Xero for interior designers: a practical setup guide for UK studios

Most studios start Xero with an accountant’s default chart of accounts and a plan to “sort the codes out later”. Later arrives at year end, when someone asks how much the studio made on furniture versus fees, and the answer is a long afternoon with a spreadsheet.

This is the setup worth doing on day one: the right plan, income codes for fees and product, project tracking, purchase orders, currency, deposits and reconciliation. Xero details were checked on Xero’s UK site on 21 October 2026. VAT points are general information, not tax advice; agree the final treatment with your accountant.

Which Xero plan does a studio need?

Xero’s UK pricing page lists four plans, priced per month excluding VAT: Ignite at £18, Grow at £39, Comprehensive at £55 and Ultimate at £70. New customers currently get 90% off for the first six months. The features that matter for a design studio sit on different tiers.

Ignite includes entering 10 bills, which a studio buying for several projects will outgrow quickly. If you buy from Italian, French or American suppliers and want those bills held in euros or dollars, you need Comprehensive at least, because multi-currency is not on Grow. Xero Projects, which tracks time and costs against a job, is on Ultimate only. You do not need Projects to see profit per project: tracking categories, below, do most of that work.

Step 1: split income into fees and product

The most useful change to a default chart of accounts is separating what you earn from design work from what you earn reselling goods. Fees depend on your time and carry little direct cost. Product sales carry a cost of sale, tie up cash in deposits and carry the risk of damage and delay. If they share one “Sales” code, you cannot see which half of the business is carrying the other.

A simple structure that works for most studios; match the codes to your accountant’s numbering:

With this in place, gross margin on product is product sales less product purchases, freight and duty. Fee income stands on its own. Keep overheads such as rent, software and salaries below the line, not in cost of sales.

How you buy goods matters for VAT as well as reporting. Buying as principal and reselling with a mark-up is a sale of goods. Passing a cost on at exactly cost, as the client’s agent, may be treated as a disbursement, but HMRC’s VAT Notice 700 (section 25.1) only allows that when all of its conditions are met. The distinction is covered properly in our guide to VAT for interior designers and in trade discounts and mark-up.

Step 2: one tracking category for projects

Tracking categories are Xero’s way of tagging transactions without multiplying your account codes. You add a category, give it options, and then pick an option on each invoice line, bill line or bank transaction. You can then run the profit and loss for a single option.

Xero allows two active tracking categories per organisation, with up to 100 options in each, and a long-running request on Xero’s own product ideas forum asks for both limits to be raised. So spend them carefully. For most studios the right pair is:

• Project: one option per job, named the way the team refers to it, for example “Hollins Road – Smith”.
• Work type: optional, for residential versus commercial or two offices.

The habits that make project tracking reliable:

1. Create the project option the day the client signs, before the first fee invoice.
2. Tag every line, not just the invoice header: one supplier bill may cover two projects.
3. Tag freight, duty and subcontracted trades, not only the goods. These are where product margin quietly disappears.
4. Archive the option when the project closes, rather than deleting it, so the list stays short and the history stays in your reports.

Run the profit and loss by project each month. Thin product margin usually means untagged freight, a currency move or a mark-up quoted before the supplier’s price rose.

Step 3: purchase orders before supplier bills

Xero’s purchase orders let you build an order from a template or copy a previous one, send it to the supplier as a PDF and, when the supplier invoices, convert the order into a bill that you pay and reconcile like any other. User roles set who can create, approve and send them. Xero’s UK plan comparison does not show purchase orders tier by tier, so confirm with Xero that your chosen plan includes them.

For a studio the value is matching. Check the supplier’s invoice against the PO and their order acknowledgement: same item, finish code, quantity, price and currency.

What Xero’s purchase orders do not hold is the design side of an order: the room, the approved fabric, the required-by date and the lead time the supplier confirmed. That lives in your FF&E schedule or studio software. Our purchase order template guide lists the fields worth carrying on every PO, including Incoterms and a confirmed lead time.

