Next steps after conversion to Xero

We try to make your conversion as comprehensive as possible, aiming to save you as much time as we can. However, there are some things that we are not able to do because of limitations in the software process we use to enter data directly into the Xero accounting system.

This means that there will be some post-conversion tasks that you will need to perform and this document is provided as a guide to completing these tasks. The post-conversion tasks should be done as soon as possible after the conversion. If you encounter problems or think something might not be right please refer to our troubleshooting page.

Overview

These are the tasks you will need to perform post-conversion if applicable:

Clean up VAT | Tidy bank reconciliations | FreeAgent corpration tax | Tidy foreign currency

Clean up VAT

We do not set your VAT number and return periods although we do convert your VAT transactions. This is something that you will want to set immediately.

Go to Accounting > Advanced> Financial Settings

 

Enter your VAT number

You can now set your VAT details as required.

File the most recent VAT period you’ve already submitted to HMRC. Xero will then be able to recognise any future transactions entered that are dated back into historical VAT period as “late” claims. These will then automatically be included in the next VAT Return.

Access the VAT Returns page by clicking Accounting and selecting VAT Return.

Select VAT Return

You’ll be prompted to choose either “Making Tax Digital (MTD) VAT” or “VAT without MTD”. Choose VAT without MTD and you can always return to setup MTD later.

select VAT without MTD

If you already see an MTD page as per below then scroll to the very bottom to select “Go to VAT without MTD”.

select go to VAT without MTD

Pick the dates for the most recently completed VAT Return (the dates shown below are for example only) and then “Create” the Return to show the appropriate details.

select your date range and create VAT

Then choose “Finalise VAT return”

Click create to finalise VAT return

You are hopefully already aware of our VAT limitations and that the VAT Returns may not agree. You can adjust the balances or leave them as they are.  Once you’ve Finalised the return you should see the following message indicating the return has not been submitted to HMRC

Finalised VAT Return is not submitted yet

If so required you can now choose the option to Sign up for MTD that will appear on the VAT return page.

Sign up to MTD
Note that when preparing your first VAT Return in Xero (the first to be submitted to HMRC since converting), it won’t include any unfiled “late” claims relating to prior periods and may be incorrect if we’d had to use some workarounds. We recommend you carefully check the figures in this first Xero VAT Return. If the figures provided by Xero are different to those you need to file with HMRC you may need to enter a manual journal or adjustments in Xero necessary to submit the correct figures. This will only affect VAT Returns to be submitted to HMRC that include converted data. Subsequent VAT Returns containing only entries made after the conversion should not require any manual adjustments. To read more about why VAT Returns may be different for the same period in the old and new software please click here.

Tidy bank reconciliations

We try our best to convert the bank reconciled status of transactions but this is not always possible. Xero prevents us from marking some transactions eg. overpayments, prepayments and bank transfers as reconciled so you will probably need to manually complete this so that the “Statement Balance” in Xero is correct.

Remember, there are potentially two balances shown on the Dashboard for each bank account – the “Balance in Xero” is the “books” balance from your old system. The “Statement” balance is the total of transactions marked as reconciled in Xero.

 

Balance in Xero

To tidy your bank reconciliations click on the three dots menu button then Account Transactions

Account Transactions

You now want to make sure that you enable the Mark as reconciled function via the help menu

Mark as Reconciled

We also recommend that, if you have a large number of transactions to mark as reconciled, you switch the page view to show 200 items. This will allow you to tick the top checkbox in the left column and mark transactions in blocks of 200 if you wish.

Number of Items

All you need to do now is mark the transactions you want to change to reconciled and click select Mark as Reconciled from the More button.

select mark as reconciled

If your bank balance was fully reconciled in your desktop software, you will want to mark all transactions as reconciled. Then your “Balance in Xero” and “Statement Balance” will be the same.

If your account was not fully reconciled in your desktop software, you will want to leave the unreconciled items as remaining unreconciled. Then your “Statement Balance” will be the same as the statement or cleared balance in your desktop software. 

