREATE AND APPROVE THE FOLLOWING SALES INVOICES ON 30 DAY TERMS

If a customer doesn’t have a contact record, create it as you go.
Don’t forget to select the product or service code in the item field to populate the description
and selling price automatically.

Customer Date Invoice # Product code Net £ VAT £ Total £

Rachel Foster 02/01/25 Inv807 Train1.0 50.00 10.00 60.00

LShortsS 30.00 6.00 36.00
LShortsM 30.00 6.00 36.00

Alex Hill 05/01/25 Inv808 Train1.0 50.00 10.00 60.00

Katie Moran 07/01/25 Inv809 LShortsM 30.00 6.00 36.00

John Peters 08/01/25 Inv810 Train0.5 35.00 7.00 42.00

Rachel Foster 08/01/25 Inv811 Train1.0 50.00 10.00 60.00

Alice Hall 10/01/25 Inv812 Bronze 350.00 70.00 420.00

Jamie Woods 14/01/25 Inv813 Gold 625.00 125.00 750.00

CREATE CREDIT NOTES

You can create a credit note against an invoice if it’s awaiting payment. Find
and open up the invoice in the Awaiting payment tab of the Sales Overview.
Select Create and apply credit from the overflow menu, make any changes and
Approve. This will create a credit note and automatically match it against the
invoice.

If you need to create a ‘stand alone’ credit note, for example if the invoice has
been paid, head to Business, select Sales and New Credit Note. You can then
match it against any other invoices outstanding, save it as a credit note or
create a refund.

Learn more about how to create a credit note by clicking here

22

Activity 7.2 - Add a credit note

CREATE THE FOLLOWING CREDIT NOTE

Don’t forget to match it against the correct invoice.
Description: Returns

Credit Net £ VAT £ Total £

Customer Date Product code
note no

Rachel Foster 05/01/25 CRN56 LShortsS 30.00 6.00 36.00

(relates to
Inv807)
23

Section 8 - Purchase Ledger

All purchase bills issued to suppliers can be reviewed in their contact record, so
you can easily see how much you owe a supplier at a certain point in time.

CREATING BILLS

You have already created sales invoices within Xero. The process to create
purchase bills is very similar. The quickest way to create a bill is to go to the
+ icon. You can also create a new purchase bill by:

1. Select the Business menu

2. Then select Purchases Overview

This will take you to the Purchase Ledger dashboard, and will show you the total
amount of bills in their various statuses. It also gives you the ability to create
new transactions, including purchase orders and credit notes.

Activity 8.1 - Create purchase bills

CREATE & APPROVE THE FOLLOWING PURCHASE BILLS.

NOTE, choose the most appropriate purchases account code,
Don’t forget to use the products and services option to populate the clothing

Supplier Date Ref no Product code Net £ VAT £ Total £

or description

Cleaning 02/01/25 490 Specialist 130.00 26.00 156.00

Supply Co cleaning
materials

Sportswear Co 09/01/25 654 LShort S x 2 30.00 6.00 36.00

LShort M x 3 45.00 9.00 54.00

WeightsR Us 10/01/25 1001 Dumb bells 140.00 28.00 168.00

5KG

Cleaning 12/01/25 509 Specialist 76.00 15.20 91.20

Supply Co cleaning
materials
24

CREDIT NOTES

Credit notes for bills work in a similar way to invoices. Find and open up the bill
in the Awaiting payment tab of the Purchases Overview. Select Bill options
and Add Credit note. Apply the credit and change the total amount at the top
of the bill to match the amount of total credit. Click Approve. This will create a
credit note and automatically match it against the bill.

If you need to create a ‘stand alone’ credit note, for example if the invoice has
been paid, head to the Business menu, select Bills to pay, click the arrow next
to New bill and choose New credit note. You can then match it against any
other bills outstanding or create a refund.
Activity 8.2 - Create a credit note

CREATE THE FOLLOWING CREDIT NOTE

Don’t forget to match it against the correct bill.

