set up and operate xero for small businessset up and operate xero for small business isbn number:...

Set Up and Operate Xero

for Small Business

ISBN Number: 978-1-925782-64-6

Part Number: 781

Version: Xero 19.6

AUTHOR – Kerryn Maguire

Kerryn is an authorised Xero Learn Partner.

Kerryn has been working with accounting software products for over twenty years. Originally working from 1994 as an accountant with small business when accounting software became mainstream. Kerryn then focused on providing consulting and training services to small business in particular. Expanding from this into to providing curriculum based resources to TAFE and private RTOs. Through Learner Link and as a Xero Learn Partner, Kerryn provides a wide range of resources for the Accounting and Business Services Certificate courses. Kerryn has a long association with many TAFEs and RTOs across Australia. Kerryn’s fundamental aim is to provide resources that are easy to understand while providing a practical application of skills acquired. Kerryn also co-authors two titles for Cambridge University Press which are in their 4th Edition – first published in 2000. Kerryn has considerable experience and knowledge:

Bachelor of Applied Science Mathematics

Diploma of Education

Graduate Diploma of Accounting

CRI: Criterion Referenced Instruction

Member of Institute of Certified Bookkeepers

Member of VELG

Reproduction and Communication for educational purposes

The Australian Copyright Act 1968 (the Act) allows a maximum of one chapter or 10% of the pages of this publication, whichever is greater, to be reproduced and/or communicated by any educational institution for its educational purposes provided that the educational institution (or the body that administers it) has given remuneration notice to the Copyright Agency Limited (CAL) under the Act. For details of the CAL license for educational institutions contact:

Copyright Agency Limited Level 15 233 Castlereagh Street Sydney NSW 2000

Telephone: (02) 9394 7600 Facsimile: (02) 9394 7601 Email: [email protected]

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All Rights Reserved

© Copyright 2019 Kerryn Maguire v19.6

No part of the contents of this book may be reproduced or transmitted in any form or by any

means without the written permission of Learner Link. All registered trademarks or service marks

are the property of their respective owners.

While care has been taken in the preparation of this Training Tool, Learner Link, the developers

do not accept any liability for any damage or loss (including indirect and consequential loss)

incurred by any person as a result of relying on the information contained in this material. This

tool should not be regarded as professional advice and it should not be relied upon in any

important matter without obtaining appropriate advice relevant to your situation.

If there is one, it is the Registered Training Organisation’s responsibility to validate the mapping

of this tool to the performance criteria.

Trademarks and Acknowledgements

All terms or products mentioned in this manual that are known to be trademarks have been

acknowledged. Learner Link cannot attest to the accuracy of this information. Use of a term in

this manual should not be regarded as affecting the validity of any trademark.

Software Description

This course has been designed for users of the Xero software. All attempts have been made to

provide current information. Instructions are correct at the time of writing.

The case study in this material uses fictional information.

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Contents

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Contents

Unit 1 Introduction .................................................................. 1

Purpose of this User Guide ....................................................................... 1

Accounting software used ........................................................................ 2

Prerequisites ........................................................................................ 2

Delivery .............................................................................................. 2

Duration ............................................................................................. 2

What you will need ................................................................................ 2

Conventions used in this User Guide ........................................................... 3

Student Files ........................................................................................ 4

Create an Account in Xero ....................................................................... 6

The Xero Business Site ............................................................................ 9

The Getting Started Panel and Help Centre .................................................10

Navigation Tools.................................................................................. 11

The Tab Menus ................................................................................... 12

The Contacts Tab ................................................................................ 14

The Reports Dashboard ......................................................................... 16

Unit 2 Business and GST .......................................................... 19

Why Use Xero ..................................................................................... 20

Reference Websites ............................................................................. 22

Goods & Services Tax ........................................................................... 23

The Invoice and the Tax Invoice .............................................................. 26

Cash versus Accrual Accounting ............................................................... 28

Methods of reporting GST ...................................................................... 28

Source Documents ............................................................................... 29

Unit 3 Creating a Business Organisation ...................................... 31

Requirements for setting up an Organisation File ......................................... 32

Case Study Overview ............................................................................ 32

Login to Xero...................................................................................... 33

Basic Settings for your Organisation .......................................................... 35

Upload a Logo .................................................................................... 37

Financial Settings ................................................................................ 40

Conversion Date .................................................................................. 41

Tax Rates .......................................................................................... 42

Display Advanced Tax Rates ................................................................... 44

Change User Role to Adviser ................................................................... 45

Invite a New User ................................................................................ 47

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Unit 4 Working with the Chart of Accounts .................................. 49

The Chart of Accounts ........................................................................... 50

The Chart of Accounts in Xero .................................................................. 51

Change an Account Name ....................................................................... 53

