How to Set Up Xero Accounting for a New Business

Gerry Williams

 

How to Set Up Xero Accounting for a New Business (Step by Step)



Starting a new business is exciting, but let’s be real: accounting can feel overwhelming. From tracking expenses and managing invoices to paying employees and staying tax compliant, the financial side of business quickly piles up. That’s where Xero Accounting comes in.

Xero is one of the leading cloud accounting systems, trusted by millions of small businesses, sole traders, and accountants worldwide. What makes it stand out is its ease of use, wide range of features, and powerful integrations—all of which help you manage your money with confidence, no matter your industry.

If you’re launching a new business and want a clear step-by-step guide on how to set up Xero, you’re in the right place. In this guide, I’ll share a comprehensive walkthrough, highlight important features like Xero payroll, invoicing, and integrations, and give you insights from a business owner’s perspective on what works best when getting started.

What is Xero Accounting?



At its core, Xero is an online accounting software that runs in the cloud. Unlike traditional accounting tools installed on a computer, Xero allows you to access your financial data anytime, anywhere via the Xero app or a web browser.

Here are some highlights of what Xero can do for your business:

  • Manage invoicing and billing

  • Track expenses and receipts (with the Xero receipt app or Hubdoc)

  • Run Xero Payroll for employees

  • Sync with your bank accounts for real-time reconciliation

  • Connect with over 1,000 integrations (Shopify, Stripe, HubSpot, Salesforce, and more)

  • Generate detailed financial reporting and cash flow management

  • Scale with different Xero packages and pricing options

For new businesses, the biggest advantage is that Xero gives you a complete accounting system from day one—no spreadsheets, no manual data entry, no disorganized receipts.

Step 1: Creating Your Xero Account

The first step in setting up your Xero accounting system is signing up for an account.

  1. Go to the Xero website.

  2. Click on “Try Xero for free” to start with a 30-day free trial.

  3. Enter your details:

    • Business name

    • Email address

    • Country (Xero customizes tax and compliance based on your location)

  4. Create a secure password.

Xero will then send a verification email to confirm your account. Once verified, you can log into your new dashboard.

💡 Pro Tip: If you’re a startup, the Xero promo deals sometimes give discounts for the first few months. Always check their current offers.

Step 2: Setting Up Business Details

After signing in, Xero asks for your business profile. Fill in:

  • Legal business name (must match your registration details)

  • Trading name (if different from the legal name)

  • Industry (this helps Xero suggest chart of accounts templates)

  • Business type (sole trader, partnership, corporation, nonprofit, etc.)

  • Tax details (VAT, GST, sales tax IDs depending on your region)

  • Currency you’ll operate in

You can also upload your logo so it appears on invoices and quotes, which instantly makes your documents look professional.

Step 3: Choosing Xero Packages & Pricing Plans

One of the most important parts of setup is deciding on the right Xero accounting package.

Here’s a breakdown of Xero pricing (US version):

  • Early Plan – Ideal for freelancers or sole traders

    • Limited invoices and quotes

    • Bank reconciliation

    • Limited bill management

    • Starting at ~$13/month

  • Growing Plan – Best for small businesses

    • Unlimited invoices and quotes

    • Full bank reconciliation

    • Bills management

    • ~$37/month

  • Established Plan – For growing or international businesses

    • Multi-currency support

    • Advanced expenses

    • Projects and analytics

    • ~$70/month

  • Payroll Add-On – Pricing varies by country (e.g., Xero Payroll Canada or Xero Payroll US has additional charges)

💡 If you’re unsure, start with the Growing Plan, as it balances cost and functionality. You can always upgrade later.

Step 4: Setting Up Chart of Accounts

The Chart of Accounts is the backbone of your bookkeeping system. Xero provides a prebuilt chart depending on your industry, but you can customize it.

Categories include:

  • Assets (cash, bank accounts, equipment)

  • Liabilities (loans, taxes owed)

  • Equity (owner’s equity, retained earnings)

  • Income (sales, service fees)

  • Expenses (rent, utilities, salaries)

To customize:

  1. Go to Accounting > Advanced > Chart of Accounts

  2. Add or remove accounts as needed

  3. Assign tax rates if applicable

For example: If you run an online store, you might add accounts for Shopify sales, PayPal payments, or Stripe fees.

Step 5: Xero Invoicing Setup

One of the biggest reasons new businesses love Xero is its invoicing system.

Setting up invoicing:

  1. Go to Business > Invoices > New Invoice

  2. Add customer details (you can import them from a spreadsheet)

  3. Create invoice templates with your branding, logo, and payment terms

  4. Enable online payments (via Stripe, PayPal, Square, or GoCardless)

  5. Set up recurring invoices for subscriptions

💡 SEO Tip: Businesses searching for “Xero invoicing system” often want automation. Xero allows you to send automatic payment reminders, saving you from chasing late payments.