Credit
Name Date Product code Net £ VAT £ Total £
note no

Cleaning 15/01/25 CN009 Cleaning 12.00 2.40 14.40

Supply Co (Relates materials
to 509) (damaged)
25

Section 9 - Tracking
Xero uses Tracking categories to analyse costs and revenues in different
departments, cost centres or locations. You can have 2 tracking categories with
up to 100 options in each category. For example:
One tracking category named ‘Region’ with the options as North, West, South,
East...

To set up Tracking:

1. Go to Accounting
2. Select Advanced
3. Under Advanced settings, choose Tracking categories

Learn more about Tracking categories by clicking here

Activity 9.1 - Add Tracking categories

Gemma would like to analyse the sales for different exercise classes.

SET UP A TRACKING CATEGORY CALLED CLASSES

AND ADD THE FOLLOWING OPTIONS:

1. Yoga
2. Spin
3. Step
4. Zumba
5. Pump

Don’t forget to click Save.

26

Section 10 - Bank receipts & payments

Many of the customers at Xero Leisure pay for fitness classes directly through
the website using ‘Payfriend’. These are consolidated on a weekly basis and
transferred into the bank current account.

To record receipts from the bank manually:

1. Go to the + icon
2. Select Receive money
3. Click on the Bank current account and Next

Learn how to add a manual bank receipt by clicking here

Activity 10.1 - Enter bank receipts

Enter the following receipts into the bank account. You will be required to add
‘Payfriend’ as a contact, you can do this as you prepare the transaction. Simply
type the name into the From field and the contact will be created when you
select Save.

To save time when adding multiple, similar Spend Money

transactions, click Save, select to View transaction and in the
Options tab, select Copy. You can then change the date and
values and the rest of the data has been entered for you..
27

ENTER BANK RECEIPTS

Note: Choose the correct sales account for the fitness classes,
choose the correct tracking option, and check all amounts are inclusive of VAT

W/E Amount including VAT Session

£

09/01/25 492.00 Yoga

588.00 Spin
572.00 Step
314.00 Zumba
560.00 Pump
2,526.00

16/01/25 544.00 Yoga

628.00 Spin
454.00 Step
414.00 Zumba
684.00 Pump
2,724.00

23/01/25 482.00 Yoga

580.00 Spin
660.00 Step
420.00 Zumba
554.00 Pump
2,696.00

30/01/25 614.00 Yoga

560.00 Spin
672.00 Step
440.00 Zumba
760.00 Pump
3,046.00
28

The process for adding a bank payment for items that don’t relate to a bill is
very similar. Simply select Spend money from the + icon and complete the
details.

Learn how to add a manual bank payment clicking here

Activity 10.2 - Add bank payments

ENTER PAYMENTS MADE FROM THE BANK ACCOUNT.

Note - use Salaries & Paul’s Plumbing Services for the contact names

Details Date VAT £ Total £ Account

Amount £ Reference
code

Salaries for 31/01/2025 5,400.00 No VAT 5,400.00 477 Bank

January transfer

Paul’s 18/01/2025 200.00 40.00 240.00 473 Bank

Plumbing transfer
Services
(repairs to
sink)
29

Section 11 - Customer and supplier payments

When a customer pays an invoice, or you pay a bill, you can add the payment
against it straight away, whether this has been paid in full or just a part payment
towards the total amount. To save time, you can also apply the payment at the
same time when you reconcile the bank account.

To record a payment on an invoice:

1. Go to the Business menu

1. Select Sales Overview
2. Click on Awaiting Payment
3. Search for, and open up the invoice
4. Click Add payment and enter the details

To record a payment of multiple invoices from the same customer:

1. Go to the Business menu

2. Select Sales Overview
3. Click on Awaiting Payment
4. Select the checkboxes for the invoices that are being paid and click Deposit
5. Complete the details such as the payment date, reference and bank account.
Click Deposit.

