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Xero is cloud accounting software, which means your books live online and you open them in a browser or an app. For a Canadian business, a tool like this does the bookkeeping and can help with GST/HST tracking. It doesn’t make you compliant by itself, it doesn’t decide what’s deductible, and the tax rules still come from the CRA, not the software.
What does Xero accounting software do for a small business?
Xero is one of several products in this category, and it’s named here as an example only. The job is the same across all of them. You record sales, bills and bank transactions in one place, then the software turns them into reports: profit, what customers owe you and what you owe suppliers.
Prices, plans, features and rankings are a different story. They change often, and the vendor’s own page is the only place worth trusting for them, so none are quoted here. What this page can do is help you decide whether you need software at all and what to test before you commit.
Do you need accounting software for GST/HST?
Not at the start. The CRA treats you as a small supplier while your worldwide taxable sales stay at or under $30,000 in a single calendar quarter and over the last four quarters in a row. Past that line you must register and charge tax. A spreadsheet can work until then, and software starts to pay for itself once you have to track tax on every sale and every bill. You can also register early on a voluntary basis, which lets you claim credits on what you buy, but from then on you charge tax on every sale.
Once you’re registered, how often you file depends on your yearly taxable revenue.
| Yearly taxable revenue | Reporting period the CRA assigns | Options |
|---|---|---|
| $1,500,000 or less | Annual | Monthly or quarterly |
| $1,500,001 to $6,000,000 | Quarterly | Monthly |
| Over $6,000,000 | Monthly | None |
The due date follows the period. Monthly and quarterly filers have one month after the period ends, and annual filers have three months after their fiscal year end. A reminder in the software is handy, but the date is on you.
A worked example with HST
Say you run a small consulting business in Ontario. You bill $10,000 in a quarter, and the GST/HST calculator shows $1,300 of HST on top at 13%. You also bought $3,000 of supplies and software, which carried $390 of HST.
The tax you collected is $1,300. The tax you paid on business purchases is $390, and you can usually claim that back as an input tax credit. So you send the CRA $910. Good software tracks both sides as you go. If you’re keeping receipts in a shoebox, you’ll do this sum at the end of the quarter and hate it.
If a customer paid a tax-included price, the HST reverse calculator pulls the tax back out. And if you have staff, the payroll remittance calculator shows what an employer sends the CRA each period, a handy check against whatever your software reports.
How to choose a tool and what to test
Ask five plain questions. Does it handle the GST/HST or provincial sales tax where you sell? Can your bookkeeper or accountant log in? Can you export everything in a readable file if you leave? Where is your data stored? And what happens to your records if you stop paying?
The last two matter for the CRA. Records must be kept for six years from the end of the last tax year they relate to, and normally at your place of business or home in Canada unless the CRA gives written permission. The CRA may accept electronic copies kept elsewhere if they’re true copies, readable, and available to CRA officials in Canada. If a vendor stores data abroad, ask how you’d meet that.
Try a trial with a month of real transactions before you move over. Set up one client, one bill and one bank feed, and see how much of it needs fixing by hand.
What happens to your books if you leave?
Think about it on day one, not the day you’re annoyed. Cloud accounts can be closed, locked or changed, and your records still have to be readable years from now. The CRA’s circular on electronic record keeping asks for periodic testing of backed up records, to verify they can be restored into an electronically readable format. So once a year, export a full copy, store it somewhere you control, and open it. If it opens, you’re covered. If it doesn’t, you’ve found out while it’s still cheap to fix.
Where accounting software falls short
It’s only as accurate as what goes in. A bank feed can put a personal purchase, say a Saturday Timmies run for the whole family, into your business expenses, and the software won’t know. Tax codes set to the wrong rate carry the mistake into every report.
It doesn’t decide what’s deductible, and it doesn’t replace a year-end review by someone who does. If you’re self-employed, the self-employed tax calculator gives a rough estimate of your income tax, though it leaves out EI and the deductions don’t lower CPP in it, so treat the result as a guide.
Where this comes from
The small supplier limit, reporting periods and input tax credit rule come from the CRA‘s GST/HST registrant guide. The six-year rule and the location rule for records come from the CRA’s page on keeping records. Examples use this site’s 2026 calculators. This site has no link with the CRA or with any software company.
Frequently asked questions
What is Xero?
It's cloud accounting software that stores your books online. It records sales, bills and bank items and turns them into reports.
Does Xero file my GST/HST return?
We couldn't confirm what any product files for you. The CRA return is your responsibility, so check what the tool exports and what it submits.
Do I need accounting software if I'm a small supplier?
Not by law. You're a small supplier while taxable sales stay at or under $30,000 in a quarter and over four quarters, and a spreadsheet can do the job.
How long must I keep my business records?
Six years from the end of the last tax year they relate to. Electronic copies must be readable and available to CRA officials in Canada.
Can I keep my books on a server outside Canada?
The CRA may accept true electronic copies stored elsewhere if they're readable and can be produced in Canada. It's worth confirming with the CRA first.
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