Step 6: Setting Up Xero Payroll

If you plan to hire employees, Xero Payroll is a must.

  1. Go to Payroll > Payroll Settings

  2. Add employees (name, contact info, salary/hourly rate)

  3. Enter tax details (W-2 in the US, PAYE in the UK, etc.)

  4. Set pay schedules (weekly, biweekly, monthly)

  5. Connect your bank account for direct deposit

Xero payroll pricing depends on your region and number of employees. For example, in the US, payroll is offered in selected states and charged per employee.

If you’re in Canada, Xero Payroll Canada includes compliance with CRA requirements.

Step 7: Bank Feeds & Payments

One of Xero’s strongest features is bank feeds—automatic syncing of your business bank account with your accounting.

To set up:

  1. Go to Accounting > Bank Accounts > Add Bank Account

  2. Search for your bank (e.g., Chase, Wells Fargo, Barclays)

  3. Log in securely to connect your account

  4. Transactions will automatically feed into Xero daily

You can also connect Stripe, Square, or PayPal for easy reconciliation of online payments.

Step 8: Setting Up Xero Integrations

Here’s where Xero really shines: integrations.

  • Shopify Xero integration – Automatically syncs sales and inventory

  • WooCommerce Xero integration – For WordPress store owners

  • Zapier Xero integration – Automate workflows with 5,000+ apps

  • HubSpot Xero integration – Connect your CRM with accounting

  • Salesforce Xero integration – Sync customer data

  • Stripe Xero integration – Manage online payments

  • Square Xero integration – POS sync

To add integrations:

  1. Visit the Xero App Store

  2. Search for your tool (Shopify, WooCommerce, HubSpot, etc.)

  3. Click Connect and follow instructions

Step 9: Xero Projects & Expense Management

If you run a business where you manage projects, Xero Projects is a valuable add-on.

You can:

  • Track project budgets

  • Assign tasks and time sheets

  • Bill clients directly from projects

  • Compare estimated vs. actual costs

For expense tracking, you can use the Xero receipt app or Hubdoc to scan and upload receipts instantly.

Step 10: Advanced Features (Reporting & Multi-Company)

As your business grows, you’ll benefit from Xero’s advanced features:

  • Xero consolidated reporting – For businesses with multiple entities

  • Xero multiple companies – Manage different companies under one login

  • Cash flow management – Track future cash flow with Xero Cashflow

  • Custom dashboards – Build reports tailored to your needs

Step 11: Xero Cost Breakdown

So, what does Xero cost for new businesses?

  • Xero monthly cost: $13–$70 depending on package

  • Xero payroll cost: Additional fees based on employees

  • Xero bookkeeping services: Vary depending on outsourcing needs

  • Xero accountant fees: If hiring a certified Xero accountant near you

In short, your Xero cost per month depends on how many features you need.

Step 12: Common Mistakes to Avoid When Setting Up Xero

  1. Skipping chart of accounts customization – Leads to messy records

  2. Not reconciling bank feeds regularly – Creates errors in reporting

  3. Forgetting to set up payment reminders – Delayed cash flow

  4. Not exploring integrations early – Missed efficiency opportunities

Step 13: Xero vs Competitors

How does Xero compare with others?

  • Xero vs QuickBooks – Xero has a cleaner interface, better integrations; QuickBooks has stronger US payroll

  • Xero vs MYOB – MYOB is popular in Australia, but Xero is more modern

  • Xero vs Sage – Sage is good for larger businesses, Xero is better for small business

Step 14: FAQs About Xero Setup

  • Is Xero good for sole traders?
    Yes, Xero Sole Trader package is cost-effective.

  • Does Xero work with Shopify?
    Yes, Shopify Xero integration is seamless.

  • Can I switch from MYOB to Xero?
    Yes, migration tools like Jet Convert make it easy.

  • Does Xero support multiple companies?
    Yes, but each company requires a separate subscription.

Conclusion

Setting up Xero Accounting for a new business is one of the smartest decisions you can make. It streamlines bookkeeping, automates invoicing, simplifies payroll, and gives you insights into your financial health—all in real time.

Whether you’re a sole trader, a growing small business, or managing multiple companies, Xero offers flexible packages, competitive pricing, and powerful integrations that adapt as you grow.

By following the steps in this guide, you’ll not only have your Xero accounting system fully set up but also ensure your business starts with a solid financial foundation.

👉 Ready to try it? Visit Xero’s official website and sign up for your free trial today.

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