Guide
Keeping two sets of books without keeping them twice
A great many people keep their day to day records in one place and have a Xero organisation as well, because Xero is where their accountant works. Left to themselves, those two accounts of the same year drift quietly apart, and somebody spends an evening in March typing one into the other. Connecting Xero puts a stop to that. You carry on exactly as you are, and the records make the journey themselves.
The shape of the thing
Think of Xero as a second filing cabinet, one your accountant has a key to. Everything you record here is a piece of paper: money that came in, money that went out. Connecting Xero means that when you file a piece of paper in this cabinet, a copy is placed in the other one, in the drawer where your accountant expects to find it.
Money received becomes a sales invoice. Money spent becomes a bill. Each carries the date, the amount, the person or company involved, and the account it belongs against. That is the whole idea. Everything below is detail about which drawer, and in which direction.
Income arrives already paid
This is a small decision with large consequences, so it is worth stating plainly. Tax App only ever records money you have actually received. It has no concept of an invoice you have sent and are waiting on.
It follows that an income record must not arrive in Xero as an open invoice, because that would be a fiction: Xero would show you owed money that in truth was already in your account, and your receivables would fill with debts nobody owes. So each one arrives as a sales invoice with its payment already recorded, dated the day the money came in and posted against the bank account you nominated.
Expenses arrive as bills, and are paid when you reconcile
A bill is different, because a bill genuinely can be outstanding. Each expense arrives in Xero carrying the due date from its invoice, so what Xero tells you that you owe is what you actually owe, and your aged payables mean something.
It is marked paid at the moment you reconcile it against your bank statement, and not before, because reconciling is precisely the point at which the money is known to have left the account. You do not have to do anything to bring this about: reconcile here, and the bill is settled there shortly afterwards, on its own.
Your accounts already speak Xero
Every organisation starts life with the same chart of expense accounts that Xero itself starts with, carrying the very same codes. Advertising is 400 in both. Repairs and Maintenance is 473 in both. Three more are added that Xero does not provide and no landlord can do without: Rates, Water, and Property Management.
The practical effect is that the two charts line up before you begin. The tedious afternoon of matching one list against another, which is where most people abandon an integration, has already been done. You can still change any of it, and every account shows its code beside its name so you always know what you are looking at.
Rent and commission do not share a bank account
Nor should they share one in Xero. Rather than nominating a single account for everything, you say where each kind of money actually moves: rent into this one, commission into that one, and the same for what each kind of expense is paid from. Every invoice and bill is then settled against the right account without further thought.
Every record that arrives also carries a reference naming its line of business, so a single Xero organisation holding both a rental and a practice can still report on each separately. Anyone who has tried to untangle two businesses filed together will see the point immediately.
Both directions, and your address book
For income, expenses, contacts and accounts alike you choose a direction: leave it alone, send it to Xero, bring it in from Xero, or both. Most people begin by sending income and expenses and leave the rest until they are comfortable.
Contacts are matched by name and created on whichever side is missing them, so you are not maintaining two address books that slowly disagree.
Nothing is ever deleted or overwritten, in either direction, and a record is never copied twice however often the sync runs. When a record cannot be sent, it is named and the reason given. Nothing is quietly dropped.
What it does not do
It is as well to be clear about the edges of a thing.
- The connection does not file returns. Filing happens in Xero, in myIR, or through your accountant. Direct GST filing from Tax App to Inland Revenue is in development.
- It does not send invoices to your customers. An invoice arrives in Xero already paid, as a record of money received.
- It does not touch payroll, fixed assets, or anything in Xero beyond invoices, bills, contacts and the chart of accounts.
- It does not delete or overwrite. A record that is wrong in both places must be corrected in both places.
Connecting, and stopping
You approve the connection at Xero, not here, which means Tax App never sees your Xero password and cannot. Xero asks which of your organisations to share and hands back a key that opens that one and nothing else. Disconnecting forgets the connection at this end; withdrawing the permission inside Xero achieves the same from the other. Either way nothing is removed from either set of books. The two cabinets simply stop being copied into one another.
Xero is optional and off until you turn it on. It is one of the modules you choose when you set up your account, and it can be switched on or off later without touching a single record.
Where to go next
- Reconciliation - the habit that marks your Xero bills paid.
- Bank feeds - and how the transactions get here in the first place.