Learn more about how to record a payment on an invoice or by

bill clicking here:
Record a payment on an invoice
Record a payment on a bill
30

Activity 11.1 - Enter invoice payments

ENTER THE FOLLOWING INVOICE PAYMENT

Alex Hill
To: Xero Leisure
Date: 10 January 2025
Amount: : £84.00

Detail: Payment of invoice 720 dated 2/12/2024

Katie Moran
To: Xero Leisure
Date: 15 January 2025
Amount: £60.00

Detail: : Part payment of invoice 789

Rachel Foster
To: Xero Leisure
Date: 16 January 2025
Amount: £108.00

Detail: Payment of invoices 705, 710 by Faster Payments

The process to record a bill payment is very similar to recording an invoice

payment.

1. Go to Business
2. Select Bills to Pay and go to the Awaiting payment tab.
3. Find, and open up the bill
4. Enter Make a payment details at the bottom of the page

To record a payment of multiple bills from the Awaiting payment tab:

1. Select the checkboxes for the bills to be paid

2. Click Make payment
3. Choose the Bank Current Account and the payment method Mark as paid.
4. Select the date and Create payment
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The process to record a bill payment is very similar to recording an invoice

payment.

1. Go to Business
2. Select Bills to Pay and go to the Awaiting payment tab.
3. Find, and open up the bill
4. Enter Make a payment details at the bottom of the page

To record a payment of multiple bills from the Awaiting payment tab:

1. Select the checkboxes for the bills to be paid

2. Click Make payment
3. Choose the Bank Current Account and the payment method Mark as paid.
4. Select the date and Create payment

Activity 11.2 - Enter bill payments

ENTER THE FOLLOWING BILL PAYMENT

Sportswear Co
To: Xero Leisure
Date: 8 January 2025
Amount: £98.00

Detail: Payment of invoice ref 621 by bank transfer

Cleaning Supply Company

To: Xero Leisure
Date: 15 January 2025
Amount: £293.00

Detail: Payment of invoices ref 484 and 490

Another, more efficient way to allocate a payment is to do it at

the point you reconcile the bank account. We’ll look at that in
more detail in the bank reconciliation section below.
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Section 12 - Bank reconciliation

Xero works best with bank feeds so the bank feed automatically imports
transactions from your bank or financial institution directly into the Xero
organisation. This eliminates the need to import transactions manually. Once
you’ve connected a bank feed, statement lines appear in your bank account in
Xero ready to be reconciled.

If you cannot get a bank feed then you can import a statement.

In the first exercise we’ll manually import a bank statement and do a basic
reconciliation, the second exercise will be for a more complex reconciliation.

To import a bank statement:

1. Head to the bank account on the dashboard

2. Click on the overflow menu (3 dots) and select Import a Statement

Learn how to manually import a bank statement clicking here

Activity 12.1 - Import a bank file

DOWNLOAD THE CSV FILE HERE AND IMPORT THE BANK STATEMENT

When you’ve successfully imported the statement, go back to

the bank account on the dashboard, you’ll see there are 8 items
to be reconciled.

When you select Reconcile 8 items you’ll be taken to the bank reconciliation
screen in Xero. This is where you can match statement lines with individual
transactions, create new transactions or deal with pre payments, part payments
etc.

The left hand side of the screen displays the bank statement lines and the right
hand side is used to match with your transactions in Xero.

Learn how bank reconciliation works in Xero by clicking here

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Activity 12.2 - Reconcile the bank account

REVIEW THE TRANSACTIONS AND CLICK OK TO RECONCILE

There are two transactions that won’t match against anything as
they have no transaction in Xero.

The payment of of £48 to the bank is for bank fees, the payment
to Staysafe Insurance is for Insurance. Create the transaction
by adding the contact details, an appropriate account code and
description in the boxes to the right of the line item.

FURTHER BANK RECONCILIATION

This next bank reconciliation will involve dealing with bulk receipts & payments,
part payments and writing off a minor adjustment.