Change an Account Code and Type ............................................................ 55

Change the Tax Rate for an Account .......................................................... 56

Create a New Account ........................................................................... 57

Create New Asset and Depreciation Accounts ............................................... 60

Deleting an Account .............................................................................. 62

Add a Bank Account .............................................................................. 63

Add a Credit Card Account ...................................................................... 65

Set up a Petty Cash Account .................................................................... 66

Account Opening Balances ...................................................................... 67

Enter Account Conversion Balances ........................................................... 70

Print a Trial Balance Report .................................................................... 73

Unit 5 Setting up Contact Records ............................................. 75

Overview ........................................................................................... 76

Add a New Contact ............................................................................... 78

Set up Default Terms for Contacts ............................................................ 82

Search and Find ................................................................................... 87

Sort Contacts ...................................................................................... 88

Delete/Archive a Contact ....................................................................... 89

Restore an Archived Contact ................................................................... 90

Unit 6 Creating Items ............................................................. 91

Overview ........................................................................................... 92

Create a Simple Inventory Item for Sale ...................................................... 93

Create Simple Inventory Items to be Purchased ............................................ 95

Create Non-Inventory Service Items ........................................................... 97

Inventory Items that are Purchased and Sold ................................................ 98

Tracked Inventory Items ....................................................................... 101

Check Items ...................................................................................... 103

Search and Find Items ......................................................................... 104

Unit 7 Sales Invoices ............................................................ 105

Create a New Invoice with Items ............................................................ 106

Send an Email with Invoice ................................................................... 109

Create an Invoice without Items ............................................................. 112

Create a Quote .................................................................................. 114

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Create Invoice from an Accepted Quote .................................................... 116

Create New Invoice from Last Items Used .................................................. 118

Copy an Invoice ................................................................................. 119

Edit an Invoice ................................................................................... 123

Unit 8 Recording Customer Payments ....................................... 125

Analyse Receivables ............................................................................ 126

Receive a Payment ............................................................................. 128

Batch Payment .................................................................................. 130

Incorrect Payment from Customer ........................................................... 132

Send Receipt ..................................................................................... 133

Enter Invoice and Payment in One Step .................................................... 135

Cash Sales Receipts using Receive Money .................................................. 136

Add an Item while entering transaction .................................................... 138

Send a Statement ............................................................................... 141

Unit 9 Adjusting Invoices ...................................................... 143

Create a Credit Note ........................................................................... 144

Create a Credit Note for an Unpaid Invoice ................................................ 147

Bad Debts ......................................................................................... 149

Unit 10 Purchasing from Suppliers ............................................ 153

Overview ......................................................................................... 154

Enter payments through Spend Money ...................................................... 154

GST Free Purchase .............................................................................. 158

Edit an Inventory Item ......................................................................... 159

GST Free Purchase: Supplier not Registered for GST ..................................... 161

Purchase Part GST and Part GST Free ....................................................... 162

Enter Asset Purchase by Credit Card in Spend Money .................................... 165

Prepayments ..................................................................................... 167

Add a New Bill ................................................................................... 169

New Bill with Previous Items .................................................................. 172

Enter a Purchase Order ........................................................................ 173

Purchases Overview ............................................................................ 176

Create a Purchase Order with Items......................................................... 179

Convert a Purchase Order to a Bill and Edit ............................................... 180

Repeating Bills ................................................................................... 184

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Unit 11 Recording Supplier Payments ........................................ 189

Analyse Payables ................................................................................ 190

Pay Bills ........................................................................................... 192

Part Payment of Bill ............................................................................ 193

Pay Several Bills Together For One Supplier................................................ 194

Email a Remittance Advice.................................................................... 195

Edit Transactions ............................................................................... 197

Refunds and Credits from Suppliers ......................................................... 199

Unit 12 Bank Reconciliation ..................................................... 203

Overview ......................................................................................... 203

Account Transactions tab ..................................................................... 204

Physical Bank Statements ..................................................................... 205

Things to do prior to a Bank Reconciliation ................................................ 206

Importing a Bank Statement .................................................................. 207

The Reconcile tab .............................................................................. 209

Match transactions ............................................................................. 210

Create Transactions ............................................................................ 214

Fixing Mistakes in a Bank Reconciliation ................................................... 216

Bank Rules........................................................................................ 220

Cash Coding ...................................................................................... 226

Entering Bank Fees ............................................................................. 227

Enter a Transaction with split lines and part private .................................... 228

Create a Transfer Between Accounts ....................................................... 230

The Discuss tab .................................................................................. 231

Recording Payments of Invoices and Bills while Reconciling ............................ 232

Bank Reconciliation Report ................................................................... 235

Practice: Import a Bank Statement and conduct a Bank Reconciliation .............. 236

