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Common Mistakes to Avoid When Using Xero in Singapore

Common Mistakes to Avoid When Using Xero in Singapore

At InCorp, we have seen how cloud accounting platforms like Xero can fundamentally transform operations for our small and medium-sized enterprise (SME) clients in Singapore and across Southeast Asia.

The key selling point of platforms like Xero is that they give smaller businesses access to accounting capabilities that were once only available to large enterprises. The result is nearly always better financial visibility, improved decision-making, and more efficient operations.

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While Xero offers an intuitive, user-friendly interface, our experience supporting businesses across Asia shows that simple setup and configuration mistakes can limit its effectiveness. This guide addresses the most common issues we spot when working with clients and practical solutions to help you maximise your Xero investment.

Listen to Podcast: InCorp x Xero: Revolutionising Accounting for Businesses in Asia


Setting Up Your Xero Environment

Bank Account Integration Issues

Effective Xero usage starts with properly connecting all your business bank accounts and credit cards. Most major banks now offer integrated Xero feeds, making this process straightforward. However, missing even one account can create crucial gaps in your financial reporting.

Essential integration steps include:

  • Connecting all business bank accounts
  • Setting up credit card feeds
  • Creating separate PayPal feeds for each currency you operate in
  • Maintaining clear separation between business and personal accounts

For businesses operating across multiple currencies, proper feed configuration becomes even more important. Each currency requires its own distinct PayPal feed to guarantee accurate transaction tracking.

Receipt Management Challenges

A common mistake we see is businesses lacking a clear process for managing receipts. Without a structured approach, many companies find themselves scrambling at the end of the month (or worse, at the end of the financial year), hoping no important receipts have been lost or misplaced.

The solution lies in establishing a clear receipt management system from day one. While Xero includes Hubdoc with all subscriptions, simply having the tool is not enough – you need to use it actively as much as possible. We recommend setting up automated receipt management through Hubdoc to:

  • Fetch invoices directly from suppliers
  • Store digital copies of all receipts
  • Extract key data automatically through your mobile device’s camera
  • Maintain a clear audit trail throughout the year

Addressing receipt management early will almost always avoid the stress and potential financial implications of missing documentation at tax time.

Chart of Accounts Configuration

An easy mistake for businesses is failing to customise their Xero Chart of Accounts to match their specific needs. A chart of accounts is a list of all of your financial accounts. However, many SMEs do not realise they can modify it to track expenses and revenue in ways that support better business decisions.

For instance, if you run social media marketing campaigns, you may want to track your advertising costs separately from general marketing expenses to analyse their effectiveness. The standard Chart of Accounts doesn’t make this distinction, but creating separate accounts for each expense type is simple.

Common customisation oversights include:

  • Not creating specific accounts for major expense categories
  • Using overly broad account classifications
  • Missing opportunities to track costs at a granular level
  • Failing to adapt the Chart of Accounts as the business grows

By customising your Chart of Accounts, you can:

  • Track specific marketing channels separately
  • Monitor different revenue streams
  • Analyse costs by department or project
  • Create meaningful financial reports that inform business strategy

Administrative Oversights

Subscription Ownership

A key mistake we see at InCorp is businesses not maintaining direct ownership of their Xero subscription. Often, their accountant sets up and controls the subscription. While this might seem convenient, it can create access problems and limit your control over business data.

If your accountant suggests that they keep ownership of your Xero subscription, remember that as the paying client, you have the right to maintain control of your accounting software. Direct ownership protects your interests and ensures you can:

  • Grant access to team members when needed
  • Switch accountants without complications
  • Maintain control of your business data
  • Manage user permissions independently

This way, your accountant can still have full access to perform their duties while you retain administrative control of your subscription.

User Permission Management

We often see subpar management of Xero access rights creating unnecessary security risks. Many businesses unknowingly give full access to team members who should only need limited visibility of financial data. This oversight can often lead to data security issues and potential misuse of sensitive information.

Smart permission management includes:

  • Limiting access based on job roles
  • Reviewing all user permissions every three months
  • Creating clear security guidelines
  • Building a staff exit process
  • Recording who sees which data
  • Matching access levels to job functions

For additional security, you should always maintain an exit checklist to guarantee immediate access removal when team members leave the organisation.

Financial Standard Operating Procedures (SOPs)

Without clear financial SOPs, Singapore SMEs can make inconsistent decisions and introduce errors into their workflows. Written procedures keep your financial operations running smoothly.