Learn more about bank reconciliation in Xero by clicking here

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Activity 12.3 - Import a bank file

DOWNLOAD THE CSV FILE HERE AND IMPORT THE BANK STATEMENT

Activity 12.4 - Reconcile the bank and deal with adjustments

REVIEW THE TRANSACTIONS AND CLICK OK TO RECONCILE

• When you reconcile the payment of £60 from Katie Moran,

make sure you select the correct item to reconcile. This is for
the part payment that you entered previously against Inv789.

• The payment received of £84 from Katie Moran is for the two
invoices in the description. Select Match and tick the boxes
on the transaction lines that apply. Click OK to reconcile.

• The payment for Cleaning Supply co is for a part payment of

bill number 509. Click Match and tick the box alongside the
item. Use the Split link to make a part payment against the
bill. Click Split and OK to record the payment and reconcile.

• The payment of £41.99 from John Peters was for an invoice

for £42 but was accidentally underpaid by £0.01. This can be
recorded as a part payment or you can write off the balance
outstanding. In this case, write off the balance. Use Match,
tick the box and scroll down. You’ll see the amount is out
by £0.01. Use the Adjustments option to enter a Minor
adjustment and enter -0.01 for the amounts to Reconcile.
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Section 13 - Useful reports

There are many reports to choose from, here is just a small sample which you
may find useful towards your studies.
All reports can be exported as a PDF or saved in Xero. If you save a report as a
Published report it is similar to having a hard copy and will not change even if
the data is amended. You’ll see the links at the bottom of every report.

RECEIVABLE INVOICE SUMMARY

This report lists all of the invoices and credit notes for a chosen date range.

To find this report:

1. Choose the Accounting menu from the top navigation bar

2. Select Reports
3. Search for the Receivable Invoice Summary
4. Add the date range
5. Click Update

To add additional columns to the report such as VAT, Net, Payments:

1. Click into Columns

2. Select
Select the
the options
optionsyou require
3. Click Update

PAYABLE INVOICE SUMMARY

This report is similar to the receivable invoice summary but lists bills and credit
notes.

To find this report:

1. Choose the Accounting menu

2. Select Reports
3. Search for the Payable Invoice Summary
4. Choose the date rangeate range
5. Click Update
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To add additional columns to the report such as VAT, Net, Payments:

1. Click into Columns

2. Select the options you require
3. Click Update

AGED RECEIVABLES

The Aged Receivables Summary will provide final closing balances for
customers

To find this report:

1. Go to the Accounting menu

2. Select Reports
3. Search for the Aged Receivables Summary report
4. Choose the date
5. Click Update

AGED PAYABLES

The Aged Payables Summary report will show any unpaid bills at a given time

To find this report:

1. Go to the Accounting menu

2. Select Reports
3. Search for the Aged Payables Summary report
4. Choose the date
5. Click Update

TRIAL BALANCE

The trial balance is a list of all the balances in the nominal accounts at a chosen
date.

To find this report, search for Trial Balance, choose the date and click Update.

ACCOUNT TRANSACTIONS REPORT

This report lets you see a detailed view of transactions in selected accounts.
You can select all accounts or individual accounts for a set date range.

To find this report, search for Account Transactions, select the Accounts and a
Date range.
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JOURNAL REPORT

This report shows an audit trail of all postings made into Xero.

To find this report, search for Journal report, set the date range and click
Update.

There may be other reports which you find useful for your studies or to help you
in your day to day use of Xero.

Have a look around and find what suits your own needs. Additionally, you could
try out the demo company. Everyone with a Xero login has access to the Demo
Company in Xero. It contains fictional data so you can try out features and look
at more detailed reports.

Click here to find out more about the demo company

 We hope you are enjoying your studies.

Some will see this as the end, others will see this as the beginning.

Remember… Financial Skills are the foundation of all Business Skills.

All the best CEOs and Business owners have them!

“Education is the most powerful weapon, which you can use to

change the world.”

Nelson Mandela

© Xero Limited, 2025