Xero bookkeeping basics: Chart of accounts, bank feeds, and daily workflows

If you run a small business in the UK, getting the basics right in Xero can save you time, reduce stress at tax time, and keep you on the right side of HMRC. Three areas matter most at the start: your chart of accounts, bank feeds, and your day-to-day bookkeeping workflow.

1. Chart of accounts – the backbone of your records

Your chart of accounts is the master list of all the “buckets” you use to categorise income, expenses, assets and liabilities. Xero provides a default chart of accounts for UK businesses, which you can customise to match how your business actually works.

For example, a typical UK chart of accounts in Xero might include:

• Separate sales accounts for different revenue streams (e.g. consultancy, online sales)
• Cost of sales accounts (e.g. materials, subcontractors)
• Overheads (e.g. rent, software subscriptions, telephone and internet)
• VAT control accounts and a directors’ loan account for limited companies

A clear, well-structured chart of accounts makes your management reports, year-end accounts and tax returns much easier to prepare and interpret. You can read Xero’s own guidance on the chart of accounts here: Xero – Chart of accounts overview.

If you work with an accountant, ask them to review or supply a template tailored for your sector. Xero also supports chart-of-accounts templates within Xero HQ for practices managing multiple UK clients.

2. Bank feeds – keeping your bank and Xero in sync

Bank feeds connect your online banking to Xero so that transactions flow into your software automatically rather than being keyed in manually. With direct or open-banking feeds, Xero can securely import daily transactions and give you an up-to-date view of cash flow.

Xero users report saving several hours a week by using bank feeds and automated reconciliation, because they avoid manual data entry and reduce errors.

To get started, you typically:

1. Go to Accounting → Bank accounts in Xero
2. Add your business bank account, savings account, or credit card (or click Manage account → Get bank feeds if the account is already listed)
3. Click “Get bank feeds” (or “Connect to your bank”) and follow your bank’s secure login prompts

You can find a step-by-step overview here: Xero – Connect your bank.

Once feeds are running, use Xero’s bank rules to auto-code regular items like software subscriptions, fuel or GoCardless collections, speeding up your reconciliation even further.

3. Daily workflows – building good habits

With a solid chart of accounts and live bank feeds, your focus should shift to a simple daily or near-daily workflow. For most UK small businesses, a good routine in Xero looks like this:

• Reconcile bank transactions: Match each imported transaction to an invoice, bill or spend/receive money entry, using bank rules where possible.
• Raise and send sales invoices: Invoice promptly, apply correct UK VAT rates, and email invoices directly from Xero.
• Record bills and expenses: Enter supplier bills (or use Xero’s document capture tools) so you do not miss allowable expenses or input VAT.
• Check the dashboard: Monitor bank balances, upcoming bills, due invoices and the VAT balance so there are no surprises.

Alongside this, make sure your Xero data meets HMRC record-keeping rules. Sole traders and partnerships must keep records for at least 5 years from the relevant 31 January self-assessment deadline (effectively 6 tax years). Limited companies must keep accounting records for 6 years from the end of the accounting period in which the records were created. You can read more about UK requirements here:

• GOV.UK – Business records if you’re self-employed GOV.UK
• GOV.UK – Company and accounting records GOV.UK

Ready to take the hassle out of your finances? Speak to FHP Accounting today — your trusted accountants nottingham for clear advice and fast, friendly support. Whether you need reliable accountant payroll services, specialist help from property tax accountants, seamless xero bookkeeping services, or a dedicated accountant for landlords, our team is here to help you stay compliant, save money, and grow with confidence. Get in touch now to book your consultation.