Xero Projects: How to Track Time and Bill Clients Efficiently in Australia

2026-03-07 · 12 min read · PaidMate Team

If you run a service-based business — consulting, design, accounting, engineering, legal, IT, or any profession where your time is the product — the gap between hours worked and hours invoiced is costing you money. Xero Projects is Xero's built-in time tracking and project billing tool, and for many Australian service businesses it remains significantly underused despite being included in most Xero subscriptions.

This guide walks you through exactly how to use Xero Projects to capture every billable hour, track project expenses, and convert that data into accurate client invoices without the manual effort of spreadsheets or disconnected time-tracking apps.

Professional reviewing time-tracking and billing data on a laptop

What Is Xero Projects and Who Is It For?

Xero Projects is a project management and time-billing add-on within Xero, available on the Established plan or as an add-on for lower-tier plans. It lets you create projects tied to specific clients, log time against tasks, record expenses, and invoice for project work directly from within Xero — no third-party integrations required.

It is designed specifically for businesses that bill by the hour or by project milestone, including:

Xero Projects is not a full-featured project management platform like Asana or Monday.com. It does not have Gantt charts, task dependencies, or team communication tools. But for the core workflow of time-to-invoice, it is highly capable — and the tight integration with Xero's accounting and invoicing engine is its key advantage.

Setting Up Your First Project in Xero

Getting started with Xero Projects takes less than five minutes. Here is how to create your first project:

  1. Log in to Xero and navigate to the Projects tab in the top menu (if you do not see it, you may need to enable it under Settings > Add-ons).
  2. Click New Project.
  3. Enter a project name — use something descriptive that your client would recognise (e.g., “Smith & Co Website Redesign” or “Johnson House Renovation — Stage 1”).
  4. Link the project to an existing Xero contact (your client).
  5. Set a deadline — this is optional but helps with reporting and project status tracking.
  6. Specify the project type: Time and materials (bill for actual time and expenses) or Fixed price (bill a set amount regardless of hours).
  7. Click Create.

Once created, you will land on the project dashboard where you can add tasks, log time, record expenses, and eventually generate an invoice.

Creating Tasks and Setting Charge Rates

Tasks are the billable units within a project. Each task represents a type of work you perform, and each task can have its own charge rate. This is particularly powerful for businesses with multiple service tiers — for example, a consulting firm that charges different rates for junior versus senior staff time.

To add a task to your project:

  1. Open the project and click Add Task.
  2. Name the task (e.g., “Strategy Workshop,” “Content Writing,” “Site Inspection”).
  3. Set the charge rate per hour. This will be used to calculate the billable amount when time is logged against this task.
  4. Optionally, set an estimated number of hours. This allows Xero Projects to show you a budget vs actual comparison in real time.
  5. Click Save.

You can add as many tasks as needed. If your project has a single billing rate (e.g., $150/hour for all work), you can simplify by creating one task and logging all time against it. For more complex engagements, separate tasks provide clear transparency on your invoice — which helps clients understand and approve what they are paying for.

Tracking Time Against Your Projects

Time tracking is where Xero Projects earns its keep. There are three ways to log time:

1. Manual Time Entry

Open a project, click Log Time, select the task, enter the date, and type in your hours and minutes. Add a description of what you did — this description will carry through to your invoice, so be specific enough to justify the charge.

2. Timer (Start/Stop)

Xero Projects includes a live timer. When you start working on a task, click the timer icon. When you stop, the time is automatically recorded. This is ideal for professionals who work in focused blocks and want precise billing rather than estimates.

3. Xero Projects Mobile App

The Xero Projects app (iOS and Android) lets you log time and expenses on the go. For tradies, site visitors, or anyone working away from their desk, the mobile app is invaluable. Snap a photo of an expense receipt and log it directly to the project — it syncs instantly with your Xero account.

A key discipline to build: log time as you go, not at the end of the week. Research consistently shows that retrospective time logging (trying to remember what you did on Wednesday from memory on Friday) underestimates actual hours by 15–25%. That is revenue you are simply leaving uncaptured.

Tracking Project Expenses

Beyond time, Xero Projects lets you record project-specific expenses — materials, subcontractor costs, travel, software subscriptions, or any other disbursement you want to on-charge to the client.

To add an expense:

  1. Open the project and click Log Expense.
  2. Enter the amount, date, and description.
  3. Mark it as Chargeable if you want it to appear on the client invoice, or leave it uncharged for internal costs.
  4. Attach a receipt if required for your records or client transparency.

You can also link existing Xero bills and purchase orders directly to a project, keeping all financial activity consolidated in one place. This is particularly useful for businesses with significant pass-through costs, such as marketing agencies managing media spend on behalf of clients, or contractors ordering materials for client jobs.