Unit 13 Reports .................................................................... 239

The Balance Sheet Report ..................................................................... 240

The Trial Balance Report ...................................................................... 242

The Profit and Loss Report .................................................................... 244

Customise a Layout ............................................................................. 245

The Aged Receivables Report ................................................................. 248

The Aged Payables Report .................................................................... 250

GST reporting .................................................................................... 252

Check Activity Statement Settings ........................................................... 253

Run the Simpler BAS on Cash basis .......................................................... 254

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Contents

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Run the Simpler BAS on Accrual Basis ....................................................... 256

Difference between Cash and Accrual GST Reports ...................................... 257

Unit 14 Petty Cash ................................................................ 259

Manual Petty Cash Documents ................................................................ 261

The Petty Cash account ........................................................................ 262

Enter Petty Cash Entries Using Spend Money .............................................. 263

Upload a Receipt Image ....................................................................... 265

Enter a Transfer to Petty Cash ............................................................... 269

Conduct a Manual Reconciliation ............................................................ 270

Unit 15 Journal Entries .......................................................... 275

Add a New Account to the Chart of Accounts .............................................. 276

Entering a General Journal .................................................................... 277

View the Reallocated Accounts .............................................................. 279

Enter a General Journal for Depreciation .................................................. 279

Print a Posted Journal Report ................................................................ 281

Unit 16 End of Financial year ................................................... 283

End of Financial Year Rollover ................................................................ 284

View the Balance Sheet ........................................................................ 286

Reconcile Account Receivable ................................................................ 287

Reconcile Account Payable .................................................................... 287

Reconcile GST ................................................................................... 288

Lock Dates ........................................................................................ 291

Appendix A: More on Opening Balances ...................................... 295

Accounts Receivable............................................................................ 296

Accounts Payable ............................................................................... 300

Bank Account Opening Balance ............................................................... 304

Setting up Unpresented Cheques ............................................................ 306

Setting up Uncleared Deposits ................................................................ 307

Run a Bank Reconciliation that includes unpresented cheques and uncleared deposits ........................................................................ 311

Inventory Opening Balances ................................................................... 314

Add the Inventory Adjustment Account ..................................................... 314

Enter the Inventory Opening Balance ....................................................... 315

Enter Inventory Stock Items Opening Balances ............................................ 316

Reconcile Inventory Items balance with Inventory account ............................. 323

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Appendix B: Customising Templates ........................................... 325

Edit a Standard Branding Theme .................................................. 326

Create a New Standard Branding Theme ........................................ 329

Setting Up Payment Services ...................................................... 331

Add a Bank Account for a Payment Service ............................. 332

Add the Payment Service to the Xero Organisation ................... 333

Add Payment Service to Branding Theme ............................... 336

Test Payment Service ...................................................... 337

Add Payment Service to New Branding Themes ........................ 338

Customise a Document Template ................................................. 339

Add Payment Services to a Custom Branding .......................... 340

Download Custom Document Templates ................................ 341

Edit a Template in Microsoft Word ....................................... 343

Delete Table ................................................................ 344

Enlarge Logo Space ......................................................... 345

Move a Field and Text ..................................................... 346

Change Font Size and Colour ............................................. 347

Save the Template ......................................................... 348

Upload a Template Document ............................................ 349

Check New Layout .......................................................... 350

Open Template to Continue Editing ..................................... 352

Find List of Available Template Fields .................................. 354

Insert a Field ................................................................ 356

Display Table Cells ......................................................... 358

Change a Field to be Tax Inclusive ....................................... 359

Split Cells to Create New Columns ....................................... 361

Change Column Widths .................................................... 362

Delete Text and a Field .................................................... 363

Display Field Codes ......................................................... 365

Format Numerical Values .................................................. 366

Check Text Format of Field ............................................... 367

Remove Borders............................................................. 368

Summary: The Cycle of Customising a Template ...................... 369

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Unit 3: Creating a Business Organisation

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Unit 3

Creating a Business Organisation

Lesson outcomes

In this unit you will learn how to:

list requirements for creating an organisation

create an organisation file

make financial and organisation settings

view tax rates in Xero

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Requirements for setting up an Organisation File

An organisation file is the term used in Xero software to name a company’s

data file. Before you create an organization or company file you need to have

the following information:

Company details such as name, address, ABN and phone number

Your current financial year and the last month of the financial year

The conversion date – this is the month when you plan to start using

Xero. This month is important for the opening balances that will be

entered during the data file setup. Examples include bank account

balance, debtors and creditor aged balances.

A list of all the accounts can be generated by Xero based on templates

or you can build your own, for example, Assets and Liabilities.

