Xero Invoicing for Canadian Businesses: The Complete Setup Guide

Getting paid is the entire point of running a business, yet most of our new clients come to us with broken invoicing workflows — Word document templates emailed as attachments, no payment tracking, and zero follow-up on overdue amounts. Xero invoicing fixes all of this in about 20 minutes of setup time. Master your billing with our Xero Invoicing Guide. The combination of professional templates, automatic GST/HST calculation, online payment buttons, and automated reminders means you send better invoices, get paid faster, and spend less time chasing money. Here is exactly how we configure Xero invoicing for every Canadian client, step by step.

What Your Canadian Invoice Must Include (CRA Requirements)

Before configuring anything in Xero, you need to know what the CRA actually requires on your invoices. This is the section that every generic Xero tutorial misses — and it matters because if your invoice does not meet CRA standards, your clients cannot claim input tax credits on the GST/HST you charge them.

For invoices over $150 from a GST/HST-registered business, the CRA requires:

• Your legal business name (or the operating name registered with CRA)
• Your GST/HST registration number (your 15-digit Business Number, often called your BN15)
• The date of the invoice
• A description of the goods or services supplied
• The total amount charged, with GST/HST shown as a separate line
• Your payment terms

For invoices under $150, a simplified format is acceptable — you need the vendor name, date, total amount, and an indication that GST/HST is included.

The good news: Xero's default invoice templates handle most of this automatically once you enter your business details. But you need to make sure your GST/HST number is configured correctly. Go to Settings → General Settings → Business details and enter your BN in the tax registration number field.

For current GST/HST rates by province, including the HST-versus-PST distinction and Quebec's QST, see our dedicated guide.

Setting Up Your Xero Invoice Template (Step by Step)

This is the core setup that takes about 20-30 minutes. Once configured, every invoice you send will be professional, CRA-compliant, and set up to get you paid faster.

Pro tip: Create 2-3 branding themes — one for standard invoices, one for recurring retainers, and one for project milestones with different payment terms. You can also create French-language templates for Quebec-based clients.

Sending Xero Invoices and Getting Paid Faster

The invoice template is only half the equation. How you send and follow up on invoices determines how quickly you actually get paid.

Online Payment Options for Canadian Xero Users

• Stripe — Credit card payments, approximately 2.9% + $0.30 per transaction. This is the most popular option with our clients. Stripe also supports Interac e-Transfer in some configurations.
• GoCardless — Direct bank debit with lower fees (~1% per transaction). Best for recurring payments where you want to pull funds automatically. Particularly effective for retainer or subscription billing.
• PayPal — Available as an integration, but we generally do not recommend it for B2B invoicing. Fees are higher, the customer experience is less professional, and PayPal holds can delay access to your funds.

The fee question we always get: "Is 2.9% too expensive?" The math usually says no. If you invoice $5,000 and Stripe takes roughly $145 in fees, but you receive payment 12 days faster, that $5,000 is back in your account where it can cover expenses, earn interest, or be reinvested. The cash flow benefit far outweighs the processing fee for most businesses.

Automated Payment Reminders

Xero can send payment reminders automatically, which means you never have to write awkward "just following up on my invoice" emails again. Here is the schedule we set up for most clients:

• 3 days before due date — Friendly heads-up that payment is coming due
• On the due date — Reminder that payment is now due
• 7 days overdue — Firmer reminder noting the invoice is past due
• 14 days overdue — Final reminder with clear language about the outstanding balance

You can customise the tone and content of each reminder. Our template starts friendly and gets progressively more direct. Xero sends these automatically — you configure them once and do not think about them again.

Recurring Invoices

If you have retainer clients, monthly service contracts, or subscription billing, recurring invoices eliminate a monthly admin task entirely. Create one invoice, set the frequency (weekly, monthly, quarterly), choose a start date, and Xero generates and sends the invoice on schedule.

About 40% of our clients' invoices are recurring. Setting these up takes about 5 minutes per template and pays for itself immediately in time saved.

GST/HST on Xero Invoices — Getting the Tax Right by Province

This is where Canadian invoicing gets more complex than what you will find in any global Xero tutorial. If you sell to clients across provincial boundaries, you need to charge the correct tax rate for each client's location.

How to handle this in Xero: Set the correct default tax rate for each contact. Go to Contacts → [client name] → Financial Details and set their default sales tax rate to the appropriate province. Once configured, every invoice you create for that contact will automatically apply the correct rate.

The most common mistake we see: businesses in Ontario charging 13% HST to a client in Alberta (which should be 5% GST only). Xero's contact-level tax rate defaults prevent this — but only if you configure them.

For a complete breakdown of current Canadian tax rates, see our GST/HST rate guide by province. If your multi-province tax setup feels complicated, our tax compliance services can configure everything correctly.

Tracking What Is Owed and Following Up on Xero Invoices

Once invoices are sent, Xero gives you clear visibility into what is outstanding:

• Awaiting Payment view — Go to Business → Invoices → Awaiting Payment to see every outstanding invoice in one list. You can sort by due date, amount, or client name.
• Aged Receivables report — Under Accounting → Reports → Aged Receivables, this report breaks down who owes what and how overdue each amount is (current, 30 days, 60 days, 90+ days). This is the report we review with every client during monthly calls.

If anything is 30+ days overdue, we flag it immediately. Xero makes this a two-minute check that can save thousands in uncollected revenue.

Common Xero Invoicing Mistakes (and How to Avoid Them)

After configuring invoicing for hundreds of Canadian businesses, here are the five mistakes we see most often:

1. Missing GST/HST registration number. Your BN must appear on invoices over $150. Without it, the CRA can deny your client's input tax credit claim — which damages your professional relationship and can create compliance issues.
2. Wrong tax rate for the client's province. If you are in Ontario but invoicing a client in Alberta, the rate should be 5% GST, not 13% HST. Set contact-level default tax rates in Xero to prevent this.
3. No online payment option enabled. Adding a "Pay Now" button is the single highest-impact change you can make. Clients who can pay with one click pay significantly faster than those who need to write a cheque or set up a manual transfer.
4. Not using sequential invoice numbers. Xero auto-numbers invoices, but make sure the sequence has not been accidentally reset or duplicated. Sequential numbering is a CRA expectation for audit purposes.
5. Forgetting to lock periods. After filing your GST/HST return, set a lock date in Settings → General Settings → Financial Settings. This prevents anyone from accidentally editing or deleting invoices in a closed filing period.

Frequently Asked Questions About Xero Invoicing in Canada