Should I Enter Bills and Create Batch Payments In Xero?

Karin Josefsson Blog, Xero Blog 2 Comments

Xero has another time-saving feature: batch payments. However, it is not the best solution for every situation. Here is how to decide whether it is for you.

Batch payments allow you to upload a bank file (ABA) with all payment details for when you pay your suppliers, so you do not have to enter them into your bank portal. This process also automates the emailing of a payment advice to anyone you paid.

However, it means you need to enter all bills into Xero and make sure that the bank details of your suppliers are up to date in the contact section.

The other option is to create your expenses from the bank feed without having to enter anything. 

Every situation is different, but here a are few points to help with your decission.

Enter Bills If

  • your are reporting for BAS or income tax on accrual basis (this is a legal requirement)
  • you get lot of bills from the same supplier (saves you having to add bank details all the time)
  • you have longer payment terms and need to manage when to pay suppliers
  • your suppliers need to receive a payment advice
  • you make part payments or pay for multiple bills for the same supplier at once
  • you need a cashflow forecast to manage your money
  • you are mainly paying via electronic bank transfer
  • you team manages expenses from different locations but it is being paid “centrally” (you can let them enter it and use the approve function to let managers keep an overview)
  • you want to track your cost of sales through items

Use Bankfeeds for Expenses If

  • you are able to automate most of your payments (set up direct debit agreements with your suppliers)
  • you mainly pre-pay with a credit card
  • you only have a few bills every month
  • you use most suppliers once only
You can also mix both options, but then it is good to have a clear policy of when to use what (e.g. you could enter all bills for your main suppliers and pay all others through the bank and use bank feeds to create the expenses).

A. Your Overview In Xero

  1. Go to the accounts tab
  2. Select purchases

From this area you will be able to add a new bill or create a new credit note. You can also view bills by their status, you will find your bills by draft, awaiting approval, awaiting payment or paid.

In the “Upcoming bills” area the bars show the net amount outstanding for each month based on bills and credit notes (based on their due date). If you have any un-allocated credit from your suppliers you will find a negative bar showing on the graph. Click on the the bar if you want to be able to to view the items that make up the amounts. In this area you can view bills from today and 60 days forward and remember that only items in the “Awaiting Payments” status and partial outstanding payments will be included in the totals.

For your information, if you want to override the due dates on the bills and add a planned date for the bills to be paid you can due that by pressing the “Schedule Payment” button. In the overview the bars will override the due date an show you the bills by planned date instead.

 

B. Add A Bill

  1. Go to the accounts tab
  2. Select purchases
  3. Add a new bill by clicking on the ‘New” button
  4. Start with typing in the clients name (if the client is in the system already it should appear when you start typing). If the client is new it will be created on the go.
  5. Put in the bill date, if the bill day is today you can just tab to the due date and it will fill automatically
  6. Put in the due date for that bill (if the due date is 7 days after bill date you can type “+7” and then press tab to the next area)
  7. Add the reference (this shows in the bills overview page, so it can help you identify a bill, so it can be a summary of what the bill is about or a PO Number)
  8. Attach a pdf file (a copy of the bill if you want)
  9. Select to show the amount with tax exclusive or tax inclusive depending on how the bill is written
  10. Enter the purchase details (using items if you have them set up)

 

When you are done either save or approve the bill. If you choose to save the bill it will be in the “draft status” and you can either submit it for approval if there is someone that needs to check the bill or approve it. If you approve the bill it will go to the “awaiting payment status”.

If you need to edit your bills you can do that in the “draft”,”awaiting approval” and also “awaiting payment” status. In the “draft” and “awaiting approval” status you simply click on the bill to edit it. In the “awaiting payment” status you will have to click on the bill and press on the button “Bill Option” button to edit it.

For paid (or partly paid bills, you can only adjust the tax code. For all other modifications, you will have to delete the payment first. In the bill click on the payment link (located under the bill total), click the button “Payment Options” and choose delete. When this is done you can make the changes by going to the “Awaiting Payment” status clicking on the bill and press the button “Bill Option” to edit it. Then remember that the payment you have deleted is now unreconciled and you will have to reconcile it again in bank account. (Important: We only recommend you to making changes on the GST codes or amounts if you are working with bills that are in the current period of your BAS.)

C. How To Create A Batch Payment

  1. Go to the accounts tab
  2. Select purchases
  3. Go to the “Awaiting Payment” tab
  4. Tick the bills you want to include in the batch payment
  5.  Press the “Batch Payment” button

  1. Select payment date (Notice: You can choose any date in Xero, but remember to check with your bank if they accept weekend payments. It is normally best to use today’s date and create the batch payment when you actually upload it)
  2. Select the bank account that you want to make the payment from
  3. In the details area you write what information you want to appear on your bank statement and on your statement line that is imported to Xero. An example would be to name it “Bills October 12” if that is what you pay off or a suppliers name if you pay off several bills for one of them
  4. In the area to, reference, and due date Xero shows the details of the bill for your information. Apart from the supplier, none of these details are used in the batch payment creation
  5. If you are missing the bank account details, entering it here will actually save it into your contact, so next time you pay this supplier, the details will be pre-filled.
    If their bank account details show up on the screen it means that you have added these details to their contact details. If you change the bank account in this screen, it won’t change any existing details. You need to update their details in the Contact tab.
    Please note that the bank account includes the BSB first, then the account number.
  6. The first time you enter details, they are also saved to your contact. This is useful when you have an account number that you want to show in your payment to them. If you want to show the bill number, you’ll have to enter it manually.
  7. If you want to remove a line item from this batch payment simply press on the delete “X” on the right hand side
  8. Press on the button “Make Payments” and confirm.
There are a few things that you should be aware of before exporting the batch payment file: Make sure that the suppliers bank is in your base currency, otherwise payment wont be made. In the “Details field” you can only enter 18 characters.


Press on the button “Export Batch Payment” and save the file somewhere you can easily find it. Log in to your bank, upload the file and follow the steps in your bank to make the payment.

When this payment comes through on your bank feed, it will automatically match with this batch payment, making reconciliation simple and quick.

2 Responses to Should I Enter Bills and Create Batch Payments In Xero?

  1. mike

    Thanks for the article. I am wanting to know what process to use. I currently have most of my payments set up automatically using my business debit card. These expenses are picked up in xero through my automatic bank feeds. The issue is i am wanting to be able to track upcoming expenses (forecasting) to ensure I have enough cash available to cover these automatic payments. Am i able to set these recurring payments up in bills and have them processed in xero through the bank transfer?

    Cheers

    Mike

    • Alexander Kohl

      Hi Mike,
      that is an ideal situation for using repeating bills. When you set them up so that they are raised on the day the invoices are issued, you’ll be able to see what money needs to be available. The payments coming through the bankfeeds will automatically preselect the unpaid bill that is paid and you just need to click OK to reconcile the two. Any payment that are not a repeating bill, you’ll create from the bankfeed as they occur.
      Alexander

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