Case Study Overview

Sugar Pie is a small baking business owned by Clara Cooper. Clara’s business is

divided into 3 main areas. She has a small shop where she sells cakes and other

baked goods directly to customers. She also sells wholesale cakes to other

cafes and supplies cakes to catering events.

Up until now Clara has used a manual method of recording transactions. Her

Accountant has indicated the opening balances of Assets, Liabilities and Equity

We will commence entering business transactions in Xero from 1st July 2018.

We are therefore working in financial year 2019 which ends on 30th June 2019.

Company details

Sugar Pie has an ABN and is registered for GST reporting quarterly on a cash

basis. The business reports income tax on an accrual basis and does not take

advantage of the small business income tax concessions.

GST Legislation

Clara is making use of Xero accounting software to meet her GST legislation

requirements.

Source Documents

All source documents are to be filed in folders in alphabetical order for future

reference. When hardcopy source documents are processed into Xero a stamp

‘entered’ should be used to identify it has been processed and where possible

save a copy of the document.

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Login to Xero

1. If necessary, type www.xero.com and click on the Login link

2. Type your email which is your username

3. Type your password then click on Login and work through your 2 step

authorisation

The Demo company will load automatically as this is the last one you were using.

4. Click on Demo Company name then select My Xero from the menu.

Email address

Password

Login

Demo Company

My Xero

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http://www.xero.com/



The following page will appear. We are creating a file for Sugar Pie. On this first

page some basic information needs to be entered.

5. Click on the first box and type the name Sugar Pie

6. Check that Australia appears in the country for tax purposes

7. Click into the box What does your organisation do? and type Retail Bakery

8. Check that a tick appears in Are you registered for GST?

9. Click on Start Trial

Remember as soon as you start the trial you only have 30 days to complete user

guide. If you don’t get through it in 30 days you can always create another trial and

start again – good practice.

Start Trial

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Basic Settings for your Organisation

Most of this is carried out via the General Settings area.

1. Click the tab Sugar Pie – the organisation name

2. Click on Settings

3. Click on Organisation details

The Organisation details window appears where you can enter more details about

your business.

Settings

Organisation Name

Organisation details

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4. Check in the box Display

Name that Sugar Pie is

displayed

5. Press the TAB key to move to

the field What is your line of

business?

6. Check that Retail Bakery

appears then TAB

7. Click on the droplist button

and click on Sole Trader

8. TAB to the ABN box and type

84 111 122 223

9. TAB to Organisation

Description and type

Delicious cakes and tempting

treats

Before moving on we will upload a business logo.

Note: Only real ABNs can be entered in Xero. This ABN will be used for all your

learning about Xero. The ABN above is recognised by the ATO as an

education tool and will not be treated as real by the ATO.

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Upload a Logo

1. Click on the Upload logo placeholder – the following box appears

2. Click on the Browse button

3. Locate the student files you downloaded – instructions on how to do this

are on page 4

4. Click on the file Sugar Pie Logo and Open

Browse

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5. Scroll down to Contact Details

6. Leave the Quick find box empty

7. Click into each field and type the information shown

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8. Click on + Add contact field to display a list as shown here

9. Click on Mobile

This will add a new field for a Mobile number.

10. Click into the box for Mobile and type 412123123

11. Click into the County code for Mobile and type +61 and select Australia

+61 that appears

12. Click on Save

13. Scroll back to the top of the window

Add contact field

Mobile

Mobile

Save

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Financial Settings

This area is where you make settings relevant to GST and other Tax details.

1. Click on tab Accounting Advanced Financial settings

2. Enter the details shown

3. Click on Save

Tax File Number

123456

GST Method

Cash Basis

For Sales

Tax Inclusive

For Purchases

Tax Inclusive

Accounting

Advanced Financial settings

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Unit 4: Working with the Chart of Accounts


Unit 4

Working with the Chart of Accounts

Lesson outcomes

By the end of this unit you will be able to:

set up the Chart of Accounts

list account classes and types

change account information

move accounts

delete accounts

enter account opening balances

print a Trial Balance report

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The Chart of Accounts

A Chart of Accounts contains a list of all the accounts required to record, track,

organise and report on your company’s financial activity.

In Xero all accounts are in one of these five Classes: Assets, Liabilities, Equity,

Expenses and Revenue.

In Xero these five classes are further divided into 17 specific account types.

Numbers are associated with the accounts, but they do not determine grouping –

the account type determines this.

Account Types

The Account Type determines the layout of reports

Account Class Description Examples Account Type

Asset Items owned by

the business.

Cash at bank,

debtors, motor

vehicles.

Bank

Current Asset

Inventory

Prepayment

Non-current Asset

Fixed Asset

Liability Items owed by

the business.

Creditors, Visa,

bank loans.

Current Liability

Liability

Non-current Liability

Equity The owner’s

share in the

business.