Step 4: foreign currency without the guesswork

On Comprehensive and Ultimate, Xero supports more than 160 currencies. Exchange rates update automatically and you can change them manually. Quotes, invoices, bills and purchase orders can all be raised in a foreign currency.

The practical rule for a studio is to keep each document in the currency it really happened in:

• A PO to a Milan workshop stays in euros. The supplier’s invoice is a euro bill.
• If you pay from a sterling account, the sterling your bank actually takes will rarely match the rate on the bill. That difference is a currency gain or loss, and it belongs to the project.
• Your client invoice is normally in sterling. Decide when you convert: at the quote, at the order, or on the invoice date. Then write that rule into your terms so a weak pound does not come out of your margin.

Our guide to buying from overseas suppliers covers duty, postponed VAT accounting and Incoterms alongside currency.

In Techstyles, each project has its own currency, purchase orders stay in the supplier’s currency, and a client invoice converts at that day’s rate, which is then frozen on the invoice. Xero receives each document in its own currency, so the two systems agree on what was actually agreed.

Step 5: client deposits and supplier deposits

Money arrives weeks or months before the goods, so deposits need a fixed method. There are two common ones:

• Raise a deposit invoice. Invoice the deposit as its own document, coded and tagged to the project. The receipt matches cleanly and the final invoice shows the balance.
• Hold it in a liability account. Record the receipt in a balance sheet account such as “Client deposits” and clear it against the sales invoice on delivery. Income stays out of the profit and loss until earned.

Whichever you choose, check the VAT. HMRC’s VAT Notice 700, paragraph 14.2.3, says most deposits serve as advance payments and create a tax point when you receive them. Holding a deposit as a liability in Xero does not move that date. Agree the method with your accountant and use it on every project.

Supplier deposits mirror this. If a workshop asks for 50% with order, record the payment against that supplier so it can be set against the bill when it arrives, and the bill does not appear unpaid in full.

Step 6: reconcile weekly, not quarterly

Bank reconciliation is where the setup proves itself. A weekly half hour is enough for most studios:

1. Match client receipts to invoices, including deposits. Chase anything overdue the same day.
2. Match supplier payments to bills and check currency payments against the euro or dollar bill.
3. Code card spend with the account and the project tag. Samples and couriers are easy to forget.
4. Check unpaid deposit invoices before placing orders. An unpaid deposit should usually hold the order.

For how the fee side is priced in the first place, see interior design fee structures in the UK.

Stop re-keying: let the studio system feed Xero

In many studios the numbers reach Xero by hand: the designer builds an invoice from the FF&E schedule, then someone types it into Xero, then types the supplier POs in again. Each copy is a chance to get a price, quantity or currency wrong.

The better pattern is to create invoices and POs once, where the schedule lives, and send them to Xero with codes, project and currency set. Several studio tools do this. Programa, for example, has a listing on the Xero App Store: it sends invoices to Xero with Xero accounts assigned to line items, and shares contacts in both directions. Techstyles sends invoices and purchase orders to Xero, with drafts arriving as drafts, and brings invoice paid status back. See the integrations page and finance features for detail.

Before trusting any sync, check that it carries account codes and project tags line by line, keeps foreign documents in their own currency, and approves nothing without a person.

A one-page setup checklist

• Plan: Comprehensive or above if you buy in foreign currencies; Ultimate if you want Xero Projects.
• Income codes: design fees, product sales, procurement fees, recharged costs.
• Cost of sales codes: product purchases, freight and storage, import duty, subcontracted trades.
• Tracking: one “Project” category, an option per job, archived at close.
• Purchase orders: one number series, matched to the supplier acknowledgement and bill.
• Currency: each document in the currency it happened in; a written rule for client conversion.
• Deposits: one agreed method, with VAT accounted for at the right tax point.
• Reconciliation: weekly, with every line coded and tagged.

Techstyles sends the invoices and purchase orders built from your FF&E schedule to Xero, so the studio keys each number once. You can try it free for 30 days, no card needed.