It’s important you don’t connect bank feeds or manually import any bank statement data for your conversion period. The steps above will correct your Statement Balance and the reconciled status of transactions in your conversion period. If you’ve already imported bank statement data for the conversion period or do so in the future this is likely to adversley affect your data and cause duplicate transactions.

FreeAgent corporation tax calculations

If you’re a company that converted from FreeAgent, the automatically posted journals relating to corporation tax won’t have been converted. The only one of these journals we do convert is where the year end has completed but the corporation tax payment due date is in the future.

We recommend entering a manual journal in Xero for each year’s corporation tax posting in FreeAgent. Xero’s conversion balances may also need amending for any opening balance on the Corporation Tax Liability account. The Trial Balances should then agree.

Access the Corporation Tax page in FreeAgent to review the calculations of each year’s corporation tax.

Review the “liability” figure for any historical year with a payment due date in the past. The liability for each of these years should be entered in Xero as a journal. The “Balance Owed” at the last year end before the start date of your conversion will need entering in Xero’s Conversion Balances. This will be covered later on.

Before creating the journals in Xero, check that both a Corpration tax liability and a Corporation tax expense account exist in the Xero chart of accounts. If not create them as necessary.

 

The example to the right shows how you could create the Corporation tax expense account although customise this as you require.

Once you have the necessary accounts, add the journal to Xero. The journals page can be accessed from the Journal report or from the Accounting > Advanced page if relevant permissions are provided.

The journal date in Xero should be the same as the “Dated on” date from FreeAgent. The liability is posted to both the Corporation tax liability and Corporation tax expense accounts in Xero.

Enter a journal in Xero corresponding to the corporation tax liability of each historical year in FreeAgent where the “Payment due” date is in the past. Do this for each year within your conversion period. If there’s multiple journals to enter in Xero you may find it useful to copy one journal and amend the date and amounts as necessary.

Next, amend the Xero Conversion Balances to enter the opening Corporation Tax Liability balance. This balance can found in the FreeAgent Corporation Tax report. If your conversion was for the period 01/01/2019 – 31/12/2024 the “Balance Owed” at 31/12/2018 would be the correct figure.

Access Xero’s Conversion Balances (Accounting > Advanced > Conversion Balances) and enter or amend the relevant line relating to the Corporation Tax Liability for the amount referenced in FreeAgent. The balancing entry can be posted to the retained earnings or Profit & Loss account.

Note that if there’s a balance on either account in the Xero Conversion Balances, the amounts will need to be adjusted eg. If there’s no Corporation Tax Liability balance but a credit balance of £3,376 exists on Retained Eanrings then to enter a Corporation Tax Liability of £190 a new line with a credit of £190 would be entered to the Corporation Tax Liability account but the debit of £190 would be deducted from the credit of £3,376 meaning the Retained Earnings balance should be amended to £3,186.

Tidy foreign currency (if applicable)

The recommendations below may not always be required or optimal for your user case. Please read them carefully and consider if they are relevant to you before attempting to apply them. 

All bank accounts will be in base currency so create new foreign currency bank accounts. You’ll need to have added your currency to Settings > Currencies first. Once the currencies are added, navigate to Accounting > Bank Accounts and click Add Bank Account. Follow the prompts making sure to select the correct currency for the bank account.

Add Bank Account and Currency

Once you have the new foreign currency account you may wish to transfer the GBP balance into the new foreign currency account. Do this by navigating to Accounting > Bank Accounts and selecting Transfer Money. Choose to transfer from the GBP account to the foreign currency account. Enter the date to be the same as the “convert to” date selected for the conversion. Apply an exchange rate such that the GBP account will be emptied and the deposit in the foreign currency account will reflect the correct foreign currency amount.

If there are unreconciled foreign currency transactions you may wish to transfer the unreconciled transactions as individual Transfer Money transactions. The remaining balance can then be transferred as lump sum and manually marked as reconciled.

If you have any outstanding foreign currency invoices or bills before converting then these will also have been converted at their GBP equivalent value. You may wish to edit (or void then re-enter) these to correctly reflect the foreign currency values owed or owing.