Capital, drawings. Equity

Revenue Money earned

from sales.

Sales, service

income.

Sales

Revenue

Other Income

Expense Costs to run your

business. Costs

associated with

producing a

product.

Wages, rent,

advertising,

stationery. Raw

materials, labour

costs.

Direct Costs

Expenses

Overhead

Depreciation

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The Chart of Accounts in Xero

1. Click on Accounting Advanced Chart of accounts

Note: The Chart of accounts option is also listed directly under Accounting as

it has been highlighted by a star to create a shortcut.

The default Chart of accounts is listed. There are no bank accounts to begin

with. You must create these yourself – we will cover this later in this unit.

Each account has a Code, Name, Type and Tax Rate.

You can modify this chart to suit your requirements by deleting, adding,

changing the name, code, tax rate etc. Some accounts cannot be changed as

they are crucial to proper working of the system – these accounts are indicated

with a small padlock symbol.

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Liabilities

2. Click on the Liabilities tab to view just those Account types.

3. Notice the Padlock next to the Accounts Payable account and the GST

account.

4. Click on the line of Accounts Payable which will display the Edit

Account Details window

5. Click on Show on Dashboard Watchlist so a tick appears

6. Click on Save

Show on …

Accounts Payable

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Changing Account Details

When Clara’s file was created it included a default set of accounts. This default

Chart of Accounts needs to have some existing accounts changed or deleted to

meet the specific needs of Clara’s business.

Information such as account name, account type, code, description and tax

rate can be changed.

Change an Account Name

1. Click on the Assets tab in the Chart of accounts.

2. Click the line for Office Equipment to display details.

3. Click into the Name box at the start of the text, delete the text

Office and then type Production so the name is now Production

Equipment.

4. Click into the Description box at the start of the text, delete the text

Office and then type Production to match the Name.

5. Click Save.

Name

Description

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Your window should now look like the following:

6. Click on the Name for account Less Accumulated Depreciation on

Office Equipment

7. Edit the Name and Description to replace Office with Production

8. Click on Save

Account name and description

have changed.

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Change an Account Code and Type

When you change an account code, all entries that have ever been entered will

change as well for all new reports. Any reports that have already been

published will not change. In this example we will change the 425 Freight and

Courier Account Code to 315 and change the Account type to Direct Costs.

1. Click on the Expenses tab in the Chart of accounts

2. Click on the account 425 Freight & Courier

3. Click into the Code box and type 315 and TAB – check that it is

available

4. Click on Account Type droplist button and click on Direct Costs. Notice

the warning.

Your window should look like this.

5. Click Save to save your changes.

Code is available

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Unit 5: Setting Up Contacts Records


Unit 5

Setting Up Contacts Records

Lesson outcomes


create a contact

create profile information

set selling information

set default credit and tax terms

set payment details

delete a contact

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Overview

The Contacts feature is a database that stores information about your customers,

suppliers and employees.

When you create a card, you can enter information such as contact details, credit

terms and tax terms. When you choose a Contact in a transaction, the information

stored within it is automatically retrieved, helping speed up your data entry.

Types of contacts

Use Customer contacts to complete sales quotes, orders and invoices.

Use Supplier contacts to complete supplier quotes, purchase orders and bills.

You can put as much or as little detail as you need in a Contacts record. As an

example, we will look at a Card already set up in the Demo Company.

1. Click on the Sugar Pie menu at the top left

2. Click on Change organisation

3. Click on the tab Contacts All contacts

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4. Click into the Search box and start to type Bayside

5. Click on the contact Bayside Club

6. Click on the Edit button to view the contact with some details filled out

as shown below

7. Click on Save to close

the Edit window

8. Click on Demo and

Change organisation

9. Click on Sugar Pie to

return to your

organisation

Edit

Search

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Add a New Contact

Let’s add a couple of contacts to the Sugar Pie organisation.

1. Click on the + symbol for Add New in the menu

2. Click on Contact to add a New contact

3. Start typing Stevenson – you can see suggestions appearing

4. Continue to type Stevenson & Co

5. Click on + Add “Stevenson & Co’ as a new contact

Add New

Contact

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6. Enter the following details in the Contact Information section

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Unit 6: Creating Items


Unit 6

Creating Items

Lesson outcomes


create an item

link accounts to items

enter buying and selling details of an Item

create inventory reports

create a service item

create a tracked item

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Creating Items


Overview

Inventory Items are good or services that you buy and sell. An item can be a

physical unit, such as a cake, or it can be a service, such as labour for an event

setup.

When you create an item, you can enter information such as:

the item’s selling price

unit of measure.

Items must be linked to accounts.

If you mark the ‘I purchase this item’ then it must be linked to a cost of sales

(or expense) account. When you use the item, the amount is automatically

allocated to the correct account, for example, 310 – Cost of Goods Sold.

