Xero Canada – Settings Canadians Need to Know About
“Xero looks good, but I heard that it doesn’t work well in Canada.” I hear this regularly from Canadian business owners looking to switch to Xero. That statement couldn’t be further from the truth and those that say this are clearly misinformed. For Xero Canada to work, all it takes is setting things up properly from the get-go. In this article, we’ll look at a few areas that need to be adjusted before starting to use Xero in Canada.
At the time of writing, those of us in Canada will need to use the global version of Xero. While Xero is more regionalized in Canada than it used to be, we’re still not fully there yet.
But fret not, with a minimal amount of tinkering, your system will be perfectly suitable for any Canadian small business to use. The one area that most Canadian small businesses would need to adjust before getting started with Xero would be the sales tax component of the application. There are a few areas of the settings to pay attention to when it comes to this.
Adjusting Xero’s sales tax rates
This section forms the bulk of what needs to be adjusted when it comes to setting up Xero properly for Canadian purposes. Years ago, I had posted “Sales tax 101 for Canadian Businesses” on the Xero blog and recently, Xero posted their own help centre article here as they head toward further regionalization in Canada. These links will give you plenty of information on how to setup Canadian sales taxes appropriately in Xero.
In order for Xero to work properly for your Canadian business, setting this up properly is step #1. We often see Xero files that we inherit that have this part of things done incorrectly. It doesn’t take very long to setup properly, but if done wrong, it will spell trouble for your business during a sales tax audit.
Adjusting Xero’s invoice settings
If you have sales in Quebec, British Columbia, Manitoba and/or Saskatchewan, then you likely, though not necessarily, need to include several different tax numbers on your sales invoices. If your business is in Ontario and you only sell in Ontario, then you probably only have 1 tax rate, HST. But if you have multiple tax rates (such as with Quebec, BC, Manitoba & Saskatchewan), then you have multiple tax numbers, and these tax numbers always need to be shown on your sales invoice.
Why is this important?
Because if you use Xero’s default invoice template, when you try to edit it in the invoice settings, there is a check box that says “show tax number”.
This tax number would come from the “financial settings” page where it asks for certain information in the sales tax section.
You’ll notice that there is only room to put one tax number however. So, generally, if you sell to a province that has 2 tax rates (QC, BC, SK, MB), then the above settings would not work since only 1 tax number would pull through to your sales invoice and therefore your company would not be in compliance for sales tax audit purposes which could cause you and your customers trouble.
The solution is therefore to uncheck the “show tax number” box and instead, include all of your tax numbers in the “terms and conditions” of the default branding theme settings that you are trying to edit.
If you are using a custom Xero sales invoice template, then these tax numbers would need to be included as well.
Xero is a truly global company and their app will work for just about any country in the world, including Canada. But before getting started, you’ll need to run through the app’s settings and tweak things appropriately. Only after that’s been done will Xero Canada work well for your Canadian small business.