Xero Setup Guide for Tradies
Getting Xero right for a trades business comes down to a few key things: a chart of accounts that separates materials, subcontractors, and plant costs; connected bank feeds; tracking categories so you can see profit per job; and adviser access for your accountant so they can actually work in the file. Done properly, the setup takes two to three hours. After that, your accountant can spend their time giving you advice rather than untangling your bookkeeping.
Who this guide is for: Tradies in Queensland and around Australia who are on Xero or just getting started, and want to set it up properly from the beginning.
Why most tradie Xero setups are a mess
Out of the box, Xero is set up for a generic small business. Think retail shop or cafe, not electrical contractor or building company. Sign up without configuring it first, and this is what you end up with:
- Your accountant burns the first hour of every meeting fixing your bookkeeping instead of talking about your business.
- All expenses sit in one bucket. Nobody knows whether it’s materials, subcontractors, or plant costs that are eating your margin.
- You have no way of knowing which jobs actually made money.
- BAS prep is a nightmare because transactions are wrong and your bank hasn’t been reconciled.
- Your accountant can’t access the file without your login, so everything ends up as an email chain.
None of that is Xero’s fault. It’s a setup problem, and you can fix it in an afternoon
Common mistake: A lot of tradies connect Xero to their personal bank account instead of a dedicated business account. That creates a mess that takes hours to sort out. Before you do anything else, open a business account and connect that to Xero.
What the difference looks like
Here’s a side-by-side of what a poorly configured Xero setup costs you, compared to one that’s set up properly.
| Poorly configured Xero | Properly configured Xero | |
|---|---|---|
| Chart of accounts | Generic categories, everything in 'expenses' | Separate accounts for materials, subbies, plant, fuel, tools |
| Bank feeds | Manual entry or personal account mixed in | Business account connected, importing automatically |
| Job costing | No visibility. All jobs look the same | Per-job P&L via tracking categories or a connected app |
| BAS preparation | Accountant rebuilds it from scratch each quarter | Accountant reviews and lodges. Clean in under an hour |
| Accountant access | You share your login or email CSV files across | Accountant has adviser access, works directly in the file |
| Invoice follow-up | Manual chase, often weeks behind | Automatic reminders at 3 and 7 days overdue |
| Payroll | Done manually or in a spreadsheet | Xero payroll with STP reporting to the ATO |
| Subcontractor tracking | TPAR put together from memory at year end | Bills coded correctly, TPAR data ready by 28 August |
Step-by-step: Setting Up Xero for Tradies
Work through these in order. Steps 1 to 3 matter most. Get those right and the rest falls into place.
01 | Set up your chart of accounts correctly
The chart of accounts is the foundation. Get the categories wrong and everything downstream is wrong too. Start with Xero’s trades-specific template (search ‘chart of accounts’ in Xero Central) or ask your accountant to set it up.
Expense accounts every trades business needs:
- Materials and supplies (keep this separate from subcontractor costs)
- Subcontractor payments(required for TPAR, must be its own account)
- Plant hire and equipment rental
- Fuel and vehicle running costs
- Tools and small equipment (under $1,000)
- Tools and equipment (over $1,000, for depreciation purposes)
Work clothing and PPE - Licences and registrations
Why it matters: With proper expense accounts, your accountant can see your gross margin, benchmark your material costs against industry norms, and tell you where money is leaking. Without them, every conversation starts with ‘so what did you actually spend on subcontractors?’
02 | Connect your business bank feeds
Every major Australian bank supports direct feeds to Xero. Go to Accounting, then Bank Accounts, then Add Bank Account, search for your bank, and follow the prompts. Transactions come in automatically, usually overnight.
Connect all of these:
- Your main business transaction account
- Any business credit or charge cards
- A GST/BAS holding account if you use one (recommended)
A tip worth using: Open a second account just to hold the GST you collect. Each week, transfer 10% of income into it. When BAS comes around, the money is already there. A lot of tradies get caught short at BAS time. This one habit fixes that.
03 | Set up tracking categories for job costing
Tracking categories are how Xero shows you profit and loss by job. Go to Accounting, then Advanced, then Tracking Categories, and create a category called ‘Job’ or ‘Project’. Add each active job as an option.
From there, every time you raise an invoice or enter a bill, you assign it to a job. Xero can then run a Profit and Loss by Tracking Category report showing income and expenses per job.