If you mark the ‘I sell this item’ then it must be linked to an income account.

Again, when you use the item the amount is automatically allocated to the

correct account, for example, 210 Sales Wholesale.

Inventory can be tracked or untracked.

If you mark the ‘I track this item’ then it must be linked to an inventory asset

account, for example 630 - Inventory. The Products and services list is then

automatically updated when you buy or sell the item.

There are four basic steps involved in creating an inventoried item:

1 Enter the item with an Item Code and Item name.

2 Linking the item to the appropriate accounts.

3 Setting up the buying details.

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Create a Simple Inventory Item for Sale

Each item has both a code and a name. If you begin similar types of items with

the same number, it helps you to keep your items list organised.

1. Click on tab Business Products and services

2. Click + New Item

The New Item window appears.

3. In the Item Code field, enter BT001 then press TAB. This code will

identify the item

4. In the Item Name field, type in Blueberry Custard Tart

5. Clear the tick from I purchase this item

6. Check that a tick appears in I sell this item

7. Type 4.00 in Unit Price

8. Click on the droplist button for Sales Account and click on 200 - Sales Shop

9. Check that the Tax Rate is GST on Income

10. Click on the Save droplist button and click on Save & add another

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Creating Items


Practice Exercise 6.1: Create Simple Inventory Items for Sale

1. Now add two more items in the same way

Item Code CR002 CM003

Item Name Chocolate Raspberry Tart

Chocolate Mud Stack

Unit Price $4.00 $4.50

Sales Account 200 200

Tax Rate GST on Income GST on Income

Your list of products and services will now look like this:

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Create Simple Inventory Items to be Purchased

You can add items that you purchase just to make it easier to fill out order forms.

1. Click + New Item

2. The Item Information window appears

3. In the Item Code field, enter FLWT5000 then press TAB. This code will

identify the item

4. In the Item Name field, type in White Flour 5 Kg Bag

5. Check that a tick appears for I purchase this item

6. Clear the tick from I sell this item

7. Type 5.00 in Unit Price

8. Click on the droplist button for Purchases Account and click on 310-Cost of

Goods Sold

Your window should now look like the following:

9. Click Save droplist button and click on Save &

add another

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Unit 8: Recording Customer Payments


Unit 8

Recording Customer Payments

Lesson outcomes


Analyse receivables

Receive a payment

Review customer payments

Enter invoice and payment in one step

Cash sales receipts using receive money

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Analyse Receivables

A quick picture of how much the business is owed is obtained via the Sales

Overview.

1. Click on tab Business Sales Overview

2. Click on tab Accounting Reports

3. Click on Aged Receivables Summary in the Sales list

Aged Receivables Summary

Accounting

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4. Click in the Date box and type 31/8/18 and Update

A better picture is provided of how old outstanding invoices are and who

owes you what and when.

At the end of the unit we will work through Statements.

Date Update

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Receive a Payment

In the next few sections we will work through entering payments in Xero.

You can also do this very quickly when conducting a Bank Reconciliation.

1. Click on tab Business Sales overview if necessary

2. Click on the Awaiting Payment tab on the Sales Dashboard

3. Click on the invoice INV-00126 for Ebb and Flow

The total amount is entered automatically in the Amount Paid box.

4. Click onto Date Paid and type 28 Jul 2018

5. TAB to Paid To and click on the droplist button and click on

100 – Business Account

6. TAB to the Reference box and type Direct Deposit

7. Click on Add Payment

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You will be returned to the Awaiting Payment tab – the invoice will no longer be in the list as it was paid in full. If you want to view it, you can just click on the Paid tab.

8. Click on the Paid tab

9. Click on the line for the payment to display the original Invoice

10. Click on Invoice Options just to view what is available if you need to edit or repeat it.

Paid

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Batch Payment

A customer may pay more than one invoice in one payment.



3. Click on the Select box for the oldest two invoices for The Pier Events

4. Click on Deposit

The New Batch Deposit window appears as shown on the following page.

Deposit

Select

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5. Click into Payment date and type 31 July 2018

6. TAB to Reference and type Inv 124 and 127

7. TAB to Bank Account and type 100 then TAB to set the Bank account

8. Click on Deposit

9. Click on Send Receipt

10. Enter your email address

into the Email box for

the customer ( of course

in practice you would

enter the customer

email address)

11. Click on Send

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Incorrect Payment from Customer

Sending a receipt can be very useful if a customer has accidentally paid you

the incorrect amounts for an invoice or invoices.

Ebb and Flow have made a direct deposit on 18 August 2018 for two invoices

128 and 130. All the details re invoice numbers and dates appear to be

correct on the remittance advice however the amount is $909.08. On your

system the amounts for each invoice are $500 but they have paid $454.54 for

each. How annoying.