Your SOPs should list:

  • Who does what tasks, and when
  • Exact steps for each process
  • When to review procedures
  • Who reports to whom

Take accounts receivable as an example: write out the exact process for running ageing reports and specify what actions staff should take when payments fall behind schedule.

Related Read: What Are the Benefits of Using Xero Accounting Software?


Transaction Management and Reconciliation

Bank Statement Reconciliation

While Xero provides reliable automatic bank feed importing, we strongly encourage your finance processes to regularly use Xero’s Reconciliation Report feature. This simple check spots any bank-side issues like:

  • Gaps in transaction records
  • Double-posted entries
  • Bank feed breaks
  • Amount discrepancies

Many businesses skip this step, but running reconciliation reports gives you complete confidence in your financial data and reporting. We recommend you schedule these checks monthly to catch any issues early.

Accounting Method Considerations

Understanding the difference between cash and accrual accounting impacts how you use Xero’s features. Take an office rent payment of $5,000 paid on January 5th for December’s rent:

In cash accounting:

  • The expense appears in January when paid
  • No need to create bills in Xero
  • Bank rules can automatically categorise payments
  • Reports show when money moves in and out
  • Perfect for small businesses tracking cash flow
  • Suits companies with simple payment structures

In accrual accounting:

  • The expense belongs to December, when it was incurred
  • Create a bill in Xero for December
  • Match the January payment to this bill
  • Bank rules work best for recurring items only
  • Reports show your true financial position
  • Better for businesses with invoicing and credit terms

Xero tips for each method:

Cash accounting:

  • Set up bank rules to categorise regular payments
  • Use the cash basis reporting option
  • Skip the bills and invoices features
  • Focus on the bank reconciliation tools

Accrual accounting:

  • Use bills to track the money you owe
  • Create invoices for money owed to you
  • Set payment reminders in Xero
  • Match payments to bills and invoices
  • Use bank rules sparingly

Business Owner Transactions

We see many small and medium business owners make errors in Xero when recording money they take from or put into the business. Each type of transaction needs specific handling:

Paying Yourself:

  • Salary payments need processing through Xero payroll
  • Director’s fees require different account codes
  • Dividends must link to shareholder records
  • Distributions need proper equity account handling

Personal Card Use:

  • Create a bill in Xero for business expenses paid on personal cards
  • Add the receipt via Hubdoc
  • Code it to the right expense account
  • Pay the reimbursement to your personal account

The key? Label every owner transaction clearly in Xero:

  • Mark the payment type
  • Note the purpose
  • Add supporting documents
  • Use separate accounts for different payment types

This clear recording protects your tax deductions and makes tax time smoother. It also gives you an accurate picture of how much you are taking from the business.


Where to Next With InCorp

Xero gives SMEs powerful accounting capabilities that transform financial management. But its real value comes from matching the software to your business needs. By avoiding these common mistakes and implementing proper configurations, Xero becomes more than just accounting software – it becomes a financial management system that drives better business decisions.

Our InCorp accounting specialists can help optimise your Xero setup based on your unique business requirements. Contact us today to review your configuration and unlock the full potential of your accounting system.

About Xero

Xero is a global small business platform with 4.2 million subscribers. Xero’s smart tools help small businesses and their advisors to manage core accounting functions like tax and bank reconciliation, and complete other important small business tasks like payroll and payments. Xero’s extensive ecosystem of connected apps and connections to banks and other financial institutions provide a range of solutions from within Xero’s open platform to help small businesses run their business and manage their finances more efficiently.

FAQs about Common Mistakes to Avoid When Using Xero

  • Yes, Xero supports multiple currencies but requires proper setup. Each currency should have its own PayPal feed, and you'll need to configure currency settings in your Chart of Accounts for accurate financial reporting.
  • Connect your business bank accounts directly through Xero's banking menu. Most major banks integrate automatically. For proper setup, connect all business accounts and credit cards and keep business transactions separate from personal ones.
  • Cash accounting records transactions when money moves in or out of accounts. Accrual accounting records transactions when they're incurred, regardless of payment timing. Your choice affects how you use Xero's features, especially bills and bank rules.

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About the Author

Yang Wen

Yang Wen has an impressive background with more than a decade of expertise in accounting, advisory, and a suite of corporate services including financial due diligence and advisory on the FRS. He is a distinguished member of the ISCA and holds the esteemed title of fellow member at the ACCA in the UK. He manages a team of professional accountants and excels as a Xero-certified advisor, specialising in initial setup consultancy, implementation, and software data migration, bringing unparalleled proficiency and guidance to his clients.

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