Worth knowing:
- Tracking categories cover income and direct costs, but not labour hours unless you enter them manually
- For proper job costing with time tracking, you’ll need a connected job management app (see Step 7)
- Archive completed jobs regularly or the list gets unwieldy
Why it matters: Without per-job data, a business that looks profitable overall can be hiding several jobs running at a loss. Knowing which jobs actually make money changes the way you quote.
04 | Configure your invoice template and payment terms
Go to Settings, then Invoice Settings. A well-configured invoice template reduces payment disputes and gets money in faster.
Set these up now:
- Payment terms: 14 days is standard for most trades work. Seven days is reasonable for smaller residential jobs.
- ABN: Required on every tax invoice.
- Contractor licence number: Required for building and construction work in Queensland.
- Online payment link: Enable Stripe or direct bank transfer through Xero’s payment services. Clients pay faster when there’s a button to click.
- Invoice reminders: Set automatic follow-ups at 3 days overdue and 7 days overdue. Most slow payers just need a nudge.
On progress billing: If you invoice in stages, set up a separate template for progress claims. Include the contract value, amounts invoiced to date, and the current claim. It’s standard on larger jobs and it prevents the ‘I thought that was already paid’ conversation.
05 | Configure your GST and BAS settings
Go to Accounting, then Advanced, then Financial Settings. Getting this right from the start means your BAS figures are accurate without extra work.
Check and confirm:
- GST basis: Cash basis means GST is reported when money changes hands. Accrual means it’s reported when the invoice is raised. Most small trades businesses use cash basis. Confirm with your accountant first.
- BAS lodgement frequency: Quarterly for most SMEs. Monthly only applies if your turnover is above $20 million.
- Fuel tax credits: If you use diesel or LPG in plant, machinery, or vehicles off public roads, you can claim fuel tax credits. Set up a fuel tax credit account in Xero to track these. It’s one of the most commonly missed deductions in the trades.
Worth checking: The wrong GST basis can mean significant under or over-payment. If you’re not sure which one applies to you, ask your accountant before lodging your first BAS.
06 | Invite your accountant as an adviser
This is the step that makes the whole relationship work. Go to Settings, then Users, then Invite a User.
Choose the Adviser role.
Adviser access gives your accountant full read and write access to your Xero file. They can run reports, reconcile accounts, prepare your BAS, process journal entries, and fix any miscoded transactions without you needing to send files or hand over your login.
Once they’re in, a good accountant should be able to:
- Pull a profit and loss for any period
- Check your bank reconciliation and see what’s outstanding
- Recode any miscategorised transactions
- Review and lodge your BAS
- Run a job profitability report if tracking categories are set up
- Access payroll data for STP reconciliation
A useful benchmark: Your accountant should be able to open your Xero file and have a clear picture of your financial position within 10 minutes. If the first 45 minutes of every meeting is spent sorting out your books, something in the setup needs fixing.
07 | Connect your job management app
Xero handles the accounting. Your job management app handles quoting, scheduling, and tracking time on site. When the two are connected, invoices flow from your job app into Xero automatically and you stop entering the same thing twice.
The main options for Australian trades businesses:
| App | Best for | What connects to Xero |
|---|---|---|
| ServiceM8 | Electrical, plumbing, HVAC | Invoices, job costs, and payments sync automatically |
| Tradify | General builders, sole traders | Quotes, invoices, timesheets, and purchase orders |
| Buildxact | Residential builders | Full estimating with bill and invoice integration |
| Fergus | Multi-staff trade businesses | Job management, timesheets, and purchasing |
Before you commit to an app, ask your accountant which one they’ve worked with. They’ll have a preference based on what they can actually see and use in Xero.
Keeping Xero Clean
What to do each week and month
The setup is only half of it. A Xero file that nobody maintains turns into a mess quickly. Here’s the minimum routine.
Weekly (15 minutes)
- Reconcile your bank transactions. Match each imported transaction to an invoice or bill in Xero.
- Code anything uncategorised before you forget what it was.
- Move your GST amount into the BAS holding account.
- Chase any invoices that are more than 7 days overdue.
Monthly (30 minutes)
- Run a profit and loss and check your gross margin.
- Look at your job tracking report. Any jobs running over budget?
- Review outstanding subcontractor bills. You’ll need these for TPAR at year end.
- Confirm payroll is current and super has been paid.
Before you meet your accountant
- Make sure the bank is fully reconciled up to yesterday.
- Clear anything sitting in ‘Uncategorised Expenses’.
