How to Set Up Xero for Your Trades Business (A Plain English Guide)

Xero is the best accounting tool available to a small Irish trades business. That’s not a marketing statement. It’s a practical assessment based on what it does, what it costs, and how well it integrates with the other tools a trades business typically uses.

But Xero only delivers that value if it’s set up correctly. A poorly configured Xero account is almost as useless as no accounting software at all. The numbers won’t be meaningful, the reports won’t reflect reality, and the VAT returns will be wrong.

Here’s how to set it up properly from the start.

Before you start: what you need

Before logging in to Xero for the first time, have the following to hand:

Your business name and trading address. Your PPS number (for sole traders) or your company registration number. Your VAT registration number if you’re registered, or confirmation that you’re not yet registered. Your bank account details (IBAN and BIC for Irish accounts). Your Revenue registration details if you’re operating PAYE payroll.

Xero’s pricing (2026): the Starter plan covers most sole trader needs at approximately €29/month. The Standard plan (€46/month) is needed if you issue more than 20 invoices per month or want multi-currency. Most trades businesses start on Starter and move to Standard as they grow.

Setting up your chart of accounts for trades

The chart of accounts is the list of categories Xero uses to classify your income and expenditure. Getting this right from the start saves significant hassle later.

Xero provides a default chart of accounts when you set up. For a trades business, you’ll want to customise it. The key income and expense categories worth setting up specifically:

Income accounts:

• Labour income (your main revenue, labour charges to customers)
• Materials income (if you bill materials separately from labour)
• Emergency/call-out fees (if you charge these as a separate line)

Direct cost accounts:

• Materials and supplies (what you buy for jobs)
• Subcontractor costs (payments to other trades)
• Equipment hire (hired plant or tools for specific jobs)

Overhead accounts (operating expenses):

• Vehicle expenses (fuel, servicing, tax, insurance for your van)
• Tools and equipment (smaller items not capitalised as fixed assets)
• Insurance (public liability, tools, employer’s liability if applicable)
• Mobile phone and communications
• Professional fees (accountant, solicitor)
• Advertising and marketing
• Work clothing and PPE

The goal is enough categories to produce meaningful reporting without so many that every transaction requires a judgment call. Eight to twelve expense categories is about right for a sole trader trades business.

Connecting your bank feed

This is the feature that saves the most time in Xero: live bank feeds that pull your transactions directly into Xero without manual entry.

To set up: go to Accounting → Bank Accounts → Add Bank Account. Search for your bank. Most major Irish banks (AIB, Bank of Ireland, Permanent TSB, Ulster Bank) are supported. Follow the authentication process for your bank.

Once connected, transactions appear in Xero within 24–48 hours. You then categorise them, a process Xero makes faster over time by learning from your previous categorisations and suggesting matches. Transactions from the same supplier get recognised and auto-suggested after the first few entries.

Bank feeds don’t eliminate bookkeeping. You still need to review and categorise each transaction. But they reduce the time significantly and eliminate the risk of manual data entry errors.

Setting up VAT

If you’re VAT-registered, this is a critical step. An incorrectly configured VAT setup will produce wrong returns and potentially create a Revenue compliance issue.

Go to Settings → General Settings → Financial Settings. Set your VAT registration number and your VAT period (bi-monthly for most small businesses in Ireland). Set your VAT basis. Most trades businesses use invoice basis (VAT is due when you invoice) rather than cash basis (VAT is due when you’re paid). Your accountant can confirm which is more appropriate for your situation.

Tax rates: in Xero Ireland, the main rates you’ll use are:

• 13.5%, for construction services (labour and supply-and-fit work)
• 23%, for standard-rated goods and some services
• 0%, for zero-rated items
• Exempt, for exempt supplies

When you create invoices and bills in Xero, assign the correct tax rate to each line item. Xero then calculates your VAT liability and populates your VAT return automatically.

The VAT return in Xero integrates with Revenue’s Online Service (ROS) for direct filing. Once connected, you can submit your return from within Xero without logging into ROS separately. Setting up this connection takes about 20 minutes.

Connecting Tradify or ServiceM8 to Xero

This integration is where significant time savings come from. When your job management system connects to Xero, invoices created in Tradify or ServiceM8 flow automatically into Xero without any re-entry. Payments received against those invoices sync back. You get the operational detail in your job management tool and the accounting overview in Xero, without managing two separate datasets.

Tradify → Xero: In Tradify, go to Settings → Integrations → Xero. Authenticate with your Xero account. Map your Tradify invoice items to the relevant Xero account codes. Once connected, invoices approved in Tradify push to Xero automatically, and payments are synced back.

ServiceM8 → Xero: Similar process through ServiceM8’s integrations menu. The mapping of job categories to Xero account codes is slightly more involved but well-documented in ServiceM8’s help centre.

After setup, verify the integration is working by creating a test invoice in your job management tool and confirming it appears correctly in Xero with the right account codes and VAT treatment.

Invoicing settings: making your invoices look professional

In Xero, go to Settings → Invoice Settings. Upload your business logo. Set your default payment terms (7 days or 14 days, not 30, which is too long for a trades business). Add your bank account details to the invoice footer so customers can pay by bank transfer directly from the invoice.

Consider enabling online invoice payments. Xero integrates with Stripe, which means your invoices can include a “Pay now” button. Customers pay by card directly from the email. For customers who are prompt payers, this removes any friction. It costs approximately 1.5–2% per transaction. Weigh that against the benefit of faster payment.

Set up an invoice reminder sequence. Xero can automatically send reminder emails for overdue invoices, at 7 days overdue, 14 days overdue, and so on. This removes the awkward manual follow-up while keeping the pressure on.

The 10-minute weekly Xero routine

Once set up correctly, maintaining your Xero account takes approximately 10 minutes per week.

Log in once a week. Monday morning or Friday afternoon work well. Review new bank transactions and categorise any that haven’t been automatically matched. Check your accounts receivable (money owed to you). Are there any invoices significantly overdue that need a follow-up? Note your current bank balance and compare it to expected outgoings in the next two weeks. That’s it.

Monthly, run a basic profit and loss report (Reports → Profit and Loss) to see how the month went. This takes five minutes and gives you the financial picture most tradespeople never have.

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Want your Xero set up correctly from day one?

A properly configured Xero account that integrates with your job management tool and files VAT correctly is the foundation of a well-run trades business. Our Business Systems Setup service handles the full setup, training, and integration.

Book a free 30-minute call. We’ll assess what you currently have and what needs fixing.

Or read next: Tradify vs ServiceM8: Which Job Management App Is Right for Your Business?