Bills and Invoices
Bills and Invoices are accessed via the “Business” main menu tab. Click on either “Invoices” or “Bills to pay” as appropriate. You can also go straight to creating a new bill or invoice via the “+” icon at the top right and selecting “Invoice” or “Bill”.
Creating and editing bills
See Xero help: https://central.xero.com/s/article/Add-and-approve-bills#Web
(interface a bit out of date)
For more detail go to “Entering bills”.
Creating and editing invoices
Unless the bill/invoice includes items you stock and sell, ignore the first column on the invoice and references to inventory items. Set the due date to be one month after the invoice date unless you specifically want a different due date.
For more detail go to “ Invoicing”.
Rent paid by donor
A local donor may also be your landlord and simply deduct rent due from the payments they make to you. I describe here how to handle the related accounting, which you can also use for other cases where a payer sets what you owe them against their payment.
When reconciling the net payment from the donor (e.g. grant paid minus rent due to them):
- Increase the payment value to the gross grant value; give this the “Grants” accounting code or apply to the relevant invoice created, if one exists.
- Enter, as an additional line, the rental amount as a negative figure to go against the rental accounting code or to the rental bill if that already exists.
- Save the transaction.
Cash received before/after formally due
(e.g. cash received in FY19_20 for use in FY20_21):
See guidance on “Reconciling money coming in”, Payment for invoice dated in the future. This explains how to record money received before it should be recognised, namely as a Prepayment. If necessary, an internal invoice dated at the time income should be recognised should be created. Then follow this advice for matching the prepayment to the invoice: https://central.xero.com/s/article/Apply-a-prepayment-to-a-sales-invoice
If payment is overdue on services provided in the previous year, then, absent an invoice having already been created for the donor, create an internal invoice for the date at which income was due. When the payment eventually comes in, match it to the appropriate invoice.
Where the donor expects invoices from us, do NOT create additional internal invoices. This is liable to lead to confusion, for example if an internal invoice gets sent to the donor.
Where the donor has requested an invoice to cover a specific period (say, their financial year) and that period is split between 2 of our financial years, then follow the procedures described in the Invoicing section of “Accounting for Grants”.
For expenses distinguish between
- paying for something before getting the bill for it and
- paying a bill for services which will be supplied beyond the end of the financial year.
Paying for something before getting the bill for it
If you know that there is no need for any bill to be entered in the system in relation to this payment, then simply enter the payment with the cost code and any other coding appropriate.
If a related bill will be entered on the system, then enter the payment as a Prepayment as follows, using the Account code 620 – Prepayment.
When the bill arrives, enter the bill, adding any appropriate coding to the line items therein. When you enter a bill for a customer whom you have prepaid, then Xero should prompt you to allocate the prepayment to the bill.
Failing this, select the related “Prepayment” bill from the Awaiting Payments tab and apply as a credit to the newly entered bill as follows:
Paying a bill for services which will be supplied beyond the end of the financial year
Any service than spans the end of the financial year requires a related bill to be entered on the system (even if only an internal bill).
Preferably, create 2 lines in the bill, splitting the value of the bill into the appropriate cost code for costs related to the current financial year and 620 – Prepayment for costs related to the next year. [Someone with Advisor status and OK with Manual Journals will convert the prepayment into the appropriate cost code in the next financial year.]
Match the outgoing payment to the bill created.
Split deposit between donors
You can’t split a single Receive Money between two donors. You will need to enter a separate Receive Money for each one or allocate portions of the deposit to existing invoices and/or one or more Receive Money transactions.
When doing the bank reconciliation for a deposit coming from more than one donor, first click “Find and Match” against that item in on the reconciliation page.
The first box contains unpaid invoices or previously entered but unreconciled Receive Money transactions. If any of these apply to the current payment, then check them. In this example, I have checked one for 5 Nov 2019, which is an invoice for £234. This brings that invoice into the second box, as shown above.
Note we get a warning that we have not accounted for the full deposit value and hence will not be able to complete the reconciliation until we have.
If you want to allocate less than £234 to the invoice, then do so by clicking on the “Split” link in the first box.
You can add one or more Receive Money transactions via the New Transaction button at the top right of the second box:
The Receive Money details entry form will likely be prepopulated by Xero:
Don’t be unnerved by this. Xero is guessing and most likely has it wrong. Be prepared to just make all your own entries.
Then Save Transaction.
When you have saved the transaction, you should go back the deposit reconciliation page:
If the value of your listed transactions now equals the deposit value, then the warning of a discrepancy will go away and you will be able to complete the reconciliation by pressing the Reconcile button.
Bulk change to coding
To change the account or tracking codes for a batch of transactions, use the find and recode feature of Xero:
N.B. This does not work when trying to change the tracking code for depreciation. Find and Recode will not find depreciation entries. You have either to make a journal entry or change the tracking code in the Fixed Asset register. A manual journal entry might be OK in relation to assets now fully depreciated but it won’t change the code applied to future deprecation entries.
To change the tracking code in asset depreciation:
- First roll back depreciation as far back as the change needs to be made
- For each asset affected, change the tracking code to be applied. As of the time of writing, there is a bug in that “None” is not offered and it is tricky to delete the previous code and then Save without it popping back in again. The trick is not to click anywhere before hitting “Save.
- Then Rerun deprecation up to the desired date.