- Give your accountant a heads up on anything unusual: big one-off purchases, insurance payouts, equipment sales.
What this saves you: A tidy Xero file means your accountant can spend the meeting talking about your business, not fixing your admin. Most CA-qualified accountants charge $200 to $400 per hour. If the first hour of every meeting is clean-up, that’s an expensive way to do your bookkeeping.
Xero Setup Checklist for Tradies
Run through this before you hand access to your accountant. If anything’s missing, let them know upfront.
- Separate business bank account connected (not personal)
- Chart of accounts updated with trades-specific categories Materials, subcontractors, plant hire, fuel, and tools as separate accounts
- GST basis confirmed (cash or accrual) and BAS frequency set
- Tracking categories created for job costing One category called 'Job' or 'Project' with active jobs listed
- Invoice template set up with ABN, licence number, and payment terms 14-day payment terms; automatic reminders at 3 and 7 days overdue
- Online payment option enabled on invoices
- Stocktake materials and consumables on hand at 30 June
- Accountant invited with Adviser access Not Standard or Read Only. Adviser role only.
- Fuel tax credit account set up (if applicable)
- Payroll configured with STP enabled (if you have employees)
- Job management app connected and syncing ServiceM8, Tradify, Buildxact, or Fergus
- Bank fully reconciled to today No transactions sitting unreconciled for more than 7 days
Frequently asked questions about Xero
Questions we often hear from our client tradies getting started with Xero.
Which Xero plan do tradies need?
Most trades businesses with employees need Xero Standard ($65 per month as of 2025) or Xero Premium ($85 per month) if you have more than one employee on payroll. The Starter plan caps how many invoices and bills you can process each month, which is too restrictive for most active trades businesses. If you’re a sole trader with low transaction volume and no employees, Starter can work to get started.
What is the best job management app to connect with Xero for tradies?
ServiceM8 works well for electrical, plumbing, and HVAC businesses. Tradify suits general builders and sole traders. Buildxact is the better option for residential builders who need detailed quoting and variation tracking. Fergus suits trades businesses with multiple staff and more complex project management. All four connect directly to Xero. Ask your accountant which one they have experience with before you decide.
How do I give my accountant access to Xero without sharing my password?
Go to Settings, then Users, then Invite a User. Enter your accountant’s email address and choose the Adviser role. They get an email invitation and can log in with their own credentials. Adviser access gives them full read and edit access, including reports, reconciliation, and BAS preparation. You never need to hand over your login.
Does Xero do job costing for tradies?
Basic job costing is available through Xero’s tracking categories, which shows you income and expenses by job. For more detailed costing that includes labour hours and materials per job, you’ll need a connected job management app like Tradify or Buildxact. If you’re just starting out, tracking categories alone give you far more visibility than having nothing in place.
What is the difference between cash and accrual GST in Xero?
Cash basis GST means you report and pay based on when money actually changes hands. If you invoiced $1,100 in July (including $100 GST) but weren’t paid until August, you report that $100 in your August BAS. Accrual basis means you report it in July when the invoice was raised, regardless of when you got paid. Most small trades businesses use cash basis. If you’re not certain which applies to you, check with your accountant before your first lodgement.
Can I use Xero to prepare my TPAR?
Yes, if your subcontractor payments are coded to a dedicated expense account. With that set up, Xero can generate a report with the payment details you need for your TPAR. You’ll still need to check that each subcontractor’s ABN and address are correct in Xero. Your accountant or tax agent then lodges the report with the ATO by 28 August each year.
How long does it take to set up Xero properly?
For most trades businesses, a proper setup takes two to three hours. If your accountant does it for you, it’s closer to one hour and is usually worth paying for. Connecting the bank feed is quick. The chart of accounts, tracking categories, and invoice template take the most time. Adding a job management app is roughly another hour depending on the platform. After that, you’re looking at 15 minutes a week to keep it tidy.
Elle Green, CA
Elle Green is a Chartered Accountant (CAANZ) and Co-Founder of Acctivate Business Accountants, with over a decade of experience supporting small businesses across taxation and cash flow management. Holding a Bachelor of Commerce and a Xero Advisor certification, Elle is known for translating complex financial concepts into clear, practical guidance for business owners.
Need a hand getting Xero set up properly?
Acctivate Accountants are CA-qualified and Xero-certified, based in Brisbane. We set up Xero for trades businesses from scratch, sort out setups that have gone sideways, and work alongside you so your numbers are always in good shape.
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