3. Click on the Select box for the oldest two invoices for Ebb & Flow

4. Click on Deposit

5. Click into Payment date and enter 18 Aug 2018 and in Reference Inv 128 and 130.

6. In Bank Account enter 100 – Business Account

7. Click into the Payment AUD field for each invoice and enter 454.54

8. Click on Deposit

9. Click on Send Receipt

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10. In the Send Receipt window enter a message explain what you think

may have happened.

11. Enter your email address so you can what happens (of course

ordinarily you would send this to the customer’s email address)

12. Click on Send

Your email address here

Add to the message here to

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13. Check your inbox for the email

14. Open the Receipt pdf attached

You have noted receiving the payment and asked the customer to check

their records while entering the payment in your system and maintaining the

current outstanding amount on these two invoices.

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Unit 9: Adjusting Invoices


Unit 9

Adjusting Invoices

Lesson outcomes


Credit note adjustments and refunds

Create and pay a refund

Create a credit note and apply to relevant invoice

Create a credit note and apply to another invoice

Adjustment notes for bad debts

Collecting debts and disputes

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Adjusting Invoices


Create a Credit Note

Credit notes are created when a customer returns an item or disputes the

amount of an invoice and you agree to either refund them cash or create a

credit for them to use later.

In this example you are going to create a credit note for The Pier Events.

Management is disputing the Labour fee – they were under the impression they

would not be charged for that on this occasion as they were purchasing so many

items. The Invoice has already been paid so you will create a credit note that

can be applied to future sales to that customer.

1. Click on Business Sales overview

2. Click on the droplist button for + New and click on Credit Note

3. Enter the details as shown here

+ New

Credit note

Who To

note

Date

Automatic

Specific Inv if appropriate

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When entering a credit, the amount is entered as a positive number. You

should also use the same Item and Account that was originally used if

possible. You could alternatively use an Expense account such as Refunds

and Returns.

4. Use the Item LAB001 with Qty of 1 and leave the Unit Price as 50.00

5. Click on Approve

You can click cash refund and pay a refund here OR you can apply it as

credit to another invoice.

We are going to apply it to an Invoice that is still outstanding.

6. Type 50 in the Amount to Credit box

7. Click on Allocate Credit

Approve

Allocate Credit

Cash refund

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Adjusting Invoices


The credit note is paid out. The invoice it was applied against is indicated.

8. Click on the link to the Invoice.

A new Amount Due has been calculated.

Link to Invoice

Link to Credit Note

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Create a Credit Note for an Unpaid Invoice

You can use this process when a customer still has an unpaid invoice. A credit

can be created and immediately applied to the Invoice.

1. Click on the Invoices link (or the tab Business Invoices)

2. Click on the outstanding invoice INV-00132 for Hamilton Homes to

display it

3. Click on Invoice Options and click on Add Credit Note

Invoice Options

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Adjusting Invoices


4. Click into the Date box and type 25 Aug 2018

5. Click into Description and type Reduction in price then TAB to Unit Price

and edit the automatic entry of 660 to read 100

6. Click on Approve

The invoice amount due now will be reduced to only $560. The amount you

entered into the Unit Price on the credit note appears as the Credit amount.

Unit Price Description

Credit Note

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Bad Debts

From time to time it happens that a customer will not be able to pay their

debts. This is dealt with in the same way as a credit note but a bad debt account

is used instead of a reversal of a sale item.

You have received formal notification that Ebb & Flow will not be able settle any

existing debts they have with Sugar Pie.

First let’s check if there is a Bad Debts account.

1. Click on tab Accounting > Chart of Accounts and check for an Expense

account called Bad Debts. You will find the account 406 – this account

was created in Unit

Now let’s check how much is still outstanding for Ebb & Flow.

2. Click on Contacts Customers

3. Click on Ebb & Flow in the list

A neat little list is displayed of what is owed along with a total of $340.92.

4. Click on New Sales credit note

Sales credit note

New

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Unit 10: Purchasing from Suppliers


Unit 10

Purchasing from Suppliers

Lesson outcomes


Enter payments to suppliers through the Spend Money

Edit an inventory item

Create a bill received from a supplier

Pay bills

Create a batch payment

Send a remittance advice

Enter and use repeating bills

Edit a payment

View transactions in the bank account

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Overview

Xero is all about accurate records and saving time. You don’t want to go through

the process of entering every little purchase as a purchase order or bill and then

paying it.

There are three methods of entering money that has been spent:

Paying bills

Spend money

Cash coding

Bills are useful for purchases from Suppliers that you have an account with.

Entering Bills helps you keep track of what you owe when and to whom.