Monitoring Project Profitability in Real Time

One of the most underappreciated features of Xero Projects is its real-time budget tracking. If you have set estimated hours for each task, the project dashboard shows you at a glance:

This makes scope creep visible before it becomes a problem. If your 20-hour estimate is already at 17 hours halfway through the project, you know to have a conversation with the client about scope adjustment before you exceed budget — not after.

For fixed-price projects, this profitability visibility is equally important. Knowing that a $5,000 fixed-price job has already consumed $4,200 in staff time allows you to make informed decisions about whether to re-scope, increase efficiency, or adjust your pricing for similar work in future.

Business owner reviewing project profitability reports in Xero

Creating an Invoice from a Xero Project

This is where all the time tracking pays off — literally. Converting project work into a client invoice in Xero Projects is straightforward:

  1. Open the project and click Invoice.
  2. Select which items to include: all uninvoiced time, specific tasks, expenses, or a custom amount for fixed-price billing.
  3. Xero will pre-populate the invoice with task descriptions, hours, rates, and expense items based on your logged data.
  4. Review and adjust the invoice date and due date.
  5. Add any invoice-level notes if needed.
  6. Click Create Invoice.

The invoice is now in your standard Xero invoice workflow — you can review it, approve it, and send it to the client just like any other Xero invoice. The time and expense entries are marked as “invoiced” within the project so you do not accidentally bill for the same work twice.

If you are billing in stages (e.g., a progress claim at the 50% milestone), you can invoice for only selected items and leave others for a future invoice. This is particularly useful for large projects or retainer arrangements with monthly billing cycles.

Best Practices for Xero Projects in Australian Service Businesses

Set Time Entry as a Daily Habit

The biggest failure mode in Xero Projects is inconsistent time logging. Dedicate 5 minutes at the end of each working day to logging your time. This takes discipline initially, but quickly becomes automatic and pays dividends in billing accuracy.

Name Tasks Descriptively for Client Transparency

Task and time entry descriptions carry directly onto your invoice. Write them with your client in mind. “3.5 hrs — Technical review and drafting of environmental impact assessment Section 4.2” is far more convincing than “3.5 hrs — Work.” Clear, specific descriptions reduce the chance of invoice disputes and build client confidence in your billing.

Invoice Regularly — Not Just at Month End

Many service businesses default to monthly invoicing because it feels tidy. But monthly billing means you are effectively providing 30 days of interest-free credit before you even start the payment clock. For long projects, consider fortnightly or even weekly billing cycles. Smaller, more frequent invoices are easier for clients to process and reduce your cash flow vulnerability.

Combine Xero Projects with Smart Payment Reminders

Xero Projects helps you create accurate, timely invoices. But getting those invoices paid on time requires a consistent follow-up process. This is where PaidMate adds its value: once your project invoice is sent via Xero, PaidMate automatically monitors the payment status and sends professional, relationship-preserving reminders on your behalf. You focus on the work; PaidMate handles the collections.

Use Project Reports for Pricing Decisions

Over time, your Xero Projects data becomes an invaluable pricing reference. The project profitability summary shows which types of work are most profitable, which clients tend to generate scope creep, and where your time estimates consistently miss the mark. Use this data to refine your quotes and pricing for future engagements — turning accumulated project history into a strategic business intelligence tool.

Xero Projects vs Dedicated Time-Tracking Tools

The obvious question: if you are already using a dedicated time-tracking tool like Harvest, Toggl, or Deputy, should you switch to Xero Projects?

The honest answer depends on your complexity. For many Australian service businesses, Xero Projects is genuinely sufficient — it covers time logging, expense tracking, basic project budgeting, and direct invoicing in one integrated tool. The elimination of data sync between separate platforms reduces errors and saves time.

Dedicated tools like Harvest offer more granular team management, client-facing time reports, and more sophisticated scheduling features. If you manage large teams or need to share detailed time reports with clients as a deliverable, a specialised tool may be worth the additional subscription.

But for sole traders, small professional practices, and boutique agencies, Xero Projects — particularly combined with PaidMate for automated invoice follow-up — covers the end-to-end workflow from project creation to cash in the bank.

Getting Started: Your Xero Projects Action Plan

Capture Every Hour, Protect Every Relationship

Xero Projects removes the two biggest sources of revenue leakage for service businesses: uncaptured time and late-billed expenses. When every hour is logged and every invoice is accurate, client trust goes up, billing disputes go down, and your cash flow becomes more predictable.

Pair Xero Projects with PaidMate’s automated payment reminders and you have a complete system: work gets done, time gets captured, invoices go out accurately and on time, and payment reminders go out automatically. That is the infrastructure of a service business that gets paid without burning bridges.

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