Help Centre

Set up your client's financial details

Your financial settings include information used to produce your reports, invoices and bills.

The financial information you're asked to provide is used in the production of financial reports and print versions of invoices, bills and credit notes so for these to generate accurately you will need to enter the information asked for on this screen. If you are unsure about the financial information asked for, you might like to wait until you have consulted your accountant or bookkeeper.

Choose your financial year-end

Xero uses your financial year-end to generate financial reports. Xero sets the date to March by default, for a financial year that runs from 1 April to 31 March.

Changing your financial year-end date can impact your balances, reports, and fixed assets. Avoid changing it if you’ve already set Xero up for your organisation and entered your conversion and comparative balances.

  • Go to Settings, then click General Settings
  • Under Organisation, click Financial Settings.
  • Under Financial Year End, choose your financial year-end date.

Choose your VAT period and scheme

VAT Period – choose the frequency you submit your VAT Return. When entered, the Xero VAT Return will automatically generate the VAT amount to pay based on this period. You need to complete this so Xero can generate the VAT Return (or Flat Rate VAT Return).

If you don't complete the VAT information here, your VAT return will prompt you. If you don't provide a VAT scheme, the Return won't run. Make sure you complete the VAT settings before you rely on either of the VAT reports.

VAT Scheme – You need to complete this to be able to generate Xero VAT (or Flat Rate VAT) Returns. Choose Cash or Accrual in line with your organisation’s VAT registration. If your company is not registered for VAT choose 'None'. If you are registered for flat rate VAT, choose the relevant Flat Rate Cash or Flat Rate Accrual Scheme. Your choice will determine which kind of return will be generated for you in Reports (whether a VAT Return or a Flat Rate VAT Return), and which transaction dates are used for populating your return.

  • If you choose a Cash scheme: The return will be run based on the date you made or received payments for invoices, bills and expense claims. It will also be based on the date you entered Spend or Receive Money transactions in your bank account.
  • If you choose an Accrual scheme: The return will be run based on the invoice date, or, in the case of expense claims, the 'Reporting date'. All other reports in Xero are based on the actual transaction date. For example, Spend or Receive Money date, invoice date, expense claims reporting date.

Only change your VAT registration status if you fully understand the necessary VAT requirement for all accounts within the chart of accounts.

About flat rate VAT schemes: Only choose a flat rate VAT scheme if you are registered for flat rate VAT. Choosing a flat rate VAT scheme significantly alters your chart of accounts and the type of VAT Return generated in Xero. If you switch to either of the two flat rate VAT schemes in Xero:

  • Any draft VAT Returns for standard rate VAT are deleted.
  • In your chart of accounts, all asset and expense accounts are changed to 'No VAT' by default.
  • New tax codes are added to your chart of accounts, for VAT on Capital Purchases and Sales.
  • The standard VAT Return are replaced by the Flat Rate VAT Return, which allows you to enter the flat rate percentage applicable to your business.

If you switch back to standard rate VAT, your chart of accounts will not be automatically changed back to the original settings. You may want to archive your flat rate-specific VAT tax rates so that you don't accidentally use them on future transactions. If in doubt, please check with your accountant or bookkeeper.

Organisation’s VAT Number – required to display on outgoing invoices and financial reports (although you can change your invoice branding so that it doesn't show on customer invoices if you prefer).

VAT-related information won't display if your organisation isn't registered for VAT.

Tax Basis - choose Cash or Accruals Basis. You need to complete this field so the Xero can generate the Report.

  • Cash basis. You report income when you receive payment and report expenses when you pay your supplier. The report is run based on the date you made or received payments for invoices, bills and expense claims and the date you entered Spend or Receive Money transactions in your bank account.
  • Accruals basis. You report income when you create the invoice and expenses when your supplier bills you. The report is run based on the invoice date or in the case of expense claims, the Reporting date. All other reports in Xero are based on the actual transaction date. For example Spend or Receive Money date, invoice date, expense claims reporting date.

For example, if you send an invoice to your customer dated March 15 for 500.00 plus 6% sales tax, totalling 530.00. Your customer pays you 212.00 in April and 318.00 in May.

Using the Cash basis, you'd report 12.00 sales tax for April and 18.00 in May because that's when you received the payments. On the Accruals basis, you'd report 30.00 sales tax for March because that's when you invoiced your customer.

Use Bankers' Automated Clearing Services (BACS)

To export batch payment files to your bank (to pay your bills through BACS transfers), enter your BACS service user or owner ID number. (Though if you bank with HSBC, you do not have to enter your BACS number.)

Use lock dates to close off your accounts for a period or year end

Lock dates stop any changes to data entered before that date. Only users with the Adviser user role can view, set and change either lock date.

Time zone setting in Xero

The time zone setting in Xero determines the date and time shown for those items that are time-tracked. For example, when a user logs in. Xero also uses the time zone setting for time-stamping all actions recorded in History & Notes.

Xero uses your computer's clock to determine what the current date is when entering any transactions or running reports that default to today's date. For example, entering the date on an invoice, or running the Balance Sheet report as at today's date.

The time zone is set to GMT by default but you can change it.

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