Spend Money can be used to enter immediate payments, writing a cheque or

using eftpos to pay expenses such as your electricity bill, telephone account,

insurance payments etc.

Cash Coding is useful for recording bank charges from a bank statement or

paying for fuel, or other payments that happen multiple times in a month.

We will look at Cash coding in the Unit on Bank Reconciliation.

Enter Payments through Spend Money

Clara has made several purchases during the month.

1. Click on the New + icon and Spend Money.

2. Click on Business Account in the list of bank accounts then Next

New +

Business Account

Spend Money

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You can add new contacts as you go and edit their details later if needed.

3. Click on Spent as and select Direct Payment if necessary

4. In the To box type Super Stationery Suppliers then TAB

5. In the Date field type 4 July 2018 and press TAB twice

6. In the Total field, enter 320.

7. Check that Amounts are is Tax inclusive

8. Leave Item blank – this is only for Inventory items

9. Click into Description and type Various office stationery and TAB

10. Type 1 in the Qty field and TAB

11. Type 320 in the Unit Price field and TAB

12. Start to type 461 Printing & Stationery and TAB

13. Check the GST on expenses appears in the Tax Rate column

14. Click on Save

The transaction appears in the transaction list.

Spent as

To

Date

Tax

Description

Save

Tax Rate

4 Jul 2018

4 Jul 2018 8,180.00

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We will enter another purchase via Spend Money.

15. Click on the + Icon and Spend Money

16. Click on the Business Account in the list of bank accounts then Next

17. Click on Spent as and select Direct Payment if necessary

18. In the To box type Bell Tel and TAB

19. In the Date field type 6 Jul 2018

20. TAB to the Total field, enter 220

21. Check that Amounts are is Tax inclusive

22. Click into Description and type Monthly internet telephone and TAB

23. Type 1 in the Qty field

24. Type 220 in the Unit Price field and TAB

25. Click on the droplist button and scroll down to 489 - Telephone &

Internet and click

26. Check the GST on Expenses appears in the Tax Rate column

27. Check that the Total reads 220.00

28. Click on Save

6 Jul 2018

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You will now have two transactions in the Spent column of the Account

Transactions tab for the Business Account.

You can continue to enter payments from the same bank account just by

clicking on + New Transaction

1. Click on + New Transaction

2. A New Spend Money window appears – enter the following details

3. Click on Save

A blank New Spend Money window appears automatically. You can continue

to enter transactions and just click on Save until you are finished and then

just click on Cancel to close and return to the Account transactions list.

10 Jul 2018

+ New Transaction

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GST Free Purchase

In this transaction we will enter a GST Free purchase. In this instance it is

because the products are classified as GST-free food.

1. Click into the To box and type Bakers Mill and TAB

2. In the Date box type 19 Jul 2018

3. TAB to the Total box and type 16.50

4. Click into the Item box and click on the droplist button to display all

the inventory items

5. Scroll down and click on FLWT5000 – all the details for this item will

be entered into the Line

6. Tab to the Qty column and type 2

7. Tab to the Tax Rate column and click on the droplist button

8. Click on GST Free Expenses

9. Click on Add a new line

10. Enter the details for 1 of the item SGWT5000 changing the Tax Rate here

to GST Free Expenses as well

11. Click on Save

Add a new line

19 Jul 2018

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12. Enter this purchase from Dairy Queen on the 19 July 2018 for Milk and

Cream which cost 5.00 – the Tax Rate should be GST Free Expense

Edit an Inventory Item

We will edit the Tax Rate for this item, so it doesn’t need to be changed

each time it is used in Spend Money or a Bill.

1. Click on the tab Business Products and services

2. Click on the line of the item FLWT5000 White Flour 5 Kg Bag to display

3. Click on Edit Item

This will change the Tax Rate just for this item not for the Account.

Edit Item

4. Click on the droplist

button for Tax rate and

click on GST Free

Expenses

5. Click on Save

19 Jul 2018

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Practice Exercise 10.1: Editing an Inventory Item

1. Click on the tab Business Products and services

2. Click on the line of the item SGWT5000 White Sugar 5 Kg Bag to display

3. Click on Edit Item

4. Click on the droplist button for Tax Rate and click on GST Free Expenses

5. Click on Save

6. Click on Inventory again to view the Products and services list

Practice Exercise 10.2: Spend Money

1. Click on the + Icon and Spend Money

2. Click on the Business Account in the list of bank accounts then Next

3. Click into the To box and type Bakers Mill

4. Tab to the Date box and type 24 Jul 2018

5. Click into the Item box and click on the droplist button to display all the

inventory items

6. Scroll down and click on FLWT5000

7. Tab to the Qty column and type 3

8. Check that GST Free Expenses is in the Tax Rate box then click on Save

24 Jul 2018

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