Is Xero Worth It for Freelancers?

If you're spending your weekends chasing up late client payments and fighting spreadsheet chaos, you're losing valuable billable time.

This guide breaks down how Xero can help your growing freelance business become more profitable by helping you spend more time on client work, get paid faster and do your tax compliance tasks quickly and easily.

But first, when you’re ready to sign up to Xero, make sure you take advantage of our exclusive discount of 90% off the first 6 months of your Xero subscription and save hundreds of dollars.

Xero is specifically designed to help small business owners, such as freelancers, do their own bookkeeping no matter how much their business grows.

Whether you should use Xero or not for your freelance business bookkeeping depends mostly on its size:

If you earn money by invoicing clients, you’ll be happy to hear that Xero comes with a range of inbuilt tools to help you get paid faster.

After adding your logo and business details to Xero, you can start sending professional, branded quotes and invoices to your clients.

You can send a quote by email directly from your PC or your phone and the second they approve it, you can convert it into an official invoice in Xero with just a single click.

Then, once you’ve finished the job, you can send the invoice by email from your phone or PC.

If you’ve connected Xero to an online payment gateway like Stripe or Pinch Payments, a secure "Pay Now" button is added right onto the invoice.

Your client can simply plug in their card details, tap the button and pay you immediately, putting cash straight into your bank account.

If you use Pinch Payments, you can also pre-approve customers, which gives you authority to take payments automatically. So no more stressing over whether your customer will remember to pay you.

For clients who don’t pay on time, you can just turn on Xero’s automated email reminders to politely remind them on a custom schedule - such as every 7 days - so the software handles the chasing in the background while you focus on your client work.

Whether you get paid via invoices or through platforms like Fiverr or Upwork, if you use Xero, there’s no need to manually type transactions into a spreadsheet.

Instead, you just need to connect your business bank account and online wallets such as PayPal to Xero and it will automatically import your daily transactions, completely eliminating manual data entry.

After the transactions have flowed into Xero, you can quickly and easily reconcile them either on your PC or on your phone.

You can also use Bank Rules to help automate the process. You can set up as many bank rules as you like, which makes reconciling your regular transactions a breeze, saving you lots of time and guesswork.

And as a pro-tip: always keep your personal and business finances separate.

Never connect your personal bank account or online wallets - such as PayPal - to Xero. If you do, your personal transactions will end up in Xero, creating a messy reconciliation process you definitely want to avoid.

Just get a dedicated business bank account, PayPal account and any other accounts you need and hook those up to Xero.

Now that we’ve got your income sorted, let’s talk about your expenses.

For a freelancer with a small business, I recommend using Xero’s free inbuilt tool - Hubdoc - to manage your expenses without the shoebox full of receipts.

When you get a receipt, you simply snap a photo of it on your phone, Hubdoc reads the date, the supplier, the amount, and the GST and then pushes it straight into Xero for you.

You can then attach the receipt to a transaction in your bank feed and feel safe in the knowledge that you’ve got all the evidence you need to claim your tax deductions and GST credits. It’s all right there in Xero.

If you want something more sophisticated to help manage your expenses, check out Dext. It’s an advanced alternative to Hubdoc that offers deeper data extraction and smarter automation for complex workflows.

If you'd like to check it out, make sure you grab our exclusive discount of 15% off the first 12 months of your Dext subscription.

If you’ve got different income streams you might want to know which ones are profitable and which ones are wasting your time.

You don’t need to open several bank accounts to track this because Xero has a feature called Tracking Categories.

Here, you can create different categories for each income stream and when you get paid, you can tag the income transactions in your bank account feed with your category name such as Upwork or Fiverr.

You can also tag your expenses and then run reports to see exactly how much profit you’re making for each source of income.

The last thing any freelancer wants to do is spend all weekend trying to lodge their BAS return, which is one of the main reasons we recommend Xero because they make it so easy.

If you keep up with snapping pictures of your bills and reconciling your bank transactions, Xero will send the GST amounts to your Activity Statements behind the scenes.

This means that when BAS time comes around, all you need to do is check it and lodge it directly from Xero to the ATO.

As long as you keep your accounts clean and up-to-date, this takes barely a few minutes each quarter, which is a massive time saver.

Also, if you need help, your tax accountant can log into your Xero account from their own office, so no more endless emailing or taking time off to visit them.

If you only have one client and hardly any expenses, you could probably get away with doing your bookkeeping in a spreadsheet.

But if doing the books for your growing freelancer business is taking too long and is draining your energy, consider moving to Xero to buy back your time.

If you’re ready to make the change, make sure you take advantage of our exclusive discount of 90% off the first 6 months of your Xero subscription and save hundreds of dollars.

After you've signed up, check out our free Xero Australia courses so you can learn how to set up and use Xero without spending a cent.